Traditional venture capital is not the best solution for funding life science innovations…

The Current Funding Dilemma

An EvaluateMedTech report on 5 Predictions for med-tech in 2020, revealed that venture capital funds invested in medical technology have been dwindling, a trend that is likely to continue. The traditional venture capital funding is not only a conservative method, but also one that proves both slow and expensive for start-ups.

But here is the state of funding for life science research, and it’s not good:

“80 to 90 percent of research projects fail before they ever get tested in humans. By industry’s reckoning the number may be even higher, for every 5,000 compounds tested, only five make it to clinical trials.” — Faster Cures

“There’s a backlog of about 20 years of drugs that are waiting to be tested but can’t be funded.” — Roger Stein, Senior Lecturer in Finance at MIT’s Sloan School of Management

The research and innovation industries need a better solution to venture capital. For a start, it’s not inaccessible for most. On average, only about one in 100 businesses receiving such funding. Those that do receive funds find that they need to sign away quite a large proportion of their earnings and shares in their company, to their VC partners.

According to a May 2015 article by CB Insights, early-stage investor-backed start-ups (seed stage) have only a 1.28% chance of becoming a $1 billion unicorn. Meanwhile, the traditional VC model entails funding 30 to 40 start-ups per fund. For a top performing fund, this means making winning investments about 15% to 20% of the time over 7 to 10 years, resulting in very modest returns.

Venture capital is very restrictive

This explains why the average VC firm barely manages to return investor capital after fees, with occasional and almost random “home run” investments. Some of the key limitations of traditional sources of funding include:

· The investment is not liquid, typically for 7 years or more
· There is no access for small, retail investors
· The VC fees are usually about 2% PA of funds under management (and 20% of profits)
· Once invested, the investors are passive, which means you have no say on how your money is being used
· The usual timeframe of 5 to 7 years of fund life and strategy are no longer pertinent in a fast-moving, fast-changing world
· VCs depend upon liquidity to recycle money, but the IPO market remains subdued resulting in limited recycled fund-availability for investment
· The track record of returns is mixed in a high risk/high return area where the potential upside is very high
· Investors depend upon a formal liquidity event such as a trade sale, or IPO

In short, traditional funding has been neither a win for the provider nor the company seeking funds. On the other hand, the need of the hour is to improve healthcare while reducing spending, which can only be achieved through innovation.

HeartChain is revolutionizing life science research funding

HeartChain is pioneering the very first decentralized, global sponsorship network designed specifically for the medical technology industry. It will remove funding hurdles for medical innovators, and speed up the time taken for new products to reach the market, where they start earning for their creators. Sponsors will benefit by owning a tokenized version of the medical innovation, with the option to donate or sell back the token for profit.

You can get more detailed information and download the whitepaper at www.heartchain.com or join the Telegram community at https://t.me/heart_chain