Abstract
We examine the effect of the Jumpstart Our Business Startups (JOBS) Act on biotech startups, who conduct almost 40% of IPOs since 2012. Reduced compliance costs encourage innovation capital formation as biotech IPO volume increases 200% and proceeds rise by 30%. After the JOBS Act, biotech startups go public significantly earlier in the FDA approval process, more frequently target rare diseases and cancer, and exhibit higher employment growth. We find no increase in failure rates, financial restatements, or internal control weaknesses, suggesting that startup quality is not compromised by compliance exemptions. We also introduce novel survey evidence quantifying eventual compliance costs. Our results demonstrate how regulatory exemptions can provide important economic and societal benefits.
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