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The
bio-innovation conference: where biotechnology and intellectual
property meet
Maine Science and Technology Foundation
June 27, 2002
DAY
ONE
Public
and Private Financing for Biotech Businesses
Jeffrey
Moore, Ph.D., Phylogix Inc., Scarborough, ME
Janet
Yancey-Wrona, Ph.D., Maine Technology Institute, Gardiner,
ME
Kerri-Ann
Jones, Ph.D., Maine EPSCoR, Portland, ME
Braden
Bohrmann, Masthead Venture Partners, Portland, ME
Moderator:
John Carpenter, Esq., Bernstein, Shur, Sawyer & Nelson,
Portland, ME
Jeff
Moore, founder of biotech company Phylogix, has been
through "The Valley of Death" for startups. In Phylogix's
early days, Moore said he spent his savings and used
personal credit cards to buy lab supplies. But various
infusions of cash, including grants, an award from the
Maine Technology Institute, and a round of venture financing,
have meant that Moore and Phylogix have crossed the
Valley and stayed alive.
Moore
emphasized that venture capital firms vary, but all
want to see their investments yield products, not conduct
research. Some investors, he said, may be interested
in business models and intellectual property founded
on platform technologies, while others prefer products.
Finding
money that matches your product is key, said Moore,
but most important, he believes, is that "you basically
go where you need to get and you try not to focus on
just getting the money. For example, we haven't focused
on bioterrorism, we've focused on clinical unmet needs,
which gets a real product."
Bohrmann
agreed, noting that many founders of startups display
passion and "that passion is wonderful. It's absolutely
necessary. It's the gas in the gas tank, so it makes
everything go round. But… successful companies demonstrate
over and over again that they've identified a point
of pain in the marketplace that their technology or
solution solves… that's a really critical thing."
The
venture capital business, said Bohrmann, aims to "understand
and manage risk, not merely incur it" in the hope of
making profit. Masthead partners have collectively invested
around $75 million in 71 companies over 15 years and
returned over $470 million to their investors. Bohrmann
said the company takes its management role seriously,
helping companies with strategic planning, management,
and recruiting assistance.
Bohrmann
suggested any company looking for both cash and the
aggressive assistance of a venture capitalist prepare
a short 30-second pitch and one-page executive summary
of the company's plans and prospects. He also said entrepreneurs
should research investors carefully to target those
most interested in their market sectors or products.
Referrals, he added, can ease the financing process.
Applying
for federal and state funds also requires careful research
into the best sources, said Jones and Yancey-Wrona.
Federal resources are large, said Jones, citing research
and development funding that should total about $103.7
billion in 2002 for all fields, including biotechnology
and life sciences. About 28 percent of the total is
granted to industry and about another quarter to colleges
and universities, she said.
"There's
a lot of money out there," said Jones, urging companies
to think broadly, investigate funding possibilities,
and consider how biotechnology "intersects with a lot
of things that the federal government is funding that
go in and out of fashion – nanotechnology, biotechnology,
biocomputational, marine science – depending on what's
involved at the time, what the priorities are."
Understanding
priorities includes contacting program officers, said
Jones. "Get to know a human being who's working on the
program because it makes all the difference in the world.
The Web is wonderful, you get lots of information, but
until you talk to a program officer who really understands
the ins and outs of the place and the project and what
the budget is for this year, you might want to decide
whether it's worth your time or not."
Applicants
for MTI awards should also take care that their goals
meet MTI's needs. "If you're asking the MTI for money,"
said Yancey-Wrona, "you need to appeal to our purpose…
The reason the MTI was created and the reason the MTI
continues to exist and has $6 million a year of taxpayer
money to expend by investing in your company is not
to help your business. It's to help Maine Technology
Institute accomplish its goal of generating highly skilled
sustainable jobs for Maine people and developing a technological
infrastructure here in Maine that will support a critical
mass and help develop Maine industries."
Yancey-Wrona
also discussed the Small Business Innovation Research
(SBIR) and Small Business Technology Transfer (STTR)
Programs administered by 10 federal agencies. SBIR and
STTR provide about $1.2 billion in funding, and Yancey-Wrona
said "sometimes utilizing the federal programs or the
state programs or these nontraditional sources of financing
is a really good way to get your company closer to a
place where it can be financed, even if it's not venture.
Often these programs can take you to the point where
you're able to get traditional bank financing, traditional
debt financing."
MTI
assists SBIR and STTR applicants with proposal review,
grants to write proposals, and help navigating solicitations
from various agencies, said Yancey-Wrona.
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