After the 2021 public biotech market shakeup, life science investment dollars may be shifting. The past few years have seen a crowded investment market, with both veteran life science investors and new opportunistic investors getting in on the groundswell, especially in the case of IPOs.

In 2021, many of these transient investors cleared out when the bottom finally dropped out. While this investor exodus has been tough for pre-clinical and Phase I startups hoping to go public, steadfast VCs and other biotech investors have the flexibility and wherewithal to weather the froth coming of the IPO market . Comparing 1Q22 to a year earlier is revealing: only nine came in the first three months of 2022 versus 33 IPOs in 1Q21.

So, how will investors wield this new-found freedom? Some signs point to early-stage opportunities as a good destination for their dollars.

Demand for biotech IPOs still weak

One factor pushing investors away from later stage biotech is compressed exit opportunity – either through acquisition or IPO. The fervor for biotech investment carried over from 2020 drove the overvaluation of biotechs going public at all technology stages, leading to a poor post-IPO performance from 2021’s public crop. This trend has shaken confidence in the ability of biotech IPOs to yield returns and has caused all except dyed-in-the wool biotech VC investors and strategics to hang back. While there

is a continued supply of biotechs at the age and stage to go public (approximately 75 companies have SEC registrations ready), there is simply not enough demand for those IPOs currently.

While companies considering an IPO do not all necessarily boast technologies in advanced clinical trials, there is certainly a correlation between technology maturity and propensity for IPO. As a result, those in late-stage clinical work with technologies closer to market may feel the pressure of a slumped IPO market more acutely than less mature firms, primarily because of their cost structure.

With the XBI still leveling out at about half its highwater mark of a year ago, investor confidence in the biotech market will take time to recover. So, it may be a while before capital flows back into public biotech markets to enable the consistent exit environment of last year.

Though the valuations won’t be as lofty as in 3Q21 without the “crossover” or pre-IPO investors, late-stage biotechs can nonetheless seek financing from seasoned VCs, eager to put their money into more reasonably priced deals, and fund the significant

C-rounds needed to support these larger, more mature biotech firms.

Late-stage acquisitions few and far between

The other exit path for late stage biotechs, acquisition by big biopharma, is showing very little activity currently. At the J.P. Morgan Healthcare Conference in January 2022, big pharma such as BMS, Novartis, Pfizer, and Roche indicated their preference for smaller, ‘bolt-on’ deals with small- to mid-size companies rather than large, capital-intensive M&A deals. Smaller deals allow big biopharma to leverage the target’s unique expertise, whereas value added from large, late-stage biotech acquisitions may be not as substantial because of acquirer overlap with the target’s skills.

Moreover, the hawkish tone of the FTC since 2021 has indicated that the coming years could see increased scrutiny on large deals. While the Pfizer completed the acquisition of Arena Pharmaceuticals,  the waters of large-scale acquisitions remain untested. These factors may make the ‘exit via merger’ route harder to come by for a large share of later stage companies..

Could VCs and strategic investors shift focus upstream to earlier-stage biotech?

Given biopharma’s currently small appetite for late-stage acquisitions, the focus on earlier-stage biotech is coming from both strategic investors and life science VCs. And that’s not a bad thing, as it will avoid putting more pressure on the large number of biotechs that went public in 2021 whose shares trade below their IPO price. An investor shift toward earlier-stage, private-market opportunities where those companies remain private longer will give public biotech markets time to recover. Meanwhile, companies spending time to create real, milestone-based value, will be in a position for an exit either via industry acquisition or through a solid, facts-based IPO story.

Moreover, looking backwards to early-stage companies could help investors find more potent contenders to face the now-crowded startup scene. The IPO enthusiasm of 2021 weakened the winnowing process for biotechs and led to an environment with too many companies, with similar, poorly differentiated technologies. Backtracking to earlier stage opportunities could help investors find technologies with the potential to leapfrog the current generation rather than ones providing only incremental improvements.

Rising interest rates could interfere

While a new focus on earlier stage companies seems to be a natural shift, factors like current events and high inflation, which add uncertainty to the market, may intercede. Investors expect the Fed to push interest up rates several times over the coming months to fight inflation, projecting interest rates six more times over the year. These higher interest rates work against longer term, riskier investments while pushing investors into safer markets. However, the magnitude of this effect on current markets is unclear as of yet.

Takeaways: Early stage biotechs could be the winners of 2022

Despite the difficulties of 2021, life science investors are fueled up and ready for

another round. Already in the first quarter of 2022, VC funding reached almost $8 billion, which is higher than all of the last three quarters of 2021. Many of these funds are explicitly set for new venture creation or early stage technologies, such as Atlas Venture’s recent $450 fund geared toward generating new biotechs from existing and new creators. Other players are also making their plays in the early-stage biotech market – including corporate VC such as Fujifilm, which has set up a small new fund of $60 million explicitly for early-stage companies and in modalities like cell therapy.

With the intensity of the current market downturn, factors pushing investors towards earlier stage companies are also strong. Namely, the lack of exit opportunities for later stage companies, either by IPO or acquisition, could cause capital to shuttle rapidly up pipeline. The recently churned market may yield exciting opportunities to a fresh generation of early-stage tech in 2022.

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If the atmosphere of the pandemic is feeling somewhat optimistic after years of tumultuous ups and downs, the tenor of Biotech financing is feeling rather the opposite. While 2021 broke records in biotech IPO and private investment markets, it left many disappointed by the aggressive cool-down following the February peak. With a steady downward trajectory for the XBI, the S&P index for Biotech, leaders at emerging biotechs, established pharmas, and life science VCs have had to change strategies to face the challenge. Now, with some distance from the bubble of 2021 and the first quarter of 2022 over and done with, it’s time to evaluate how the biotech markets have been faring.

Recap of 2021 biotech capital markets

2021 started out strong with a record-breaking total of IPOs and an unprecedented number of early-stage biotechs going public, with many not yet able to provide clinical data. This frenzy was fueled by high demand for IPOs and rewarded crossover investors with high returns over short turnover times. This steady string of successes compelled even investors traditionally interested in less risky ventures to turn their attention to biotech.

Large early-stage crowd at the IPO door 

A dearth of M&A deals by large pharma companies accompanied this IPO craze, despite pharma giants purportedly holding ample cash. The lucrative IPO market and inflated valuations pushed smaller biotechs and large pharmas away from more traditional M&A partnerships and collaborations.

This rush to list brought a crowd of insufficiently de-risked companies to the public markets, causing a disappointing run for XBI. In total, 80% of 2021’s biotech IPOs ended the year below their initial offering price, signalling investor flight and sapping demand for IPOs. With the bubble of investor enthusiasm for biotech financing burst, startups and fund managers moved to reevaluate their strategies for the coming months.

Little clinical data, similar indications

The early IPO plan pursued by many biotechs in 2021 needs revision for those looking to go public in 2022. The poor performance of 2021’s batch and the tightening availability of capital has made IPOs a much more difficult process. Only five biotechs have had IPOs in Q1 of 2022, and of those only two are currently trading above their listing price.

The aftermath of 2021’s frenzied IPO market are cut-down valuations for biotechs and increased pressure to show value through concrete milestones. Moreover, the 2021 biotech IPO surge brought with it a glut of similar technologies for similar indications, frustrating investors who were seeking differentiated offerings for their money.

Tourists flee, layoffs, but VC & industry at the ready

Investor hesitation in biotech markets is now reflected in a recent rise of layoffs in biotechs, such as at Zymeworks and Passage Bio. The CEO of life sciences executive search firm Slone Partners recently told Fierce Pharma that layoffs seem more prevalent at public biotech companies, underscoring the direct impact of the market-wide decrease in investor confidence in the real strategies of public biotechs.

Despite the flight of investors from last year’s poorly performing market, life science-focused VCs have maintained a deep purse to invest in new biotech startups and technologies. Atlas Ventures recently announced a new $450 million fund, targeting new venture formation. Frazier Healthcare also announced a fund of $987 million to invest in novel biopharmaceuticals in a range of maturities.

Slow down the race to the IPO gate, get concrete milestones in order

According to some biotech leadership and VC managers, emerging biotechs are likely to stay private longer in lieu of the abridged IPO timeline of the last few years. While the enthusiasm of crossover investors has waned with the demand for IPOs, the reshuffling of VC and startup strategy may be a beneficial correction in the long run.  

Perhaps most interestingly, large pharma companies are in a strong position for transactions for the remainder of 2022. The lofty valuations for emerging biotechs in 2021 proved difficult for pharma, evidenced by low M&A activity which consisting primarily of small acquisitions rather than large deals.

Slight uptick in M&A 

In 2022, M&A deals have seen a small uptick. So far, major deals include UCB taking over rare disease biotech Zogenix and AbbVie acquiring neuroscience-focused Syndesi Therapeutics. Furthermore, giants like Pfizer have ample cash on their books and have stated their willingness to spend it on deals. Though yet to play out, such prospects are no doubt on the minds of many.

In addition to the IPO hangover, the slow return of M&A activity may also stem from uncertainty in the regulatory environmentsince March of 2021. At that time, the FTC announced a ‘working group’ to the include European, Canadian and UK competition authorities to create a framework for analyzing pharma mergers, triggered by a spate of deals and high drug prices. However, the FTC recently allowance of  Pfizer’s acquisition of Arena Pharmaceuticals may resolve some lingering concerns holding up similar transactions.

Seasoned investors have plenty of dry powder for clear milestones

Despite a tough couple of quarters since the 2021 cool-down, biotech stakeholders are changing strategies to weather the current market. Many committed investors see the increased scrutiny and focus on milestone-realism as a healthy voice for the true value of biotechs, rather than the overexuberance that led the overbought market of 2021.

Though unclear how long the climb from the 2021 sell-off will take, seasoned life science investors and leaders see this as a temporary blight.

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As part of the 2020 TechConnect Virtual Summit last month, we attended a session called “Working with Defense Primes.” We had the opportunity to hear from Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) program leads at four of the five US-based defense prime contractors: Alf Carroll of Raytheon Technologies, Kevin McGrath of Northrop Grumman, Craig Owens of Lockheed Martin, and Paul Staszak of Boeing. 

If you aren’t familiar with the SBIR/STTR programs, they are competitive awards-based Research and Development (R&D) programs available to US-based small businesses. Through the programs, small businesses have the opportunity to develop and commercialize their technologies. 

The SBIR and STTR programs are coordinated by the Small Business Administration (SBA) and funded by one of eleven federal agencies. Some of these agencies include the Department of Health and Human Services, the Department of Energy, and the Department of Defense (DoD). STTR differs from SBIR in that it involves collaborations between small businesses and US-based nonprofit research institutions. The DoD plays a critical role in the programs. In fact, the agency makes up over 40% of the SBIR/STTR budget. 

The benefits of startup-defense prime collaboration

So why work with a defense prime contractor? Small businesses receive all sorts of benefits from partnering with a prime. Some of these benefits include access to subject matter expertise and resources, roadmaps towards commercialization, resources for IP concerns, funding strategy guidance, and support during proposals. 

The collaboration benefits the primes too. Through the partnership, primes build long-term, strategic relationships with small businesses. Additionally, the partnership helps primes to deliver innovative solutions and advanced technologies to their customers. The primes often align innovative small businesses and their technologies to their innovation priorities. This alignment results in the development of more advanced technology that benefits both parties. 

How small businesses can initiate a collaboration with primes

So how does a small business get started on collaborating with the primes? In order to apply for SBIR/STTR funding through the DoD, a small business must meet the qualifications explained here. Most of the primes send out a topic interest list that can give hopefuls an indication of whether their emerging technology is of interest. If your technology is not listed, a small business can usually reach out to each prime to be added. If your technology aligns with one of the primes’ interests, you can fill out an SBIR/STTR form for that prime and email it to their SBIR/STTR department. 

Tips for Successful Collaboration

What is the best way to engage with the defense prime contractors? In the session, the speakers had some important advice for small businesses beginning the process:

1. Be flexible and able to pivot. The primes often will have ideas about how to adjust your technology to fit specific needs.
2. Be persistent about contact. Furthermore, understand where your contact is within these big companies. It is important to find the right person who can advocate for you.
3. Don’t be vague. Come prepared and be concise about where and how your technology will fit in at the prime with whom you are speaking.

We hope we helped to de-mystify the process of working with the US-based defense prime contractors. We wish you luck in advancing your technology through this process!

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Ever since the passage of the Bayh-Dole Act in 1980, licensing of patented technologies has been the mainstay of university Technology Transfer Offices seeking to harvest and share the fruits of federally funded research activities. For most universities, licensing doesn’t generate robust returns; in fact most TTOs are cost centers for their institutions rather than revenue generators. According to a 2014 Brookings study, in 2012 84 percent of university TTOs weren’t breaking even. (It’s important to note that licensing generates traffic from industry and adds to the prospects for private-sector funded research on top of licensing income.) For public-minded institutions, operating in the red is reasonable as long as public resources continue to sustain them. After all, the mission of technology transfer is to translate scientific discovery into benefits for their communities, not to generate institutional income. But with declining state and federal support for higher education and research, this becomes harder to justify. Today TTOs are being asked to find strategies to earn more from university intellectual property while they also support — and often lead — university “third mission” efforts.

Universities of all sizes operate venture funds. Most target seed-stage companies, the startup phase when risk is high and private “gap funding” is scarce and precious. For some universities, there’s a new goal for technology transfer: to become self-sustaining — earning enough from investments to support the TTO and continue to provide startup funding. But as public dollars continue to dry up and demands for greater third mission commitments intensify, some university venture funds have been prompted to seek healthy investment returns, for their own sake.

To achieve those returns, university funds have had to rethink their place in the startup lifecycle. The University of Michigan investment fund, a member of the Osage University Partners venture capital group, for example, tapped into the university’s endowment to give it the heft required to make larger deals. UM’s fund does not invest at the seed stage, instead investing in later rounds after private venture funds have already vetted the startup and its prospects. Ken Nisbet, executive director of UM’s TTO told the newsletter “Technology Transfer Tactics,” that while healthy returns are the main impetus behind the program, its investments are “about investing in community, too, and economic development,” he says. “The university participating is a sign of commitment. I don’t think this will substitute for some other capital investment. I think it means an expansion of investment.” Last month, Osage University Partners announced the closing of its third university startup fund at $273m, bringing its total assets under management to $600m.

In late 2014 the University of California launched a similar fund (“UC Ventures”), with $250m from UC’s $91b endowment. UC’s fund is focused on “high-conviction discoveries,” later stage investments and even investments outside of the university’s research ecosystem. Why would a Bay Area startup choose the UC program for funding over any of the many Bay Area venture capital funds with better and deeper startup support networks? For one, the university can require exclusivity in its licensing, an observer of the Bay Area investment scene told Re-Code. And for researcher/entrepreneurs who studied at the investing institution, funding via the TTO and the university can be less complex than chasing private money. Eventually, UC’s fund is expected to earn enough to contribute back to the endowment, but as of April 2018, the fund was still considered by its managers to be in “an incubation period” and not yet adding value back into the endowment.       

Before seeking to transform a seed stage-focused fund designed to try and earn its keep, TTOs should consider several factors.

Evaluate the ecosystem

Louise Epstein, director of university partnerships for the Walton Family Foundation, identifies 12 key components of successful research commercialization. Beyond familiar-to-the-university features such as quality research and skilled researchers, Epstein includes availability of CEO talent (to head-up startups), private funding (to complement university investment and to provide additional vetting) and geographic resources such as startup incubators and an engaged/active business community (to sustain them). For TTOs in large metro regions accessing these resources may be easy; university TTOs in smaller surroundings may have to keep their goals more modest. 

Tap into multiple funding streams — and multiple opportunities

A profit minded university fund shouldn’t be the sole investor in its startups — and tech startups needn’t be its sole investment focus. Thinking bigger, Wake Forest University took advantage of cigarette company RJ Reynolds’ declining fortunes and the city of Winston-Salem’s desire to revitalize a dilapidated corner of the city to develop a bio-tech research center and startup incubator in the area. The Innovation Quarter, as the project is now called, is home to more than 4,000 workers and 1,000 residents.

Be aware of conflicting priorities and requirements

Even though healthy ROI is now in focus, the mission of the TTO remains the release of university tech into the wider community and for public benefit. For private venture funds, whether brought in as GPs or LPs, the goal is a profitable exit, in a relatively short period of time. As recipients of public funds, university partners in these arrangements have strict regulatory and reporting requirements, which can add to costs and reduce returns. Successful university funds recognize these priority differences early and manage them from program start up.  

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Industry partners – the most common type of strategic investor – can be a game-changing resource for a young company.

Strategic investments by industry are fundamentally different than financial investments. Before deciding which approach to take for your startup, it’s important to understand the differences.

Financial investors

Financial investors are fundamentally driven by making returns on the individual assets in a portfolio.

While investing in a young emerging technology company may have some effect on the value of other assets in the financial investor’s portfolio, that’s not what drives the investment. The goal of a venture capital operation is to make a return on a specific asset by buying a security and later reselling it at a higher price – usually several years later.

The financial investor is always thinking about the gain on the sale of the asset – that’s the goal of the investment. The gain can stem from happen from an IPO (in rare cases), from a “trade sale” to an industrial company, or some combination of recapitalizing the asset, selling to management, or selling to another financial investor.

With this type of investment, there is no plan for the investor to use the technology directly.

Strategic Investors

In many cases, strategic investors have the opposite outlook of financial investors. They are motivated by the prospect of incorporating the technology into their business. An industry partner that wants to make a strategic investment in your company is going to want to see different information than a venture capitalist would.

An industry investor usually wants to get involved in a new technology venture because their scouts have an interest in deploying the technology to benefit their firm’s business. They want to know if, and how, they can incorporate that technology in their business over the long term.

Assessing Partner Fit

If you’re looking for capital and other resources, there are a few strong reasons to look into industry partnerships. Fundamentally, resources from strategic investors can provide a great deal of scope and support for a startup as it scales and commercializes new technology.

What kinds of resources do you need for your development plan? Perform an inventory of your required resources against potential in-kind contributions from a prospective industry partner. Industry partners could provide any of the following:

• Money (which can be turned into something else that your team needs, such as salaries or equipment purchases)

• Physical assets (pilot facilities, manufacutring capacity, distribution networks)

• Intangible assets (scale-up insights, customer access, deep ecosystem knowledge, a place at the table)

MAKE A FREE STARTUP PROFILE

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Young science-driven companies are different from consumer product startups

Startups developing and commercializing products based on deeply technical principles and scientific research have special challenges that startups in non-technical business services and direct-to-consumer products just don’t confront. While it’s true that you can buy just about anything you can imagine, having the money to play boss to an ever-expanding set of functions may still leave you with a lot more heavy-lifting — even after the bills are paid.

Entrenched industry forces aren’t evil, but they are real

Your business plan probably calls for you to sell your new product to other businesses rather than to consumers. You may have developed an advanced material for a sensor, an electronic component for a smartphone, a life science research tool, or even software protecting a machine or a network.

The point is, if you’re planning on B2B sales of a new technology-based product, chances are you’ll be facing a complex ecosystem. Paradoxically, the more disruptive an offering looks, the more resistance you’re likely to find, including from some big players and groups who can slow you down, or even keep you shut out long enough for you to run through your cash pile.

On top of money itself, and the time and effort needed to raise it, here are several fundamental types of hurdles young technology companies (and startups-to-be) face:

• 2^nd and 3^rd gen prototypes
• Customer testing/validation
• Scale-up design
• Regulatory matters
• OEM integration
• Distribution complexity
• Manufacturing flexibility

But they’ll rip off my idea, steal my business and leave me with nothing…

Emerging technology teams often experience a nagging tension between remaining in stealth mode and letting the market see what they have in order to generate some buzz and interest. While seeking an industry partner does mean having to show something, having discussions does not equal giving the farm away. The distinction lies in the ability to clearly articulate what you want.

So, if you are affected by one or more of the above challenges to the point where you are required to explain this to investors, you should think about the trade-off involved in an industry collaboration partnership. “Trade-off”? Of course there’s a trade-off, but it’s not about morals and dreams. It’s about practicality and the overriding rule of collaborating with industry partners: know your purpose and goals for working with them.

Here’s an example: you need scale up insights, and your prospective partner wants to use your technology in an application that doesn’t really interest you. Sound like a good fit?  It could be great – you receive the benefits of their expertise, have access to development insights, and let them spend money on an application that’s not strategic for you anyway.

Looking in the right places: smart gap-filling

Look for a venture group that is well-matched for you and your business.  Look for an organization that likes your technology and business plan, has a reputation for patience and support, and is eager to use its network. Finding the right partner will make a quantifiable difference.

Unlike industrial companies, VCs don’t own the assets that you covet. Even being referred by a financial investor to a top OEM for product testing is still no match for the backing of an industry partner who says, “We’d like to work with you on this young company’s technology. It can lower final cost of the component by more than 10%. Please try it and tell us what you think?” That industry is likely to have other assets that can accelerate your scale-up and product development.

Define what you need, identify the players are, and figure out what it’s worth

Some may comment “They’ll steal your idea” or “You want to sell out and work for a big company already?” But those comments miss the point: you know what your gaps are, and you seek efficiency and acceleration on your commercial path.

First, do your gap analysis and determine the milestones to achieve commercialization. Then, lay out your basic alternatives by economic cost, along with the risk of failing to achieve them on time or at all. Finally, determine who the players are that have those resources to smartly fill your gaps. Here’s a sample gap analysis to get the juices flowing.

Next week, we’ll talk more about trade-offs and negotiating with industry partners. (Hint: They’re completely different from financial investors!)

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Back in 2012, the Jumpstart Our Business Startups (JOBS) Act was passed to facilitate funding innovation in the United States. On the JOBS Act’s 5^th anniversary, we wanted to explore two of its major areas of focus: small company IPOs and crowdfunding.

Going Public in the United States

One part of the JOBS Act was intended to facilitate IPOs, but five years later it seems that measuring its impact on IPOs is far from straightforward.

Overall, IPOs in the United States trended downward in the years after the JOBs Act was passed, with the average number of IPOs per year in the United States hitting a 7-year low in 2016. Experts typically do not cite the JOBs Act when discussing the factors of the IPO drought, which include an active mergers and acquisitions market, events like Brexit and the US election, and a public skeptical of sky-high tech valuations. A surge in IPO activity in Q1 2017 has this year pulling ahead of 2016, a revival that experts at EY credit to the post-election market rally.

According to Joseph Hall, a former Managing Executive at the U.S. Securities and Exchanges Commission, the JOBS Act has made the steps to becoming a public company simpler but expressed doubt that it had any major impacts on overall IPO levels.

“I think if a company was ready to go public, they were [already] a good candidate… the JOBS Act came along [and] made that a little bit easier,” Hall stated in an interview with the Financial Executives Research Foundation in early 2017.

That answer seems unsatisfying – shouldn’t the JOBs Act have had an effect?

The JOBs Act and Small Company IPOs

The answer is that it has – but the impact is mainly related to Title IV, the provision that helps small companies file for an IPO more easily. The impact is focused on small company IPOs versus traditional IPOs, rather than on overarching IPO trends.

The JOBs Act provided a mechanism, Regulation A+, allowing small companies to pursue “mini-IPOs” – raising up to $50 million from the general public. In August 2017, the division of economic and risk analysis at the Securities and Exchange Commission published a report that indicated the Regulation A offerings jumped significantly in the 18 months after the new rules went into force.

The number A+ offerings relative to traditional IPOs has grown.

No company needs to IPO just for the sake of it. With industry collaboration platforms like seedsprint, emerging technologies may find themselves find themselves partnering with existing companies that help them scale. But the more possibilities that are out there to support tech companies, the better.

And small company IPOs aren’t the area where the JOBs Act has had an impact.

A New Funding Strategy for Startups: Equity Crowdfunding

The more pronounced impact of the JOBS Act seems to be on equity crowdfunding, a much-hyped approach to financing new technology in its earliest stages.

Though the Jobs Act was signed in 2012, its crowdfunding provisions (Title III: Regulation Crowdfunding) did not take effect until May 16, 2016. This part of JOBS Act allows ordinary Americans making less than $200,000 a year ($300,000 for married couples) – the ability to invest directly in the equity of a startup. The Act also authorized the use of third party portals for this kind of crowdfunding.

Even before the JOBS Act made it possible for this type of investor to take equity, “family and friends investors” had purchased billions of equity in US technology companies. Equity investing may now tempt even more first-time or small-scale investors.

Crowdfunding Versus Venture Capital

What will happen to traditional venture capital as crowdfunding expands?

Eileen Burbidge, from VC Firm Passion Capital, says that she is glad the ecosystem is getting larger – but that traditional VCs won’t suffer as a result. When Reuters asked Burbidge if she saw equity crowdfunding pulling business away from VC firms, she responded, “I don’t think so… the whole pie is growing bigger. We’re seeing more people start businesses, more innovation, more opportunities.”

There is disagreement on this count; reporters at both Forbes and TechCrunch have published articles predicting that VC firm could become destabilized by the rise of crowdfunding, as their funders pivot to direct investment via new crowdfunding platforms.

According to some, growth in crowdfunding is related to the decentralization of startups, beyond traditional hubs like Silicon Valley – where VC firms thrive.

“[Startup] proliferation has been global whilst the innovative companies and venture investors remained local,” writes TechCrunch. This implies that equity crowdfunding may come to serve innovators who have trouble securing venture capital in today’s tech ecosystem.

The Fate of Equity Investing

No matter its impact on VC as a whole, democratization of startup funding is likely to make a big difference for certain startups.

New technology drives the seedsprint community, and so changes to new funding approaches like crowdfunding are always of interest.

There may be cases where equity investing and crowdfunding can give a small company enough runway to tweak their technology, develop a proof of concept, or gather data – successes that they can then present to a major investor or corporate partner.

Both small company IPOs and equity crowdfunding unlock new possibilities for fundraising. Data shows us that the JOBS Act is having an impact on emerging technology companies.

Interested in connecting with industry technology scouts and emerging technology entrepreneurs?

JOIN THE SEEDSPRINT COMMUNITY

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