Nonprofit foundations are not, by definition, out to make money; but they are making deals. Discontented with more traditional channels of scientific advancement, patient advocacy nonprofits are now working directly with industry to bring ideas to the bench and treatments to the marketplace. For a company in early-stage drug development, the timing couldn't be better. With seed money rare and willing venture capitalists (VCs) scarce, industry can turn to the succor of venture philanthropy (VP).

A tale of one such journey from woe to rescue sounds like this: "We started our fund raising initiative just at the time that the Internet bubble was bursting," recounts Ely Simon, founder and president of NeuroTrax, based in New York City. "So the timing was just awful." VCs lost interest in early-stage companies or, if they did get involved, it was only on the harshest terms. But coincidentally, the era of VP had just...

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