What a time to start a business. Lab and university shutdowns, travel restrictions, stay-at-home orders, nervous investors, and social distancing—the novel coronavirus has created a lot of uncertainty. How can scientific entrepreneurs plan and execute what may be the biggest move of their professional lives when no one even knows what next week is going to look like?

The monthly number of deals raising venture capital for young and start-up companies dropped 38% for the two months starting March 4, as compared with the four months before the COVID-19 crisis, according to a recent Harvard Business School study from Sabrina Howell of New York University, Josh Lerner of Harvard University, and colleagues (SSRN 2020, DOI: 10.2139/ssrn.3594239). The study has not been peer reviewed.

Most of that decline was in early-stage deals, and the deals that did happen were more cautious. “Venture groups fund less innovative firms during recessions,” the authors write.

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That notion is corroborated by reports from companies participating in America’s Seed Fund, a program at the US National Science Foundation that provides grants to scientific start-ups. Senior program director Ben Schrag says a large number of firms in the seed fund’s portfolio have delayed or canceled fundraising rounds, and others have had them go poorly.

The Wall Street Journal reported in January that venture capital firms had a record $276 billion of “dry powder”—cash in hand that they were not investing. “It’s not that there’s not money out there,” Schrag says, it’s that investors are waiting for company values to drop so they can get a better deal.

Starting a company based on chemistry is a multiyear endeavor, and few such ventures have the luxury of waiting for the investment climate to thaw. For many firms, seed money is dwindling, but new investors want more data and progress than normal to feel secure putting up capital. It’s scary, with a silver lining. New firms that learn to run lean, develop discipline, and find the right partners can come out of the pandemic stronger than if they’d been born during more normal circumstances.

Ingrid Fung of the agriculture-focused venture capital firm Finistere Ventures says companies in Finistere’s portfolio that started during or just after the 2008 financial crisis are doing well today because they learned to be efficient with money, including by outsourcing some R&D. “They typically have lower burn; they can dial up or dial back,” she says.

C&EN spoke with three chemistry start-ups making big moves in the midst of the pandemic. The leaders at these firms have had to get creative to raise funds, build their teams, and move their products forward, all while keeping up staff morale at a time when it’s harder than ever to make a personal connection.

Source: Starting a science business during a pandemic