No, that’s not a typo. I’m feeling optimistic about fundraising opportunities for small biotechs. Yes, I know we’re seeing venture firms pull back on an almost weekly basis (Prospect Ventures, Scale Venture Partners, etc.). And yes, I know the NVCA said VCs are fleeing life sciences. And yes, I know the initial public offering (IPO) window remains dubious at best.
BUT . . . there are some really interesting new options making their way through Congress, as anyone who read either BioWorld Insight or BioWorld Today on Monday already knows. For everyone else, here’s the low-down:
- H.R. 1070 ‑ would provide an alternative to the IPO by letting private firms raise up to $50 million publicly and trade their shares, without the expense of becoming a reporting company (under current Regulation A rules, companies can only raise $5 million, which makes it hardly worth the trouble ‑ see more on that in BioWorld Insight next week)
- H.R. 2930 ‑ would let private start-ups raise up to $2 million through crowd funding, essentially opening the private markets to non-accredited investors and perhaps providing just enough support to get that preclinical proof-of-concept data needed to hook a venture investor or a pharma partner
- H.R. 2167 ‑ would let private companies have more shareholders before they have to start reporting to the SEC
- H.R. 2940 ‑ would loosen the restrictions on advertising private financings
- H.R. 3213 ‑ would expand the small company exemptions from Sarbanes-Oxley compliance
Does H.R. 1070 solve the problem of all those mid-stage biotechs stuck in venture portfolios with no exit? No. Does H.R. 2930 solve the valley of death? No. In both cases, it remains to be seen how much demand the public will have for risky biotech ventures (see, I can be a realist, too). But in both cases: at least the government is trying to give small companies some new options. And there’s a chance some of those companies might actually be able to make it work.