Last year was A record 12 months for venture-backed biotech and pharmaceutical companies, with transaction activity of $ 28.5 billion, up from $ 17.8 billion in 2019. As vaccines roll out, Drug development pipelines are returning to normal and next-generation therapies continue to attract investor interest, 2021 is set to be another successful year.
The median rise in Series A to Series A valuations is now 2x, higher than in all subsequent cycles. As a result, biotech startups will continue to attract more investment at early stages from a larger and more diverse pool of venture capitalists.
It can also change the nature of the biotech founders themselves: as a Y Combinator blog post suggests, these founders tend to be younger and perhaps less willing to cede control to VCs and hired executives than others. ‘they would not have been able to in the past (ie through the “start-up” so prevalent among early stage biotech companies).
Founders are some of the most creative people, but legal documentation should be anything but.
As long-time members of the biotech startup community – as executives, entrepreneurs, advisers, and legal counsel – we’ve seen our fair share of the founder’s missteps early on in the fundraising journey lead to dire consequences.
In this exciting time, where the young founders will likely receive more attention, capital and control than ever before, it is essential to avoid certain pitfalls.
Clarity trumps creativity
Founders are some of the most creative people, but legal documentation should be anything but. Keep it as simple and clear as possible. This means using documents from the National Venture Capital Corporation that everyone knows and understands, as well as keeping organized documentation for employee intellectual property (IP) assignments and NDAs, option grants, employee agreements. independent contractor, tax documents and other contracts and key documents.