MichBio Expo Attendees Hear Ways to Get VC Funding for Startups

YPSILANTI -- In today's uncertain investment environment, biotech companies and venture capitalists are working together to make sure each side sees a return on its investment.
Ideas on how Michigan biotech companies can get funding from various sources and investment trends were among the subjects discussed during the 2010 MichBio Expo and Conference at the Marriott at Eagle Crest in Ypsilanti.
"There has been a decrease in number of biotech and medical investments overall," said Mary Schaheen, CEO of Philadelphia-based Numoda Corp. "But there have been a lot of very creative sources for funds: grants, alliances, high net worth investors and consolidation."
Schaheen said that companies need to think in terms of the system as a whole.
She also said that many CEOs are wearing many different hats.
"Oftentimes, you can't imagine a life-sciences CEO as a fundraiser," Schaheen said. "But they have to become a pitchman."
Getting the investment is one thing for a biotech company, she said, making sure they have a full plan from development to commercialization is something else.
"Some early-stage companies don't think about the commercialization," Schaheen said. "You always have to think about the end."
Thinking about that end is exactly what Vic Schmitt, venture partner with San Franciso-based Bay City Capital, looks at when deciding where to invest.
"When we look at investments, one of the most important things is trying to figure how we're going to get out," Schmitt said. "Getting in is easy. Getting out is hard."
From 2002-2007, venture capital investments in Michigan totaled $269 million. Despite the economic downturn in the past two years, venture capitalists are beginning to loosen their purse strings.
"In terms of traditional financing, venture capital seems to be coming back," said Mark Arizmendi, founder of Charlotte, N.C.-based Northwestern Capital Partners LLC. "You need to try to find investors, smart money people, who are in it for the long-term. There are a lot of people out there with deep pockets for young companies with great ideas."
But sometimes getting that money can be tricky.
"The pharmaceutical partners want to see data first, and the company needs money to get the data," Schaheen said. "It's a precarious place, like the chicken and the egg.
"Everybody wants the money returned for a higher amount, faster and more assured."
Greig Davis, managing member of Southfield-based Vo2 Ventures LLC, said he's seeing a lot more interest coming from individual investors who are looking for a long-term investment.
"They are a little more risk-tolerant to take a chance on a young company," he said.