Seeking Funding Alternatives
A weakened VC market might persuade some startup entrepreneurs to think about crowdfunding—but they can’t act on that urge yet.
Back in April, Obama signed into law the Jumpstart Our Business Startups (JOBS) Act, which will exempt from SEC registration rules any transactions to offer or sell crowdfunded securities by businesses raising up to $1 million within a 12-month period—or up to $2 million if the company provides audited financials.
However, the U.S. Securities and Exchange Commission has yet to write the regulations needed to implement JOBS Act. The absence of regs also precludes biopharma startups from benefiting from other provisions of the law, such as exemption from full Sarbanes-Oxley reporting requirements for five years after going public, or until reaching $1 billion in revenue.
The fiscal cliff may also prompt some biopharma startups to consider venture philanthropy.
“They have provided a pathway to innovation, but there’s not a venture philanthropy group for every disease out there. What do you do if you’re diagnosed with something and there’s no great venture philanthropy group? If you’re a company that has a product under development in an area that doesn’t have one of these groups, you’re going to have to look to alternate means,” Margaret Anderson, executive director of FasterCures, the Milken Institute's Center for Accelerating Medical Solutions, told GEN.
She said stepping back from the fiscal cliff was part of a deeper policy discussion officials must open, quickly, if the U.S. expects to maintain biopharma leadership.
“Europe realized that even though they are facing these incredible trials and tribulations right now with their economic future, they have really staked a lot on the future of life science. And I just don’t think Washington, D.C., has woken up to what this life science economy has done for the United States, and for patients, or what it could do,” Anderson said. “The world is not the U.S. as much. And I just fear for the scientific establishment in the United States, not only what we have built here, but also the secret sauce, if you will, of our entrepreneurialism.”
Congress blew the first chance at avoiding the “cliff” last year, when the 12-member “supercommittee,” or Joint Select Committee on Deficit Reduction, succumbed to political stalemate and failed. The second chance was blown this year as Obama and much of Congress focused on re-election. The next few days will determine if the current third opportunity is the charm—or the step over the edge where, like Wile E. Coyote, biopharma has nowhere to go but down.