Financing Small Companies: Strategies to Fund Clinical Trials with Limited Resources

2nd June 2017 (Last Updated July 18th, 2018 12:23)

David Larwood, CEO, Valley Fever Solutions, provides a key considerations for funding clinical trials, from a small company perspective

Financing Small Companies: Strategies to Fund Clinical Trials with Limited Resources

Clinical trials are notoriously expensive. The more credible the trial design and trial managers, the easier it will be to find and maintain funding. More successful approvals on the resumes of the trial managers are comforting to investors. But even first timers can get this done.

There are some typical approaches, but nothing beats good planning and execution. This is helped tremendously by having at least a core experienced design team, and operations team. Good design and execution will improve the use of funds.

Attracting resources for a small company has parallels with resourcing a project within a larger company. All successful projects have a champion, who needs to be particularly effective. The champion must secure and maintain enthusiasm from the funding source (investors or company), to keep them informed of progress, and of course to set and continue good inertia throughout the trial execution.

Above all, the champion must be responsive to change. The biggest challenge to most projects is unexpected events. Clinical trials are inherently complex. A mismatch with predictions is certain, but from where will the biggest challenges arise, and when? Slow enrollment, site problems, drug supply, and a hundred other issues are sure to impact every trial. The champion must recognize and respond to these. First timers can do this, but this is easier with experience. A good team of advisors is always a help. This is particularly true since trials have a great breadth of requirements and skill sets, which means the champion needs a stable of advisors to cover this scope.

Determining the Essentials

The attributes of a fundable project or company have been studied closely by many. This is often captured in three key attributes of a successful project proposal: Team, Technology, and Target. 

The Target or reason for the project must be compelling – a large enough and credible market needing a solution. Alternatively, particularly in health care, the target may be some socially or personally compelling story, such as curing your own child, curing a tragic disease or such.

The Technology (or solution to the fundamental problem) is often a device or a drug, but it can also be a treatment, a surgical technique, a software tool, gamifying an exercise regime through social group motivation, or many other things. Ultimately, it needs to work, in order to satisfy the market need for the Target – technically satisfactory, and scalable to the point that the Target goals can be met. The Team and investors need to have a credible plan, and they need to manage the progress. This is often one of the highest risk areas of a project. As elements of the Technology are assessed and proven, the risk decreases. Thus the value of a project increases as the Technology solution advances, ultimately resulting in a complete solution, one that both works and can be rolled out in a scale needed to satisfy the market. Each risk element adds to the project balance. Can it be done at all? Is the time-to-solution and the project cost acceptable?

This is fairly easy to see in a classical drug trial – pre clinical, Phases I, II, III – each with costs and risk factors, but each with fairly clear milestones. There are many sub-parts and components to each of these. A device needs to be conceived, tested, be proven in manufacturing, and thinking through testing, approval and distribution. Each Technology will have a sizeable list of deliverables, and the essential ones must be met for a successful project.

The Team is the glue that advances the Technology towards the Target. A typical project starts with the Team, typically a small group at the core, which collectively recognizes a candidate Target and a path to a credible Technology.

It is quite common for a team that has brought a successful project forward to choose a new Target and develop a new Technology. This happens all the time in successful companies – a series of cars, computers, drugs or such. There may be turnover in team members – bringing in a new person to fill gaps. Such experience with success can be a dramatic benefit when assessing a Technology, and presenting this to investors. Such a team will already have insight into sufficient and efficient solutions. Flexibility and response to challenges are important. Many of these skills can be hired by adding team members, senior advisors (Board, upper management), or consultants. Ultimately the core management needs to reach a sufficient solution. Experience will comfort the investors.

Basic Funding

Small companies gather support from a range of sources, depending significantly on context. Many projects start as an exploration into a biological process (such as a faulty gene, a metabolic pathway, or disease symptoms – a problem in search of a solution), or with a compound or device (a solution in search of a problem). Many academic projects evolve with grant support – NIH, FDA, DOD – many sources. A common first step towards commercialization is an SBIR grant (Small Business Innovation Research) or the similar Small Business Technology Transfer (STTR) grant. These typically include a “Phase I” where the principal investigator (PI) demonstrates some likelihood of success, and a larger “Phase II,” designed to advance a project to some useful milestone. These grants are often in the $0.5-$1.5M range for the full grant, often spread over several years. A PI may be academic focused (common) but a few develop a business focus (rare) or team up with an experienced business partner (common).

For private funding, the classic starting point is “F&F” – Friends and Family. This is high risk, and the PI should be careful to diligently and very carefully spend this money so as to not alienate these investors. Angel investor groups are well developed and always looking for projects. Angel investors typically invest in the $0.5-2M range. Next in maturity and scale is venture capital, investing from $1M up to quite large numbers, appropriate to the stage of the company. There is a general trend for VCs to wait for a project to be in advanced clinical trials, or at least considerably de-risked, with the idea that they will provide significant expansion capital for the more expensive trial phases that are closer in time to an IPO or acquisition.


Funding a medical solution is essential to bringing the solution to market. The promoters need to provide a plan that will satisfy investors so this expensive process can move forward. Experienced developers need to be on the team or accessible as consultants, at least in most cases. A good team with a good solution for a strong enough market should be able to compete well for funding, whether private, government, corporate, or public market.