VC biotech funding produces no results

The problem has been not only the lack of venture capital investment in the most critical early seed stage, but also its own objectives in the innovation process. This has been strongly evidenced in the biotech industry, where an increasing number of researchers have criticized the venture capital model of science, indicating that significant investor speculation has a detrimental effect on the underlying innovation (Coriat, Orsi and Weinstein 2003; Lazonick and Tulum 2011; Mirowski 201 1). The fact that so many venture capital-backed biotech companies end up producing nothing, yet make millions for the venture capital firms that sell them on the public market, is highly problematic. It creates a need to question the role of venture capital in supporting the development of science and also its effect on the growth process. The increased focus on patenting and venture capital (VC) is not the right way to understand how risky and long-term innovations occur. Pisano (2000) in fact claimed that the stock market was never designed to deal with the governance challenges presented by R&D- driven businesses. Mirowski (2011, 208) describes the venture capital- backed biotech model as:

. . . commercialized scientific research in the absence of any product lines, heavily dependent upon early-stage venture capital and a later IPO launch, deriving from or displacing academic research, with mergers and acquisitions as the most common terminal state, pitched to facilitate the outsourcing of R&D from large corporations bent upon shedding their previous in-house capacity.

The problem with the model has been that the 'progressive commercialization of science' seems to be unproductive, generating few products, and damaging to long-term scientific discoveries and findings over time.