Early stage biotech companies have it tough. Often starting from an academic background, life science company leaders must take unproven technologies and convince investors to place bets on their success. If that quest for funding is unsuccessful, unproven ideas can stay that way forever.
As an angel investor, Carolyn Myers has seen plenty of good ideas (and more than a few bad ones) fail to get off the ground due to their founders’ inability to raise money. Myers has had careers in several fields, first as a scientist with a doctorate in genetics and biochemistry, then on the sales and later the business side of the pharmaceutical industry, and now as an angel investor and a consultant for small and mid-sized biotech and medical companies.
The NJEDA will host a panel of experts on early stage investing in the life sciences on Thursday, October 24, at 5 p.m. at the NJ Bioscience Center incubator at 675 Route 1 in North Brunswick. In addition to Myers the panel will feature James M. Golubieski of Foundation Venture Capital Group and the New Jersey Health Foundation; Tony Dimun, a medtech angel investor; Peter Alff of Kairos Ventures; and TomBrennan of ARCH Venture Partners. John Pennett of EisnerAmper will moderate the discussion. The event is free. Register at www.njeda.com. For more information, call 732-839-1880.
“For any startup, it’s tough,” Myers says. “If this is the first time they’re actually going out to raise money, it’s very competitive.” For some perspective, the angel investing group that Myers is a part of, New York-based Mid-Atlantic Bio Angels, only funds a tiny percentage of the companies that file applications for funding. And it’s often not enough to raise funds from just one investor: companies usually need funding from multiple sources to stay afloat.
There are things that companies can do to improve their chances, however, and Myers and her company, BioEnsemble, help find them. Assuming the company has good technology, they need the right leadership team, the right business plan, and a good story and pitch deck to get investors excited about the company.
“From my experience as an angel investor, the first thing that’s important to be comfortable with is who the management is. If you have a great opportunity but the wrong people, then you need to step back and have a conversation about changing the management,” Myers says.
That doesn’t mean researchers are necessarily bad leaders. “In a lot of case I’ve worked with, scientists are actually pretty good. But they’d be the first to admit that business strategy is not their forte. They do need help to be able to translate ideas into business strategy and put together a business plan that’s cohesive in terms of making sure that they have timelines. What are the costs? What is the exit strategy?” Myers says. Angel investors generally want to exit in around five years, with their investment worth five to eight times as much as when they made it.
Myers says people who own companies like this and are aware of their own shortcomings would do well to find an advisor to help them develop a good business plan.
Pitch competitions are a good way to learn what makes a good pitch. (Check the U.S. 1 business meetings calendar for listings.) Mid Atlantic Bio Angels founded an annual event called “First Pitch” that gives entrepreneurs feedback and constructive criticism from experienced professionals. Another good resource, for those in an academic setting, is the tech transfer office that major research universities have. These offices can help provide advisors who will work pro bono or for equity, which Myers has done many times.
Myers met one company at a First Pitch event that came with a science-heavy presentation. Myers worked for them as a consultant and helped turn their deck into a presentation that clearly outlined their business strategy: it started with the problem they were trying to solve, how they would solve it and what they needed, what their competitors were, and on what timeline investors could expect to see a return. “As a consequence of that they have won awards at various pitch presentations,” Myers says. “They’re finally making traction to raise money.” (Even with traction, this can take a while — as long as 18 months to two years.)
Myers’ background in research has set her up for a career in life science angel investing. As a high school student, Myers found she loved math as well as the complex organic chemistry that gave her classmates headaches, so she decided to go into science. She earned a bachelor’s degree in biology at the University of Waterloo in Canada and a doctorate in genetics and biochemistry at the University of British Columbia. She embarked on a postdoctorate research career that involved several projects, the most well known of which was a way of measuring the pollution created by paper mills by examining the chlorine content of fish. However, she found scientific work isolating, and she decided to go into private industry.
Her private sector career began in sales at a pharmaceutical company, where she quickly climbed the corporate ladder, eventually holding numerous sales, marketing, and leadership positions at pharmaceutical companies.
Myers says companies that successfully get funding have three things in common:
“The key to having a really exciting technology or invention is having enough data to make it valid, then having the right management, then having the right business plan in place that you can articulate to investors.”