The increase in venture capital funding was indeed good news for the biotechnology industry in 2006-07. The venture funding for the Indian biotech sector saw a growth of 150 per cent to $125 million, largely due to growing interest from institutional investors and investment banks. Globally, the total venture funding for biotech sector was $639 million and was disbursed among 66 companies in the sector.
Although venture capitalists were cautious, there has been dedicated effort from the companies to raise money. The increase in funding can undoubtedly attributed to the rosy prospects of the biotech sector in the country. Venture capitalists have comprehended the business dynamics of biotech firms and realized that they can reap profit by concentrating in the industry through identifying drug targets, and taking them through various phases of clinical trials and drug development.
Fueling biotech investment activity, venture capital funds like APIDC VCL (Andhra Pradesh Industrial Development Corporation Venture Capital Ltd), a joint venture between the AP Industrial Development Corporation and Dynam Venture East of USA, has emerged in the scene. APIDC VCL is the country's first dedicated biotech venture capital fund and helps start-ups in biotechnology industry a great deal. Apart, ICICI Venture, Kotak Mahindra Bank, Nadathur Holdings are some of the names that Indian biotech firms are familiar with.
"Only if the biotech companies have innovative ideas and come up to venture capitalists, they will receive support. Actually the funding scenario is more positive now as the venture capitalists (VCs) are not deterrent to invest in the right companies. For instance take APIDC-VCL. It is doing a hell of job by identifying and encouraging innovative ideas and concepts in the sector. Apart, the Small Business Innovation Research Initiative (SBIRI), launched by the Department of Biotechnology should provide a fillip to the public-private-partnerships in the country because it supports the high-risk pre-proof-of-concept research and late stage development in small and medium companies," said Dr. Kiran Mazumdar Shaw, head, Vision Group on Biotechnology and chairman and managing director, Biocon Limited.
As per P Sudhakera Naidu, managing director and CEO, Biovel Life Sciences Pvt. Ltd, an Indo-US joint initiative, the VC funds are hard to come by. Our company managed to raise money through term loans and US NRIs, he added. Biovel Life Sciences was incepted in mid-2004 and is engaged in manufacturing and marketing of bio-generics and bio-therapeutic.
Biotech companies are also looking at options like SBIRI, Technology Development Board and New Millennium Indian Technology Leadership Initiative (NMITLI) which offer lower return and higher risk plays, according to Prof. G Padmanabhan, scientist emeritus and former director, Indian Institute of Science.
Sarath Naru managing director, APIDC-VCL, is of the view that spotting good early stages opportunities in India is a challenge as there is not enough experienced / business savvy technoprenuers that are emerging to start up businesses. The VC's have to proactively identify entrepreneurs to help shape their business plans.
The VC industry has enhanced revenue generation through funding revolutionary technologies. Most success stories have been through identification of early-stage opportunities. The trick is to identify the opportunity, noted Nitin Deshmukh, head, private equity, Kotak Mahindra Bank and Director, Association of Biotech Led Entrepreneurs (ABLE).
In a bid to explore opportunities for investments and partnering for the biotech sector with VCs, the ABLE organized a BIOINVEST 2006, an interactive conference for Life Science and Investment Firms. "With the significant growth in investments over the last couple of years, the Indian biotech industry is well on track to be reckoned in the global map," said, Dr. K. K. Narayanan, President, ABLE and Managing Director, Metahelix Life Sciences.
"The biotech sector is seeing interesting and novel models of funding," said Alok Gupta, Country Head, life science and Technology, Yes Bank Ltd. and Regional Director (West) ABLE.