One of the biggest worries for entrepreneurs in trying to get their startups off the ground is where are they going to get funding. These entrepreneurs think that if they can throw enough money at their idea, it will come to fruition. The issue this creates is that entrepreneurs take on debt and third-party expectations without developing other portions of the startup. Eventually those other areas have to be developed. When investors want a return on their investment sometimes that can cause pressure to rush through the process and spell disaster for the startup. There is no hard-fast rule on when funding should be sought but generally it’s a natural progression.
Privately held biotechnology firm Tolera Therapeutics Inc., a startup based out of Kalamazoo, Michigan, recently closed its second round of funding. Hopen Life Science Ventures of Grand Rapids, Michigan led the round and was joined by other current investors including Triathlon Medical Venture Partners and SWMF Life Science Fund to infuse $5.5 million into Tolera. Tolera has said the funds will be used for a Phase 3 clinical trial of its immunotherapy drug called TOL101, a drug that could have broad application potential for treating diseases such as transplant rejection, Type-1 diabetes, multiple sclerosis and leukemia.
This was Tolera’s second round of funding but you can see the natural timing of the timing of the cash infusion. Tolera had developed the drug to the point where they were prepared take it to a clinical trial and needed the funding for the trials. Tolera obviously can’t sell the drug without the required testing so the business has no way to raise the money for the trials without outside funding. Tolera did not get the funding before it was ready to go to trial either. If Tolera had gotten this funding even 6 months ago, other testing and work on the drug might have been rushed because of the demand by the investors.
While your startup might not need $5.5 million, it might need funding at some point. Finding that right time for funding is a balancing act. The funding needs to be received so there is no slowdown in the development of the startup but not too early that can cause the startup unnecessary issues. A startup should really try to do as much as possible for as little as possible early on. Failures, hiccups and issues are part of the startup process. Debt can cause those growing pains to become real pains.
Source: “Tolera Therapeutics closes Series B-3 financing, raises $5.5 million to submit Phase 3 Special Protocol Assessment for its immune targeting biologic drug in kidney transplantation” by PRNewswire.com