Calling All Angels

Yes, companies across all industries are scrambling for capital given current market conditions, but none so desperate for inflows as the life sciences/device sector.

There has always been a funding gap in the life sciences sector, proverbially known as The Valley of Death. Basic research in the U.S. is particularly well-funded by the NIH and others, but there is a steep cliff from which more than a fair share of companies exiting the academic environment fall to their premature death. With them die many potentially life saving (or at least pain-easing) technologies, along with billions of tax-payer dollars.

Earlier this year, I held out some hope that in my own state of Massachusetts, Governor Deval Patrick’s $1.5 billion bio bill would help capitalize local startups and save them from the fall, but alas it looks like just another pocket of funds and incentives for basic research. To me, this defies logic. We are planting seeds that we have no intention to water.

For a while, venture capital was pitching in to fund the gap. But the party line from the VCs today is a broad unwillingness to fund regulatory risk, and a resistance to fund commercialization risk. In other words – call us when you can demonstrate safety, efficacy and demand – a very risk adverse position.

So here lies my plea – a call to angels to rescue these important technologies from that valley of death. More than ever before, there is an opportunity for angel investors, as individuals or as groups, to play a fundamental and vital role in funding early stage life sciences ventures. Through appeal to their philanthropic side – often as a result of direct connection to a medical area of need, or as a pure financial investment, we need to convince angels of the importance of the sector. Without this funding group, we are faced with the export of one our nation’s greatest core competencies.

Diane Woolf is a banker with Covington Associates, and this post first appeared at Covington’s blog.