How would you describe the need for gap funding/accelerator programs to someone outside of the university tech commercialization/innovation community?
Funding plays a crucial role in the development of university IP-based startups. But, venture capital investors and strategic partners rarely invest in startups at their earliest stage of development as there are many associated risks and uncertainties. The future market and application of the technology, or even what the product will be, might be unclear. A challenge for startup companies is to show investors they have a unique IP-protected technology. Showing clear advantages over competition is imperative, together with addressing a market need.
For UNC, the predominant focus on life sciences magnifies the funding gap. For example, NIH is UNC’s largest federal funder, awarding $473M in 2019 to more than 900 projects, and so a significant number of our startups are in the biotech or healthcare space. Many of these companies need extended development times and substantial investments to translate a discovery into a product capable of reaching the market. Even before clinical trials start, the drug discovery and translational research required by many of these startups can cost up to $50M per program, take 5+ years, and face high failure rates.
Most investors want to see market feedback and a working prototype or validating data in animal models before committing an investment. Yet, to show these to investors, the startup needs to find funding – a classic chicken or egg dilemma. This dilemma is why gap funding and accelerator programs are so crucial in the success of university IP-based startups. Gap funding de-risks early-stage startups and makes them attractive to investors and commercial partners.
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