Life Sciences Research Tools and Services companies may be a better fit for the small investor than the diagnostic or therapeutic companies with compelling returns, lower risk and shorter times to profitability.
The JOBS Act (Jumpstart Our Business Startups) may transform the way that startups in the Life Sciences are funded (at least initially) as crowdfunding fills the gap that was held by more traditional Angel and Venture investors. There is a lot of controversy surrounding this issue with a lot of discussion on whether or not this is going to work. Luke Timmerman wrote a very interesting post for XConomy (Crowdfunding Is Coming to Biotech, so Get Ready for a Wild Ride) where he very clearly describes the potential opportunities and challenges that both companies that receive funding and investors who provide it will face when the crowdfunding part of the act is signed into law. A few of these concerns surround the riskiness that regulatory approvals introduce for diagnostic and therapeutic offerings. The large amount of money and long times required before a given product is permitted to being sold may not be ideal for investors who do not have a good understanding of this industry.
The Other Life Sciences Market
The research tools and services market may prove to be a better fit for crowdfunding investors. Unlike the diagnostic and therapeutic Biotechs, companies that are commercializing new instruments, reagent kits, software and services do not require FDA approvals to begin to market and sell their products. Therefore, the amount of capital required is an order of magnitude less and the risk is lower as well. Companies in this market would likely have a risk profile that is a much better fit for crowdfunding investors. With a global market size estimate for the Life Science Tools and Services sector alone estimated to be ~$ 37 Billion in 2011 with a CAGR or 9% projected until 2016 this sector of the Life Sciences deserves a second look.*
*Note: Market size and growth rates calculated using the statistics found in the following market reports.
- Life Sciences Tools Market Size, Growth And Trends, 4/12/12
- Life Science and Chemical Instrumentation Market (2011 – 2016) (Spectroscopy, Chromatography, DNA Sequencer & Amplifier, Lab Automation, Array, Flow Cytometer, Electrophoresis, Immuno Assay & Others) Global Trends, End User & Competitive Analysis, 2/2012
- Life Science Tools and Reagents: Global Markets, 4/2011
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