Why grant funding is a necessity for woman founders in deep tech/biotech
I recently watched an entrepreneur pitching his biotech startup, and an angel investor asked the founder, “What is your grant funding strategy?” For pre-seed/seed stage biotech startups, I frequently see grant funding on their pitch deck to demonstrate the validation of new technologies. Of course, I put Pheronym’s grant funding in my pitch deck. When I was raising funds from investors, surprisingly, grant funding did not have the same effect as the other entrepreneurs’ pitch decks did.
This is an important topic for women entrepreneurs. Should I push for VC funding at the pre-seed/seed stage or not? When I talked to many VCs and read articles about raising VC/institutional funds, the top three major risks are technology, market, and team risk. “The team risk is the most important factor in making a decision for investment,” all investors said unanimously for seed stage companies. If you are a first-time entrepreneur, you are an inherently risky team. I am guessing that if you are a first-time woman entrepreneur, you just made this seed stage company an “off-the-chart” risky.
How can I fix the team risk? I was told business advisors could strengthen or eliminate the team risk. Would it really work? I have been told that you need to talk to 100 VCs to get one to invest. According to PitchBook 2024 report, female founders had only 6.5% of the VC deal count, which was only 2% of all VC funds. Black, Latina, and other minority women founders get even less. This also means male founders made the 93.5% VC deals and have access to 98% of all VC funds. For male founders, accessing 5% of all VC funds is easy due to having access to 98% of all VC funds. Augmenting the team with advisors would work for the first-time male founders. However, women founders have access to 2% of all VC funds. I think taking 5% of the 2% of all VC funds is going to be a very challenging task with or without the augmented team.
Don’t be discouraged!
Investment decisions have a lot of intangibles that can make an investment happen despite the odds. The intangibles include the founder’s network, the colleges she attended, the institutes she is affiliated with, gender, race, ethnicity, nationality, etc. These intangibles can move the needle either in the positive or negative direction. For example, for Latino and black women founders, this goes in the negative direction, meaning 2% goes down further. With the looming technology and market risks, I can see the needle moving even further in the nay direction.
Be optimistic!
VC-funded seed accelerators are just for derisking technology and the market. As a first-time women entrepreneur, you are more likely to get investment from an accelerator because technology weighs a lot more in their decision criteria. Accelerator investments are not a lot of money. Derisking deep tech/biotech is expensive and requires more money than accelerators invest. Therefore, accelerator funds need to be synergized with grant funding to de-risk the technology and the market.
Too often, investors and even founders view grant funding as a distraction. I think grant funding should be looked at positively. As a founder, I am pulled in 5–10 different directions on any given day. It is easy to get distracted. Grants, which are well-thought-out plans, are easy to follow and execute. I use grants to drive Pheronym’s commercialization and product development milestones.
Looking at things positively allows you to see opportunities!
That is critical for the success of the first-time women founders. For example, successful grant funding comes with peer-reviewed manuscripts. We universally hear from investors, mentors, and fellow founders, “Investors are not interested in the manuscripts. It is too academic. It is a waste of time. Focus on the milestones, etc.” That is one way to look at it. But there is another way of looking at things that brings many more opportunities. This is not just me. I have come across many deep-tech VC-funded companies advertising their peer-reviewed manuscripts as validation for their science and technology. I have seen many opportunities in peer-reviewed manuscripts for our technology development toward commercialization. In a manuscript, data is analyzed and ready to 1- apply for grants, 2- draft patent applications to secure intellectual property (IP), 3- create product awareness, 4- communicate our technology with commercial Ag-input companies for partnerships, 5- differentiate from “snake-oil” in the eyes of farmers, 6- create sales literature or instructions, and 7- provide peer-reviewed documents for technical support after commercialization. Peer reviewed literature is critical for the adoption of any new technology, especially for deep tech that is being commercialized by women founders.
At Pheronym, we have effectively leveraged grant funding with investments from accelerators, angel investors, and entrepreneur fellowships to prove efficacy, secure IP, and develop scalable manufacturing for our technology. We have derisked our technology and market. Now, we are raising investment to commercialize our first product, Nemastim, and to develop our second product, Pherocoat. Join us. Together, we can create the future of agriculture!
Author: Dr. Fatma Kaplan is the CEO/CSO of Pheronym. She is an Activate Berkeley Alumni Fellow & Berkeley Lab Affiliate Cyclotron Road Cohort 2021. She is also an entrepreneur and an accomplished scientist with experience in both biology and chemistry. She has a Ph.D. in Plant Molecular and Cellular Biology and postdoctoral training in Natural Product Chemistry with a focus on isolating biologically active compounds. Dr. Kaplan discovered the first sex pheromone of the nematode Caenorhabditis elegans and published it in Nature. Then she discovered that pheromones regulate other behaviors in both parasitic and beneficial nematodes. Dr. Kaplan conducted the first agricultural biocontrol experiment in Space at the International Space Station in 2020. She has very high-impact publications, and her dissertation (beta-amylase’s role during cold and heat shock) was cited in textbooks within 5 years of publication. Dr. Kaplan worked as a scientist at NASA, the National Magnetic Field Laboratory, and the US Department of Agriculture — Agricultural Research Service. Dr. Fatma Kaplan and Mr. Karl C. Schiller co-founded Pheronym to bring nematode pheromone technology to the market and to provide effective, non-toxic, sustainable pest control for farmers and gardeners.
