Start-up funding sources and biotechnology firm growth

Biotechnology is one of the world's fastest growing industries, expanding almost four times faster than the G-7 average for all sectors with global demand of US$50 billion in 2005. Biotechnology offers significant economic benefits, particularly in exports and job creation, as well as important health, safety and environmental benefits. Although it has the potential to be an important engine of economic development in the twenty-first century, its research-intensity and the associated long lead times have intensified the equity gap faced by all rapidly growing firms. As a result, there are concerns about start-up financing on growth and performance. Our results show that angel, venture and conventional capital have contributed significantly to R&D capital formation and sales growth. Conversely, the contribution of funding from government, IPO and alliance capital sources are unimportant for our sample of biotechnology firms. These are counter intuitive results for conventional capital's importance for firm growth rates. It was expected that venture capital would be most important; however, it may be that older firms with more mature products or products ready for market are chosen as bank customers. In that case, perhaps it makes sense that bank capital is correlated with higher growth rates.