Seattle biotech start-ups have difficult time raising VC funds

Food for thought from the Pacific Northwest. Biotech entrepreneurs call Washington State a “valley of death” — a reference to the difficulty that scientists have in finding money to take their ideas from the laboratory to the marketplace. Seattle Post-Dispatch Joseph Tartakoff writes that the complaint was not new, but it highlighted a gap in the state’s biotech community. Biotech start-ups, which are heavily capital dependent, need venture capital firms — with their connections and big pocketbooks — to finance research and ultimately get products to market. Truble is, only a handful of biotech companies Washington state get early-stage venture capital funds each year, according to the quarterly MoneyTree Report, which tracks venture capital investments. So far this year, only three Washington biotech companies have received early-stage money. Local entrepreneurs say it is difficult to raise money because there are only a few venture capital firms with Seattle-area offices which finance biotech start-ups. Venture capitalists, however, say the shortage is related to a broader problem: As the cost of developing and bringing drugs to market has increased, VC firms have had to become more selective when deciding what ideas to finance. “It is increasingly difficult to get money because it’s been increasingly difficult for the venture capitalists to make money themselves,” said Alan Frazier, the founder and managing partner of Seattle-based Frazier Healthcare Ventures. “Why go through all that work if your IPO is difficult and not particularly successful?”

The paucity of early-stage venture capital is significant enough that the Washington Biotechnology and Biomedical Association (WBBA) has recently stepped up its efforts to help researchers and entrepreneurs raise money. During the last four years the association has held a conference called Invest Northwest, which brings together investors and scientists. Other ideas are now in the works. The WBBA is looking to hire somebody who will help researchers and entrepreneurs raise money, and the group is also talking to the state’s pension fund to see if it can invest more of its resources locally. “We do not have as many companies as some … other regions,” said WBBA president Jack Faris, who added that the group’s “No. 1 organizational priority” is to create more companies. “It’s not just important to the WBBA but for the whole region.”

Thomas Ranken, the former CEO of VizX Labs, argue that a healthy biotech community needs to generate many young,