Funding a new biotechnology firm Assignment Example | Topics and Well Written Essays - 1500 words

Funding a new biotechnology firm - Assignment Example Initial Public Offering (IPO) is the primary source of fundraising for the public limited companies only. Other sources of funds can be used by sole traders and partnerships. Debentures are special types of loans which are mostly secured. Apart from debentures, the companies can apply for normal types of loans and leases. Government grants can be another option. However, the most famous and used source of fund for the new businesses is the venture capitalists. The venture capitalists are firms which provide the new entrepreneurs with the required initial investment (Soderblom & Wiklund, 2006). According to Lebherz (2010), as middlemen in the financial industry, VC (venture capitalist) obtain funds or finance from the investors and then provide these funds to different entrepreneurs but is only available to the private organisations. The main aim of the VC is to ensure that at exit the overall return is maximised, either by selling of the firm or by IPO and it often use to facilitate the process of internal growth. To a large extent, institutional investor including PE (private equity) is another approach for external finance. However, these entities have prior knowledge for the economic market and often take many precautions before involving money in. POSSIBLE FUNDING OPTIONS FOR THE START UP BIOTECHNOLOGY FIRM: Today, although labelled with ‘fast-growing’, biotech venture is avoided by a number of investors. In order to decide for the funding options for the start up biotechnology firm, it is better to study and explore the market trend in this regard. Different Technology Based Small Firms (TBSF) have been able to achieve growth in the previous three years. Different research studies have shown that the Technology Based Small Firms are usually discouraged... After exploring and analysing the current market situation along with the funding history, it can be concluded that the existing financial and market situation has made it difficult for the start-up business to acquire funds from the external sources and there have been increasing financial gap. Apart from this there is increasing uncertainty among the entrepreneurs about the approval of the applications for funds. All this information and data implies that the new biotechnology firm should first go for internal sources of funds and the group of entrepreneurs should pool in the available money. Then, the remaining funds should be financed through the venture capitalists firms. Venture capitalists firms are ready to facilitate the new innovative business in the process of collecting required funds and finance. Also, these firms ensure a successful exit strategy and provide the entrepreneurs with their valuable insights and opinions. As the venture capital cycle turns bigger and strong er in this way, institutional investors might be tempted in this new venture which beneficial to further growth. In the third stage the biotechnology firms can go for Initial Public Offering.