WHITE PAPER RELEASE: Private Placements in the Life Sciences Industry
For many life science startups, traditional funding sources, like federal and university grants, can be difficult to obtain and often only cover a portion of administrative, research and development expenses. As a result, equity crowdfunding has become an interesting and viable fundraising alternative. Offerboard’s research team recently published its inaugural white paper on fundraising activity in life sciences industry , as reported through the end of the 2014 calendar year.
The standard funding route for biotechnology companies and other life sciences businesses begins with contacting angel investors and venture capital groups. But the new SEC rules under the 2012 JOBS Act now allows these businesses to receive investments from from individual accredited investors.
This relatively new piece of legislation induces less reliance on venture capital and the traditional means of raising capital. The capital raising landscape as well as the structure of deals, previously ruled by early-stage angels and venture capitalists, could change significantly because of it.
Key Indicators of the growth of private placements in life sciences from our whitepaper:
The current record for fundraising from private placements goes to Welsh startup Cell Therapy, which raised $1 million from nearly 300 investors
808 of the 17,885 private placement offerings were in companies in the Life Sciences industry
The life sciences industry represented 6.5% of all non-pooled filings in 2014.
The biotech and life sciences industries have tremendous potential to benefit from expanded crowdfunding opportunities. Life science firms often struggle to attract early investors, and crowdfunding provides an opportunity to circumvent a lot of the financial roadblocks that impede these early stage companies.
However, reticent general investors have picked up on the volatility of the performance of life science businesses, causing dips in the biotech IPO market. This reticence will likely carry through into the pool of investors that would participate in larger life sciences crowdfunding efforts.
Despite the concerns, crowdfunding could be game-changer for US biotech firms, and has already proven to be an important player in the space. The emergence of crowdfunding could be the missing ingredient that solves some of the problems that the life science world is seeing in biotech financing. The success rate will boil down to the amount of money a firm can raise through this rapidly expanding investment vehicle.
Our white paper catalogs data, graphs, and analyses that help promote a general understanding of private placements in the life science industry. Click here to download the entire free report.