The classic startup catch 22: You won’t invest fearing we’re going to die – if you don’t, we will

Recently Dr. Steve Arlington, President of The Pistoia Alliance, had a great piece on reasons for why large pharmaceutical companies should support the growth of startups. Unsurprisingly we agree with Steve and want to highlight one of the classic challenges we have in common.

The classic startup catch 22: Customers don’t want to pay full price for new technology, fearing the startup might not be here tomorrow. Well, if no customers want to pay, the startup certainly won’t be around for long.

Honestly, it’s absolutely correct that a lot of startups won’t make it past the first 1-2 conceptual years, for whatever reasons. However, if you’re dealing with a startup that has existed for more than a couple of years and have several prominent customers – market validation – in reality the likelihood of them going out of business is not vastly bigger than older mid-sized companies with a much bigger cost base.

The irony is, that quite often the scientific staff have bought in on the new technology and are waiting to get their hands on it, while it’s typically purchasing and legal departments that in effect prolong the finalization of a deal, while trying to get various guarantees and squeeze the size of the deal.

If big biotechs and pharmas rather focused on making multi-year contracts with startups, understanding that their funding would effectively secure the continued development to the benefit of themselves and longevity of the company, who would lose?