By Tracy Will
For WisBusiness.com
The current economic slowdown is putting the squeeze on biotech start-ups, Promega deputy general counsel Sara Jensen.
“Cash is tight and your customers, your vendors and customers might fail, your business might fail, and we are seeing the effects of that every day,” she said.
She said over half of Promega’s sales are international, adding that sales to smaller biotech companies are “probably the largest single area where our sales are going down.”
“They are going out of business,” Jensen said of the smaller firms. “I’ll just be frank, many are going out of business.”
Jensen made her comments as part of a seminar at the UW Law School titled “Global Financial Crisis: Implications for Wisconsin,” sponsored by the UW Center for World Affairs and the Global Economy (WAGE).
The effect is most pronounced for start-ups that rely on angel investors, according to UW Law School Professor Darian Ibrahim.
“Angel investors are losing 25 or more percent of their worth. There is a real problem in the entrepreneurial finance market,” Ibrahim said, both for angel investors whose wealth has been reduced by the stock market meltdown and for small start-up companies that cannot attract conventional loans.
To deal with these problems, Jensen suggested that many companies will enter into international markets, where added risks must be addressed.
“Export compliance may matter more and will increase in importance,” she said.
“In looking for new markets the new Obama administration might offer new opportunities,” Jensen said. “What about Cuba as new market? Promega would love to get into that market.”
“The most important thing you can do is to understand new markets. And contract laws will be very important, as litigation is very expensive if things go wrong. What your distributor agreement says and what local law requires may be totally different,” Jensen said.
