Siren, a gene therapy startup, tests unconventional alternative to venture funding

Biotechnology startups usually turn to a few tried-and-true options to raise the money they need to develop a new drug. Company founders might get initial financial help from friends, family or an angel investor. Perhaps they’ll apply for grant funding or a spot in a startup accelerator. More often than not, they’ll then rely on venture funding to survive.

Siren Biotechnology, a San Francisco-based gene therapy startup, has already done some of that work. The company received a $4 million grant as well as $28 million in venture funding since its founding in 2020, and has the support of a few well-known firms like Founders Fund and Lux Capital.

Recently, though, Siren began testing a different idea to supplement its fundraising: the type of “community investment round” often employed by tech startups but rarely their biotech counterparts.

Last month, Siren announced plans to pursue what’s known as regulation crowdfunding, a financial tool that involves selling equity stakes to “accredited” investors who meet specific Securities and Exchange Commission income and net worth criteria, as well as non-accredited individuals who don’t. The SEC allows companies to use this approach to raise up to $5 million over a one-year period through an online, agency-registered intermediary, such as a funding portal. Siren is using a platform called WeFunder.

The amount Siren seeks represents a fraction of the typically hundreds of millions — if not more — that biotech companies need to bring a drug to market. However, CEO and scientific founder Nicole Paulk views the idea as a creative way to attract different types of investors.

“The scientist in me is just like, ‘We’re going to run this experiment and see if it works,’” she said in an interview.

Siren is developing a kind of medicine that blends elements of gene therapy and cancer immunotherapy. It’s using a type of virus to send into tumors engineered versions of cancer-fighting cytokines. The company’s lead program, for an aggressive form of brain cancer called high-grade glioma, is in preclinical testing. Siren aims to ask regulators around the end of the year to start human testing, according to Paulk.

Biotechs in Siren’s mold have had a difficult time of late raising funds for these experiments. Venture firms have coalesced around fewer but larger bets, leading a spike in $100 million-plus “megarounds” and a preference for more proven drug startups. Gene and cell therapy developers have been hit particularly hard during this shift, with funding totals falling significantly from their peak a few years ago.

Paulk says the investment climate didn’t factor into Siren’s decision to pursue crowdfunding. Nonetheless, Paulk believes such tools could be helpful for Siren and early-stage companies like it. A small amount of cash goes a long way for a preclinical startup, she said, and could be useful for biotechs that need to reach their next milestone but can’t secure cash from institutional investors.

Paulk, a former University of California, San Francisco assistant professor, said the idea was first suggested to her by a prominent local CEO who invested in Siren. She began looking into it in January, and became intrigued by crowdfunding’s novelty, as well as its potential to draw in individuals, like patients and their families, who might have a personal stake in the company’s research.

“I just became enamored with the concept,” she said.

Patients, caregivers and their friends can, of course, donate to disease foundations that often issue grants to academic labs and scientists. Yet those funds might go toward supporting projects that are years from human testing or may never get there. Paulk contends these communities might be inclined to invest in a company with a treatment their patients could later receive in a trial.

Such direct investment does pose risks, however. Siren’s WeFunder homepage doesn’t mention the gene therapy field’s recent headwinds, nor does it fully detail the arduous journey every biotech faces in proving the safety and efficacy of promising new therapies. Most drugs, even those based on cutting-edge and sophisticated science, later fail in testing.