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Developing the Business of Life Science

Developing the Business of Life Science. “Securing Funding Opportunities for High-tech Businesses” A high-level overview of common funding sources available to entrepreneurs for technology-based high-tech startup businesses. The Academic Entrepreneur (and most other entrepreneurs).

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Developing the Business of Life Science

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  1. Developing the Business of Life Science

  2. “Securing Funding Opportunities for High-tech Businesses” A high-level overview of common funding sources available to entrepreneurs for technology-based high-tech startup businesses.

  3. The Academic Entrepreneur(and most other entrepreneurs) A good idea is necessary but not sufficient

  4. Funding for Commercialization • Internal institutional grants • Michigan 21st Century Jobs Fund • SBIR/STTR • Angel investment • Venture capital • Corporate investment • Banks

  5. Funding for Commercialization • Non-Dilutive • Equity • Debt

  6. Funding for Commercialization Non-Dilutive: • Internal institutional grants • MUCI • SBIR/STTR

  7. Funding for Commercialization Equity • Michigan 21st Century Jobs Fund • Angel investment • Venture capital • Corporate investment

  8. Funding for Commercialization Debt • Corporate investment • Banks • SBA Loans

  9. Non-Dilutive • Typically government or non-profit • Looking to achieve goals such as job creation or public good

  10. Purpose of SBIR/STTR Programs • Create jobs • Promote small businesses: recognized more and more as a unique national resource of technology innovation • Stimulate technological innovation • Help develop products of commercial merit

  11. Participating Agencies* SBIR Only SBIR &STTR TOTAL: >$2.3 B FY 2005 *www.sbirworld.com

  12. Small Business Innovative Research Grant (SBIR) Phase Amount/PeriodPurpose I$100k/ 6 months Evaluate scientific/technical merit and feasibility II$750k/ 2 years Expand results of and further pursue development IIIrequires private $ Commercialization

  13. Small Business Innovative Research Grant (SBIR) • PI’s primary employment is with the company • Must identify company controlled research facilities • Lag between phase I and II funding • Extremely limited discretionary funds

  14. Non Dilutive:Michigan – Based Sources • Michigan Universities Commercialization Initiative (MUCI) • Michigan Economic Development Corporation (MEDC)

  15. MUCI Challenge Fund • Goal is to transfer university-based technologies into the private sector • Available to 10 MI public universities • University TTO/OVPR is the applicant • Up to $150K available per project for market studies, prototype development, business plan prep and more… www.muci.org

  16. What you’ll need for non-dilutive financing… • Find a funding source applicable to your opportunity • Typically require response to an RFP or Solicitation • Technical / Product Development / Business Plan as appropriate • Ability to write extremely competitive proposals

  17. Equity: Angel Investment • Typically high net-worth individuals • Looking for a product, service, company or entrepreneur with whom they can identify • Mentoring relationship • “Street Smarts” • Can move quickly

  18. Equity: Venture Capital • Often specialize in a business sector • Many have life-stage preferences • Often require significant equity positions to invest • Typically are able to invest more than angels • Company needs a clearly defined exit strategy

  19. What you’ll need for equity financing… • Extensive knowledge of your market • How do you plan to make money? • “Elevator Pitch” • Clear, concise executive summary - only one chance to make a first impression! • Business Plan

  20. Where to find Angels… • Networking (Accountants, Attorneys, University TTOs) • Michigan Angel Networks: • Great Lakes Angels (www.glangels.org) • Grand Angels (www.grandangels.org) • Aurora Angels (www.auroraangels.com) • Ann Arbor Angels (www.annarborangels.org)

  21. Where to find venture capital firms… • Networking • Venture Capital Associations: • Michigan Venture Capital Association (www.michiganvca.com) • National Venture Capital Association (www.nvca.org)

  22. Equity:Michigan – Based Sources“Convertible Debt” • 21st Century Jobs Fund • Michigan pre-seed capital fund

  23. MI 21st Century Jobs Fund: • FY2006 almost completed • FY2007 RFP due???? • Technology areas supported: • Advanced automotive, manufacturing, and materials • Alternative energy • Homeland security and defense • Life sciences www.michigan.org/21stcentury

  24. Michigan Pre-Seed Fund • Goal is to provide access to early-stage capital for company development • Supported by Michigan Smart Zones • Technology areas supported: • Advanced automotive, manufacturing, and materials • Alternative energy • Homeland security and defense • Life sciences • $50K to $250K available per company • $1 : $1 match required! www.annarborspark.org

  25. Debt: Banks • Difficult for start-ups to secure debt financing • Risk averse • Collateral Required • May require personal guarantees • Do not require board seats • Do not share in profits

  26. Debt: Small Business Adminstration (SBA) • Provides loan programs to small businesses • SBA is a guarantor of loans, not a provider • Works through its network of lenders • Small Business Investment Companies (SBICs) • Many other services

  27. What you’ll need for debt financing… • Summary of the loan request • Historical balance sheet and income statements • Projected balance sheet, income statement, and cash flow • Accounts receivable/payable reports • Breakdown of inventory • Summary of collateral values • Personal financial statements (incl. tax returns) • Summary of the business and industry

  28. Corporate Investment • Team up with customers, suppliers, even competitors • Lots of possibilities… • Joint ventures • Strategic alliances • Other business combinations • Technology licensing • May allow you to concentrate on what you know best – your technology!

  29. Other Sources • Personal assets • FFF (Friends, family and fools) • Vegas, baby, Vegas!

  30. Michigan – Based Sources • 21st Century Jobs Fund • Michigan Universities Commercialization Initiative (MUCI) • Michigan pre-seed capital fund • Michigan Economic Development Corporation (MEDC)

  31. Funding for Commercialization:Build a funding portfolio • FFF $ • SBIR/STTR $ • Angel investment $ • Venture capital $ • Corporate investment $ • Banks $

  32. Funding Strategy Timeline

  33. NETWORK, NETWORK, NETWORK! BBC Training Meetings and Seminars www.bioconsultants.com MEDC Strategic Economic Investment & Commercialization Board www.michigan.org/medc/ttc/tricorridor/ MTEC Training and Events www.mtecsmart.com

  34. Business Development Resources • Attorneys - corporate and patent • Accountant • Scientific Advisors • Consultants • Non-profit agencies • Michigan SBTDC:www.misbtdc.org • Michigan Economic Development Corp.: http://medc.michigan.org • John Shallman – Life Science • Vince Nystrom – Advanced Manufacturing • Fred Grasman – Homeland Security • Smart Zones/ Accelerators • www.michigan.org/medc/smartzones/index.asp

  35. Client Access Commercialization Training SBIR/STTR Training Business Development Consulting Grant Development Assistance BBC MTTC Program Life Sciences Only All 21CJF Tech Sectors

  36. SBIR Phase I Funding SBIR Phase II Funding Commercialization Plan Market Research & Competitive Analysis Business Plan Investor Presentations Equity Funding Licenses negotiated Strategic Partners Management recruited Customers identified Financial and grant management systems developed Board members recruited Contract Manufacturers identified Sales plans and implementation strategies Grant Development Assistance BBC MTTC Program: Deliverables Client Access Business Development Consulting

  37. Questions??

  38. Developing the Business of Life Science

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