Biotechnology is all of the technologies used to develop plants, animals and microorganisms with DNA technology and to obtain products that do not naturally exist or are not produced as much as we need. Many People believe that biotechnology holds the key to pushing the boundaries of the human lifespan. That encourages scientists to do business in the field of biotechnology.
Startups, investors, corporations, and journalists all wanted some comprehension into the question: Why biotech startups fail?
Biotech startups are a high-risk venture in the startup ecosystem, and many do not reach the final stage. Economists explain the most common reasons for failure. In this article, we gathered the three most important ones.
1.Incorrect Financial Strategy
The common problem of entrepreneurs is that they do not form a financial strategy before establishing a business. In general, only the establishment cost of the undertaking is calculated, and the remaining costs are not taken into account. The general view is that these costs can be solved when the business makes money. However, this miscalculation made before the company began its business life, will lead to a short life for the company.
If a good strategy is not developed regarding the total cost of the investment, the structure of fixed and variable expenses, the capital needs of the business, and the monthly and annual distribution of cash flow, and cash flows after production, the failure possibility of the startup will increase.
The most prominent feature of the startups is that they grow very fast and try to get investment. It is vital to manage this money well for entrepreneurs who take this investment. Once startups have the money, it’s important to make a plan and show investors they can trust in startups following it, which can be decisive for future fundraisings.
If the calculation is made only once and is not updated, it makes it difficult to balance the new income-expenditure scale. Income and Expenditure budgets should be used extensively through the startup’ life cycle.
2.Not Finding an Investor
The biggest common feature of startups is having a rapid growth curve. To ensure this, strong investors are needed. Getting investment from the investor is important for the future of the business. Undoubtedly, the biggest obstacle to finding investors for Biotech startups is the time factor.
The development of biotechnology products takes considerable time. One of the primary reasons that investors do not want to invest in biotechnology is a matter of time. Because the investor wants to make a profit from investment quickly. Therefore, the success of a new venture doesn’t just about with the founders of the startup and their experiences. Failure to manage time well leads to startup failure.
3.Inexperienced Management Unit
Experience of the management unit is always a challenge for a startup. The challenge is even greater for biotech startups, which need to produce significantly more bioproduct and make sure it lasts long enough.
The management of a company can be instrumental to the success of a biotech startup. Naturally, the same is true for the opposite.
Understanding the causes of failure which mentioned above can help reduce the risks faced by startups. And even if Startups fail, the founder still has a chance: Entrepreneurs who have previously failed are often successful in their second run.
As Winston Churchill said,
Success is not final, and failure is not fatal: it is the courage to continue that counts.
Ugur Yilbasi is a Junior Research Fellow at European Institute of Policy Research and Human Rights. Ugur is a senior student at Department of Molecular Biology and Genetics, Istanbul Kültür University.