Adrenaline junkie? Raising capital could be for you!
Raising capital is no easy task and demands a great deal of time and energy.
Raising capital is no easy task and demands a great deal of time and energy. We interviewed Kitozyme CEO François Blondel, who agreed to share his experience of running several campaigns to raise capital. We also talked to KiOmed Pharma, Nyxoah and OncoDNA, three companies that have successfully raised capital in recent months.
What in your mind is the golden rule when it comes to launching a campaign to raise capital?
François Blondel: The key thing is to think ahead. Don’t wait until the cash is running out before taking the plunge. Campaigns generally last somewhere between 6 and 9 months, depending on the amount of capital to be raised, so you need to draw up your business and financial plans well in advance in order to organise the campaign in time. It’s also worth remembering that it isn’t just about the money – there’s also the matter of credibility. Potential investors want to feel as though they’re dealing with a sound company that has studied and prepared the matter carefully.
Speaking of which, how do you go about approaching investors?
FB: Having a good network of contacts is important. If you don’t have this, then you can use a financial intermediary who does this kind of thing for a living. They will help you to gather all the necessary information, such as financial plans, the company’s predicted future performance and market research, and will be able to communicate the message in a language that investors understand. They can open doors to investors who have an interest in your product, technology or service.
Is that enough to open every door?
FB: No, while a good intermediary is useful, you can’t rely solely upon them. Raising capital successfully to support a specific project ultimately boils down to the person managing that project. They have to weigh up their strengths and weaknesses and ask themselves if they are up to the job of running the campaign. People who are both scientific and business savvy are a rare breed, so it is only normal to team up with a partner who has the requisite complementary skills. This is exactly what we did with KiOmed Pharma. Yves Henrotin, Professor of General Pathology at the University of Liège, and I were looking for someone who would balance our own areas of expertise and so approached Houtaï Choumane, the current CEO of KiOmed Pharma.
Are all investors good investors?
FB: No. Generally speaking, those who invest larger amounts will want to monitor how the company is managed and sit on the board of directors. When preparing your campaign, it is therefore important to define the kind of people you want around the table. To do this, you need to identify the company’s needs and not just in terms of finance. A preclinical-stage company will need different resources than the one that is ready to take its product to market. The type of investors that you want to attract will depend on the stage you’re at. It’s a great opportunity to bring people and resources to the table that offer much more than just money. Companies sometimes make the mistake of focusing solely on the financial side of things.
Which is better: national or international investors?
FB: You have to weigh up the pros and cons. International investors certainly bring a sense of credibility that inspires confidence and respect. This isn’t something that can be measured, but it’s very noticeable nonetheless. Having said that, it’s important not to underestimate the added difficulties that such investors can pose for a company, such as the need to provide more explanations – a foreign investor will be less familiar with the Belgian market. Different languages can also have an impact if an investor is also a member of the board of directors and demand more time and energy.
In both instances, transparency is the key consideration. Any investor could ask you at a given moment: “What is the main risk? What keeps you awake at night?”. The project manager has to be ready to respond to such questions in a clear, structured, well-argued and transparent way in order to build up trust between the partners. Doing so shows that you know your ecosystem, industry and markets inside out and that you are able to take a step back and analyse the situation accurately.
Finally, what would you say to an SME that is considering launching a campaign to raise capital?
FB: That it’s an incredibly exciting adventure! The feeling of being able to persuade others to come on your journey and support your project is like nothing else.
Don’t wait until the cash is running out before taking the plunge
Three Walloon biotechnology companies and BioWin members all raised capital in 2016. Here, they describe how they found the experience.
“KiOmed Pharma is a spin-off of the University of Liège and a spin-out of Kitozyme. We currently have a team of 15 people who specialise in developing medical implants based on a new polymer: ultra-pure plant-based chitosan. Kitozyme worked on this new polymer for 10 years and KiOmed is now using it in the pharma and biomedical markets. No other company in the world is currently using this plant-based polymer.
We used this polymer to develop a series of medical devices, including a chitosan-based gel, which is administered to patients suffering from osteoarthritis through an intra-articular injection and helps to lubricate the joint and reduce the symptoms of the disease. This can postpone the need for joint replacement surgery by several years.
The campaign we ran in June 2016 raised 7.3 million euros in capital, which will be used to finance the clinical phase involving 50 patients from a dozen clinical centres in Wallonia and Flanders, as well as to obtain CE marking ready for the product to be sold on the market in 2018. Thanks to this capital, we are also now able to prepare for the production scale-up and start other developments that are based on the same technology but target other clinical indications.
In terms of the KiOmed campaign, the challenge lay in simultaneously running the company day-to-day and investing the time and energy needed to prepare and manage the campaign – it was a real marathon. You have to organise your time appropriately and think long term. We are delighted with the really positive outcome that we were able to achieve thanks to the commitment of the whole team.”
Nyxoah is a start-up that was founded in 2009 in Mont-Saint-Guibert, Belgium. Its focus is on treating obstructive sleep apnoea syndrome (OSA), the most common form of sleep apnoea that is associated with increased cardiovascular risks and severe comorbidities. To improve patients’ lives, the company has developed a solution comprising an implant and a patch that act together through neurostimulation.
Fabian Suarez: “We raised 18 million euros in June 2016. This capital will allow us to apply for CE marking and start the process of obtaining FDA approval. If I have to give just one piece of advice to companies looking to start a fund raising, it would be to prepare it in time. The process of raising capital is long, you have to anticipate it and not wait until the company runs out of cash.
Another tip would be to meet potential investors in person by attending international events organised for investors.”
OncoDNA’s pioneering advanced solutions, from molecular tumour profiling (OncoDEEP) to personalised liquid biopsies (OncoTRACE), are designed to help oncologists select the most appropriate treatment options. These solutions help oncologists to decide on appropriate medication and monitor the effectiveness of the chosen therapy.
Jean-Pol Detiffe: “In September 2016, we ended a campaign that raised 7.7 million euros in capital. These funds are being used to support OncoDNA’s growth on international markets, continue the development of IT platforms and expand our patient database.
Personally, I attached great importance to the types of investors that I wanted to have around the table. Don’t be tempted to jump at the first offer.”