After a record year for biotech investments in 2020 — in which the industry saw $28.5 billion invested in 1,073 deals – the market for new innovations remains strong. Moreover, these innovations are increasingly coming onto the market through early stage startups and/or their scientific founders from academia.
For example, in 2018, U.S. campuses conducted $79 billion in sponsored research, thanks in large part to the federal government. that number pointed amid the pandemic and could increase even more if President Biden’s infrastructure plan, whichplan includes $180 billion to improve R&D efforts.
Since 1996, 14,000 startups have licensed technology from those universities, and 67% of the licenses are taken by startups or small businesses. Meanwhile, the median seed rise to Serie A is now 2x higher than at all other stages, suggesting that earlier-stage biotech startups continue to attract investment.
When it comes to protecting IP, early and consistent communication with investors, tech transfer offices and advisors can make all the difference.
For biotech startups and their founders, these headwinds hold tremendous promise. But initial funding is only part of a long journey that (ideally) ends with bringing a product to market. Along the way, founders will need to make additional investments, develop strategic partnerships, and avert competition. It all starts with protecting the fundamental asset of any biotech company: its intellectual property.
Here are three key considerations for startups and founders as they get started.
Start with an option agreement
Most early stage biotechnology starts in a university lab. A disclosure is then made with the university’s tech transfer office and a patent is filed with the hope that the product can be brought to market (for example, by a new startup). More often than not, the vehicle to do this is a license agreement.
A licensing agreement is important because it shows investors that the company has exclusive access to the technology in question. This, in turn, allows them to attract the investment needed to really grow the business: hire a team, build strategic partnerships, and conduct additional research.
But that doesn’t mean that jumping straight to a full license agreement is the best way to get started. An option agreement is often the better move.