Contrary to popular belief now is actually an exciting time to be fundraising for health
care innovation.
The reason is that there are a greater variety of sources of funding.
It used to be the only source was traditional venture capital firms.
Those still exist: large organized professional firms that have hundreds of millions of dollars
to manage and write $5, $10-$15 million checks for companies.
They’re there.
There are not as many as there were 10 years ago.
There’s been somewhat of a reduction in them.
But the ones that are active today and that are still playing around the US and in Europe
are better ones and that’s what you want on your team and your capital as advisors
to the entrepreneurs besides the money.
There are new sources also.
Two years ago congress passed the Jobs Act which was a remarkable piece of legislation
that I think has done more for funding entrepreneurship and growth companies in technology than anything
else in decades.
It has a feature that allows crowd funding and I’m starting to see new models come
out of that.
I predicted there will be more crowd funding vehicles managed by actually professional
investors who have a good filter on quality so the money won’t be wasted and lost and
investors who want to invest $5000, $10,000, $50,000 will be able to do that into pools
and go into companies.
There’s a lot of worry about individual investors making poor decisions and losing
money; that will happen.
Professional venture capitalists make poor decisions and lose money so it’s the nature
of risk taking but I’m happy for the entrepreneurs that this additional source is there.
Foundations are also becoming much more active: Realizing that just collecting donor money
and then funding research and not being very involved in translation wasn’t getting them
where they wanted.
Examples of that are Parkinson Foundation lead by Michael J. Fox, Cystic Fibrosis Foundation
and so on.
That’s been happening in the drug area where those foundations have been funding clinical
trials.
We’re starting to see it in the device area too where there are foundations who have specific
disease interests and entrepreneurs should be very savvy about going to them and saying
“We would like to engage with you in a creative way.”
The foundations are starting to create new models too.
Being able to make program related loans and program related investments.
We’re having an adjunct piece of the 501(c)(3) for that.
Seed funding and angels has exploded over the past five years.
It’s been around for decades but it’s really taken off.
The reasons are, one, popularity: a lot of success in seed funding companies and successful
models, successful companies with seed investing begets more and more.
Wealthy entrepreneurs who’ve made their money in Google Facebook, social media, so
on; a lot of them are coming to me and other people who’ve been doing healthcare investing
for many years and saying alright I made a lot of money, I developed an app., it’s
not gonna make the world a better place.
I’d like to do that now.
I’d like to get involved.
By the way if you can point me to a great company doing that I’ll not only invest
I will help them with their digital side of what they need to do.
Social media is so powerful now to help raise awareness of products not just among consumers
who might use that but doctors because almost all doctors are on, at least, mobile devices
and most, I would say, almost all doctors under 35-40 years old are on social media.
Corporations are getting more involved as well.
There have been corporate VC activity for a while but we’re starting to see more on
that; they are hiring full time people, they are doing this because they want a window
into the technology and they want to see things before they get too ripe.
The improved IPO market for biotech and medical device and now, coming soon, digital health,
will cause the corporations to realize they need to look back earlier.
They can’t wait because now there’s competition for acquisition by the IPO market.
Doing joint startups with large corporations is a possibility.
This is happening on the drug side and I predict this will happen in the – with the large
medical device companies too where entrepreneurs and maybe venture capitalists providing alongside
the money from the large corporation are doing a structured funding and then structured liquidity
buy out later down the road if things work out but not too tidied up so that it gives
the entrepreneur a chance of ______ upside.
All this is working together, I think, to the benefit of entrepreneurs.