Posts Tagged financing
Posted by Darshana V. Nadkarni, Ph.D. in Big Data -Cloud -IoT-Software -Mobile -Entrepreneurship, Biotech - Medical Device - Life Science - Healthcare on November 20, 2014
Recently, Karl Handelsman, Founder, Codon Capital, talked about the Lean LaunchPad Entrepreneurship program, at www.bio2devicegroup.org event. Handelsman, with Allan May (Managing Director at Life Science Angels), are instructors in the Lean LaunchPad for Life Sciences program at UCSF and also will be teaching at NIH, in the future. Handelsman is the Therapeutics cohort and May is the Medical Device cohort.
It is a mistake to assume that pre-clinical programs are risky and they need to focus on easier low hanging fruit or they must take 10+ years and a billion dollars to create value, said Handelsman. We have a duty to search for the path to unlock the value of the idea as industrially relevant innovation, and there are examples of biotech startups reaching that point in 18-30 months, said Handelsman. Lean LaunchPad program teaches scientists and clinicians in startups to do a real world assessment of their idea or technology, before plunking down millions of dollars, in an idea. Entrepreneurs receive training in determining their product’s market viability, regulatory risk, potential clinical utility, and also likely financing vehicles before making big dollar investments in research, design, and manufacturing.
Entrepreneurs need good operational models that build a context of value creation, said Handelsman. Investors like value, not milestones. “Investors want to invest money and they want to hear a business case, and operational milestones don’t get you there”, stressed Handelsman.
Big things often have small beginnings and start with contributions from many small pockets. Sharing the case of a company that started with collaboration and became the behemoth, Genentech, Handelsman said, entrepreneurs need to start thinking about collaboration, not competition, and begin to look at models of collaboration that would create true value. After all, strategic alliances built the Silicon Valley and there are many diverse and creative ways of creating partnerships. Entrepreneurs need to talk with others and be really good listeners.
Successful entrepreneurs are not thoughtless risk takers, but approach problems in a disciplined way. Value creation for therapeutics begins with thoughtful consideration of who would benefit from solving a certain problem; patients, payers, insurances companies or any other entity? Once entrepreneurs can figure that out, they can go to a VC and explain the business case. Value creation, after all, is not what entrepreneurs think or believe, but an idea or concept that gets external validation from the customer. “Do not constantly worry about keeping the concept in the stealth mode, and talk to a lot of people”, advised Handelsman. VCs do not count, they are not potential customers. In the end, one could have a sexy product, but if it does not solve a pressing problem then it is not creating value. Real answers to key commercialization questions, in the case of therapeutics, lie outside the lab, and entrepreneurs need to actively engage and talk with customers, partners, regulators and so on to figure out the value of their product. Lean LaunchPad methodology therefore, helps to validate the product, before commercial strategy is considered, saving time, money, resources and in some cases, helping guide the change in the trajectory, for more meaningful outcome.
Posted by Darshana V. Nadkarni, Ph.D. in Biotech - Medical Device - Life Science - Healthcare on March 7, 2013
Mr. Michael Allen, a serial entrepreneur, (previously in executive roles at Xlumena, Metrika, and Chemtrack), and currently CEO of Vascular Designs, a targeted drug delivery company, talked about “starting a medical device company in Silicon Valley”, at www.bio2devicegroup.org .
Financing is one of the major early challenges that entrepreneurs face. While it begins with a good idea, they also need to obtain some seed financing, and they need a short 2 page summary. Their business plan should be an outline that includes some financial projections, some data about market and market need, information about regulatory path and reimbursement issues. Advocates, typically medical experts, are also needed. With these pieces in place, they would be ready to go for institutional financing and begin to meet the investors.
The VC model has changed, said Allen. Traditional VC model used to focus around a goal with very high end value, in the range of $250 M where 10’s of millions would be invested. It was built around the idea of large management teams in the early phase and a ready sales force in anticipation of the launch, that often never happens. Many VCs who adhered to this model, are out of business. The current model is to focus on a goal to achieve a moderate exit. Team is scaled in proportion to the need, sales force is maintained at small level until product and market are demonstrated. It is assumed that delays are inevitable and cash is king.
Allen talked about his experience and learnings from leading ChemTrak from seed stage to IPO exit, with 6X return. ChemTrak was a diagnostic company, with a single use diagnostic kit to measure Total and HDL cholesterol and other non-instrumented quantitative tests. He also shared lessons in leading Metrika, another diagnostic company that was sold to Bayer, with 1.5X return plus ongoing royalty deal. Metrika’s several products included A1C test, giving patients with diabetes on the spot feedback on their A1C number and e.p.t. pregnancy test. They had some good patents, but mixing electronics, optics, and chemistry was very challenging, said Allen. Allen’s next company Xlumena, is medical device company with products aimed to advance image guided endoscopic therapy. These products allow minimally invasive alternatives for diseases of the organs that surround the GI tract. Summarizing some of the learnings, Allen said, CEO is responsible for everything, no matter who makes decisions.
Allen’s current company, Vascular Designs offers a new treatment option for people suffering from life-threatening illnesses like cancer, through targeted drug delivery, as opposed to systemic approach. Through transfemoral catheter, drugs can be delivered directly into the tumor cells and block the blood supply. It allows for high concentration of drugs delivered, while at the same time, reduces systemic exposure, thus minimizing caustic side effects. This procedure can be performed as an outpatient procedure, takes only about an hour, and nothing is permanently implanted. For success of a venture, Allen stressed, it is very important to hire the right people. He discussed hiring process he follows and also emphasized the importance of spending time and writing a good job description. The talk was followed by Q&A.