Forbes on Essentials for Attracting Angel Investors

Great article on essentials for raising angel funding.

Forbes.com
Deep Pockets
Ten Ways To Attract Angel Funding
Martin Zwilling, 10.27.09, 6:15 PM ET

The papers are filled with scary statistics. Here are a few more for entrepreneurs on the hunt for capital from angel investors--those loosely banded groups of deep-pocketed individuals looking for the handsome returns that only risky, early stage investing can (sometimes) bring.

According to the latest data from AngelSoft, which pairs entrepreneurs with angel groups in a particular city or ZIP code, only about one out of 100 companies that make a formal request for angel funding manage to secure the capital. Among the axed, three-quarters never make it past the initial screening process; of those that do, more than half are eliminated during live presentations and discussions, and another 10% during the following due-diligence process.

It's a brutal gauntlet.

While there are no guaranteed strategies for success, you can boost your chances of survival. Over the past decade, I have had the opportunity to see how the process works, several times from the start-up side, and more recently from the angel perspective (as a member of the selection committee for the Arizona Angels Investment Network, in Phoenix).

Here is my list of the top 10 action items for those looking to land angel funding. If some of these are familiar, ask yourself: Are you actually doing something about them?

1. Incorporate your business now. If you expect to seek external funding, first incorporate as an S-Corp, C-Corp, or a limited liability company, rather than the more expeditious sole proprietorship or partnership. Corporate entities allow for easy carving up of equity stakes, one reason why unincorporated entities often can't find funding.

2. Line up an experienced team. There's an adage: "Investors fund people, not ideas." Not only is this dead on, poorly assembled teams are probably the biggest stumbling block in the initial angel-screening process. If the founders are not experienced, find a couple of advisers who are experts in your industry to fill the gap.

3. Launch a Web site. I don't care what kind of company you are, in today's world, you need a cleanly designed, easy-to-use Web site. If not, you won't be perceived as a real company. Investors routinely troll sites of companies looking for capital to get a feel for their tone and scope, as well as the nature and maturity of their products and services. Also, protect that virtual real estate by reserving the company name on social-networking sites.

4. If you have real intellectual property, defend it. File patents and trademarks. They may or may not be true barriers to entry (first-mover advantage can be more powerful than any patent), but they are often perceived as such. Start the process early, as it takes a while to pound through. (Note: Patents can run the gamut. For more on this, check out "Ten Of The Zaniest Patents.")

5. Build a prototype product. Many entrepreneurs need capital to build a prototype product, yet most angels expect to see a prototype before they invest. Do what you can to demonstrate progress early.

6. Hit the high notes. At the initial screening, investors expect a one- or two-page summary of the business, including an explanation of how it makes money and how specifically you would invest an angel's capital to boost your prospects--all backed up by a streamlined 10-slide PowerPoint investor presentation. Remember to aim the content at investors, not customers. (Translation: Don't spend too much time gushing over every last product detail.)

7. Prepare an investment-grade business plan. All entrepreneurs need a well-crafted business plan for their own use, whether they intend to seek investor funding or not. As a founder, you may think that everyone understands your vision based on your words and passion, but it doesn't work that way. A good business plan should answer every question an investor or associate might ask. For a breakdown, check out "10 Elements Of A Sound Business Plan."

8. Finalize your financial model. Like the business plan, a financial model is required as much for your own use as to impress angel investors. In most cases, an interactive Microsoft Excel spreadsheet is adequate, with projections (and well-defined and denoted assumptions that drive them) for revenue, expenses and cash flow over the next five years. Best-, expected and worst-case scenarios add credibility.

9. Close at least one customer. This must be someone who is willing to pay real money for your product or service. Free trials don't count. All the conviction and market research in the world are no substitute for real customers paying real money.

10. Network--ahead of time. This last item should be your first: Build relationships with investors and friends of investors before you need their money. Start by taking an active role in relevant technology groups, trade associations and university functions.

I hope the takeaway is clear: Angels can be saviors, but not without plenty of careful preparation. Don't expect anyone to swoop down, gather you up and whisk you to financial freedom. For more on raising angel funding, read "Wooing And Choosing The Right Backer."

Martin Zwilling is the founder and chief executive officer of Startup Professionals, a company that provides products and services to start-up founders and small business owners. He can be reached at marty@startupprofessionals.com.

Biotech Issues Featured in O'Bannon vs. Shields Race for Delegate

Delegate John O'Bannon (R-Henrico), co-chair of the Virginia Bioscience Caucus, is promoting his support of the Virginia biotech industry in his advertising. John also was the chief sponsor of our legislative package last year that enhanced the incentive for investors to support advanced technology companies in Virginia.

Way to go, John!

A New Treatment for Chronic Wounds

Israel could become a leader in the $3 billion chronic wound industry with a new device that heals wounds faster and more cheaply than alternatives.

Millions of Americans, particularly the elderly and diabetics, are afflicted with chronic wounds, which are complicated to treat and can lead to lengthy hospital stays. With life expectancy and the numbers of those suffering from diabetes and obesity increasing worldwide, the global chronic wound industry currently totals around $3 billion.

Israeli company EnzySurge hopes to change the way chronic wounds are treated, with its DermaStream product line. The device is relatively low-cost, has the appearance of a bandage and is disposable, unlike the unwieldy equipment in use today.

Its small size and simplicity make it convenient for use in outpatient facilities or at home, reducing the need for costly hospital stays. It also helps wounds heal faster, saves time for physicians and nurses, and cuts costs. The technology is currently undergoing regulatory procedures and will reach the market next year.

Based on the company's patented Continuous Streaming Therapy technology (CST), the new DermaStream device meets a variety of important needs: It applies negative pressure to a wound, while at the same time providing a continuous stream of healing solutions to the wound bed. DermaStream also drains the wound of exudates - bacteria and other fluids that are released and can hinder the healing process.

Simplify treatment, reduce costs

"DermaStream provides the combined effect of streaming, negative pressure, and the active ingredient in a solution that is determined according to the wound type and stage, for a comprehensive approach to treatment," Amir Shiner, CEO of EnzySurge, tells ISRAEL21c. "The idea is to simplify the means of treatment while simultaneously providing an effective solution for patients that is low-cost, easy to use, and can be used in homecare."

A supplemental technology developed by EnzySurge is SilverStream solution, which topically infuses the wound with a very low concentration of silver ions. This solution is a powerful enemy of bacteria and can enhance the effects of DermaStream. Like DermaStream, it will be available next year.

Given recent US government attempts to reform national healthcare and reduce standard treatment costs, EnzySurge's products are coming to market at just the right time, says Shiner.

"Most of these chronically ill patients are 65 and older and are covered by Medicare or Medicaid. There's a lot of receptiveness now to alternative treatments that are lower-cost and intended for outpatient settings, to be used by the patients themselves," he says.

Getting rid of dead tissue in the wound

The latest technology in development at EnzySurge is an enzymatic Debridement solution, which in conjunction with the DermaStream device removes necrotic (dead) tissue from the wound.

A clinical trial on the new system performed on 48 venous ulcer patients in Israel demonstrated good results. The debridement solution is expected to begin its regulatory approval process in 2010.

EnzySurge's technology is based on research by Prof. Amihay Freeman of Tel Aviv University's Department of Biotechnology. He founded the company, which is headquartered in central Israel in Rosh Ha'ayin, with an additional office in Richmond, Virginia, in 2001.

The company is collaborating with the Virginia Biotech Commercialization Center (a wholly owned subsidiary of Virginia Life Sciences Investments) on business development, reimbursement, marketing and sales. EnzySurge currently employs 10 people and has raised $8 million from private investors in Israel.


Israel 21C
By Ilana Teitelbaum
October 25, 2009

State bioscience group formed

West Virginia's bioscience firms have started a new group in hopes of expanding the biotech industry across the state.

The BioScience Association of West Virginia will be made up of biotech companies and organizations, as well as research groups at Marshall University and West Virginia University. The statewide association will be an affiliate of the National Biotechnology Industry Association.

"This organization will coordinate the exchange of ideas and research, develop new business relationships and expand efforts to attract economic development opportunities for biosciences in our state," said Gov. Joe Manchin in a prepared statement.

About 6,900 people across the state work in bioscience jobs, according to a study by WVU's Bureau of Business and Economic Research. In 2006, the average bioscience worker earned more than $55,000 a year. Bioscience employees made a combined $1 billion in wages. The industry creates about $7.2 billion a year in economic activity across the state, according to the WVU study.

Bioscience employment is largely concentrated in Charleston, Huntington, Morgantown and Tyler County. Monongalia has the most bioscience employees -- 2,269, followed by Kanawha County with 2,033. West Virginia has about 241 firms that work in bioscience fields. Those firms include organic chemical and fertilizer manufacturers, biopharmaceutical companies, and biological research facilities and testing laboratories.

Patrick Kelly, vice president of government relations for the national bio-tech group, said Manchin's "Bucks for Brains" initiative -- a plan to stimulate research jobs at WVU and Marshall -- has given West Virginia's nascent bioscience industry a "tremendous shot in the arm." The state spends about $4 million a year on the "Bucks for Brains" program.

"We look forward to working with [the West Virginia BioScience Association] to help promote the bioscience industry development, champion science education and help attract high-skill, high-wage jobs to the state," Kelly said.

The West Virginia biotech group has started a membership drive. Its Web address is www.biowv.org.

Derek Greg, chief operating officer at Vandalia Research in Huntington, is chairman of the statewide association. Steven Turner, chief executive officer of Protea Biosciences in Morgantown, also will serve on the group's board of directors.

By Eric Eyre

The Charleston Gazette

Two Prominent State Biotech CEOs Resign: Gardner from BayBio and Eaton from AzBio

Two state biotech execs with roots in the Maryland biotech community resigned from their posts last week. Bob Eaton, the former CEO of MdBio, resigned from AZBio. Matt Gardner, the CEO of BayBio, and former executive director of the Tech Council of Maryland's Bioscience Alliance, also resigned his post late last week.

Both were members of the board of directors of the Council of State Bioscience Associations (CSBA), the national group comprised of all 44 state bio trade associations across the USA.

BayBio chief Matt Gardner resigns
Matt Gardner, president of local biotech trade organization BayBio for six years, has resigned.

In an email from Chairman Bill Young to BayBio members, Gardner said he would “pursue other opportunities.” Gardner did not specify what he was considering or when he would officially step down from BayBio.

“I have worked with the BayBio board of directors to effect a smooth transition plan designed to deliver the organization to new heights,” Gardner wrote.

In six years under Gardner’s leadership, BayBio has grown more than 150 percent in membership, he noted, and is nearing 500 members at its 20th anniversary. The organization also has added new programs, including lobbying, advocacy, communications, group purchasing, entrepreneurship and science education.

BayBio serves more than 900 life sciences companies.

Gardner, who bachelor’s and master’s degrees from the University of San Diego, came to BayBio from the Maryland Bioscience Alliance, where he was director, and spent six years as North American business development director for the government of Queensland, Australia.

San Francisco Business Times

And here is the news on Bob Eaton...

Eaton out, Green takes over at Arizona BioIndustry Association
Bob Eaton has quietly left the Arizona BioIndustry Association, and a new president and CEO already has been named.

Eaton is resigning his position under a mutual agreement with the AZBio board.

His replacement, Robert Green, is a longtime Tucson biotechnology entrepreneur who has formed and operated several biotech companies since moving to Tucson in 1989. Late last year, he sold Integrated Biomolecule Corp. to Ventana Medical Systems/Roche Group.

On Sept. 24, AZBio held its annual awards dinner, honoring six companies and individuals who are changing the world through bioscience innovation. Ventana was named Bioscience Company of the Year, while Applied Microarrays Inc. of Tempe received the Fast Start Award.

Martin Shultz, vice president of government affairs at Pinnacle West Capital Corp., received the Jon W. McGarity Leadership Award. Bruce Rittman, director of the Center for Environmental Biotechnology at Arizona State University’s Biodesign Institute, won the Award for Research Excellence.

Arizona Rep. Nancy Barto, R-Phoenix, received the Public Service Award, and the Bioscience Educator of the Year Award went to Barbara Fransway, outreach coordinator and research specialist at the University of Arizona’s Arizona Research Laboratories.

Device Makers Fight to Cut New Fees in Senate Health Bill

This article from the WSJ provides background on the multi-billion dollar battle over new fees (taxes) placed on the makers of medical devices.


Medical-Device Makers Push to Cut New Fees in Health Bill
By ALICIA MUNDY and MARTIN VAUGHAN

WASHINGTON -- Medical-device makers, joining an 11th-hour scramble to influence the shape of health-care legislation in the Senate Finance Committee, have petitioned panel chairman Max Baucus to shave billions of dollars in fees that the industry would face under the measure.

The Advanced Medical Technology Association, or AdvaMed, the trade group for the larger device manufacturers, wants the Montana Democrat to reduce $40 billion in fees over the next decade to $15 billion, according to people close to the negotiations. But industry was told that offer is too low. As of Sunday, the final draft included the higher number.

Wanda Moebius, a spokesman for AdvaMed, declined to comment on the $15 billion counteroffer, calling it "rumors and speculation."

"AdvaMed continues to work with members of Congress to educate them of the onerous nature of this [annual] $4 billion tax -- nearly half of the total of the industry's research and development investment in 2007," Ms. Moebius said.

With the Senate Finance Committee expected to vote on its health bill as early as Tuesday, lawmakers, industry executives and others have been seeking to make final changes. A main challenge in passing a health bill has been finding a way to pay for the overhaul. That is the aim of the proposed fees on medical devices, along with other fees and taxes that would be imposed on the drug industry, hospitals and the insurance industry.

People close to the negotiations said the White House supported a medical-device tax to help pay for the overhaul. A White House spokeswoman said the administration doesn't comment on specific health-care legislative provisions.

Administration officials and Mr. Baucus were troubled that AdvaMed and the $200 billion industry didn't offer any concessions to the White House and Senate Finance Committee early this summer.

AdvaMed's president said in a recent interview that the industry had proposed a way to save billions of dollars that would involve a tax on hospital-supply and device wholesalers, which they could pass on to the device makers. Wholesalers strongly objected to the proposal. It was rejected by the Senate committee, AdvaMed said.

The pharmaceutical industry in June offered concessions that would save the government an estimated $80 billion on health-care costs over the next decade, and the coalition of hospitals proffered $155 billion. Executives from both industries believe some sort of health legislation is likely to pass and would prefer to have a say in shaping it. Administration officials have told them that expanded, government-subsidized health coverage would likely bring them millions of new customers.

Industry and congressional aides said a deal could still emerge with device makers before the Finance Committee votes on the health bill.

A number of lawmakers have voiced support for the device makers. Sens. Amy Klobuchar and Al Franken, both Minnesota Democrats, have publicly objected to the proposed fees, which they describe as a tax, as have Indiana's two senators, Republican Richard Lugar and Democrat Evan Bayh. Medtronic Inc., a major cardiovascular-device maker, is based in Minneapolis, and defibrillator maker Guidant Corp. is based in Indianapolis.

President Barack Obama pushed the health-care overhaul in his Saturday radio address, saying it would drive down the cost of insurance for small businesses, which, in turn, would help them grow and create more jobs.

'Darwinian' Cuts in VC Funds and Biotechs...

Great coverage of David Mott's remarks last week to the MAVA breakfast.

Tuesday, September 29, 2009
Dave Mott: Biotechs face tough road
Baltimore Business Journal - by Vandana Sinha Contributor

Biotech entrepreneur Dave Mott suggested that the worst capital markets he has seen for emerging life sciences companies in a quarter-century has perhaps hit bottom.
But even with an upswing, the next generation of successful companies will confront much stronger barriers to nailing capital than did its predecessors, including Mott himself, the former MedImmune CEO said in a talk to local life sciences leaders hosted Tuesday by the Mid-Atlantic Venture Association.
A year after selling Gaithersburg's MedImmune to London-based AstraZeneca PLC, Mott moved back last year to his investment banking roots to become a general partner at New Enterprise Associates, a Chevy Chase venture capital firm that focuses on health care, technology, energy and biotech companies.
“Three years from now, there will be one-third as many venture capital firms as there were three years ago,” Mott said. “And there will be half as much money.”
But he said that sort of Darwinian selection will be a good thing -- a slimmer funding pot filters out the companies with weaker prospects from the beginning, ensuring only the strongest survive. “The industry is alive if not well,” he said. “Any purging that has been happening and is still ongoing in our ranks is going to be good for our industry. ... [Before], we were starting companies that weren’t going to get bought out.”
Indeed, he said venture capitalists must continue to be more selective, a common criticism from early-stage companies that protest that investors don’t give them a second glance. Mott said he foresees that changing, that earlier-stage companies with pathbreaking science offering a broad range of drug possibilities are likely to start receiving the venture checks and undergoing initial public offerings. Later-stage companies, which have long been the sweet spot among investor circles, may have to prove themselves more able to cross the hurdles that can often pop up among that age group -- things like lukewarm drug results, partnership interference or stock dilution.
“I think there’s going to be a surprising shift to the big idea, science-based companies, sort of where we were 20 years ago,” he said.
But he did render a tough review of the local biotech industry, saying it’s only produced a handful of spinouts that would catch a venture capitalist’s eye. “I go above and beyond looking for local companies” to invest in, he said, “but I can’t make bad investments.”
He added that his job is to opt for the best science and management teams, even if he finds them in La Jolla, Calif., San Francisco Bay or Cambridge, Mass., rather than local counties. “Right now,” he said, “I see a much higher concentration of investable opportunities in those three regions than I see here.”