Emerging Opportunities For Startups In Biotechnology Sector

02-02-2019 16:26:23 7130

Startups are the centers of innovation and are a great way to enhance employment creation in the economy and India needs around 6 to 7 million jobs a year and global data shows that it is startups, not large enterprises that create net new jobs in any country.

Prime Minister of India, Shri Narendra Modi formally launched the "Start-up India" initiative on January 16, 2016 at Vigyan Bhawan, New Delhi. This initiative aims at fostering entrepreneurship and promoting innovation by creating an ecosystem that is conducive for growth of Startups. The objective is that India must become a nation of job creators instead of being a nation of job seekers. The Startup India by Prime Minister of India has already brought lots of positivity among the entrepreneurs in India. Industry is elated by the fact that India has the third largest number of startups globally. Fostering a fruitful culture of innovation in the country is a long and important journey. This initiative will go a significant way in reiterating Government of India's commitment to making India the hub of innovation, design and Startups.

The Indian Biotechnology sector is gaining global visibility and is being tracked for emerging investment opportunities. The sector is divided into five major segments - Bio-pharma, Bioservices, Bio-agri, Bio-industrial, and Bio-informatics. The bio-pharmaceutical sector accounts for the largest share of the biotech industry with a share of 64% of total revenues, followed by bio-services with 18% market share. India is becoming a leading destination for clinical trials, contract research, and manufacturing activities, which is further fueling the growth of the bio-services sector. Bio-agri segments accounted for 14% of the biotech industry in 2015-16, while the remaining market is catered by bio-industrial (3%) and bio-informatics (1%). For a country like India, biotechnology is a powerful enabling technology that can revolutionize agriculture, healthcare, industrial processing and environmental sustainability.

The Indian biotechnology sector has, over the last two decades, taken shape through a number of scattered and sporadic academic and industrial initiatives. Biotech industry is expected to grow at 30.46 percent CAGR to reach USD 100 billion by 2025. The Biotechnology Industry in India has grown from $1.1 billion in 2005 to $7 billion in 2015 and is expected to reach $11.6 billion by the end of 2018.

Presently, key drivers for growth in the biotech sector are increasing investments, outsourcing activities, exports and the government's focus on the sector. 100% Foreign Direct Investment (FDI) is allowed under the automatic route for greenfield pharma. 100% Foreign Direct Investment (FDI) is allowed under the government route for brownfield pharma in upto 74% FDI is under automatic route and beyond 74% is under government approval route. FDI up to 100% is allowed under the automatic route for the manufacturing of medical devices.

Startups are essentially of two kinds. One that starts something ground up, something that no one has thought about and is often ground breaking. This type of startup is difficult to create but once created often sees unprecedented growth. The second kind of startups are primarily the ones who do not want to reinvent the wheel. They are akin to adding old wine in a new bottle to create something new and innovative.

Entrepreneurship and startups are only a recent phenomenon in the country. Doing a startup is tough and every country sees more failures than success. More often than not, an entrepreneur needs to be prepared to face failures and unprecedented hardship. Entrepreneurship thrives on celebrations and a society that fails to appreciate business failures stifles innovation and creativity even before it can start. Failures often teach an entrepreneur, what to do and what not to do.

Financing Challenges for Startups in India
Most of the first generation entrepreneurs across the country are applauding the government's efforts to recognize their business ventures under the banner of Startup India, but for most challenges of funding, patents and creation of intellectual property remain. Around 90 percent of funding for startups, at present, comes from foreign venture capitals and domestic financiers could change the nature of innovation as well. A recent study by Grant Thornton revealed that in 2015 more than 600 such companies got funding, with over $2 billion deployed by PE and VC funds.

According to a recent study, over 94% of new businesses fail during first year of operation. Lack of funding turns to be one of the common reasons. Money is the bloodline of any business. The long, painstaking yet exciting journey from the idea to revenue generating business needs a fuel named capital. That is why, at almost every stage of the business, entrepreneurs find themselves asking - How do I finance my startup? There are various funding mechanisms available in the market for startups.

Here are some of the Innovative Funding Methods for Startups in India:-
Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA)- Started with an initial corpus of Rs. 20,000 crore to extend benefits to around 10 lakhs SMEs. You can submit your business plan and once approved, the loan gets sanctioned. You get a MUDRA Card, which is like a credit card, which can be used to purchase raw materials, other expenses etc. Shishu, Kishor and Tarun are three categories of loans available under the promising scheme.

Bootstrapping or Self Funding- Self-funding, also known as bootstrapping, is an effective way of startup financing, especially when you are just starting your business. First-time entrepreneurs often have trouble getting funding without first showing some traction and a plan for potential success.

Crowd Funding- Crowd funding is like taking a loan, pre-order, contribution or investments from more than one person at the same time. In this a startup will put up a detailed description of his business on a crowd funding platform. He will mention the goals of his business, plans for making a profit, how much funding he needs and for what reasons, etc. and then consumers can read about the business and give money if they like the idea. Those giving money will make online pledges with the promise of pre-buying the product or giving a donation. Anyone can contribute money toward helping a business that they really believe in.

Angel Investment- Angel investors are individuals with surplus cash and a keen interest to invest in upcoming startups. They also work in groups of networks to collectively screen the proposals before investing. They can also offer mentoring or advice alongside capital. Angel investors have helped to start many prominent companies, including Google, Yahoo and Alibaba. This alternative form of investing generally occurs in a company's early stages of growth, with investors expecting upto 30% equity. They prefer to take more risks in investment for higher returns.

Venture Capital- Venture capitals are professionally managed funds who invest in companies that have huge potential. They usually invest in a business against equity and exit when there is an IPO or an acquisition. They provide expertise, mentorship and act as a litmus test of where the organisation is going, evaluating the business from the sustainability and scalability point of view.

Business Incubators & Accelerators- Early stage businesses can consider Incubator and Accelerator programs as a funding option. Found in almost every major city, these programs assist hundreds of startup businesses every year. Incubators are like a parent to a child, who nurture the business providing shelter tools and training and network to a business. Accelerators are more or less the same thing, but an incubator helps/assists/nurtures a business to walk, while accelerator helps to run/ take a giant leap.

Microfinance Providers or NBFCs- Microfinance is basically access of financial services to those who would not have access to conventional banking services. It is increasingly becoming popular for those whose requirements are limited and credit ratings not favoured by bank. Similarly, NBFCs or Non Banking Financial Corporations are corporations that provide banking services without meeting legal requirement/ definition of a bank.

Thus it can be concluded that with all the support from Government of India and the kind of ecosystem that has been created in last three years, there are huge opportunities for startups in biotechnology sector. When the first generation of biotechnology startups began to be formed 20 years ago, India's initial set of companies were set up either by scientists who had no business experience, or by entrepreneurs with business backgrounds. But now, there are also a diverse bunch of startup entrepreneurs who are setting up companies in:- *regenerative medicine *new methods of drug delivery *novel biocompatible materials *molecular diagnostics *nutrition *sustainable energy and agriculture.

Many of the engineering startups are trying to solve healthcare and agriculture problems, thereby stretching the definition of biotechnology. Others develop products vital for biotech research. In the past decade, the definition of biotechnology has become broader, with the merging of engineering and biology, and the rise of medical technology companies. Conventional biotechnology has expanded too, especially with emergence of agri-biotech startups. Agriculture is now a hot area for investments by large companies and venture capitalists.

Though there are challenges in this sector but still there are many startup entrepreneurs in the biotechnology space, who are doing exceptionally well. Government of India is providing a lot of support through initiatives like DBT, DST, CSIR, and BIRAC who are pumping a generous amount of money within the biotechnology startup ecosystem.

Finally, it can be summarized that emerging Startup companies in biotechnology space are the most dynamic economic organizations in the market, since they provide additional dynamics and competitiveness to any economic system. They act as catalytic agents for change, which results in chain reaction and the process of industrialization is set in motion.

Ankita Rani
Employment News