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In the early days of BioGenerator, whenever the venture fund decided to not invest in a startup, staff members still spent time with entrepreneurs whose applications had not been accepted, to explain why they hadn’t made the cut for funding and how they might improve their pitch. Early-stage companies were then able to go back to the drawing boards with a better plan, or “fail fast” without getting in too deep.
As the largest part of BioSTL, BioGenerator has invested in some 60 life science startups since 2003, making a huge impact on the sector in St. Louis. Naturally, as the accelerator grew, so did the amount of time spent by its staff running the program and engaging with its portfolio companies. Eventually, the time set aside for pro-bono advice began to disappear.
This, as one could assume, created a gap for early-stage companies and the promising entrepreneurs running them.
“[Among] all of those people that were coming to us who weren’t getting funding, there were some valuable ideas in there. But more importantly, there were valuable people that had the entrepreneurial impulse and the desire to do something,” says Harry Arader, Director of Entrepreneur Development for BioSTL, the organization that administrates BioGenerator. “So to not understand why [they weren’t getting funding] wasn’t helping the advancement of those entrepreneurs.”
In his own career, Arader has successfully launched 10 different companies. When he finished with number 10, he decided his next role should be that of full-time mentor, focusing on entrepreneur development.
So in July of 2015, Arader and Charlie Bolten, Vice President of BioGenerator, launched BioSTL Fundamentals to address the early-stage gap. A business coaching program designed to support St. Louis’ early or would-be entrepreneurs in the Life Sciences, BioSTL Fundamentals provides a one-on-one, customized business learning experience for each participating entrepreneur. Arader serves as BioSTL Fundamentals’ director.
Cut to two years later, and 130 companies have entered the program.
“It’s been amazing so far,” says Arader. “It definitely shows there’s a huge unmet need.”
Helping Entrepreneurs Over Hurdles
Of those 130 companies, Arader estimates that only 40% make it past the program’s required three sessions. Session one covers BioSTL’s Roadmap to Entrepreneurship, then it’s on to the Business Model Canvas, where entrepreneurs focus on explaining their idea. “This means passing my red-faced test, where I’m not embarrassed to introduce you to another business person,” says Arader. Session three is numbers-focused and covers the Discounted Cash Flow Model.
So where is the issue?
“The No. 1 problem comes out pretty early in the business model canvas process,” says Arader. “It’s that value proposition—right in the middle of that business model canvas. We have to help people over that hurdle.”
But as companies do start to show progress on these tools, Fundamentals starts to bring in resources: patent diligence, market research, customer research, technology consulting (both regulatory and scientific), and funding from the BioGenerator’s i6 proof-of-concept fund for things like prototyping, proof of principal experiments, and even access to BioGenerator’s laboratory when it’s appropriate.
But these resources have to be earned, and Arader says it’s not a lock-step thing. They might be putting money in earlier while entrepreneurs are still working on their Discounted Cash Flow Model, or even–in the case of pharmaceuticals–paying for relatively inexpensive experiments, whether they be digital, in vitro or small animal studies, to aid with the proof of principle.
So far, about 15-20% of the entrepreneurs who’ve participated in the program have earned resources. Others take a different path.
“The idea is that we don’t tell someone no, but after three meetings if I’m still asking the same questions and not getting answers, I have to tell them I don’t know how I’m going to add additional value,” says Arader. “We kind of lead people through a process of self-discovery with their idea, and I think it’s a really good outcome if we have an honest, early fail. Then those people, because they didn’t have to spend that much time on it, still like entrepreneurship and aren’t burnt out.”
Showing Them the Money
A newer benefit of going through the Fundamentals Program is G2B (Grants to Businesses). G2B allows entrepreneurs to take advantage of non-dilutive funding offered by the federal government and other sources. This includes SBIR at the NIH, where an entrepreneur can receive $4.75 million non-diluted.
“I noticed that we were already training entrepreneurs on how to fill out a grant application, but they would typically wait until 3-4 weeks before the deadline, when it takes at least 4-6 months to do an application properly,” says Arader.
So Arader and his team created an Incentive-driven calendar timed to coincide with the three NIH deadlines throughout the year: April 5, September 5 and January 5. Included in this program is a two-day intensive training session, the opportunity to meet with a business consultant for critiques, and even a mock NIH application review with real NIH reviewers looking over entrepreneurs’ applications and offering critiques 6-8 weeks out.
“It’s like a freebie, or a do-over for applications,” Arader says. “And we pay for all of that.”
The Fundamentals team also helps with the pesky administration work and red tape just for registering for grants. Heads up: there are six different levels of registration alone. Once a company receives funding, Fundamentals also provides them with pro-bono bookkeeping work.
Seeing the Results
As of this year, BioSTL Fundamentals has helped raise $9.5 million across five different companies.
One company, Precision Virologics, recently received a $500,000 investment from a Japanese company called Oncolys BioPharma , a connection that Arader helped navigate. The startup also announced a license agreement with the Office of Technology Management, the tech transfer arm of Washington University.
Based on technology from Washington University, Precision Virologics is a pharmaceutical startup whose biologically targeted adenovirus vaccines provide a new approach to the expanding threat of emerging infectious diseases.
CEO Daniel Katzman sees the Oncolys BioPharma investment as a major win for public health and for the St. Louis region’s role in fighting the expanding threat of emerging infectious diseases. Both he and David T. Curiel, MD, PhD (whose research led to the development of Precision’s core technology) credit BioGenerator for their introduction to the St. Louis biotech ecosystem.
“We are so fortunate to be in St. Louis, which at this moment feels like the epicenter of vaccine development,” said Katzman said. “The initiative and tenacity of BioGenerator serve not only to bring companies here, but also to amplify the region’s reputation as a world-class research hub.”