Biotech crowdfunding with bite

Crowdfunding is becoming de rigueur for many enterprising small businesses – but is it really a suitable financial solution for biotech? Steve Trim thinks so, and he has the success story to prove it

Back in 2009, an idea was brewing concerning a problem I was facing as a drug discovery scientist at a global pharmaceutical company. The problem was how to discover new pain therapeutics that hit ion channel targets with greater potency and specificity. Chemists have struggled for years to try to improve this but with few successes, particularly in treating pain but also for other diseases.

However, I knew that several tarantulas have venoms evolved for killing prey and defending against predators that happen to act specifically at these pain targets. Using venoms as drugs is not novel; in fact there are fifteen drugs on the market already that owe their discovery to venoms. But sourcing venoms, especially in a usable form, was very difficult.

Being made redundant from the pharmaceutical industry was the kick I needed to try to solve this major problem. I found myself with a unique combination of skills in pharmaceutical drug discovery, a deep knowledge of relevant health and safety and a thorough understanding of the venomous animal biology. I also knew this was a wide reaching issue applying across many companies, countries, diseases and target areas.

So in March 2010, Venomtech Ltd was incorporated – in the back of a pet shop in   Ramsgate. This happened to be where the venomous animals were and therefore where the lab was built to process the venoms for sale. A good friend of mine always said you can do good science in the garden shed if you know what you’re doing. This was a test to that statement, using a kitchen work surface as my first lab bench.

During the first year 75% of Venomtechs’ sales were to mainland Europe, proving there was a wide market – as suspected. However, it was also apparent that the venoms needed further refining into component parts and further refining to make the idea a ‘plug ‘n’ play’ solution for modern pharmaceutical customers. This would bring greater value to the product and therefore greater global utility. In order to do this Venomtech needed more equipment and an experienced team to reach its full global potential. It was obvious to me that building the product in this way would greatly enhance the business – but current sales were irregular as there wasn’t enough people to both sell and produce the product.

So I tackled this challenge head on, bringing in a finance director – who also acted as a business mentor – and headhunting a chairman with global pharmaceutical business development experience. This can be a scary step for a small business owner as you have to give up some of the control and ownership in order to secure the right people. For me, it was a logical decision to move from owning all of something very small to a major stake in something much larger. So, we set about securing small investments from friends and moved to the Kent Enterprise Hub where we had proper laboratory space to be able to bring clients and increase production. This new location was featured as the cover story of Laboratory News in March 2012 where we explained our approach and product.

However further improvement was needed to produce our unique Targeted-Venom Discovery Arrays (T-VDAs) more efficiently and to operate the sales team needed to reach the global market effectively.

To reach our full potential we embarked on a funding round to raise £350,000 -£500,000. It wasn’t just a figure we plucked from the air, this was meticulously calculated from a five year comprehensive financial model built by our Finance Director and honed by myself.

Our initial conversations with venture capitalists and business angel networks proved we were stuck in ‘the funding gap’. That is we needed a sum too large for individual and networks of angel investors to offer, and too small for VCs to be interested. Thus it was imperative we arrived at the right figure – which was indeed going to be a challenge. However we persevered, raising £160k from a number of business angels from three major networks and secured a promise of further funds from ‘Expansion East Kent’.

By now we had solved the scientific problem; that of providing drug discovery tools to a wide range of disease areas and targets. Key interest areas where the T-VDA’s have been effective are for pain targets (our initial aim), deorphanisation of GPCRs and novel antimicrobial agents. We also had a global client base, from America through Europe, India and Australia. But the business challenge still existed, that of efficiency and sales volume.

In May 2014 we moved once again to a new enterprise zone – Discovery Park – where we currently have ideal, pharmaceutical grade custom laboratory and meeting space, perfect efficient operation and for showing clients and investors. This is the old Pfizer site, in Sandwich, Kent which is now a thriving community of SME’s in many disciplines alongside global multinationals that have a keen interest in this high class facility. For me, this has been a return of sorts to very familiar ground.

The amazing network of supporting companies at Discovery Park led to us positive leads so we could raise the further funding we required through equity crowdfunding, and specifically with SyndicateRoom. We were nervous of crowdfunding at first as experience had shown we needed to find sophisticated investors that understand the biotechnology sector and our business, and that is not easy. As the only commercial venom lab in the country, it’s very difficult to find people who know exactly what we are trying to achieve, but an understanding the specifics of the biotech sector and the pharmaceutical customers goes along way.

We were quickly put at ease by the team at SyndicateRoom who have an excellent track record, including biotech deals. They moved swiftly to understand our aims and needs, and worked hard on our business profile so that it would make sense and appeal to their investors who they know well. SyndicateRoom’s skills were quickly demonstrated, as within hours of going live on their funding platform we had secured many new sophisticated investors.

The raise continued well and by the end of the seven day ‘cooling off’ period we had reached our minimum target of £350,000. The ‘cooling off’ period is relatively unique to crowdfunding because effectively it is distance selling, whereas meeting business angels face to face in a network environment is direct. Now this is where all the planning really counts, the crowd of shareholders now will measure everything we do against the business plan and financial model. This is a very important point for all you entrepreneurs out there thinking of raising money, securing the money is only the beginning, delivering the business and more importantly the return to the shareholders is now what counts.

We have an excellent team who have worked tirelessly to get to this stage, where we are ready to launch our international growth program and continuing to close the round at the full target of £500,000 such that we can prosecute our goals at full pace in both the sales and internal programmes.

For those entrepreneurial scientists out there, the key to building a successful biotech company is much like that of any other sector, when it comes to raising money for investment it’s the business skills and strengths that get you there. As an experienced scientist it is very humbling to pitch to a room of investors who don’t care about your scientific intellect and that great idea you’ve had. What really matters is that you can demonstrate your customers want what you’ve got, you have a strong rigorous team that know how to deliver and most of all you can show your investors how they will make a good return on their money. If you have these attributes then crowdfunding can give you extra bite in the global marketplace.

The author :

Steve Trim is Founder and Managing Director of Venomtech Ltd