Compared to the challenges biotechnology startups face these days, Detroit's Big three automakers don't have much to complain about. the path to validation for biotechs is both exhausting and time consuming, said an investment banker in the sector who asked not to be named.

However, biotech companies that successfully bring drugs to market can generate hundreds of millions of dollars in sales, and even those who don't can sometimes sell their technology to big pharmaceutical companies who are constantly on the prowl for innovative new products.

To get to that point, biotechs must raise millions of dollars to fund their operations. one way to do that is list on the tsX Venture exchange using the Capital pool Company program.

The program pairs venture capitalists with small sums of money -- $1.9-million or less -- with entrepreneurs in need of capital.

The most recent company to do so is sirona Biochem Corp. sirona Biochem was launched when Howard Verrico, the co-founder of High Rider Capital inc., a publicly listed Capital pool Company with $2-million in cash as its only a s s e t s , i d e n t i f i e d t F C h e m s.a.R.l., a French biotechnology project working on drugs for the treatment of diabetes and obesity, as its partnering company.

The Venture exchange approved the deal, the details of the transaction were publicized and sirona Biochem was listed.

The company is now struggling to raise the capital it needs to move to phase 1 clinical trials.

"We've initially approached friends and family of the directors of the company and that's manageable, but as we grow and our fundraising needs grow, we need to network further for capital," Mr. Verrico says.

Telfer Hanson, a co-founder of Kingsdale Capital, has been been involved with the CpC program since Kingsdale handled the first CpC qualifying transaction in ontario in 2002.

"though the CpC process has been a tremendous benefit to especially the junior resource sector, it is also often used incorrectly by companies that are going public through a qualifying transaction with a CpC and rely too heavily on the capital that is in the CpC and don't capitalize themselves properly," Mr. Hanson says.

Biotechs that fail to capitalize themselves sufficiently run the risk of being orphaned -- too small for institutional investors but too cash hungry to be continually supported by friends and family.

Sirona, which has a market capitalization of $2.3-million, falls into this category.

"The sources of funds for that size of company have dried up and are non-existent other than by virtue of friends or family and the appetite stops there," said the investment banker, who has asked not to be named.

Cannasat therapeutics, with a market capitalization of about $6.7- million has faced similar problems since capital markets began deteriorating in 2007.

"What became apparent, with the way things are today, was we were not going to be able to go out and attract institutional financing on our own and that's when we made the fundamental decision that we need to change the strategy of the company and part of changing that strategy was bringing in a new CEo," says David Hill, vice-chairman and director of Cannasat.

Cannasat recently appointed anthony Giovinazzo as chief executive.

He has had a number of successes including selling Cita neuropharmaceuticals ltd. at a market return to investors in the largest mergers and acquisition deal in 2005 and raising $36-million for Cervelo pharmaceuticals inc. in 2007.

He says he only signed on to head Cannasat because he believes the company has taken many of the right steps toward marketing its drugs.

"They had gone from a CpC to a more fundamentally capital-supported company by having done several raising of $1-million to $2- million a piece... they have a proprietary technology... and they have a drug candidate with some very interesting potential, called Relivar," Mr. Giovinazzo says.

Relivar, is a drug for pain that is based on the active molecule in cannabis tetrahydrocannabinol.

Cannasat has completed proof-ofconcept studies that show the drug has the pain relieving effects of opiate- based drugs such as oxycodone, but without the nasty side effects, Mr. Hill says.

Mr. Giovinazzo says he plans to transition Cannasat into a company funded by both retail and institutional investment by acquiring new biotechnology assets, streamlining their clinical testing process and bringing on professionals with proven track records in the biotech commercialization space.

"A stronger team with real experience in both clinical development, capital raising and exits, demonstrating we've done this before, being able to identify assets and bring them in that have substantial value and being able to add value in this shorter strategy of proof of clinical concept, that's the opportunity," Mr. Giovinazzo says.

"it's our contention that if we do that, we can go out and institutional investors will buy in, they won't give us $50-million by any stretch but they'll give us 10 to 15 [million dollars]." "the approach they have taken is spot on," Mr. Hanson says.

"they've brought in an executive with experience to balance the business initiatives with the market initiatives.

You can't have one without the other."