Cash-burning R&D-stage biotechs have big appetites for cash, which is typically addressed with an equity-based diet. It’s also supported through corporate partnerships and other less dilutive means such as grants and foundation funding. But another important and often under-appreciated source of capital are the debt markets – taking a loan out to provide working capital for further R&D.
One might ask why and how a company that won’t have profits for a decade can raise any money through the issuance of debt, but it happens frequently, and the “venture lending” business is actually very robust. Players like Silicon Valley Bank (SVB), Oxford Finance, Hercules Technology Growth Capital, and Horizon Technology Finance (and many others) are all very active supporters of emerging life science companies.