Before biotherapeutics firm Cell Based Delivery announced earlier this month that it had obtained $9 million in venture capital, it was living on fumes.
The Providence-based company is developing products to treat chronic diseases such as hemophilia, anemia and cardiovascular disease through the use of an implantable system that delivers therapeutic proteins via muscle cells. Like most biomedical startups, the firm had subsisted on years of cobbling together grants and private investment.
Cell Based Delivery CEO Robert Valentini gave would-be "bio-entrepreneurs" a glimpse into that painstaking process at the most recent Brown Venture Forum April 18.
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From 1993 to 1997, Valentini and co-founder Herman Vandenburgh, while professors at Brown University, honed the technology that would form the basis of the company. In those early years they laid the groundwork by securing patents on their technology – a critical step for any biomedical startup, Valentini said.
"If you don’t have patent protection, you won’t even be looked at," Valentini told the audience.
From 1998 to 2000, Cell Based Delivery pulled together $5 million, mostly in federal grant money, from sources such as the National Institute of Health and the Advanced Technology Program, under the U.S. Commerce Department.
During those years the firm made the transition from a concept to an operational company by leasing lab space and hiring a small staff. And Valentini took the plunge in September 2000, leaving his job as an assistant professor of medical science and orthopedics at Brown to take the helm of Cell Based Delivery full time.
"(Vandenburgh) and I really took that risk, getting out of academics, putting our careers on hold, telling our wives ‘Well, the job at Brown is gone,’" Valentini said. "Our skin was in the game at that point, and the venture capitalists knew it. But that’s what you have to do."
Though the $5 million helped fund the company’s research efforts, there were financing holes. Federal grants generally prevent recipients from using the money for anything other than straightforward research, so the company had to find other money to sustain the business end of the enterprise – performing market analysis, writing patents and hiring a staff.
To plug those holes, Cell Based Delivery received $275,000 from the Slater Center for Biomedical Technology, the state-funded program run by the Rhode Island Economic Policy Council that offers seed funding to biomedical startups.
"The Slater money was critical for bridging some tough times for us," Valentini said. But he said the more important benefit was tapping the Slater Center’s expertise, which rendered critical feedback of the company’s technology and business plan.
"Bob’s experience is the reality for most successful entrepreneurs," said Richard Horan, executive director for the Slater Center for Biomedical Technology. "There are more people who really get beat up in this process, and what separates the winners from the losers is persistence."
Of the nearly two dozen biomedical companies that Slater has funded since its inception in 1998, five have gone on to raise a combined $60 million in venture funding. Those companies represent the "engines of growth" in the state’s nascent biomedical sector, the ones most likely to stimulate economic growth by adding jobs and making significant capital investment.
"We want to find opportunities that lend well to venture-capital financing, ones that can become big opportunities," Horan said.
But Slater must weigh those decisions carefully when spending taxpayer dollars on what are inherently risky ventures.
Augustine Lawler, a partner with Health Care Ventures, a venture capital firm focused exclusively on biotechnology, told the Brown Venture Forum audience that most biomedical startups don’t make it.
"Probably the majority will fail, and fail pretty dramatically," Lawler said. "But that’s OK, because if you invest in 15 or 20 companies and one or two of them hit with a real live therapeutic, you have extraordinary financial returns."
Cell Based Delivery’s $5 million in venture funding – backed by Techno Venture Management, ABN Amro and The Vertical Group – will allow it to hire more employees and advance its flagship product, a treatment for hemophilia, into clinical trials.
But Valentini knows that the initial round of venture funding that the company worked so hard for is just the beginning.
"Now we have a mandate in front of us," Valentini said. "We’ve been transformed from a company seeking funding to one that has to execute a specific timeline and achieve certain milestones."
The quest for funds isn’t over either. Valentini said he expects to go after one or two more rounds of venture financing before reaching the company’s ultimate goal of an initial public offering or a buyout.
During that time Cell Based Delivery also will look to tap another important financing source for startup biomedical firms: partnerships with larger biotechnology firms and even huge pharmaceutical companies.
"We look for strategic partnerships at all levels of our drug-discovery value chain," said Ravi Kiron, global head of strategic analysis and knowledge management at Pfizer in Groton, Conn. Kiron said Pfizer has more than 85 active "major" alliances worth a combined $250 million, as well as a number of smaller relationships with biotech firms.
So what is Valentini’s advice to other "bio-entrepreneurs?" Believe in yourself and your technology, and don’t be afraid to adapt your approach when necessary.
"(Prospective investors) will beat you up with new ideas and new strategies," Valentini said. "You have to hold your ground, but you also have to be willing to change. CVD has changed dramatically over the last four years, and I’d guess we will change dramatically again over the next three or four years."
