Entrepreneurs in the life sciences and biotech industries face unique challenges versus those of other industries. Life science and biotech startups require their founders to raise huge sums of money in order to progress through years of research and regulatory compliance to achieve an approved, marketable product.
Edge Therapeutics founder Brian Leuthner achieved a major milestone through his venture’s recent Initial Public Offering (IPO). Leuthner spoke at the Oct. 29 BioNJ event entitled, “Mission Possible: Non-Traditional Avenues to Funding Your Start-Up.” As Leuthner explained, his startup moved through six stages in order to reach the ultimate IPO milestone. He was able to make continual progress by optimizing a range of non-funding resources that made Edge attractive to investors.
“Our plan is to be a fully integrated biotechnology company,” he said. “We do drug development right now and we hope to do commercialization soon.”
Leuthner’s entrepreneurial journey began by tapping into a major resource for startups in New Jersey. He became a resident at the NJIT EDC incubator, which is part of a network of incubators in New Jersey. Incubators assist startups with below market office and lab space, consultants, mentors, specialists in grant writing and when part of a university such as NJIT, the startups have access to student interns.
“It was a tough market from the standpoint of raising money,” Leuthner explained. “I’ll tell you a little bit about how we did it along the way because I think today we’ve raised about 100 million dollars so far.”
Edge looked at the programs offered by the State of New Jersey that were established to help entrepreneurs. Leuthner worked closely with the New Jersey Economic Development Authority, benefiting from both the Angel Investor Tax Credit Program and the Edison Innovation Fund, a suite of financing instruments designed to develop, sustain, and grow biotechnology and technology businesses in the Garden State. The company also received $400,000 in cash via the Net Operating Loss Program that enables tech ventures to sell their operating losses to large profitable companies. For a start-up that is burning through millions of dollars, $400,000 is a significant cash infusion without the involvement of an investor.
Edge also benefited from a program previously offered by Trenton that gave incentives to tech businesses to hire graduate students from New Jersey universities. Highly skilled graduates gained valuable career experience; startups and early stage companies received talent they could more afford and New Jersey increased the chances of retaining top talent in the state.
“We were using some free labor from our students so it was quite good,” he said. “I can say right now our first intern, we hired. Our second intern got a job with Merck Business Development.”
Leuthner also pursued government grants that are available to tech startups whose proposals are accepted to do research. Leuthner acknowledged Randy Harmon of Foundations Business Development Group, LLC, whose specializes in SBIR/STTR grant writing. Grants are valuable sources of capital for tech startups that does not have to be paid back and for which no equity has been given up.
Leuthner tapped into family and friends, but he also received funding from angel investors. “A couple big things have changed from 2012 to now,” Leuthner explained. “One, the IPO market is open and I think the other thing is the angel groups. You have bigger access to potential capital,” he said, noting that angel groups now syndicate deals allowing them to invest larger amounts of money in a single round.
“Back then the most an angel investor would invest would be maybe a couple $100,000 for the group,” he said. “That clearly wasn’t something that was going to advance your drug that much, but nowadays I’ve seen a few angel investor groups and they’ll do 3, 4, 5 million dollars collectively so they’ll group together.”
For the size company that Leuthner and his startup team envisioned at the start, having their model validated was of great importance. BioNJ and its founder and CEO, Debbie Hart assisted Edge by introducing Leuthner to his current Chairman Dr. Sol Barer who is the former Chairman and CEO of Celgene, one of New Jersey’s top biotech companies. The timely addition of a prominent individual from within an industry gives a startup accelerant equivalent to investment funding because of the network of resources that individual brings.
“We started here, we are here, and we couldn’t have done it without everyone, all these groups represented in New Jersey and especially BioNJ,” Leuthner said.
