I Thought VC Funding was Drying Up?

Maybe things are looking up! VC firms invested $228 million in 39 tech startups in New York City in the first quarter of 2009. It would be interested to know how that stacks up compared to other areas in the country. Of course, we don’t know how expensive that money was (ergo how much of the pie did start ups have to give up), but overall it’s very exciting to hear that such a large amount of funding is trickling down to worthy start ups!

http://money.cnn.com/2009/06/04/technology/vc.startups.nyc.fortune/index.htm?section=magazines_fortune

Bridge Span SBIR Grant Announced

Another interesting SBIR Grant announcement to share:

This grant is meant to help companies overcome the gap between R&D and going to market. They are encouraging submissions to include preliminary pre-clinical work .  It’s quite an opportunity to gain some undilluted financing, as submissions can include a  budget of up to $1 million in total costs for up to 3 years . The NIH has committed $35,000,000 to the program, and  hanticipates awarding 10 grants in 2010.

The submission date is September 1, 2009 at 5PM local time, and while Letters of Intent are not required, they are encouraged and due by August 3, 2009 .

For more information, go to http://grants.nih.gov/grants/guide/rfa-files/RFA-OD-09-008.html

High Risk Reward NIH Grant Announced

An interesting funding opportunity opened up at the NIH. This is similar to SBIR Phase I, but only applicants who haven’t received SBIR before are eligible. It is an early stage technology development program – “high risk reward”. Details are pasted below. The full announcement is available at http://grants.nih.gov/grants/guide/rfa-files/RFA-OD-09-009.html. 

 Recovery Act Limited Competition: Small Business Catalyst Awards for Accelerating Innovative Research (R43) Letters of Intent Due Date: August 3, 2009 Application Due Date(s): September 1, 2009 Budget requests are limited to $200,000 total costs for a maximum project period of one year Research Plan: not to exceed 6 pages, including tables, graphs, figures, diagrams, and charts The Small Business Catalyst Award for Accelerating Innovative Research funding opportunity: Applications are solicited for support for projects that have the potential to generate high impact results (e.g., products, processes or services) and/or innovative research applications, research tools, techniques, devices, inventions, or methodologies. The outcomes of the research supported should have potential to lead to products that will improve public health and create significant value and economic stimulus. This FOA solicits early-stage ideas that promise to lead to major leaps forward in capabilities important to serving the mission of NIH rather than incremental improvements of existing technologies. In accord with the funding priority of this initiative to attract applicants without a history of SBIR/STTR support from NIH, the focus of the projects solicited by this FOA is on early stage technology development.

Our New Domain Name

Hey everyone,
Shockingly, it’s never been easy to get people to remember our name with the generic wordpress address, so we went ahead and picked up our new name…drum roll….www.EmergingBiz.com

We wanted to get the idea of emerging tech through without losing sight of the fact that our focus is less technical, and more business, while being easy to remember. We feel pretty good that we were able to do that.

Tell every scientist, business person and bio-nerd you know about www.EmergingBiz.com

In Cleveland on April 15th? Join us for a Great Talk on SBIR’s!

We are sponsoring the first talk in the Ghannoum Law Firm Speaker Series on April 15th. The Talk is titled: SBIR Grants and the Financial Crisis: Why Now is a Great Time for Companies to Pursue Federal Funding. Details are below. We’d love to see you there!

The Ghannoum Law Firm is excited to announce the launch of the Ghannoum Law Speaker Series. The First talk is on April 15th, and is titled, “SBIR Grants and the Financial Crisis: Why Now is a Great Time for Companies to Pursue Federal Funding.” Giving the talk will be Dr. Mahmoud Ghannoum of University Hospitals. Dr. Ghannoum has been continuously funded by the NIH since the early 90’s, and has been successful securing both public and private funding for multiple biotech ventures.

The talk will be held at the offices of the Ghannoum Law Firm in the City Club Building, in the Seventh Floor Conference Meeting room, and will begin at 5pm, with cocktails and hors d’oeuvres to follow. The address is 850 Euclid Avenue, Cleveland, OH 44114.

Please RSVP by email: Afif@Ghanlaw.com or by calling 216.973.9903

What to Consider (and Do) Before Licensing IP – PART I

Plug “Biotech Licensing” into Google and you’ll get back over five million search results. It doesn’t take a business guru to know that technology licensing is a big part of the emerging tech arena. But how do companies actually find IP, and what should they be considering before they even contemplate negotiating a licensing agreement?

 

In this post, I’ll attempt to answer those questions, by summarizing some of the advice I give to clients looking to license technology.

 

Identify Licensors and IP

So how do you find a licensor? Sometimes you’re lucky enough to hear about someone with the perfect IP for you to license, or even better, they approach YOU, and say, “hey, we think there’s a biotech application here, but we think you’re company is better able to develop it than we are,” and they offer you a license. Great, problem solved. But the reality is, it’s often difficult to find IP that is not only available for license, but can turn into something commercially viable.

 

So let’s talk about some other ways to identify licensors. Well the easiest way is using something I like to call, the Google. Sounds simple, but very quickly you may be able to identify companies that may have IP they are willing to license. In fact, sometimes, they even specifically state as much on their site. (For five places to find IP, check out this POST) Obviously, everyone knows about google, but my point is to not overlook some of the basic search tools for identifying possible licensing partners.

 

And not just for licensing, but for other possible collaborations. For example, one of our clients, based here in Cleveland, used google to find a manufacturing partner for their product, and what started as an initial cold call explaining an interest in potentially collaberating, has flourished into a very exciting partnership, that has begun to grow into partnerships on other fronts. Incidentally, that manufacturer isn’t located in China, or on either of the Coasts, but right here in Cleveland.

 

That goes to my second point, don’t overlook local resources. There’s this concept that in order to find intriguing IP and sophisticated licensing partners, you have to look to the coasts or simply somewhere else. A kind of, “Not in My Backyard” mentality. Just in Northeast Ohio not only are there incredible resources right here, but there are organizations waiting to assist tech start ups, like BioEnterprise, JumpStart, MAGNET, and Techlift. These types of organizations are popping up all over the country, meaning there’s a lot of assistance out there for tech startups.

All of these organization are easily accessible and have the resources to help your company get what it needs. Let me give you a quick example, a client company of mine has developed some very innovative technology that requires very sensitive equipment to measure it’s efficiency. It wasn’t until we contacted several of these organizations that we were put in touch with some folks over at NASA who had the equipment we needed. Therefore, ergo, vis-a-vis, try to find resources locally before looking elsewhere.

When we continue in the next post, we’ll pick up with: I’VE FOUND A POTENTIAL PARTNER AND IP, NOW WHAT?

Healthcare I-Bankers Give Outlook on Biotech, Pharma and Med Tech Financing

First, we know we know, we’ve been a little too lax on keeping up a consistent stream of posts. So here’s to our re-commitment to keeping the Biz O’ Emerging Tech Blog updated.

Now that we have that out of the way, I read an interesting interview done with Mark Dempster and Ralph Sutton of the Thomas Weisel Partners New York City healthcare investment banking team.

Here’s a couple quick hits from the interview:

• “VCs are consolidating their investments [and]…are being forced to hold onto portfolio companies longer than originally planned and…[concentrating] funds on a subset of companies.”  

I’m not sure that’s really newsworthy, but hey, it’s nice to hear someone “in the know” say it;

• “VCs may be an alternative funding source for public companies with low market valuations, but companies need meaningful clinical data in hand or in upcoming announcements to be attractive to them.”

I thought this was actually a pretty interesting insight for a couple reasons; (1)  the common perception (at least from a tech start-ups view) is that VCs provide later stage funding for small companies, not public companies (even ones with low valuations) that supposedly have a (supposedly) proven business, and have access to capital through the markets; (2) : Things have tightened so much in the VC markets, that even public companies have to prove their business ideas to get funding.

• “Access to capital is extremely challenging for small-cap and private biotechnology companies.”

I know that’s not really surprising, but again, it’s helpful (or not) to hear that from the horses mouth.

• “In medical technology…VCs [want] opportunities to provide growth capital or where the risks are related to commercialization and execution, rather than clinical, regulatory and reimbursement.”

Translation: Good luck to all you early-stage med tech companies. It’s unfortunate, because it used to be that although you gave up a ton of equity to get VC money, you knew that without it, you probably couldn’t get through the clinical and regulatory hurdles without that funding. Now, you’re still going to give up a huge chunk of equity, but now VCs only want to play ball once the hard stuff is done. Isn’t the whole point of giving VCs a huge equity stake, that they are taking on significant risk that the business won’t pan out, and should get rewarded if it does? I say, forget it, if you’ve gotten this far without them, strap on those boots and try and go it alone!

Click HERE for the whole article, as featured on rxforpr.com (check them out, it’s a cool site)

Financial Accounting for Dummies: Thanks, Youtube!

By: Brett A. Hoover [Follow me on Twitter and LinkedIn]

I am not a huge fan of Youtube. I rarely see it used for anything beyond posting tomfoolery for the amusement of others. That said, I recently came across a series of 5 minute videos on Financial Accounting, taught by Susan Crosson. The pace is slow, and I couldn’t help but feel like I was back in the 3rd grade. However, Susan is incredibly clear, succinct, and offers an utterly wholesome approach to delivering the subject matter. Bear with the sound quality…it can be quite annoying at times.

There’s no excuse for being an entrepreneur or business owner and not fully understanding how basic accounting and finance works. If you’re paying someone else to handle your numbers because you just don’t have the time, fine. If you’re outsourcing this because you don’t know how, I suggest you click the following link and take some time to improve your company’s most important brand (you!).

Accounting and Finance by Susan Crosson

Slainte Mhath!

Effectual Reasoning: A Glimpse at What Makes an Entrepreneur Entrepreneurial

By: Brett A. Hoover [Follow me on Twitter and LinkedIn]

A scientist at heart, I am a sucker for a good academic article. I read one such article a few weeks ago. It explored the differences between Causal and Effectual thinking and their approaches to starting and growing a business.
Causal thinking is what MBA’s do (and are taught to do): begin with a pre-determined goal and a given set of means, then seek to identify the optimal alternative to achieving the given goal. Effectual thinking is what entrepreneurs do: given a set of means (abilities, knowledge, and network) it allows goals to emerge contingently over time from the varied imagination and diverse aspirations of the entrepreneur and the people they interact with. Think of it as the MBA conqueror (Alexander the Great) versus and entrepreneurial explorer (Amerigo Vespucci). The prose articulates not just how MBAs and Entrepreneurs are different, it also outlines when their schools of thought excel and when they tend to fail (and
why). As you can imagine, in the end, it’s best to be a bit of both.

In short:
1) MBAs plan, Entrepreneurs execute.
2) MBAs focus on the end, Entrepreneurs fixate on the means.
3) MBAs avoid surprises, Entrepreneurs embrace and utilize them.
4) MBAs try to control the future, Entrepreneurs seek to create it.
5) MBAs grow and sustain, Entrepreneurs innovate and start.

If you have the time, and don’t mind a little ‘academic’ reading, I highly recommend this article. Click the following link to open the .pdf file.

Effectuation: What Makes Entrepreneurs Entrepreneurial?

Slainte Mhath!

“Thou Shall Nots” of Business Development

By: Brett A. Hoover [Follow me on Twitter and LinkedIn]

1) Thou shall not tell the science story and neglect the market story!
-Do realize the market is the story and focus on it. Weave a succulent picture of success, keeping in mind that your audience is not stupid and will not fall for “our target market is $50B”.

2) Thou shall not assume the market is static!
-Do project the future market and make sure your forecast and financial assumptions make sense. If you hand-wave, it’s off with your head…and your paws!

3) Thou shall not design a product based on what you think the customer wants!
-Do get off your haunches and KNOW THY CUSTOMER.  Email them. Call them. Interview them in person. Let them beta-test a demo. Take their family out to dinner…whatever. Just don’t guess when you can know.

4) Thou should not ignore a physicians’ financial motivations! (Ok, this one’s for BigPharma and BioTech. Bare with me)
-Do understand that docs are just as interested in making money and keeping their business out of the red as you are. In other words, never assume patient outcome trumps negative financial considerations. Variable levels of healthcare reimbursement will affect the doc’s behavior. Build this into your assumptions.

5) Thou shall not ignore the importance of reimbursement on future profitability!
- Do understand who pays for what and why. Further, you need to know what the “reimburser’s” price sensitivity is and what drives it. A drug or biologic will rarely (”never”) become lucrative without first being reimbursed. As soon as your product enters FDA trials, get the reimbursement call rolling (Medicare and Medicaid).

6) Thou shall not speak in strange valuation tongues.
-Do use the valuation methods of your audience. Different strokes for different folks. Biotech is not Pharm is not Venture Capital is not… you get the point. For example, Pharma loves to use the net present value (NPV) and risk-adjusted NPV (rNPV). BioTech, on the other hand, prefers to only use rNPV. Lastly, VC’s tend to focus their eyes on comparable analysis, which compares an investments ‘exit value’ across various exit strategies and with similar exits values. The licensee performs the deal(tech)-valuation. The valuation is a crucial part of the investment decision. As such, it behooves you to learn the preferred valuation methods of your prospective investor and either follow suit or give the investment team the exact inputs it needs to quickly make a valuation estimate.

7) Thou shall not pitch thy product as ‘perfect’!
-Do be honest and disclose potential problems and pitfalls. Nobody’s technology is perfect. Investors know this, and assuming they don’t will only get you laughed at. Come right out and mention and address any disadvantages. Feel free to run down you list of way to mitigate risk. This will build credibility and allow you to damage control. Better to mention it early, then to have an investor ask you about it later.

Slainte Mhath!

Ref: Stewart J and Bonifant B. “The Seven Deadly Sins of Business Development.” Nature BioEntrepreneur. April 2008.