Funding Opportunities Increase,
but Mission not Complete
Despite new opportunities, obtaining medical research funding for products in their early stages remains a difficult task for many life science companies. Seed funding and topics related to it were featured at the Indiana Health Industry Forum’s recent Life Sciences Lunch.
The event included panelists – Brian Stemme, Kevin Etzkorn, Dr. Robert Jones and Claire Deselle – from the venture capital and medical research communities.
Quality ideas and capable companies missing out on funding were common themes among the panelists. Stemme, project director for BioCrossroads and active with the organization’s Indiana Seed Fund 1, admits that the venture funding model his organization uses emphasizes potential for return and growth – factors not necessary or appropriate for many promising medical developments.
Etzkhorn, managing director of Heron Capital, understands the frustration of companies seeking funding. “We see hundreds of ideas every year and invest in two to four. We are not just turning away companies who are not viable.”
So how do life science companies land the investment of venture capital organizations? “We look for situations where a clinical need leads to a compelling economic model,” Etzkhorn offers.
Claire Deselle, president and CEO of CS-Keys (a cancer diagnostic company) stresses the economic need. “We find it helps to think of our product in a more commercialized framework,” she says. Dr. Jones, who holds life science leadership positions with Indiana University and its School of Medicine, describes the IU Medical Group Foundation’s early seed fund this way: “Our goal is not to make money but we would prefer not to lose money in the process.”
Economic viability is just one of the criteria used by venture capital investors. Other popular considerations include: the management team of the company requesting funds and whether the product is filling an unmet need. Another important factor, for this panel and the companies they represent, is the requesting company’s Indiana presence.
All are in agreement that a common goal is to maintain investments within the state. Etzkhorn notes, “It’s important we keep the funding in Indiana because it improves the (funding) culture for everyone.” The climate, they say, is improving, with more work yet to be done.
Deselle, who has also worked in Maryland, reports, “The state of Maryland is more advanced in having a wide variety of seed funding available, but Indiana is quickly closing the gap.” Stemme agrees. “The funding environment in Indiana today is better than it was five years ago,” he states.
Vital Signs: Organization: Heron Capital Founded: 2005 Investment:
$20 million in the life sciences sector over the next four to five years.
One-half of investment portfolio dedicated to medical devices.
Organization: BioCrossroads’ Indiana Seed Fund 1 Founded: June 2005 Investment:
$250,000 in SonarMed for breathing tube improvement.
$285,000 in CS-Keys for breast cancer detection
Total portfolio of $6 million
Organization: IU Medical Group Foundation, Inc. Early Seed Fund Founded: 2006 Investment:
$200,000 in Endgenitor for umbilical cord stem cell research
$70,000 in ImmuneWorks for autoimmune tissue damage research
Total investment up to $500,000 per year
Organization: CS-Keys Founded: February 2005 Research: Developing technology to detect cancer in a single cell
