VC-backed Biotechnology Firms: What is Entrepreneurs’ Return?

Abstract

Valuation is a highly significant process used extensively not only by start-ups seeking Venture Capital (VC) funding but also by large, established companies that are in need to set a price for an acquisition or merger. Such process becomes increasingly complex in the biotechnology sector where the realization of the true value of a firm is largely correlated with the success or failure of lead drug candidates undergoing clinical trials. In this article, the author sets up a simple long-term financial model that aims at providing an easy tool for estimating entrepreneurs’ return at exit.