Get angel and VC interest in your medical device startup
Paul Hartung, CEO of Cognoptix, Inc., a startup that has created a drug-device that could diagnose Alzheimer's earlier in patients, is also the first person to have a syndicated angel deal in the Northeast. He's raised more than $20 million for Cognoptix, and worked on the LASIK team at Summit until it was brought through to IPO. Here are six strategies that helped Hartung attract investors.
- Go big or go home. Pick something you care about and that has a large, clear impact on the world. Hartung was drawn to Cognoptix, Inc. because he considers Alzheimer's "the disease of the century. In order to change the course of this deadly disease, it's going to involve finding the right candidates in the early stages where treatment can really make a difference."
- Emphasize a sizable market. Investors and potential partners want to know the device will be helping a large population (and is probable to earn back their investment).Its been predicted that as many as 53 million Americans may be living with Alzheimer's by 2050, more than double the amount of AD patients today.
- Appropriately protect your intellectual property. Throughout the entire process.
- Offer unique value to investors (not just profits), and allow them to give back to you (not just money). "Angel groups are not so different from venture capital groups from the standpoint of being fairly sophisticated in terms of the diligence they do. They have to understand what they're getting into; and as entrepreneurs, they have to feel they will be able to give something back, not just money, but potentially strategic guidance, or access to other resources or connections to help you along in your development," he said.
- Build your data. "Fundamentally, the technology needs to work." You heard it here first. In all seriousness, this is where things might get tricky. The catch-22 of needing data to hook investors and needing investors to build data leads to . . .
- Get creative. The pre-clinical trials and data-building phases are where angels and alternative strategies come in to play, particularly for seed and Series A funding. "What I've learned is that the venture community has become quite risk averse and was looking for companies to generate a strong body of data that would reduce the tech risk prior to investing. So it became a question of how to bridge that gap, how to take a novel idea and generate the initial validating data, and with med tech it's more expensive than other tech," he said.
So, Hartung went to the angel community, looking for the kinds of early investments VCs may have made in the days of yore. Cognoptix also partnered early with pharmaceutical companies interested in AD technologies, emphasizing how early detection of Alzheimer's would help them find patients who need their drugs more efficiently. These deals helped fund early R&D. The venture community can pick it up for Series B and beyond, once you have strong data to show.
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