A Houston biotech company that had previously been looking into going public traditionally is now turning to a crowdfunding platform to raise capital.
FibroBiologics, a clinical-stage firm developing therapies for chronic diseases using fibroblast cells, launched a campaign on the equity crowdfunding platform StartEngine in January 2023. Chairman and CEO Pete O’Heeron said the decision to use crowdfunding came after FibroBiologics was unable to find a favorable deal with a special purpose acquisition company or launch an initial public offering.
“Since the traditional ‘go public’ vehicles are closed, we needed to find an option that would allow us to design the terms of the offering and create a compelling offering that would benefit the existing shareholders and the new ones that will join us,” O’Heeron said in an email.
FibroBiologics filed a Form C — required for crowdfunding capital raises — with the U.S. Securities and Exchange Commission on Jan. 31. According to the document, 5,917 to nearly 2.96 million securities will be offered at $1.69 each, targeting a minimum goal of $9,999.73 and a maximum of nearly $5 million with oversubscriptions. StartEngine will receive 9% in compensation and holds 3% of securities of the total amount of investments raised in the offering. The offering ends May 1.
According to the offering page on StartEngine, FibroBiologics had 48 investors raising over $1 million by Feb. 1 at noon. That makes FibroBiologics the fastest-rising biotech offering on StartEngine since the platform launched in 2015, according to the Houston-based company. FibroBiologics will accept investments between $498.55 and nearly $5 million, per the StartEngine page.
FibroBiologics had been looking into going public as early as April 2022, the Houston Business Journal previously reported. The company secured a capital commitment of up to $100 million with GEM Global Yield LLC SCS, a private investment group with locations in New York and Paris.
FibroBiologics holds more than 150 patents in the U.S. and internationally for a variety of applications for fibroblasts, including therapies for degenerative disc disease, multiple sclerosis and cancer. The company has received Investigational New Drug (IND) clearance from the U.S. Food and Drug Administration for its degenerative disc disease therapy, CybroCell, and O'Heeron said the IND study would be completed after the company raises its funds.
Other upcoming moves for FibroBiologics include a planned IND filing for a multiple sclerosis treatment and a new program targeted at extending human life by using fibroblasts to regenerate the thymus and spleen.
The company moved into new offices at 455 E. Medical Center Blvd. near the Clear Lake Medical Center at the end of 2022. O’Heeron said FibroBiologics is working on finding space for a cell manufacturing facility near the offices.
Startups across the country have turned to StartEngine to raise funds as venture capital and private equity scaled back investments at the end of 2022. Equity crowdfunding allows everyday investors to put money into a business in exchange for shares of the company, making it an attractive option for companies too young to attract institutional funding.
The SEC announced in 2021 that companies could receive up to $5 million every 12 months in crowdfunded capital, a significant increase from the previous cap of $1.07 million in the same time period.
Although SPAC deals reached remarkable highs in 2021, activity dropped off in 2022, with some local exceptions moving forward. Houston technology companies' SPAC deals in 2022 included Nauticus Robotics completing its $561 million merger, which was announced in 2021, and Intuitive Machines announcing a merger, which is expected to close in 2023.
