By Julie Nixon
I might have been dubbed ‘Queen of the Retweet’ at BioCity Scotland, but it was pretty close on the tweeting stakes between Cat and I at yesterday’s BioCity Event, “Funding Fundamentals for Life Science Entrepreneurs” given the quality of the presentations. The aim was to give SMEs a flavour of the different levels of funding available, whether your company is early stage or looking for funding for growth.
Positive Outlook for Life Science Companies
BioCity CEO Glenn Crocker opened proceedings with the positive message that life science SMEs can and should take advantage of large pharma outsourcing their R+D, now that the traditional pharma model is broken. However investment in Scottish life science companies is still in decline. Glenn advocated for early stage SMEs the Lean Startup approach - test your product early on, and assess if it meets the needs of potential customers so errors are made early and cheaply before raising money. His message was that the life science sector is strong in Scotland but SMEs should have a different approach given the decline in investments.
Funding For Growth
In attendance were some SMEs that have already achieved early stage funding, and BiogelX CEO David Lightbody gave an informative case study on his company. BiogelX is a University of Strathclyde spin out, combing the innovative hydrogel technology developed by CSO Rein Ulijn with the business acumen of its CEO. Dr Lightbody’s previous business experience helped attract the initial funding secured by the company a year ago.
But looking to secure subsequent funding, SMEs have to decide what sort of investor to make their pitch to, and what that investor is looking for. Jock Millican of Equity Gap gave an overview of angel funding, noting that business angels can provide vital contacts and knowledge as well as funding. To attract angel investment a company should understand their market and route to market, and have already thought about the company’s exit strategy. Jim Hall elaborated further on what angels look for, namely a focused company with a good management team behind it, and innovative protectable IP.
Crowd funding as a means of financing is becoming an option for life science SMEs, all be it early stage companies. According to Karen Darby of Crowd Mission the public doesn’t have to understand how your company’s technology works - they just have to see a value in what the technology does.
Andrew Elder of Albion Ventures conceded that VC’s may provide more hurdles to jump before investing than other investors mentioned above, but the degree of discipline for company governance required by VC’s might be no bad thing for an SME. “One size fits all” is certainly not the case for VC funding, and it is important to find the right VC appropriate for the stage your company is at. We also heard that VC portfolios are currently limited by less exits from existing companies, not by a lack of quality in the companies pitching for investment.
Sustainable Global Scottish Businesses?
The event closed with an excellent panel session, debating if exit and acquisition are the only answers for a Scottish life science SME, or can a Scottish business develop into a global company? Derek Douglas of Adam Smith reiterated that Scotland has excellent scientists behind many SMEs, but the scientist has to understand their limitations and leave the company to be run by those with appropriate experience. Douglas Anderson of Optos reflected that despite his company having machines in every teaching hospital in the US, somewhat tellingly the NHS has no machines despite Optos being a Scottish company. The take home message was that Scottish companies have the technology to go global, but don’t have the funding.
The talks and networking for the SME’s present was certainly invaluable and I can only hope that this becomes an annual event, not least because of the excellent hospitality provided by BioCity! As Dr. Glenn Crocker told us in the opening session, these are exciting times for life science companies. Helped by initiatives such as these, hopefully Scottish SMEs can in the future start to attract the same level of investment that we see in the South East of the UK.