Archive | February, 2015

10 Family-Office Speakers Shed Light on Direct Investing in Therapeutics and Medical Devices

19 Feb

By Michael Quigley, Director of Research, LSN

mike-2Last month in San Francisco, Life Science Nation’s RESI Conference hosted two family-office panels to discuss investors’ motivations for funding therapeutic and medical-device companies, the current trends in this space, and the distinctions between family offices’ investment strategies. Given the fact that a good portion of family offices fly below the radar, it is easy to understand why there was standing room only during these two panel discussions.

LSN recruited the panelists from our extensive network of family office investors—a network that we have developed over the past three years. As noted by both panels, family offices have been increasingly making direct investments in life science companies, a trend LSN has been following.  The reasons for this trend include avoiding poor returns (as happened during the financial crisis), increasing control over the final investment decision, and having a philanthropic and social impact. Last but not least is the personal aspect, where some family offices are also looking to provide solutions to their own family healthcare issues and thus effecting the family legacy.

Both panels stressed numerous points, including the importance of companies having a strong management team, the growing sophistication of family office investors, and the generally longer investment time lines that these investors have. The latter trait in particular means that, in many cases, a family office can more successfully align with the goals of a fundraising entrepreneur than can many other investors.

Other topics discussed by the panels included strategies and channels for finding family offices, best practices for securing funding from these investors, and the strategic benefits that family offices can bring to the table after committing capital.

One fact that echoed in these panels is that family offices represent a significant, valuable source of capital that should be strongly considered by any fundraising entrepreneur. To see for yourself, take a look at the video recaps of the panels.

 

Tales from the Road: Four Entrepreneurs Share Their Advice on Fundraising

19 Feb

By Lucy Parkinson, Senior Research Manager, LSN

lucy 10*10What’s it like to be in the driver’s seat of an early stage fundraising campaign? At the recent RESI Conference, LSN brought together four life-science executives for a “Tales from the Road” workshop to hear their firsthand accounts of navigating the fundraising process and raising capital. What stumbling blocks had they hit, how had they solved the issues, and what had they learned about raising capital? How did they go about finding potential investors, and how did they determine which investors they should pursue?

Here are the make-or-break points that our entrepreneurs stressed.

Having the Right Team

As Shantanu Gaur (CSO, Allurion Technologies) explained, the quality of the management team is particularly important when a very early stage company is raising capital. Before a company plots a development timeline, acquires data, talks to regulators, or makes a business projection, the company begins with a management team and an idea. Seed-stage investors therefore focus on the quality of the management team and the potential of the idea. Given that Shantanu was a young entrepreneur—he had not yet graduated from medical school—he built a team with “plenty of grey hairs” that could provide the industry experience he lacked. This team was able to convince investors that it was the right team to advance the idea and realize its full potential.

In addition to experience and the ability to appeal to investors, the entrepreneurs on our panel mentioned two other ways in which having the right management team is an absolute necessity.

First, many life-science companies raise money from friends and family to turn the lights on before gearing up for their first institutional financing round. If the individuals on a management team have strong personal networks, those contacts can become initial sources of support.

Second, raising capital requires having a staff that is not only dedicated to the fundraising process but also has the wide range of skills required. Rick Berenson (CEO, Thermalin Diabetes) noted that although it’s vital to have a team member who’s strong at pitching, there must also be a team member responsible for meeting logistics and chasing investors for follow-up discussions.

Following the Four Steps to Raising Capital

Rick Berenson explained the four steps of the fundraising process (Rick calls these the ‘four Ss’): sourcing investors, screening investors, segmenting investors, and selling to investors.

Several of the panelists had successfully made use of the LSN Investor Platform to connect with investors outside of their existing personal networks. This particularly rings true in the family office space, where panelists said it was often hard to find an initial contact. Other sources panelists mentioned included Gust.com, local angel networks, and lists of major donors to charitable foundations in the relevant disease field.

The next challenge, as Kurt Dieck (CEO, Biosortia Pharmaceuticals) put it, is identifying the few investors who will be willing to sign a check from a global target list of potentially hundreds of investors. This is the process of screening investors. How do you decide who to prioritize? Here, the entrepreneurs told us that investor fit plays a key role, often in a way that becomes more nuanced than simply being in the right indication area and phase of development. For example, if your company’s strategic plan involves global regulatory approval and sales, a globally active investor will be a better fit than a regional investor. Again, having the right team is vital; a campaign can be run far more efficiently if there is a team member dedicated to qualifying investor leads, finding the alignments between the company and each investor, and sending out personalized teasers to get an investor’s interest.

It’s also important to keep an eye on an investor’s mood; does the investor seem excited to have follow-up meetings with you, or do you seem to be last on his or her priority list?

Frederick McCoy (President and CEO, NeuroTronik) pointed out that the screening process goes both ways—which of the investors you’re meeting could you picture as being involved with the company after the financing round has closed? Which investor would make a strong board member, or a relevant strategic advisor?

Segmenting interested investors is the third step. When will each investor be willing to get involved? Rick Berenson noted that raising capital in life sciences is like making a movie in Hollywood: what gets investors interested is knowing that other investors are interested. Some investors like to declare their interest early, taking a risk in return for a commensurate reward. Others want to see who else will come in before joining to close out the round. And still others may pass until the next round, while they keep in touch and watch your progress.

Finally, with all your targets in line, the last step of the process is selling to investors.

Recognizing That Fundraising Is Selling

What is fundraising? According to Rick Berenson, fundraising is a sales process, and it’s therefore about overcoming all of the possible objections to close a deal. An early-stage life science company has to sell investors on complex, cutting-edge technology.  The sales process for an early-stage fundraising campaign therefore involves making the investor comfortable with the risks involved.

One persistent difficulty the entrepreneurs identified was that of unvoiced objections; it’s hard to make an investor more comfortable about a concern if he or she hasn’t told you what it is. Shantanu Gaur told the audience that it often takes many meetings for these problems to be voiced—and then more meetings before the investor becomes comfortable with the answers.

But is it possible to preemptively address these problems? Kurt Dieck suggested exploring with investors all the initial objections you had to pursuing your technology. Tell investors how you overcame each cause of skepticism and why you’re now excited to be part of this opportunity!

The entrepreneurs also explained the importance of tailoring pitch content to the audience. Fred McCoy suggested beginning with a top-level pitch deck and letting investors ask deeper-level questions. That way, you can lead each investor through the fine points that matter to them—whether it’s a question of pharmacokinetics, regulatory pathways, or financial projections. In this way, you will appear confident on the details while not overwhelming investors with details that aren’t of concern to them.

Finally, Rick Berenson advised to be sure to speak each investor’s language. If you only speak to investors in the language of a scientist, the message won’t get across; by being adaptive and engaging in their own language, you have the opportunity to build a real connection.

Hot Life Science Investor Mandate 1: Family Office Fund Seeking Early Stage Medical Devices

19 Feb

A family office/venture capital firm based in New York firm manages an evergreen fund that seeks to make seed, venture, and growth equity investments in early to mid-stage medical device companies, but will also consider secured debt to help revenue generating companies with short term cash flow issues. The firm will also consider pre-seed investments. The firm can allocate anywhere from $1M to $10M per company, but generally allocates around $8M. The firm typically does 3 rounds of financing with an initial investment of around $3M. The firm is geographically agnostic, but highly prefers to invest in companies that are based in the US. The firm seeks to make about 3-4 allocations in the next 6-9 months.

The firm is currently looking for medical device companies with a strong emphasis on products with a 510(k) regulatory pathway. In terms of subsectors, the firm is looking for products specifically in the areas of interventional radiology and cardiology, spine/orthopedics and minimally invasive surgery. The firm is generally opportunistic in terms of indication.

The firm is looking to invest in companies with a management team with a track record of success in the healthcare industry. However, the firm is generally flexible and does not require a full management team. The firm can assemble the management team over the course of the investment.

If you are interested in more information about this investor and other investors tracked by LSN, please email mandates@lifesciencenation.com

Hot Life Science Investor Mandate 2: Large Medical Technology Company Seeking to Partner with Innovative Medtech, Diagnostic, and Healthcare IT Companies

19 Feb

Allocation Information:

A leading medical technology company is looking to partner with companies from their formation through to commercialization, including expansion of operations and channel access.   The firm considers a variety of engagement models including research collaborations, licenses, investments and acquisition when partnering with companies aligned with the firm’s core businesses and new areas of strategic interest, seeking opportunities from around the globe.

Sectors and Subsectors of Interest:

The firm is currently seeking innovative companies working in sectors of Medical Technology, Diagnostics, and Healthcare IT. Within these areas, the firm is most interested in technologies including Information Enabled Devices, Healthcare Data Analytics, Parenteral Delivery, Patient and Healthcare Worker Safety, Microfluidics and Point of Care Diagnostics, Specimen Collection and Preservation, Next Generation Sequencing, and Developing World / Maternal and Newborn Health. The firm considers opportunities in these areas on a case by case basis.

Company and Management Team Requirements:

The firm  prefers to partner with experienced management teams with a track record of accomplishment including graduates from respected accelerators and incubators, providing in-kind support to advance business plan development.

If you are interested in more information about this investor and other investors tracked by LSN, please email mandates@lifesciencenation.com

Hot Life Science Investor Mandate 3: VC Looking for Therapeutics Devices and Tools

19 Feb

A Venture Capital company with offices in the US and Europe is currently looking to make investments out of its fourth fund. The firm is looking to make venture stage investment generally falling in the range of $2-$6 million though investments may fall outside of this range depending upon the opportunity. The firm also reserves additional capital for follow on rounds. The firm is most interested in companies based in the US although they are also open to investing in Eastern and Northern Europe, East Asia and Australia. The firm could make as many as 5-10 investments over the next year.

The firm is primarily interested in companies developing therapeutics and to a lesser extent medical devices and research tools. Within the Therapeutics space the firm has a slight preference for companies working with platform technologies although they are open to single asset companies as well. The firm is willing to invest in small molecules, biologics, and cell and gene therapy. The firm is willing to consider opportunities from preclinical through phase III of clinical trials though most of their investments will likely be allocated to later stage companies. The firm generally only considers pre-clinical stage companies if there is a clear path to exit in a shortened timeframe. The firm is highly interested in area of RNA therapeutics, Oncology, Structural Heart and Gene Therapy and is generally less interested in CNS disorders.  For medical device companies the firms looks for technologies that are into clinical trials with a working prototype and is agnostic in terms of technology type and indication.

The firm is looking for private or publically held companies, and has special interest in companies considering going public as well as secondary’s investments. The firm prefers to invest as a member of a syndicate and does not always require a board seat following investment. The firm looks to act as a value add investor helping companies expand their networks and filling in holes in existing management.

If you are interested in more information about this investor and other investors tracked by LSN, please email mandates@lifesciencenation.com

[Video] LSN Fundraising Boot Camp at the 10th Non-Dilutive Funding Summit

12 Feb

By Dennis Ford, Founder & CEO, LSN

I recently presented a Fundraising Boot Camp at the FreeMind Group’s 10th annual Non-Dilutive Funding Summit in San Francisco, to an audience comprised of scientist-entrepreneurs and fundraising CEOs. LSN’s Fundraising Boot Camp helps create context and understanding for these entrepreneurs around issues related to branding and messaging of their firms. The presentation also explains why organizing a global target list of investors that are a fit for your sector and stage is vital to an efficient fundraising process.  Last but not least, I discussed and debunked some of the myths around fundraising, what works, and what doesn’t work.
Check out the video to learn more.

RESI 4: A Recap

12 Feb

By Lucy Parkinson, Senior Research Manager, LSN

lucy 10*10In January, RESI came to San Francisco for the JP Morgan Healthcare Conference week.  LSN was thrilled that so many of you were able to join us there on January 13th; over 500 attendees registered for RESI –  our largest crowd to date.  RESI 4 provided four all-day content tracks outlined in the RESI 4 Program Guide. Even attendees may have missed out on some of the excitement; our video recap below can fill you in on the full scope of the event.

 

This audience provided a vibrant mix of life science industry executives. Figure 1 shows what type of firm each attendee represented:

Figure 1 | Data as of January 13, 2015

The most striking fact about this breakdown is that the investors outnumbered the attendees from biotech and medtech startups.  The pre-existing relationships with investors and strategics developed by LSN Research and Business Development staff garnered over 200 investor registrations at RESI 4.  These investors were keen to book meetings with entrepreneurs and assess their innovative technologies; almost 60% of the meetings booked on the RESI Partnering system were between investors and entrepreneurs.  Here’s a closer look at who took meetings with whom at RESI 4:

Figure 2 | Source: RESI Partnering Platform, Data as of January 13, 2015

Interestingly, investors booking meetings with fellow investors was the third most common meeting type.  This continues a trend we’ve noticed at previous RESI events: investors are interested in meeting with each other to discuss potential syndication or strategic opportunities, or possibilities for future collaboration.  RESI is a stellar venue to facilitate these meetings, given how many investors are present; RESI also offers investors the opportunity to use the RESI partnering platform to hone in on investors with common strategic interests in terms of indication area or stage of development focus.

RESI provides two core experiences; the opportunity to hear investors outline their mandates and methods of investment at RESI’s panels, and the opportunity to hold partnering meetings with fellow attendees.  By gathering so many luminaries in the early-stage life science world together under one roof, RESI creates an atmosphere that leads to a huge number of ad hoc meetings – more than we could count.  Whether it’s after a panel, at the reception, or in the exhibition hall viewing the RESI Innovation Challenge, LSN witnessed attendees engaging with each other in a highly productive environment throughout the day.  With more investors than early-stage entrepreneurs present, RESI 4 provided life science startups with an excellent opportunity to network with early-stage investors who are relevant to their fundraising campaigns.

RESI continues to innovate, with a new array of panels including a track devoted to medical technology investment.  LSN looks forward to bringing RESI to new venues in the future, and to returning to San Francisco in 2016.