Look beyond VC funds and don't rule out Bill Gates

Since the economic crash, biotechnology and device startups alike have watched their traditional sources for venture capital investment wither. VC firms continue to close or wind down in light of the poor economic climate, or as their funds reach the end of their life cycles. Not many VC funds are rising to take their places, and the ones that survive are focusing more on later-stage investments.

What to do? Entrepreneurs should turn to people like Bill Gates, high net worth individuals who want to help improve the world. International governments also have plenty of investment dollars they're itching to use, argues Neil Campbell, chairman of Mosaigen, a global technology development corporation that helps form or nurture startups in fields including life sciences and clean tech.

Campbell gave some pointers recently on how to seek investment dollars at a Canadian Embassy life sciences networking event in Washington, D.C. We spoke recently to follow up on some of his recommendations.

Campbell speaks from experience as a veteran life sciences executive, entrepreneur and investor who worked for Abbott Laboratories ($ABT) and Igen (which Roche bought) among other companies over the years. A few years back, he co-founded (and still runs) a molecular diagnostics startup called SuperNova Diagnostics initially based in Hong Kong, where the technology was developed. Today, it has offices in Hong Kong, London and the U.S. SuperNova relied, in part, on initial funding from unconventional sources including Hong Kong University of Science and Technology and the HDC Holdings fund in Hong Kong, as coverage in ChinaBio Today and elsewhere has noted. (We'll get to government investment in a bit.)

As Campbell explains, high net worth individuals and their private funds run by outside firms seeking investments have plenty of cash they want to invest in good causes. Life sciences startups fit in well because they are developing treatments and tools meant to improve lives.

And if those two sources are problematic, high net worth individuals often create venture philanthropy funds (see the Bill & Melinda Gates Foundation or The Steven and Michele Kirsch Foundation, for example) that also serve as excellent sources for startup capital.

Diagnostics For All in Boston, for example--a non-profit creating low-cost diagnostics for the developing world--raised a nearly $3 million grant last year from both the Bill & Melinda Gates Foundation and the U.K. government toward development of agricultural diagnostic tests to support livestock health. North Carolina startup Liquidia Technologies turned to the same source, which invested $10 million in the company last year to support its effort to develop safer vaccines and drugs using nanoparticles.

Here's why these money sources matter: They can afford to be more patient with their money than a traditional VC seeking an exit strategy with a short timeline, Campbell said. Plus, while they want to make money, they are also driven to do good things for patients in need.

"Their patient personalities and willingness to work with companies is very different than traditional VCs," said Campbell, "And if they feel that what you are doing still makes sense and problems can be addressed and solved, they will give you additional money to fix the problem."

Campbell said entrepreneurs should also target government funds, particularly in emerging markets in the Middle East, Asia, Eastern Europe, as well as in Denmark and Sweden. He pointed out that these governments in countries ranging from Jordan to Germany are eyeing U.S. companies that would eventually sell their drug or device in their countries. They'll commit millions of dollars in grants if these companies will, for example, commit to launching their products in their countries first. Investment from high net worth individuals often follows government funds, Campbell notes.

The thing is, high net worth individuals aren't easy to meet, nor are the people or executives who run their various funds. That's where hard-core networking comes in, knowing someone who knows someone, and working the chain of contacts you have to make these vital new ones, Campbell said.

 "You can't just cold call," he warns. -- Mark Hollmer (Email | Twitter)

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