Why biotech startups fail
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Startups are present in all industries, and when it comes to the biotech industry, startups are taking the market rapidly, making us keep an eye on it. With the fast-growing population of the earth, medications are essential to keep people alive. Somebody at some point in their life will need medication. Due to this, we can see how important pharmaceutics are to preserving human life.
In the case of Biotech startups, they have grown exponentially in the last decade. They provide large important advances in science and medicine that make people’s lives easier. Biotech startups nowadays are working on early-stage drug discoveries. Which could revolutionize the way we live and our life expectations.
The purpose of this article is to provide you with a closer look at this industry. As well as the biggest challenges it is facing today. No matter if you are an entrepreneur, an investor, or just a person looking for some information about biotech startups. You will enjoy this article about biotech startups and what are some common reasons that lead them to failure.
What Is a BioTech Startup?
Biotech is a broad term that involves several definitions. It refers to the use of biological materials such as cells, and molecules to create biological products. However, depending on the specific niche of every biotech startup, every company will provide a different definition of biotech. Some of the most common products we consume daily like milk, yogurt, or wine are a product of biotech companies.
Today’s biotech startups focus on providing solutions to bigger problems. They use a different approach to keep developing new tools, and methods that make our lives easier.
But, why biotech startups fail?
There are several reasons why biotech startups may fail. The most common reasons any startup could fail are inexperienced leadership. Inability to adapt to market change, lack of capital, and so on. These reasons are not based on the owners of the startups having the skills and knowledge to run the business. But it’s more a matter of common sense and rising above the challenges.
In the case of startups, they work with the science behind their products. Due to this, there are several factors to keep in mind before initiating a biotech startup. These also can determine if the startup will succeed or fail in the long term.
When looking at information on the internet, on social media, and even from the news about why a biotech startup can fail. You can find that most of them were related to unwanted products, and not having the right team to develop the right products for people.
For people within the biotech industry that have worked with several companies, and different lab benches. The reasons why biotech startups fail comes from within, and CEOs not being able to recognize these problems on time. So, when the reason for failures is shared among other startups and people in the industry, it may seem correct. But they are just a consequence of early-stage problems that can occur and be prevented at the beginning
Reasons Why BioTech Startups Fail
Some statistics show that about 70% of scientists worked on projects they couldn’t reproduce. The bad news is no surprise for biotech investors. There are various reasons why they couldn¡t replicate these products. Yet, the handpicking results and the selection of the resorts are the ones to blame.
Most people would believe that once a product it’s ready to get commercialized, investors are sure of its reliability. But, this is a misconception. Since it can lead to conformational bias, and pressure on the junior staff coming from the lab to produce certain results.
Overemphasis on Science
These are scientific founders’ issues related. These people create a company based on actually proven science, and then they go ahead to spend resources and time to improve a product. Without taking into consideration other aspects of the business. These startups don’t make it too far. They are the results of university projects and college-based incubators that would get some benefit before it all changes.
Industrial Upscaling Problems
When creating new technologies or biotech products at a lab scale, it’s practical to scale up its production. The challenge is that most of the time it can be extremely difficult or even impossible to achieve. Additionally, the expenses and overall investment in upscaling the projects may not be workable for young startups with limited resources. Besides, many scientists at labs interpret that “fully scalable” means shorter resources than the industrial needed requirements.
Communication problems can break companies. For biotech startups, the disconnection between the financing and marketing department and the lab scientists can mean trouble. It is leading them to overestimate the products or their advances. The marketing department may think it is ready to get commercialized. While the lab scientists affirm it may take some time still to get the product out of the lab. The result is a biotech that makes promises they can keep. Overpromising to investors, partners, and even customers, with something they can’t offer. This, later, leads to a breaking point that can get a company to fail, and harm the biotech brand, and the investors’ trust, money, and time.
Limited Due Diligence
Depending on the investor of the biotech startup, they might have a different understanding of the technical aspects. This may harm early-stage VCs by leaving them vulnerable without the right support and staff. When funds have a different biotech scope, they won’t be able to cover all the complex needs involved in the company’s portfolio.
And if it wasn’t all most respected scientists, and scientific officers are far removed from the daily basis lab work. They may not be able to see what is going on, and won’t determine how serious a problem can be in the initial stages of the project.
Having clear and aligned goals it’s crucial for any startup. When there is misalignment between the boards, the management, and even the executives, is where the trouble begins. Issues related to milestones, strategies, and capital allocation can lead to a company’s failure. Some companies have these huge amounts of cash in a short period, while others don’t raise enough cash because of the fear of founder dilution.