Great science companies can start with little funding

Many scientists we’ve been talking to think that it’s not worth starting a company unless they have significant funding on hand because research-intensive startups are so capital-intensive. Research and development can burn through a lot of money very quickly, but that doesn’t mean that only having limited resources available is a deal breaker – in fact, very successful multi-billion $ biotechs have been started this way [1]. What really matters most at this early stage is being smart about the money you have in the bank and making the right decisions on what to focus on. When operating on a budget, your primary goal should not be to figure out everything and build an almost-ready product or complete a full data package that would warrant an IND (great if you can!) but how you can de-risk things enough to make what you are working on more attractive to investors in order to raise more substantial funding at better terms at the next stage. What also matters a lot at this point are data points that are not related to the technical progress, such as building out a very effective core team and how much you grow as a founder and the company lead.

This might sound counterintuitive to some at first, but in many cases, it might actually be beneficial to raise less money in the beginning and I wanted to highlight here a few examples below of why less funding is sometimes more.

You retain more ownership and control

Especially in the current climate, it is very challenging to raise a significant chunk of money on preliminary data at all or without giving up substantial ownership of the company. Many first-time founders I talk with think of ownership as something that only affects the potential financial return but don’t realize that ownership also means control. If you give up a significant amount of equity you might up in a situation in which you are not fully in charge of your technology anymore or the approach you want to take. This is especially dangerous when teaming up with funds that have little domain knowledge and not much in-house expertise to really help you make the best decisions and if their primary goal is to get a fast return on their investment.

If you can get away with a smaller amount of capital and sell less of your company to make meaningful progress the dynamics can change quite a bit and you might be able to raise more money at better terms at the next stage. Often this ‘piecemeal approach’ results in a better deal overall as if you would have raised the full amount from the get-go.

It forces you to stay goal-oriented

Another point is that operating with less money forces you to stay focused and mindful of goals and milestones. Having a large research budget is great but a very real concern is that it can also create a lot of distraction, especially if you, as a first-time technical founder, can think of more than one breakthrough application and might itch to explore different possible options at once. With fewer resources, you are forced to think about what it is that makes your technology have world-impact potential and you need to figure out the best way to get there while hitting meaningful milestones on the way to enable subsequent funding rounds.

We for example run a program, called Scifounder Fellowship that gives technical founders $400K for an idea to get started as well as hands-on mentorship from us. It’s been exciting to see all the strong technical progress our founders were able to achieve with the capital they had on hand, ranging from building prototypes to running very meaningful experiments in animal models.

You’ll meet truly mission-aligned people

With less capital on hand, you will have a hard time competing with the compensation packages of more established startups or larger biotech companies. This is a two-edged sword because it makes attracting talent so much harder but at the same time a great filter to find like-minded researchers that truly believe that your approach has the potential to make a big impact. The reason why you want to team up with people that are mission-aligned is that these are the kind of teammates that will stay with you long term, not leave if things are getting stressful or jump ship after receiving a slightly better offer from a different company. Not having several years of a comfortable runway is also a good filter to find teammates that can handle uncertainty and don’t stress out in a faster-paced environment and are able to push toward tight deadlines.
If you didn’t have to sell much equity to investors you are also in a really good spot to be more generous with equity for your teammates and reward them with enough ownership that if all works out it would be a life-changing event for them as well [2]. This is the best way to reward amazing talent that had your back from the start and is going with you all the way.

I hope the points above help to understand why often raising less capital when getting started can make more sense. If you are a scientific founder and would like to chat more about this topic or would like to hear our thoughts on fundraising feel free to reach out at

Thanks to Matt Krisiloff, for reading the drafts of this post.

[1] Regeneron was started in 1988 with $1M (around $2.5M in today’s money) and Genentech in 1976 with $100k (would be around $500k now) and several other impressive biotechs have been started this way by technical founders. I summarized my favorite founding stories here.

[2] My teammate Matt Krisiloff wrote two very informative posts about equity for science companies. You can find his posts here.