Calling all biotech founders: top tips for managing expenses

Best practice expense management (for scientists who don’t want to be accountants)

Biotech is booming. According to research from McKinsey, in the year to January 2021 and fuelled by huge growth in VC fundraising and partnerships, average share price for European and US biotechs increased twice as fast as the S&P 500. Chinese biotechs also saw their share price double, with biotech globally outperforming the pharmaceutical sector.

Hardly a surprise, you might say, given the impact of the pandemic over the last 18-months.With so much focus on finding solutions to Covid-19, it was inevitable investors would look to bolster their portfolios in the science and healthcare sectors.

If biotech deals were attractive before the onset of the crisis, they became even more sought after in the face of a global pandemic. Reminiscent of the dotcom boom in the mid-90s, VC funding grew by 45% in 2020.But what does this mean for your biotech business? Is your start-up fully equipped to take advantage of investor interest? And what tools are available to help you run a fast-growth, innovative business without the administrative headaches that come with expansion?

Best practice expense management (for scientists who don’t want to be accountants)

Biotech founders are typically scientists, not accountants or HR professionals.

We’re pretty sure you didn’t set up your biotech so you could become an expert in capital
expenditure or master the art of supplier management.

In the context of growing opportunities in the current market, the Rebank team can offer
four top tips on seamlessly running the business and managing expenses, so you can focus
on what you are good at. One thing is certain, getting systems and processes in place early is
key.

1. Supplier management

Establishing a reliable supply chain for your lab equipment and instruments is crucial for any
growing biotech. A few simple rules will ensure both you and your suppliers remain happy:

2. Strategic spending

In the absence of a dedicated CFO or finance team, it’s vital to establish and categorise spending priorities early. Custom expense categories will make the process easier and ensure you stick to budget.

3. Who signs off?

Approving every invoice might be a necessity for biotech founders in the early days, but as the business and team grows this is neither practical or desirable. Having a documented approval flow for purchases will empower your team to sign off costs as the business matures.

4. Taking stock

Finally, a regular monthly or quarterly review of outgoings, duplications, redundant expenses, out-of-date subscriptions and everything in-between will offer your growing biotech a holistic view of your finances. Having two departments complete this review each time will make sure that no stone is left unturned.

As the business grows and requirements to manage finances become more complex, the need for a CFO will become more apparent. Even if you’re not ready to bring on someone full time, why not consider a fractional or part-time finance leader who can act strategically, take a leading role in your funding applications and support the CEO and management team to make the right strategic decisions for the business.

Opportunity is out there! But are you ready?

We know the cost of research for biotechs is decreasing and this means more individuals and teams are leaving academia to establish and grow their businesses. However, this
comes with a number of considerations:

Cashflow and money management – Outside academia, founders have to raise and manage funds independently. Sounds straightforward, right? But have you thought
about what accounting system you need? How you will send international payments? Who will take responsibility for payroll? How you will manage supplier invoices as the business grows and bills start to increase? Establishing processes early on will make life easier for your team.

Accelerators – good news for biotechs, accelerators want your application. Our own accelerator, Y Combinator, is just one of these and, of course, comes highly recommended by the Rebank team.

Other funding options – don’t forget about grants as a means to steady your cashflow in those early days. Although the application and reporting process can be somewhat onerous, there are now lots of dedicated life sciences research grants available. We even provided some advice in our blog on making your application.

One thing is for sure, as operational expenses increase, as new funding and grants are wonand as innovation and R&D present new opportunities, business processes will have toevolve. We’re excited to see what the future holds for biotech, and support some of thebrilliant innovations coming into the market by allowing founders to focus on what they aregood at.

A banner introducing Rebank's services to help startups better control their finances.A banner introducing Rebank's services to help startups better control their finances.