08 Nov Early-stage executives hear from investors
Milwaukee, Wis. – Angel and venture investors have fewer secrets these days, and they were more than willing to dispense some advice to early-stage executives during the National SBIR-STTR Conference.
In evaluating MatriLab, a Milwaukee-based biotech with scientific ties to the University of Wisconsin-Madison, they counseled technology start ups to demonstrate why their products have a sustainable market advantage, and what each round of funding is meant to accomplish.
The conference is centered on the process of acquiring Small Business Innovation Research and Small Business Technology Transfer grants, but businesses also gained an idea of what they would face if they get beyond the government funding and into private equity financing.
Kathleen Kelleher, CEO of MatriLab, provided a not-so-target-rich environment for investors, who generally were impressed with the positioning of the company as it seeks between $300,000 and $500,000 in angel funding by year’s end, with an eye toward $5 million in financing at some future point.
MatriLab, founded in 2004, has developed a broad platform technology, an extra cellular matrix product that augments the self-healing ability of human cells. The product adheres to tissue and can deliver therapeutics to wounds and donor graft sites, the areas where skin is removed to be grafted onto burns, but has a number of potential regenerative applications for the $400 billion tissue damage market.
The company plans to develop a family of products, possibly with the help of a strategic partner in the pharmaceutical industry, and enjoys broad patent claims on the composition, method of use, and process related to the extra cellular matrix. Investors were particularly impressed by the fact that MatriLab knows what it wants to accomplish with the minimum of $300,000 in angel funding it is seeking, including the completion of higher animal studies on pigs and further business development work.
George Arida, managing director of Venture Investors, liked the fact that MatriLab has established milestones, which is a sign to investors that some thought has been put into the development of the company. The same “stair step” approach will benefit the company when it seeks larger amounts of venture financing. “You want to think about what you want your company to look like at the end of this funding,” Arida said.
The same principle applies to federal SBIR and STTR grants, which should be used to build value in the company, Arida added.
The challenge some investors may have, according to Dick Leazer of Wisconsin Investment Partners, is the broad nature of the platform. “We want to see [specific] products that are getting real close to the marketplace,” he said. “Investors are in a mood to listen to more specific applications.”
In describing MatriLab’s competititve space, Kelleher noted that the company will not offer the only solution on the market, but has a “significant basket of factors” that will offer market validation. They include the patent and exclusive licenses already negotiated by the Wisconsin Alumni Research Foundation in Canada, Europe, Japan, and the United States.
The investment experts were a little unsure as to the market need for the product, which is something that has to be firmly established. “Investors want to know: does it solve a critcal market need, or is it a product in search of a solution?” Arida said.
The panel also included former Michael Best & Friedrich attorney Greg Meier, now the chief operating officer for Broadlook Technologies. Although he operates more in the software space, where investors expect much faster returns, Meier said it’s not a bad idea for any technology company to start thinking about sales long before the product goes to market. If nothing else, talking to potential future customers will sharpen the sense of product validation.
“Before you even start your business,” Meier said, “you should be making sales calls.”
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