Financing and Investment in Biotechnology

Abstract

Capital is the most important production factor. In the absence of the capital, the other production factors remain unused. Capital accumulation is the key element for any business initiation and development. The limited access to finance is the common problem of any start-up or SME. However, innovative sectors (such as biotech) have more financing options in the early stages (such as venture capital, business angels, investment funds, mezzanine financings). This chapter is discussing the main challenges for initiating a business in the biotech sector from this perspective of attracting more capital that can be provided by classical 3Fs (known as “family, friends and other fools”). The chapter is presenting also the alternatives for later stages when the business became mature and is able to attract more long-term capital from capital markets (such as initial public offering—IPO, leasing, supplier credit facility, or buyer credit facility). The financing of innovative sectors is also considered as a priority for many governments of developed and emerging countries. This chapter is introducing some of the specific public financing schemes and state-aid mechanisms that are available now for innovative sectors such as the biotech sector.