AAL Investment Forum 2010 - Financing companies in the new environment – challenges and opportunities
- 1. Financing Companies In The New Environment – Challenges and Opportunities A General View with applications to Assisted Living
- 2. What is going on in the World? A Personal, Somewhat Click to edit Master subtitle style Pessimistic Observation by Yuval Binur, Ph.D. Accelerated Technologies Partners
- 3. Innovations – The Key to our Business. Successful Innovations require: • Entrepreneurial spirit and culture: allow risk taking • Industrial and academic infrastructure: provide trained management and research support • Understanding market unmet needs: ensure the right product solutions • Active and growing local capital market: provide the FUEL that move the innovation vehicle to success
- 4. Let’s focus on the Fuel… What has changed that affects our ability to raise capital for medical companies? and what opportunities arise?
- 5. These are the main factors that have changed and affect our ability to finance companies: • The depressed world economy • Shifting global markets • Health care reform (US) and similar global H/C system problems • The changes in H/C unmet needs • The state of large corporations • The failure of the VC model
- 6. Thunderstorms over the world’s economy – how long they will last? they will last? DJIA 2010 “Today, the only trades that can make some money to investors last on the average 11 minutes from buy to sell...” SJP, a NY investment banker
- 7. Wow! my family owes $174,132.24 to U.S. NATIONAL DEBT CLOCK The Outstanding Public Debt as of 05 Sep 2010 at 08:52:07 PM GMT is: The estimated population of the United States is 309,059,262 so each citizen's share of this debt is $43,533.06. The National Debt has continued to increase an average of $4.14 billion per day since September 28, 2007!
- 8. Shifting Global Markets ”Empires don’t lose power overnight ,they fade away”… and markets follow
- 9. We have been slow to recognize the emerging new world order: Our maps still place the Atlantic in the center…
- 10. Unmet Needs and H/C reform • Remaining unmet clinical needs that can be addressed by current technologies are few and difficult • The #1 killer in the developed world is being shifted from CV to Cancer, followed by Obesity/Diabetes • A new family of unmet needs surfaced: Cost-cutting therapies to replace more expensive ones
- 11. Regulatory processes are becoming more difficult and costly • The US becomes more restrictive – they operate from fear • Costs of meeting regulatory requirements are skyrocketing • We as an industry need to understand better the regulatory processes in the emerging markets
- 12. The State of Large Corporations: • With disappearing IPO markets, corporations are the only exit to full liquidity • Organic R&D is largely dead despite huge mergers in the pharma industry • However, to be attractive for acquisition, strong IP, proof of concept, advanced clinical data and in many cases revenues are required.
- 13. Now we come to the core: The failure of the current VC model: the venture capital model was developed in the late ‘50s and was based on a supercharged IPO market fueled by the emergence of new technologies. …”Just place your BP and shake the money tree…” Business plan
- 14. “My portfolio of venture funds is mostly under water, depends only how deep. They all live on oxygen that is diminishing in their tanks…” A large institutional manager Lacking IPO exits, most of the VC funds cannot show returns that compensate for the risk taken by the institutional investors
- 15. So what do the VCs do? • To address lack of returns, venture capitalists selected a strategy of : “Invest only in late stage companies” But With no flow of early stage there will be no late stage companies for them to invest in…
- 16. A few of the pitfalls of the VC Industry: • In today’s changing world, it takes $80m to $200m from inception to commercialization of a medical product • These sums are beyond the typical VC capabilities – their answer is syndication • Syndications create boards of directors with conflicting interests, usually all VCs In the last 5 years, incompetent boards killed more companies than failed technologies
- 17. So what do we do?
- 18. Optimists, Pessimists Let’s be realists…
- 19. What can we do? A laundry list for financing medical companies today (a) Before starting a Company: • Focus on unmet needs rather than on technology • Plan a long term budget to cash break-even point • Talk to the regulatory and reimbursement advisors to get ideas as to what the barriers are • Review IP and FtO carefully
- 20. Assisted Living and Market opportunities • Define the unmet needs • Identify technologies that can address the unmet need • Example: IT in Assist Living • Build a business model – it is all about return on investments
- 21. Ageing and ICT Social • • 80+ population: doubles until 2050 • • 60+ population: from 20% in 1995 to 25% in 2020 • • 50+ population: 21% has severe vision/hearing/dexterity problems • • Today 4 working for 1 retired, in 2050 only 2 working for 1 retired • • Cost of pensions/health/long-term care: up by 4-8 % of GDP (2025) • • Shortfall of care staff Economy • • Wealth and revenues in Europe of persons over 65 is over 3000 B€ • • Smart homes market will triple between 2005 and 2020 • • Early patient discharge by tele-health: reduced cost of 1,5 B€ p.a. (DE) • • Tele-care technology at home: Empowerment of elderly and efficiency
- 22. What can we do? A laundry list for financing medical companies today (II) (b) Preparing to raise funds: • Remember that the value is in the equity – try to keep as much of it as long as possible • Do thorough DD on your funding sources as much as they do on your business • Think out of the box on funding sources – do not rush to the VC community: – Angles (covered by my colleague in this conference – Grants and government support (NIH, EU) – Early corporate money – Friends and family – New World money
- 23. What can we do? A laundry list for financing medical companies today (III) • Establish relations with the BD guys in the relevant corporations • Maintain control within the Board, either through majority or through protective provisions in the investment agreement • Plan exit on day one based on M&A, not IPO. • Build and maintain a capital efficient company
- 24. In Summary: Be realistic Be focused Be flexible Be resilient Think out of the box
- 25. The old fashioned way is gone: No more Vikings to conquer the world No more smokestack industries Old fashioned VC is not optimal any longer
- 26. It is all about people… “…with the world becoming this flat – with so many distributed tools of innovation empowering individuals to compete, connect and collaborate, the most important competition is between you and your imagination...” – Tom Friedman
- 27. As a final note - I am a realist: ♥I recognize the trends ahead ♥I believe in people’s abilities ♥I believe that crisis brings opportunities ♥I believe in early stage innovative ideas that can grow to impact how we live ♥ I look every morning in the mirror and try to see the reality
- 28. THANK YOU TACK