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MA Group Crafts Strategy to Confront National Decline of Early Stage Bio Capital

April 08, 2014

Massachusetts’ continuing success in the biopharmaceutical sector depends on finding new ways to fund startup and early stage research activities, according to a new strategic plan released by the Massachusetts Biotechnology Council (MassBio). The report cites recent data showing that life sciences venture capital has fallen by 50 percent over the past five years and many investors have turned to later stage investments. In place of this model of startup funding, the group recommends engagement with a number of alternative funding channels, including angel groups, foundations, wealthy individuals and crowdfunding services. The report also includes a number of other recommendations to improve the environment for new and growing life sciences firms.

Massachusetts remains a global leader in bioscience research and entrepreneurship and tops the list of most indicators of life sciences innovation activity on a per capita basis, according to MassBio.  The state leads the country in per capita funding from the National Institutes of Health for academic research, patents, licensing and biotech venture investment. That key role in the industry, however, had made the state’s economy especially vulnerable to the challenges that now face the national bioscience community. U.S. seed stage biotech investment peaked in 2008, but has since fallen considerably. This drop was especially pronounced in Massachusetts, where seed investment fell from $276 million in 2008 to $54 million in 2012, according to data from the PricewaterhouseCoopers/NVCA Moneytree survey.  The decline in seed funding poses a challenge for the health of the bioscience ecosystem and the pipeline of later stage investments. Though investment at later stages of development has proven more resilient, data from Silicon Valley Bank indicates that U.S. venture capital raising has dropped by more than 50 percent since peaking in 2007.

MassBio offers an examination of other sources of potential funding, along with some insight into their advantages and disadvantages. Massachusetts has a robust infrastructure of angel investors and groups, which already have helped to buoy startups activity. However, the size of individual investments is often small and investor management sometimes poses a challenge. Family foundations have become a more important source of early capital, but companies need to have a personal connection or a truly disruptive technology to get their attention. Crowdfunding has received a great deal of media attention, but the evolving regulatory environment has made its value unclear. Other potential sources include disease foundations, university and teaching hospital funds, government funds and corporate venture capital.

In order to improve the early stage investment environment, MassBio recommends:

  • Expanding MassCONNECT, the experimental, industry-sponsored effort to mentor early stage entrepreneurs;
  • Charging MassBio with gathering data on new funding sources and connecting entrepreneurs with appropriate funders;
  • Convening startup CEO groups to share information about securing capital in the new landscape;
  • Advocating for more funding options with state, federal and foundation leaders; and,
  • Marketing the Massachusetts life sciences cluster.

MassBio proposes several additional measures to improve the recruitment and retention of life sciences companies at later stage of development, including:

  • Reauthorizing the Massachusetts Life Sciences Initiative, a 10-year, $1 billion effort to expand the state’s bioscience economy;
  • Working with state and local agencies to provide incentives for anchor companies;
  • Marketing the state’s life sciences cluster and clarify the role of state agencies in reaching out to companies and offering incentives;
  • Expanding university-industry collaboration through the Massachusetts Life Sciences Education Consortium (MLSEC); and,
  • Developing a job forecasting study for the sector.

Download the Impact 2020: Advancing Massachusetts Leadership in the Life Sciences for Patients


Massachusettsbio, capital, strategic plan