The Funding Gap – Early Stage Life Science and other Technology Companies

Many viable businesses do not make it to commercialization because the capital markets are not receptive to the profitability timeline.  Life science, agriscience, drug discovery, and many other industries seek funds to bridge the gap between government grant programs and having products which are commercially available.

The private sector and state government need to step in.  Several states across the country actively support commercialization of new technology and job development through wise investment in early stage companies.  NC needs to step up to the plate and get beyond the “tax credit” mentality.  Most of these early stage companies have yet to generate a profit, so tax credits contribute nothing to their viability.  These businesses – developing everything from arthritis and asthma treatments, to educational and intervention processes – have the potential to produce significant revenues (tax dollars) and jobs.

That doesn’t mean that money should be given away without criteria or that the funds used don’t need to have a return on investment criteria.  What it does mean is that a long-term perspective and realistic timeframes for investment return need to be applied.

The funds used for investment in early stage and growth stage companies are funds that are intended for investment – can we say “tobacco settlement money.”  These dollars were intended to help NC grow and develop alternatives to dependency on the tobacco industry.

I have to admit that I am not comfortable with the proposed/planned use of escheat funds for grant and loan programs.  After all, those funds don’t belong to the state, but are being held for individuals and businesses which haven’t yet claimed them.  (This is probably a good time to explain to those who haven’t made the connection that escheat refers to the dollars and assets that for one reason or another the rightful owners have lost track of.  If you’ve ever looked on websites for the “free money” that is sitting around the country as unclaimed, then you have been searching escheat funds and accounts.)

Rather than taking funds (tobacco settlement money) which were intended to be invested in business and industry development, it seems that NC wants to use funds that it has a fiduciary duty to safeguard for the owners (escheat).  Where is the logic in that?

Grants and loans should be made based on sound criteria and objective applications.  The applications should be reviewed for business model, potential, experience, expertise, and the normal investment criteria.  There should be a significant difference:  the amount of time one of these cutting edge companies has to get a product to market.  It isn’t realistic to think that a drug discovery company will get a drug to market in 18 to 36 months.  So measure the need,  the ability, and the potential using the appropriate industry timeframes, one for pharmaceuticals, another for nanotechnology, and so on.

If NC is to be a biotech incubator, then it needs to adjust its mindset to support those types of business.  If we are to succeed long term, then we need to be adaptive, realistic, responsive, and use the right approaches to incentives and funding.

There needs to be experienced oversight of the businesses.  Part of the funds provided need to be earmarked for business infrastructure and operations to provide improved probability of success.  Here is where the dollars need to go:

–          Business plan/model development

–          Commercialization strategy and planning

–          Product development and testing

–          Marketing, sales, and business development activities

–          Financial performance monitoring and reporting

–          Audit and oversight

–          Management support and guidance/infrastructure

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