Entrepreneurs in pursuit of funding often only consider “angel investors” or “venture capital firms”. But there is an alternative funding source less widely known, foundation grants, that have a critical role in advancing a venture in need of outside financial support.
On October 18th the NJ EDA hosted a panel discussion entitled, “Foundations are the New VCs,” that provided insight about funding from foundations for startups and early stage ventures in the areas of life science, medical device, healthcare IT and biotech.
Held at the Commercialization Center for Innovative Technologies (CCIT), presentations were given by Dr. Todd Sherer, CEO of the Michael J Fox Foundation for Parkinson’s Research (MJFF), Andrea Yonah of the Israel-US Binational Industrial Research and Development (BIRD) Foundation and Dr. Lisa Hague, Associate Manager of Technical Support of Genewiz, a successful biotech spin out of the CCIT life sciences incubator. The presentations were followed by an open Q&A panel discussion with the audience.
Dr. Hague, representing the South Plainfield, New Jersey based Genewiz, gave a strong testimonial about the value of grant funding to early stage companies. Hague touted the company’s global foot print that was achieved in large part through timely access to funds from foundations. She specifically noted the support received from the BIRD Foundation, also present on the panel, as well as how the company leveraged relationships to obtain funding.
“People who initially come in to utilize our services, wind up becoming a collaborator,” is how Hague described Genewiz’s particular approach of leveraging relationships to propel the company’s growth. She described how a collaborative relationship emerged from their existing Israeli distributor Hy Laboratories that presented the opportunity for a BIRD Foundation grant.
Attempting to avoid giving up part ownership of their company or intellectual property to a venture capital firm, the Genewiz entrepreneurs sought the BIRD grant as a way to commercialize an already existing product. Partnering with Hy Labs was key to this opportunity because HY Labs had channels into markets that Genewiz would not have sought to enter otherwise.
The grant brought a range of benefits to Genewiz including greater risk diversification, geographical expansion, and being able to tap into the technical expertise of Hy Labs. Their collaboration was in the clinical area of diabetes and obesity for which Genwize used an existing panel that they developed into a diagnostic tool.
In the case of the Fox Foundation CEO Sherer outlined funding and non-funding support that can help move a startup or early stage company forward. Founded in 2000 as a public charity, the Fox Foundation is now the largest non-profit funder of Parkinson’s research in the world.
“More and more our foundation and others focus on the building blocks of a lot of diseases that have been difficult to develop treatments for due to the lack of knowledge or tools around the disease itself,” Sherer said. He described the de-risking role the Fox Foundation has in research by directly providing high risk capital in the form of grants during the early stage of the research process that generates the data critical for attracting additional funding.
“When thinking about interacting with large foundations there is the goal of getting funding, but there can be a lot of other resources that you can get from foundations that can accelerate your work,” explained Sherer.
Sherer described the Parkinson Disease Research Tools Consortium which offers free tools to researchers who otherwise would build their own. This is a “huge cost savings” for early stage companies when trying to get started in a disease area.
Another example of a non-funding resource is the largest initiative being undertaken by the Foundation, the Natural History Study of Parkinson. That initiative began seven years ago and seeks to find a way to evaluate if one is at risk for the disease which possibly could lead to early diagnosis. The study’s data is available on a web site that can be downloaded by researchers anywhere in the world.
Having been highlighted in the Genewiz example given by Dr. Hague, Andrea Yonah focused on the grant opportunities of the BIRD Foundation and its application process. The Foundation was started approximately forty years ago as a US-Israeli government funded endowment of $110 million. It focuses on the commercialization of innovative collaborative research between US and Israeli companies in all areas of technology other than military. Life sciences is the largest portion of their investment portfolio.
It is a matching fund up to 50% percent of the combined R&D project budget and has the requirement that funds be paid back, if the venture is successful. Through investments made to date almost 100% of the endowment has been recouped. A recent economic impact study showed almost $10 billion in sales directly or indirectly related to the BIRD Foundation portfolio, yielding a high ROI for both countries.
The foundation has two application cycles per year. The most recent resulted in nine investments for approximately $7.5 million invested and leaned very heavily in life science.
“Every cycle is different in terms of the type of projects we invest in,” stated Yohan. “In our last cycle it was very heavily life science.” She went on to explain geographical concentration that included California, Massachusetts and New Jersey, while noting grant recipients were both large and very small. Investments are capped at $1 million in projects that have a duration of two years and a dollar for dollar matching.
The first cycle starts in March requiring an executive summary, a four page document that is submitted jointly with the Israeli partner. The submission is reviewed, competing against approximately 25 to 30 other submissions. A recommendation is then made as to which applicants should submit a full proposal that is then reviewed by experts from the US and Israel, and the final selections on made by the Board of Governors in June. The second cycle begins in September.
“If we have given companies the recommendation to submit a full scale [proposal], there is a forty to fifty percent chance of the company being approved,” Yonah asserted.
“We are looking for projects that show innovation. We like risky projects. We like any technology that is disruptive. We want to see clear synergy in the two companies and that they have a real affinity for working together and both companies have skin in the game. The companies can quantify the market and how their expertise in reaching it,” explained Yonah. “And finally, their ability to market it that shows they have a clear commercialization plan.”
The goal of the NJEDA event was to bring to the attention of life science entrepreneurs alternative pathways to resources that will move their venture forward. As the panelists shared, foundations are an excellent source of funding, but they also provide non-monetary resources that can have a significant positive impact on a venture, as well.
