Getting Funded

By Leslie Williams, a serial entrepreneur, currently the CEO of ImmusanT, and a member of TCN’s Board of Directors.

I met Dr. Bob Anderson, an Australian scientist and clinician at the Walter & Eliza Hall Institute of Medical Research, over a year ago when he was visiting as part of a “sister city” lecture tour between Melbourne and Boston. In addition to lecturing, by chance, Dr. Anderson attended a TCN program. This led to Dr Anderson’s request to request to meet an experienced local entrepreneur to discuss his immunotherapy technology and company, NexPep. At the time, I had been working with scientists at MIT to spin out a technology and decided to put the company on hold and incubate in the lab a bit longer. I was also advising and mentoring entrepreneurs in the life science space. TCN provided an email introduction between us with the intent to simply share business advice and discuss the pharma market.

Our scheduled one hour lunch went into the late afternoon as we talked about celiac disease, technology, the market and regulatory challenges. Moreover, we discussed the active Boston ecosystem and abundant resources. Over the course of the next year Bob and I worked together and I tapped others in the community to ensure the opportunity could advance in the US and garner required funding. This ultimately led to founding ImmusanT, based in Cambridge, MA, in December and acquiring Nexpep’s assets. Thanks to an initial introduction, through TCN, the journey began and I am now CEO of ImmusanT.

TCN is truly a valuable local resource with the ability to form both local and global bridges. This translates into opportunity and economic growth for companies located in Massachusetts’ innovation economy. TCN programs provide a source of critical information for entrepreneurs and also broad and active networks of entrepreneurs, business leaders and investors. The tale of two cities continues to unfold!

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Leslie will be the featured CEO at the TCN UpStart Roundtable at the Venture Cafe in Kendall Square on Thursday, April 28th. Find out more about this event here.

GRP Partners’ Mark Suster says that having a set of metrics that you watch and feel are the key drivers of your success helps keep clarity.

Written by Mark Suster and originally posted by AlwaysOn on April 11, 2011. This article is re-posted with permission from AlwaysOn.

What I know for sure is that if you don’t have a stability goal stated for the company and if you don’t regularly measure how you’re doing against this goal you won’t have your resources focused on the right priorities in the company. Most companies have some measurements, but I would argue that people often measure the wrong stuff, measure with the wrong precision (either too high-level or sometimes too detailed to draw conclusions). I see this more often than I see good practices.

The best way is to start by asking yourself at management team level: what are our company objectives and how do we best measure them? Because it can be hard to define or agree company objectives at an early stage I believe most people avoid them. Don’t. If you change your company objectives or measurements later that’s fine. In fact, I would argue that if you’re producing charts that nobody is reading or acting on you’re probably measuring the wrong stuff. And if you’re not meeting as a team to discuss these metrics and have a regular debate about how you’re doing and what needs to change then I can assure you that you’ll never reach your destination. You’ll have no idea when you’re off course.

You will likely have multiple sets of metrics you keep depending on the company’s stage, one’s function in the company and level. For example, I highly recommend a set of board metrics that the CEO communicates to board members at every meeting. With a set of metrics the board can keep know whether the company is tracking to its objectives.

Here are some measurements I think about. How you implement them will obviously depend on the type of company you are – there is no “one size fits all” approach but there are pretty universal measures.

1. Customer Acquisition

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ROYALTY-BASED FINANCING GIVES START-UP COMPANIES A NON-DILUTIVE, ALBEIT EXPENSIVE, SOURCE OF FUNDS.

From this original article by Alix Stuart, Senior Writer at CFO.com. Alix covered TCN’s April 12th Breakfast Roundtable on Raising Capital While Maximizing Founders Equity.

Last year Velico Medical Systems, an aging Beverly, Massachusetts-based start-up with no products and no revenue, needed some money. The company had been “in perpetual funding mode,” CFO Tom Fitzgerald told a gathering last Tuesday hosted by The Capital Network, a Boston-area education and networking group for early-stage high growth startups. It had worked on products related to the handling and storage of human blood without any success. A new effort, which involved spray-drying human plasma, seemed promising, but prospects for a new source of equity capital were not as bright.

As it happens, Fitzgerald didn’t need the equity capital. Instead, he went back to a venture-capital firm that had previously turned down the small life-sciences company and emerged with a fresh infusion of cash through a nontraditional financing arrangement known as royalty-based financing.

In this arrangement, companies agree to pay a stream of income, or royalty, to the investor. The royalty can simply be a percentage of gross revenues or, as in Velico’s case, conventional royalty payments for intellectual property. Velico turned over the rights to royalties it received from a patent-licensing agreement it had with a large biosurgical-products company to the VC firm, OrbiMed Advisors. In exchange, Velico received a lump sum of money, free and clear of any future obligation. The deal closed last October, about eight months after the initial discussions about it.

Royalty-based financing is certainly not common, but it could be an increasingly available alternative for certain types of growing companies with steady cash flows, experts say. “I think we’re going to see more of [it],” says Dan Allred, Senior Relationship Manager with Silicon Valley Bank. “There are a lot of companies out there that may not be high-growth enough to get the attention of traditional equity investors, but still have good cash flow and good margins,” both of which would make them more attractive for alternative structures.

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Jean Hammond has been involved with The Capital Network for over a decade and currently sits on the Board of Directors. She is an active angel investor focusing on early stage high tech startups. She was a founder of the Boston branch of Golden Seeds and is a member of Launchpad and Hub Angels. She plays or played an active board level role with a number of her Boston area investments, including: Crimson Hexagon, Hire Reach, Home Portfolio, iTeam, and ZipCar.

Angel investors were in Boston/Cambridge Massachusetts during the week of April 4th for the National Angel Capital Association National Conference. For many angel investors, the conference provided a venue where they could get insight into 3 or 4 issues that have challenged early stage investors for a long time. The 2011 version of these issues viewed through the lens of angels who like investing in angel groups bring interesting complexity to the problems investors face. I found that a lot of the angels were discussing reaching scale and, interestingly, matching that with “right sizing” what we do.

Scale Baby Scale - Lots of fast, “early” exits:

Angel groups want to invest in great deals and analysis shows that there are a lot of companies that will indeed grow good product lines. As Basil Peter’s book points out, however, firms that take in a last final funding just for the purpose of scaling the sales force and adding a few more customers are unlikely to have a payback at the high multiples achieved in creating the product and getting the first $5-10M of sales. Additionally, even though the buyer community is ready – i.e., US corporations are sitting on mountains of cash, the infrastructure to do these deals at this scale is often lacking as most investment banker shops are still geared up for ‘large’ exits. This problem may be most extreme in the markets with a huge VC presence but finding and training a solid range of exit advisors who are interested in deals pricing out in the $50-80M range is still lacking. I have not seen a deep definition of skills needed in these advisors yet or a listing of those with great track record in deals of this size. Angels want to help quality iBanks support an efficient market from “right-time” exits, as many angels believe the trend towards lots of fast, “early” exits will continue.

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By Bill Yucatonis, CEO of CoupMe and GoodTwo

As of January 18th, 2011, I had never heard of TCN, which is strange because I consider myself to be fairly connected especially in start-up world. Believe me, I’ve attended countless hours of other so-called entrepreneurial networks in the Boston scene, and I’ve paid fairly for what they delivered - a cheap glass of wine and a cold buffet. Thanks for the heartburn.

Call it fate, but on January 18th my bookkeeper, Smartbooks, introduced me to Michelle Hipwood, Executive Director of The Capital Network. I had just launched a new brand, GoodTwo, and we were raising money to capitalize its success and spin it out into its own company. GoodTwo is a free fundraising platform for fundraisers of any size and structure. We offer deals and rewards to donors who support your mission: the donor buys a deal and money goes directly to your cause. Think of it as your own Groupon fundraiser. In particular we’re helping a lot of run-walk-ride-athons achieve their goals, so if you’re doing this year’s Jimmy Fund Walk or Pan Mass Challenge we’ll be there. GoodTwo - Good Deal. Good Cause.

So I’m the CEO, the guy that’s supposed to know it all, but since I never will, I believe it’s important to surround yourself with smart, passionate people. Thank you TCN for surrounding me, because the minute I was exposed to your group there have been countless, immeasurable benefits. I don’t where to begin, but I guess I’ll start from the beginning:

Chapter 1: Michelle introduces me to Ben Littauer, a TCN Mentor, to offer free mentoring services. Free? Seriously? OK, I’m skeptical but I’ll take it. Fast-forward to today. Ben has spent dozens of hours listening to my spiel, sharing a cup of green tea, and giving me great feedback from an investor’s perspective. Ben has gone above and beyond, and will hopefully become a partner in the company in a greater capacity.

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