Innovating in the New Austerity

We are in the midst of dramatic changes in the way life sciences companies are funded. The model of funding a company with venture capital leading to an IPO is now the exception rather than the rule for life sciences companies. Venture investors are no longer willing or able to fund companies with an indefinite exit. Instead, they are waiting later to fund companies, building exits into their investments from the start, and looking to innovative technologies other than therapeutics that can address medical and healthcare system needs, but provide a more predictable path to revenue. The financial pressures of today are leading to creative efforts to forge new business and financing models. They are driving capital efficiency and putting a proper emphasis on value creation. The resulting discipline is welcome. The result is that companies that fail to pursue true innovation and products that create value will find funding difficult to obtain and markets unwilling to pay premiums. For those of us who invest in the sector, the good news is that valuations are historically attractive and power at the negotiating table lies with those who have capital. The opportunities before us have never been greater.