Saturday, May 27, 2017

Angel Funding - Going to the Source

For the next set of blogs, I am going to take on a very different topic.

What if your passion is not to practice medicine but start up a company that can impact health outcomes?
What if what you want to do is to do research and then turn that research into life science business that sells pharmaceuticals and medical devices?

What if you want to launch a health startup with health focus? The possible ways of improving health by altering other components of our health care system are endless. With the rise of precision medicine, there are a plethora of opportunities to provide value through new technology and implementations of technological solutions. [Precision medicine ideas for VCs and angel investorsVentureBeat. October 11, 2015.]
If so, this set of 7 blogs is for you. The blogs specifically focus on early stage angel funding for the life scientist or health-oriented entrepreneur and include the following topics:
  1. Sourcing: Put your investment opportunity in a place where angels can find it.
  2. Evaluating: Providing an opportunity that appeals to angel investors
  3. Valuing: Describing the value you will provide to the angel.
  4. Structuring: Organizing an offer that appeals to the investor
  5. Negotiating: Working together to finalize an agreement that meets everyone's needs
  6. Supporting: Gaining value from the angel beyond funding
  7. Harvesting: Providing ROI to the angel.
Sourcing Groups

The first priority is to make sure an angel can find you. Investors seek opportunity so you need to put your opportunity out there. Options include:

A Local Angel Group. The main reason is the comfort level of angels for a nearby venture. For a venture that is location-dependent or dependent on some unique aspect of the local community, this is a perfect match. For a life scientist, this is unlikely to be the case. So the main value is convenient access to the angel as an adviser post-funding and the likelihood that they are more comfortable (and thus more likely to fund) someone close to them geographically.

AngelList Syndicates and Internet Focused Angel Groups. Such angel groups take advantage of the Internet to establish and foster longer-distance relationships and are more logical for an Internet-based business. The point of contact will want to be involved but they probably won't be local. If your product startup is Internet-focused, they are likely to have more comfort with and expertise in products targeting Internet-based solutions and that use the Internet for digital marketing.

Typical means to find single source angel funding. Examples include a convenient family, friend, business associate, accountant, or lawyer. These are still an option so classic face to face networking and promoting you in smaller groups and via Internet presence (e.g., LinkedIn, Facebook) may yield results. But as with most other aspects of society, the value of the Internet and the search engine are quickly eroding this means to find funding for your health-oriented venture.

Health and Medical Focused Angels
The Internet can also direct you more quickly to an individual angel or angel group with a specific focus on the life sciences aware of your venture. Not only are they more interested in what you propose but they most certainly have the connections to grow your company and advice most relevant to your business opportunity. Examples include:
  • Individual Medical Devices Angel Investors via AngelList - Links to individual investors although AngelList has other investment opportunities for more passive investors. How to Pitch Your Venture
  • AngelMD - Building relationships that spur investment in the companies, innovations, and people charting the future of healthcare. There is no cost to be listed on the AngelMD network. [FAQ]
  • Angel Investment Network - Our investors look at all stages of business and across all sectors from genuine start-ups to more established businesses. We currently have 140,130 private investors, family funds, and venture capital funds. [Note: The search engine for investors can easily identify health or medical opportunities. Cost to Expose Venture]
  • Life Sciences Angel Network - To help our portfolio companies succeed we need to provide them with funding but also with operational support and an access to a broad network of healthcare investors, key opinion leaders, corporate players and other entrepreneurs
  • Life Science Angels - Life Science Angels is sponsored by several premier service organizations. Many offer our membership special services tailored to the life science industries and emerging and startup companies. [Application process requires in-person presentation]
  • Mass Medical Angels (MA2) - A seed stage investor group exclusively focused on life science and healthcare investments. [Though I must admit that the website does not inspire confidence that this is a very Internet savvy group.]
If you are excited about a health or medical venture, proceed with the next blogs (coming soon) and get ready to upload your plan and hit the (Internet) road with your ideas.

The Startup Process: Sourcing Evaluating - Valuing - Structuring - Negotiating - Supporting - Harvesting

Reference: Stevenson David Amis-Howard (2001). Winning angels: the seven fundamentals of early-stage investing. Pearson Education.

8 comments:

  1. Brad,
    Interesting post about all the angels for the Life Science field. There are so many choices for a startup.How should a start up know which ones would be the best one for them to try to get an investment from? Life Science sounds like a broad category. What are some examples of businesses in that category?
    Cece

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    1. Thanks for stopping by!

      By no means am I am expert (this is week 1 after all) but my limited understanding is that one does not choose one's angel but vice versa. The goal is to make sure one's offer is appealing. If you get more than one person who is interested you're lucky.

      I agree that the range of businesses is quite broad. I would lump them into pharma, devices and everything else. The 5 articles in the posting do a nice job of showing the huge breadth of opportunity in the life sciences. With healthcare at 17% of GNP, there is a lot of money to be made in a startup that targets healthcare.

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  2. Hi Brad,

    Great post! Thanks for talking about sourcing groups and how important they are to us -- we need investors to be able to find us.

    Great links too! Thanks for doing the research for us. Can't wait to read your next blog posts.

    Christina

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    1. Thanks for the feedback. I was impressed with how the Internet is changing the whole Angel funding landscape. You always hear about crowdfunding and Quickstarter. But giving people easier access to the capital and wisdom of angels is also incredibly valuable. I think it will also draw more "potential" angels into supporting startups.

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  3. Angel investment in the medical sector is pretty interesting. I understand investment and innovation can be pretty challenging there. A friend of mine launched Edison Nation a few years ago and in 2012 they launched Edison Nation Medical to search for, license and/or fund new inventions in that space. It was pretty exciting at the time because it was supported by Carolinas Health Systems and other major industry players.

    I'm not sure if that's still a working concern because I have not kept up with their progress. It seems that the website is not operational, but the newsletter sign up (if you're interested) is located here: https://app.edisonnationmedical.com/

    I do like this idea more so than angel investing if it involves an invention. It's so much harder to turn an invention into a company and an inventor into a business persion. Licensing has always made more sense to me in this situation.

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    1. Agreed. I figure inventors like inventing. They always seem to have a ton of patents. But maybe that's my "Doc" image of an inventor from "Back to the Future" :) That was all real right?

      Medicine is so far behind the times. I think it offers tons of opportunity beyond the drug/device space. But mostly drugs/devices is all anyone sees.

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  4. Brad,

    I truly enjoyed reading your blog series about life science investing. Although I don't have experience in the health care industry, I am in close proximity to it on a daily basis due to my job at a pharmacy-retail store. There are endless opportunities for improvement in this space, and I see new products and services appearing quite often that either offer an improvement or something entirely fresh. It's a pretty exciting space.

    Austin

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    1. I've probably excessively focused on pharmaceuticals and devices. If someone wants a 10x return (or more) on investment I figure that creation of a drug/device is probably the only way of achieving that.

      That said, I think there are tons of life science opportunities that can be self or crowd funded, less risky, will achieve decent returns, and don't require a science Ph.D and a panel of experts. As with "FinTech" I think there are great opportunities for "HealthTech." Perhaps I will hit that topic in a later series of blogs.

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