How to Connect With Angel Investors About Your Technology and Startup:

The Real Risk/Reward Profile of Your Opportunity

UNIVERSITY STARTUP DEVELOPMENT WEBINAR SERIES

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SPEAKERS

Tony Stanco, JD, LL.M. NCET2 Executive Director Former U.S. Securities and Exchange Commission Senior Attorney Faz Bashi, M.D. NCET2 Startup Development Officer and Chair of the Angel Capital Association's Life Sciences Syndication Group

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Background on the startup development program

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Commercialization Model Timeline

2015 2016 2017

Congress seeks to understand commercialization of $B137 annual R&D in Fed Labs / Universities

NCET2 Congressional Commercialization Summit – Corporate Sub-committee Formed

First Model Proposed

Model Vetting Roadshows: CA; PA; NY

Congressional Briefs

(Pilot) First Demo Day Second

Demo Day

IP2 Startup Pgm Announced

Startup Development Officers Pgm Announced

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Startup Development Program

•  Congress funds $137 billion in federal funded research at universities and federal labs

•  Excellent opportunity for entrepreneurs to build a university startup around that IP –  Universities have programs to help you

•  NCET2 Fortune 500 members and SDOs who will partner with university startups to help develop and fund those startups

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Startup Development Program

•  NCET2 Startup Development Officer will also help university entrepreneurs, faculty, researchers, and students create, develop and fund market aligned university startups (http://ncet2.org/sdo)

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SDO SERVICES

•  Early management teams of university entrepreneurs, graduating students, faculty, and researchers

• Business plan

• proof-of-concept

• prototyping, early product development

• SBIR, Angel, and VC funding

–  “Commercialization Experiments”

• Get to work with Fortune 500 companies, angels, VCs, and serial entrepreneurs to help commercialize university and fedlab technologies

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Benefits

•  Startups/Entrepreneurs/Faculty/Researchers/Students – Access to professional SDO talent to help

create, develop, and fund your startup

•  Universities – Moving IP to market for significant market

impacts – Graduating students into startups and working

with Fortune 500

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SPEAKERS

Faz Bashi, M.D. NCET2 Startup Development Officer and Chair of the Angel Capital Association's Life Sciences Syndication Group

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NCET2 Presentation : August 30th, 2017 University Startup Development Webinar Series

Many thanks to the entire NCET2 Staff : 1. Tony Stanco, JD, LLM : Executive Director 2. Glenn Vonk, PhD : Dir Business Development 3. Ria P. Ancheta-Adrias : Dir Events and Member Service

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How to Connect with Angel Investors About

Your Technology and Startup : Are you a Possibletarian ?

FazK.Bashi,MD

NCET2StartupDevelopmentOfficer(SDO):AngelInvestorE:faz@possibletarian.com

Who am I ?

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How did I get here ?

Why am I a NCET2 Startup Development Officer (SDO) ?

To be of use by Marge Piercy

The people I love the best jump into work head first

without dallying in the shallows and swim off with sure strokes almost out of sight.

They seem to become natives of that element, the black sleek heads of seals

bouncing like half-submerged balls.

I love people who harness themselves, an ox to a heavy cart, who pull like water buffalo, with massive patience,

who strain in the mud and the muck to move things forward, who do what has to be done, again and again.

I want to be with people who submerge

in the task, who go into the fields to harvest and work in a row and pass the bags along,

who are not parlor generals and field deserters but move in a common rhythm

when the food must come in or the fire be put out.

The work of the world is common as mud. Botched, it smears the hands, crumbles to dust.

But the thing worth doing well done has a shape that satisfies, clean and evident.

Greek amphoras for wine or oil, Hopi vases that held corn, are put in museums

but you know they were made to be used. The pitcher cries for water to carry and a person for work that is real.

•  Ihavewalkedinyourshoes–academics,entrepreneur,etc.

•  Poisonouspoli<csandpompouspowergamesareNOTofuseinentrepreneurship!

•  Choices:TaleoftheTwoWolves:IndianChiefspeakingwithhisgrandsonofthe"twowolvesthatfightinsideeachofus".Oneisgoodandfullofpoten<alandenergy.Theotherisevilanddarkreadytodestroyanythingthatcrosseshispath.Thegrandsonasks,whichwolfwillwin?Thegrandfather’sresponse:theonethatyoufeed.QQ4U:Whichwolfwillyoufeed?

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What are the value-add of NCET2 : SDO Angels?

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The takeaways about being a successful entrepreneur : 1. Its a 310% endeavor - Priority #1, #2, and #3 revolve around the startup ! 2. Its a team (together everyone achieves more) effort -- surround yourself with people smarter and faster than yourself ! 3. Its about creating a product that the market wants and is willing to pay money for it. Technology is just one piece of the equation ! 4. If you don’t need outside investors, then start your business. 5. If you need outside investors, then do your careful research, check references, and make a win-win-win deal. Everyone control-the-greed

Old saying by Bankers : “Hogs get fat. Pigs get slaughtered.”

NCET2 SDO : ANGEL INVESTORS :

• Experience, Relationships, and Value-add • Investment criteria • De-risking the opportunity • Reality-based funding strategies and economics : terms, valuation,…

SDO brings a network of known relationships :

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“We analyzed over 350 angel investment groups with the algorithms we use to assess VC firms. Here's how the top angel investor groups stack up.”

SDO : Reality Check : Current Investment Climate •  Since the Market Crash of 2008 challenging

investment climate •  Especially acute in life sciences sector •  Early stage venture capital funds increasingly

difficult to obtain (seed stage, A series) •  Angel investors play increasingly significant role

in early stage financings across the USA

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SDO’s bring Proven Track Record : •  FUNDING : Governance : Relationships : Experiences :

Education, and more

•  VALUE ADD : Partnership with each investment –  Deal Lead – Termsheet, Valuation –  Board Seat –  Syndication network –  Pro-rata rights –  Exit pathways

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SDO : Viable Funding sources Greatscience.Customersreadytobuy.Arealbusinessopportunity:• FINANCING101forstartups:1.Angels:SuperAngels,AngelGroups,AngelFunds2.Non-dilu<vesources:Grants,Founda<ons,OTL3.Strategicalliances*:Pharma,OEMpartners,University4.VentureCapital:Wheredidtheygo?Choosewisely!

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QQ4U : Does the next round of financing affect the investment criteria ? QA4U : YES !!!

SDOs tracking VC market :

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NEWS : Limited Partners(LP): Resize VC •  Realiza<onthat50-75%ofallVCswerefailingtoexceedreturnsavailableinpublicmarkets

•  2008MarketCrash:decreaseinsize,%toVC•  KauffmanFounda<onresearchonVCreturns:onlythetop25%ofVCsmademoney…

n = 88 venture funds 20

VCModelofpast20yearswon’tflyanymore…

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Venture Capital (??) :

•  Longtermtrendstobeawareof:-capitalmarketsarevery<ght-revisionstothetradi<onalVCmodel;lossofthemega$1Bfundsandahri<on-remainingVCshavemovedawayfromsmaller$1-5Minvestmentsandwai<ngforlaterrounds(de-risked)-manyVCshavemovedawayfromLifeSciences

•  WhichVentureCapitalgroupisAngel-friendly?Doyourduediligence!Makesuregoalsarealigned.

•  HowdoAngelinvestmentssurvive?

Greatercollabora<on

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Angelsfundstartups!

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SDO Angels : Latest trends in collaboration •  LeanAngelinvestorswnewopera<onsmodel•  StructuredAngelgroups(>300inUS,>50inCanada)

•  Sharingandsyndica<on•  Newmodelsofinvestment(eg.Moleculo)•  CorporateVCs

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SDO + Rise of the Friendly Capitalists (FC): •  Over1100VCfundsin2007;today<50%•  Result:

1)Nofundsfornewinvestments(ie.Pormolio)2)Principalfocusonlate-laterstages3)Wai<ngforrecapswhenstartupoutofcash

•  NewbreedofFriendlyCapitalistsbehavingmorelikeAngels–willingtomentor,takeearlyrisks,opera<onsrole,etc.

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SDO Angels : Ecosystem + •  Foster/EncourageEntrepreneurship•  Ahrac<on/Reten<onofNewBusinesses•  Crea<onofJobsandWealth;DiversifytheRegionalEconomy

•  BroadentheRegionalTaxBase;AcceleratetheGrowthofBusinesseswithintheRegion

•  LocateandSupportCommercializa<onofAvailableTechnology

•  “seearoundthecorner”…26

SDO Angel : Experience +

•  Greatersyndica<on•  Novelsyndica<onmixtures:FO+AG+HNW•  Novelfundsandfounda<onsinvolvedegMJF•  Newinnova<onsupport:Incubators,Spinouts,Accelerators,etc.(Breakout,RH)

•  Newbusinessmodels(leaner)•  Innova<onintechnologyisNOTenough•  Reverseinnova<on:Faster,Beher,Cheaper

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SDO : Criteria for success in H/C Life Sciences •  Focusedscienceandinnova]on

–topscien<stsnetwork•  Outstandingmanagementteam

Beenthere.Donethat.ComplementaryskillsetsPassionateanddedicated

•  STRONGIntellectualProperty(IP)***•  Open-mindedFinancialstrategies

Science,Management,Finance:mustbesync’d

“Therearetoomanyscienceprojectsmasquerading

ascompanies” KarenBernstein,PhD,BioCenturyMagazine

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… and, What about Pharma ?

•  Facing“innova<ongap”withlowdrugapprovalrates(FDA,H/Creform)anddecliningR&Dspending

•  BuyingdiscoverypipelinesleadingtoincreasedM&Aac<vity

•  Moving$$$intocorporateventurecapitalIsCorpVCrightforyourstartups???Risks/Rewards???

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SDOs experience: Making D/D more effective •  Entrepreneurscohesivenessthroughoutinves<ga<on.

•  Entrepreneursrespondedquickly(sameday)formoreinforequests.

•  Companyallowedmul<plesitevisits.•  Companysetupaduediligencewebsite.•  Investmentstructuresimple.

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SDO Insights: Due Diligence •  Uniquevalueproposi<on•  Sustainablecompe<<veadvantage/IP•  Keysuccessfactors•  Experiencedmanagementteam•  Soundbusinessmodel;scalableprac<ces•  Cost-effec<vemarke<ng/salesplan&capabili<es•  Rigorousopera<onsprac<ces&plans•  Appropriatetechnologyimplementa<on/roadmap/scalable•  Ahrac<veandcompletefinancialmodelwithfundingplans•  AppropriateandfairdealtermsDDforHealthITandLifeSciences:

ExtraemphasisonManagementTeam,IP+FTO,BusinessModel,Fundingmilestones,Exit

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SDOAngels:AstartupisseenasanEconomicpackage•  Investorsperspec]ve:inherentcostofcapitalishigh(>20%)givenlifesciencesrisks(<mevalueofmoney,noreturnofcapital)*Long<metomarket*Fewerthan1%drugsmakeittomarket*Severalroundsofcapitalinfusion*Fewerexits(eg.IPO,Acquisi<on,etc.)Investorsneedahighrateofreturntomakeeconomicsenseofthedealb/ccostofcapitalincreaseswithrisk

•  Successfulfinancing:Focusontheeconomicsforwin-win

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1. Capital efficiency

2. Time to exit

3. Local champion(s) – a strong local champion that is a trusted partner

4. Coachable entrepreneurs

5. Huge underserved market : Disruptive tech

6. Strong, protected, intellectual property

7. ROI and IRR

SDO : Founder – Greatness !

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SDO Angels : Philosophy

•  Relationship, Friendship, and Trust

•  Collaboration and Partnership !

•  Entrepreneurship and Angel Investing is a “ Contact Sport “

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TEAM = Together Everyone Achieves More Collaboration : Partnership : Syndication

Friendship + Relationship + Trust

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ThinkDifferent(newmodels)!

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THANKYOU!!!

Ques<ons??

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Q:WhoamI?

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A:NormanVincentPeale

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Defini]onofaPossibilitarian

•  Someonewhobelievestherearealwayspossibili<es,ifyoulookforthem

•  “Ichallengeyoutobecomeapossibilitarian:Nomaherhowdarkthingsseemtobe,oractuallyare,raiseyoursightsandseethepossibili<es.Alwaysseethem,fortheyarealwaysthere.”NormanVincentPeale

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AreyouaPossibilitarian?

•  NO,ifyourfocusison$$$•  YES,ifyou’redrivenbyPassion,Vision,Energy,Team,Discovery,Problemsolving

•  Book:HeartSmartsGutsandLuck www.hsgl.com

TaketheexamandseeifyouareHSGL

•  Highestcorrela<onwithsuccess?SelfAwarenessofdecisionmakinginputs

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WhataboutCapital?•  Notthe$$typeofcapital•  ThreetypesofCapitalinvestmentsforinvestors(and

entrepreneurs):1.Psychological WhoyouareProac<ve–Problemsolving–Risktaking–Resilient(failoxen,failquickly)–Results–Scanforchangeopportuni<es–Dodifferentthings–Dothingsdifferently–ThinkDifferent2.Human WhatyouknowEduca<onExperiences3.Social WhoyouknowGoodwill:Connec<ons,Meaningful‘Win-Win’Asharedcodeofconductinrela<onships

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StartupProtocols•  EntrepreneursandAngelsarePossibilitarians! Scien<ficMethodisONEkeyingredientforstartups

•  3AWESOMERESOURCES:EricRies,TheLEANStartup

www.startuplessonslearned.com

SteveBlank,TheStartupOwner’sManual

www.steveblank.com

AlexanderOsterwalder,BusinessModelGenera>on www.businessmodelgenera<on.com

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TheLeanStartup:•  StartupsareNOTsmallerversionsoflargercompanies!•  OLDWAY:[Opera<ngPlan+FinancialModel]Engineering(MRD-QA-Ship)àMarke<ngàSalesàBusDevNOBUSINESSPLANSURVIVESFIRSTCONTACTWITHCUSTOMER!

•  NEWWAY:StartupsSEARCHforabusinessmodelCustomerDiscovery+Valida<onScien<ficMethod(PDSACycle):Hypothesis,TestProblem,TestSolu<on,VerifyorPivot,NewHypothesis

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Lean Startup protocol :

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Lean Startup protocol:

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Validate your Business Model

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G.O.O.T.B.•  GET•  OUT•  OF•  THE•  BUILDINGGovisitcustomers!Lotsofcustomers!DevelopyourTEAMSkillsT.E.A.M=TogetherEveryoneAchievesMore

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