At SXSW: How Biotech Can Overcome Obstacles

Before the SXSW panel Against All Odds: Overcoming Startup Challenges, panelists share a few insights on the benefits and limitations of new, innovative fundraising models, as well as how to survive in a heavily regulated industry.

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By Laura Entis

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Entrepreneur is on the ground for SXSW. Check back for highlights from the festival as well as insights on trends from thought leaders and innovators. See our own Laura Entis moderate a panel today Against All Odds: Overcoming Startup Challenges with Ethan Perlstein, Kara Bortone, and Linda Avey discussing new approaches biotech companies can take to securing funding.

Raising money for any kind of company isn't easy. But funding for biotech has become especially problematic with large swaths of venture capital flowing into tech apps. The funding road alone can be downright discouraging for biotech startups and heavy regulations add an additional barrier.

But there is hope, especially for those in biotech willing to consider all the options available to them, as well as plan for regulatory challenges from the inception stage onwards. In that light, Ethan Perlstein, Ph.D. and founder of Perlstein Labs, Kara Bortone, head of company sourcing at Johnson & Johnson Innovation, JLABS and Linda Avey, the co-founder of 23andMe and Curious, Inc. discuss some nontraditional funding options, as well as how to innovate in a heavily regulated infrastructure.

Related: Exits: What's Red Hot in Venture Capital and What to Expect in 2015

Consider crowdfunding
Ethan Perlstein holds a Ph.D. in molecular biology from Harvard, and has spent five years doing postdoctoral research at Princeton. But when it came to opening his own lab to study orphan diseases (conditions that affect fewer than 200,000 people in the U.S), he was turned away from university after university.

Instead of giving up, he chose to go the unconventional route of raising the money to open his own lab himself, through crowdfunding. To operate for 18 months, he estimates that he'll need $1.5 million, which he is currently raising on AngelList from accredited investors.

Crowdfunding, and the social media push that requires, seems an obvious step to many entrepreneurs, but not for academics. Still, connecting with like minds and allies in any possible way is crucial for scientists looking to fund their own research, says Perlstein, "Take control of your vision, brand and destiny," he suggests.

Related: Top 10 Early Stage Venture Capital Deals of 2014

Corporate incubators
Corporate incubators provide small biotech companies support that they often can't get outside large corporations and not all ask to control the management of your company or expect to integrate your product into their company. Kara Bortone is the head of company sourcing at Johnson & Johnson Innovation, JLABS an incubator network for biotech companies that operates under Johnson & Johnson's external R&D department. Consisting of research facilities in San Diego, Boston, San Francisco and South San Francisco, Johnson & Johnson Innovation provides emerging science startups with specialized equipment and a support network and a "entrepreneurial, high-energy, think-tank environment, all with no-strings attached," Bortone says. "This flexible platform allows companies to get up and running quickly by providing access to state-of-the-art facilities and support."

Related: SXSW: What ClassPass Learned About Making Decisions Easier for Customers

Talk to the FDA early
Linda Avey understands the challenges of pushing up against regulations. Her advice to biotech entrepreneurs: Don't be afraid to be disruptive -- the current infrastructure is very broken. At the same time, start a dialogue with the FDA early.

The company she cofounded, genetics test startup 23andMe, offers a cautionary tale on what happens when regulators feel ignored. (In 2013, the agency banned 23andMe from selling genetic testing kits: "You have not worked with us," it read.). As a result, she recommends biotech entrepreneurs work with regulators early and keep lines of communication open. She stresses to provide the agency with all the information it requests, to give your concept its best chance at thriving.

Laura Entis
Laura Entis is a reporter for's Venture section.

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