Financial Daily from THE HINDU group of publications
Tuesday, Aug 30, 2005
Industry & Economy - Bio-tech & Genetics
Funding still a roadblock for biotech start-ups
P.T. Jyothi Datta
Mumbai , Aug. 29
ARE angel investors shying away from helping biotech start-ups from taking wing? Or is it that biotech companies are not biting the bait from venture capital (VC) companies?
Both of the above are true, say representatives of the biotech industry. But a strong doze of funds and implementation of rules on the ground are imperative if the sector should get to the projected revenues of $5 billion by 2010, industry representatives point out.
It is not so much the fear of risk, "but lack of knowledge on the nuances of the business of research" that is probably keeping VCs from supporting biotech start-ups, says Dr Villoo Morawala Patell, the lady behind Avesthagen.
"They fear the dark woods where nothing is visible and is worth supposedly millions of dollars. The elusiveness and long term nature of the industry frightens them," she observes.
Dr Patell has been in the industry for about five years and Avesthagen has significant collaborations with drug and food companies such as Cipla and Nestle, to name a few.
But other biotech entrepreneurs are finding funding an uphill task. "Currently banks are almost averse to lending to young biotech companies," is an observation from no less than the Department of Biotechnology (DBT).
The Department's draft National Biotech Development Strategy (NBDS) calls for banks to fund biotech as a priority sector. The NBDS also outlines the need for proactive support through incubator funds.
"We have good ideas and our road-maps are clear at the Centre. But we just need better implementation of these vision statements," says Dr Swati Piramal, a representative of the Maharashtra Biotech Commission. States such as Karnataka and Andhra Pradesh, however, are doing a better job of supporting biotech companies in terms of infrastructure and seed-capital, she says.
Mr Prasanta Biswal, Chief Executive Officer with the International Biotech Park (IBP), also feels that VCs are not flocking to biotech, as was the case in the United States. The US model saw public, corporate and VC funding support the biotech industry, he says.
IBP is a joint-venture where the Purnendu Chatterjee group is a majority partner and the company is developing a biotech park at Pune. Mr Biswal further points out that besides Government-supported funds for biotech entrepreneurs, sops should also be given to developers to get them involved with more biotech projects.
Dr Patell points out that there are funds available with the Department of Biotechnology and the Technology Development Board, for instance. "However the road to discovery is long and needs a large amount of risk capital that can only come from the venture capital industry," she adds.
Mr Alok Gupta, Yes Bank's Country Head for Life Sciences and Biotechnology, however points out that funds are there for the asking. Biotech entrepreneurs need to have a good business model to tap into it, he observes.
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