Funding Challenges for Entreprenuers

Until recently, funding for new business ideas or products was fairly common. Sure, investors have always been extremely conservative, even in the good times, but now investors are tightening their budgets even more than usual.

In Indiana we are seeing quite a fall out of investor dollars, especially for life science (pharma, medical device) start-ups. A perfect example is the Indiana 21st Century Research and Technology Fund. According to the 21st Century Fund Proposal Guidelines (revised on August 17th, 2009):

“. . . projects addressed by direct Fund awards will typically be approaching cash flow break even in less than 24 months. This preference is a result of the pressing need for use of State resources to create high-value jobs in the current challenging financial environment.”

Gone are the days where Indiana investors would look at longer break even cash flow cycles. Small businesses likely have to start looking outside of Indiana for investors, especially medical device and pharmaceutical companies. For these types of companies it is simply unheard of to turn a product around and break even in cash flow in less than 24 months.