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MDE > Early Stage Fundraising for a Medtech Startup > Flashcards

Early Stage Fundraising for a Medtech Startup Flashcards

1
Q

What are indications for Pathfinder Medical spinout?

A

It is a catheter guidance platform technology, that helps technicians accurately insert catheter.

  • Indication 1: endoAVF creation (vascular access - replaces fistula procedure) - approval set for 2022
  • Indication 2: CTO re-entry (occlusion of lower limbs) - already approved
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2
Q

Company spin out story

A

Spun out of imperial in 2014

Strong engineering team (3 PhD, 8 engineers)

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3
Q

Pathfinder current market opportunities

A

Peripheral occlusion, coronary occlusion, bypass system

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4
Q

Capitalisation table

A

List of all individuals who hold equity

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5
Q

Dilutive funding

A

capital raised in exchange for equity (original shareholders get diluted)

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6
Q

Non dilutive funding

A

Capital raised without giving up equity (e.g. grant funding)

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7
Q

Enterprise Investment Scheme

A

Government tax incentives for private investors to invest in early stage startups. This essentially encourages anger investors to invest in risky startups by giving them tax breaks.

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8
Q

Is EIS eligibility important?

A

Yes, being eligible for EIS and being able to pitch it to investors in early stages is fundamental.

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9
Q

Burn rate

A

How much money you are spending

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10
Q

Runway

A

How much time you have until you run out of money

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11
Q

Valley of death

A

Hardest part of fundraising - when the startup is first taking off, and risk is very high

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12
Q

Hype curve

A

Huge hype at the beginning, with the first angel investment, after which the novelty wears off and you may get pressure from early investors / angels inexperiences with medtech

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13
Q

Types of non-dilutive funding

A

Grants
Prizes/awards
R&D tax credits
Loans

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14
Q

What is a grant?

A

Non-repayable funding, typically from a government or large organisation. Some may take partial ownership over the IP you develop, but it is overall less ownership based than other funding sources.

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15
Q

What is a prize/award?

A

Non-repayable funding with no strings attaches. From private sponsors.

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16
Q

What are R&D Tax credits

A

Tax relief based on eligible costs, that can come in the form of cash credit

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17
Q

What are loans

A

repayable funding (with interest) backed by the government, although rare

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18
Q

Examples of grant funding bodies

A

Innovate UK, Eurostars, SPRI, NIHR (NHS)

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19
Q

What is an SME

A

Small and Medium Enterprise
Business with less than 50-100 employees
Also exists as MicroSME (even smaller companies)

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20
Q

How does grant funding work for SMEs?

A

There are grants that are only available for SMEs

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21
Q

What does Crowdhelix do?

A

Crowdhelix matches SMEs and academics for collaborations on grants
It essentially helps small companies collaborate with academia

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22
Q

What is grant matching?

A

When the funding you need is only matched by the grant in part (usually between 30-100%) and they require that the rest of the money come from other investors.
Grant givers usually want confirmation from other investors that they will be putting in the rest of the money.

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23
Q

Can you rely exclusively on grant funding?

A

No, it is important to have other forms of investment.

Grant funding is arrear (you need to spend the money first to get it back, and it may take a long time to come through)

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24
Q

What is fundamental to a grant funding application?

A

Declaring ahead of time how the startup plans to use the funding.
Have a strong project plan and funding plan.
Plan ahead exactly to which department the money is going to go.
You may need to get approval for specific spending plans

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25
Q

How do grants and investor funding differ in terms of freedom?

A

Investors generally give less funding constrains and more freedom of action.

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26
Q

How good are grant writers?

A

They may be useful to putting finishing touches and changing wording, but you are the best person to write. the application as you know the company best.

27
Q

How should you manage your financing with a grant?

A

Make sure you have other forms of investment to finance you before the grant comes in and to pay for things before you get reimbursed by the grant

28
Q

What affects what kind of grant you can apply for?

A

COMPANY SIZE
Some grants are meant for SMEs only and are not eligible to larger companies
There is usually no lower limit for a grant

29
Q

Grant application advice

A

Applying for grants is a full time job (consider opportunity costs)
Post grant management is time consuming (meetings, reports, forecasting etc)
Grant writers are not needed if you have written academic grants before

30
Q

What is the fee charged by grant writers?

A

10-20% success fee

31
Q

Matched funding requirement for

  • Grants
  • Prizes
A

For grants: almost always

for prizes: never

32
Q

Examples of funding bodies for prizes

A

Royal Academy of Engineering
Royal Society
MedTech campus

33
Q

How do prizes and awards work

A 
SME/Founder typically apply individually
Approximately 6 month turnaround
No matched funding required 
Part of the prize is awarded upfront 
Often also include training and networking
34
Q

R&D Tax Credits for SMEs

A

Government wants to encourage R&D, so it gives out tax credits
SMES must submit application to convince HMRC that their expenditure qualifies as true research.
Tax relief on R&D is 130%
Grant funding may affect how much you can claim

35
Q

How likely are you to get a loan, and why?

A

Banks are unlikely to give medtech startups a loan due to lack of collateral

36
Q

Dilutive Funding examples

A

Crowd funding (small per capita investment from large groups of individuals)
Angels: large per capital investment from sophisticated investors investing their own money)
SEIS/EIS Funds: VC or investment manager making SEIS/EIS eligibile investments on behalf of a pool of investors

37
Q

What is crowd funding ideal for

A

For the near market, that has consumer facing technology
For instance, it will be useful to develop a cool pair of shoes and investors will receive a pair once produced
It is less likely to be successful for medtech (more complex and harder for consumers to understand)

38
Q

Pros of crowdfunding

A 
Easy for family and friends to invest 
Simple online pitch 
Quick turn-around (1 month campaign)
No need to manage investors 
validates market potential
39
Q

Cons of Crowdfunding

A

Messy cap table
Unsophosticated investors may be hard to persuade
Investors expect short term results, while this is long term
Higher success fees (7%)
Limited ability to negotiate terms

40
Q

What terms are used with crowdfunding?

A

There is limited ability to negotiate terms
There is a set term of agreement (SSA _= shareholder’s agreement) from the crowdfunding website, making it less flexible than raising investments on your own.

41
Q

How do you evaluate your company for crowdfunding?

A

Look at how much the market are willing to pay for it

> Grant funding can narrow down your valuation

42
Q

How do you get funding from angel investors?

A

Present and explain how much funding you are eligible for.
See what they are willing to offer
Check their valuations and negotiate.

43
Q

What is typical ticket size for angel investors?\

A

10-50k

44
Q

Why do angel investors like investing in Medtech/R&D?)

A

Because of the EIS /SEIS scheme

They must hold investment for min 3 years for tax relief

45
Q

SEIS/EIS Scheme

A

HMRC Scheme to encourage investments in SMEs
From investors point of view:
- SEIS: 50% immediate tax credit- overall 27.5% at risk capital
-EIS: 30% immediate tax credit, overall 38.5 at risk capital

46
Q

Angel syndacates

A

Groups of angels grouped around specific geographic locations
Very competitive
Must have SEIS/EIS pre-assurance
They like herd mentality, so they are likely to invest if others are already involved

47
Q

How much does a typical seed round cost

A

20% in equity, 5% success fee, a board seat

48
Q

SEIS/EIS fund

A

Fund managers create a sector specific portfolio and invest on behalf of angels directions

49
Q

Pros of SEIS fund

A

no need to deal with investor directly, cleaner cap table, potential for follow up finding

50
Q

Cons of SEIS funding

A

Higher levels of due diligence and oversight
Higher costs
Tougher deal terms

51
Q

Are accelerators programs necessary to be a successful startup?

A

No, 90% did not go through an accelerator program

52
Q

How are most startups funded?

A

90% are VC funded

53
Q

What is the most important thing when choosing an investor?

A

Investor quality is very important

A high quality investor (Tier 1 VC) is correlated to better startup outcome

54
Q

Imperial College Ecosystem

A

IMperial enterprise lab
Enterprise Division
NHS ICHT
Imperial Founders Choice

55
Q

What is the NHS imperial College Healthcare Trust split into

A

Clinical trial unit
Trial sponsor (helps prepare grant applications)
Clincal research facility

56
Q

Imperial Founders choice

A

Allows researches to choose the support level that is right for them
As you are going more work, the university owns a smaller part of the company

57
Q

What routes can be taken with Imperial Founders Choice?

A

Founder driven

Jointly driven

58
Q

What is the founder driven route like

A

Basic support from innovations, company formation, help with fundraising and finding investors, board seats
University owns 5-10% non-dilutive equity

59
Q

What is the jointly driven route like

A

Enhanced support from innovations

50/50 dilutive equity

60
Q

Where did funding for Pathfinder come from?

A

NIHR

Innovate UK

61
Q

What is the maximum dilution you should have after an investment round?

A

20-30%

62
Q

What does the Enterprise Lab do?

A

Runs Hackathons/competitions/awarss
Business mentorship
Incubator facilityies

63
Q

What does the Enterprise Division do?

A

Run by Moore
Sorts out IP (tech transfer)
Industry partnership and commercialisation

MDE (16 decks)

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