Ask HN: How do experimental research companies exist financially? | Hacker News Reader

Ask HN: How do experimental research companies exist financially?

12 pointsamts10 comments

As I keep listening to various biology/biotech related podcasts, sometimes the research related information is being intercepted with statements like "...and on the basis of these ground breaking results in yeast/mice/salamanders/axolotls/etc animals/a dozen of patients we founded a company for more in-depth research". There are no mentions about MVPs, business models, interactions with customers, funding, profits etc. I was curious how do such companies whose main activity seems to be the conduction of basic _cutting_edge_ biotech research with still a far goal of a broader application in humans do exist financially. Is it all about just getting a right long-term funding?

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Not the definite answer but some observations I see here in Germany: 1. University spinoffs which only exist on paper: all founders and early employees hold paid positions at the university and the spinoff is I think more of a way to deal with intellectual property, do more effective marketing and build business relationships. 2. They run on government research grants. 3. Eventually they might start selling some software/hardware they developed as a byproduct but which was not their core research effort, or they start using their highly educated employee base with their niche expertise to start building/selling a product/service that is related to their research effort, but not quite as ambitious.

For biotech, they tend to go to public markets pretty early, while the drug is still in development/approval pipeline due to the high upfront investments, much like EV firms who have high capital costs. Prior to that I'd assume private investors/VC, but that's a guess.

Moderna started out this way.

In Poland, companies can apply for state research grants just as universities. AFAIK there are some small companies which live off those. Of course, as is always the case, client shapes the company, and in this case the client is government and their byzantine grant selection process - so, that's what these companies have to optimise for.

In the US are similar paths. Highly credentialed researchers and snag a grant from the national bodies to do this kinda research, usually in collaboration with a university

I worked for a "small" 60 people biotech/oncology company which were continually in the negative, financially speaking. The company existed like this for 20 years, selling potential drug candidates for hundreds of millions (DKK). The idea behind the company was so good that investors kept it alive and it was then bought for billions (DKK) by a big American biotech company.

What was the idea?

> Is it all about just getting a right long-term funding?

Or any long term funding. Once they had the team and patents they probably created a pitch deck and met with investors. Often the friction of that process is glossed over in the founding story.

Private endowment or grant money.

It really helps if they have a catalogue of IP they can license

Don't forget IPOs and stock issuance. Loans. Lookup "biotech microcap stocks" for more examples.

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