A recent report ("The MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters") highlighted the fact that Venture Capital investment in Biotechnology decreased (33 percent fewer dollars and fewer deals from the prior quarter) in the first quarter of 2013.

Over the past couple of decades, small biotech companies have been an invaluable source of exciting new drug treatments. As a result, investors have been handsomely rewarded for funding these high-risk, speculative technologies that helped fill depleted Big Pharma pipelines. Companies with any hope for delivering a return on investor money have two possibilities; have one of their technologies acquired or have the entire company acquired by a cash rich Big Pharma or Big Biotech. The occasional multi-billion dollar buyouts have sustained investor interest with hopes that they might also be able to pick one of these winners.

So, why the decline in investment? The PwC report highlights several reasons for this decline, including the high level of funding needed and the length of time to a liquidity event. I believe there are three additional reasons Venture Capital may be harder to come by, especially for start-up, biotechnology companies going forward.

First, there are far too many small biotech companies with little or no realistic chance for delivering any (that's right, any) return on investor money. Executive salaries and disproportionately high operating expenses consume investor money, at many of these companies. Sure, like with any stock, you might make a buck here or there day trading, but realistic long-term prospects for many of these companies to deliver a reasonable return on investor money, is more crap shoot, than an investment. These small companies continue to survive based on promises for the future despite having little real progress to report.

Second, the biotech well is not endless. Decades of pent up government and academic research has been a rich source of many recent biotech successes. Mining for biotech gold is hard work, requires years of expertise and consistent unfettered funding. Aside from the occasional serendipitous find, most products of real medical value have come from a concerted effort of focused expertise applied for years to assimilate sufficient knowledge to make a clinically meaningful discovery. Nobody really knows the depth of the academic pipeline. What we do know is the crop of academic technologies and research programs that are yet to be harvested is finite and have almost certainly been thoroughly evaluated and picked over by Big Pharma.

Third, is the increasing complexity of technologies making it difficult for the average investor and even institutional experts to comprehend the real potential for technologies, especially in the context of the ever-changing healthcare market. As the market becomes more "managed" and individual physician choice for brand selection is driven more by formulary and reimbursement guidelines, mediocre products without clear clinically meaningful benefits over currently available products become less likely to succeed in the market.

So what does all this mean? I believe we are approaching a time when academic pipelines will thin making it difficult for startup biotech companies to find technologies with sufficient medical and commercial potential to attract and satisfy a smaller, more demanding investor pool. Unfortunately, it also means that without sufficient investment, some less obvious opportunities will be prematurely dismissed and will not get the necessary funding to determine their real value. Eventually, fewer products also means even higher prices for products that successfully complete development and achieve market approval.