"So as an early stage biotech investor, you have to feel comfortable in a business' ability to make money, the regulatory environment, and the science. Those are three knowledge barriers, compared to the world of software. There are fewer investors there [life science] because it's harder to invest in," said Tyler Willis.
Willis is an entrepreneur who founded Involver, software that helps corporations manage social media. Today, he is an angel investor who advises and mentors start-ups and writes advice for them on the blog Venture Hacks.
Willis and Adamian are angel investors—wealthy or well-funded individuals that step up to fund and mentor emerging companies. Angels step in when no one else will—when a venture is so risky that it requires specialized sector knowledge to determine if it can succeed. Life science angels know the industry and are able to better foresee "unknowns" like FDA approval.
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But because there have been fewer dollars flowing in from other sources, start-ups are having to look for other sources of funding. One solution has been to team up with big pharmaceutical companies much earlier in a start-up's development, a trend that is helped by corporate programs designed to foster the next generation of businesses, said Adamian. She cited her investment in ZappRx, an online prescription platform, that received funding in December from SR One, the corporate venture capital arm of GlaxoSmithKline.
Johnson & Johnson, Eli Lilly, AstraZeneca, Roche and Merck are also among the big pharma companies that have established corporate venture capital arms, and their role is increasingly important, according to a report in Nature Biotechnology.