Wow, this is tough to answer in a simple post, too many interactive questions. I would be interested in talking with him and give him my 2 cents. Being a biotech/med startup guy with medical device founding experience at Norian, I can probably enlighten him some.
From the sounds of your post, he wants to just modify a machine and set up a lab, is that to just continue being a neurologist with a cool new tool? Or, does he want to set up a company to market this idea to the Cat Mfg? Or does he want to set up a company that makes an accessory to sell to the Cat Mfg., and maybe for field modification of the installed base of Cat Scans, or what? IMHO the best bet is to seriously explore the alternatives before deciding the path. If he just still wants to be a Neurologist and not have the significant headaches of running a company, that would be the first major consideration. It would be hard to do both successfully and happily IMO.
Sounds like he has done the correct first step in patenting. Is that an issued patent, or a patent in application? Secondly, he needs to connect with a good legal firm who specializes in representing inventors and startup companies so he doesn't get screwed by the sharks. A good example is Wilson, Sonsini, Goodrich & Rosati in Palo Alto, CA. Avoid the do it all legal firms who don't know startups, it is definitely a specialty area. If he is in a hot VC area like SF Bay this whole process is easier than if he is in the middle of nowhere. If he is in the middle of nowhere, is he ready to move? This area is where these deals are very possible, that's why they happen here so often, most of the rest of the country is full of pessimistic naysayers who just don't get it, although there are isolated exceptions.
Next, he needs to decide how much of this he wants to self fund to get rolling, if at all, does he do the seed round himself or find outside money? Angels (private rich investors) can be a good start for minimal seed funding, enough to get going, get the business plan written, and support pounding the Venture Capital trail, but they can also be a pain in the ass if not chosen very wisely. They tend to be worrisome, meddlesome and rarely are you going to find pockets deep enough to come up with $6-10M, this is more in the VC range. However, angels can be useful keeping you afloat long enough to convince the VCs. Personally, I would float the idea directly with a few of the premier VCs who specialize in very early stage deals and dealing with inventors, such as The Mayfield Fund, Medicus Ventures, etc. VC's all have specialty niches and med startups is definitely a specialty niche. Keep in mind that the vast majority of VC funds tend to be sheep in early stage (if not all) deals and need one of the leaders to do the due diligence and set the stage for them to follow blindly. Firms such as Mayfield specialize in incubating companies and can provide lab space, finance guys, CEOs, board members, consultants, accounting firms and all the other expertise that their experiences and money gives them access to. If you can land a fund like Mayfield, then the sheep funds jump right in behind for a piece of the action. Of course a full service fund like Mayfield will take a bigger cut than a hands off firm, but from the sounds of your father-in-laws background he is not an expert at startups and could use their help. Often their bigger piece of the action is offset by the shortening of the timelines their contacts and money can bring. If time can be shaved off the process, it can be worth giving up a bigger piece. Also, he may have a better chance of basicly still being a Neurologist while letting others set up and run the company, which might make him happier, and give the company a better chance of success. Scientists generally do not make good business managers, and many a good company has been run into the ground by their fumbling the ball.
For some excellent articles on starting VC funded companies, call Fred Dotzler, General Partner at Medicus Ventures, 2180 Sand Hill Rd, Suite 400, Menlo Park, CA 94025 (on venture capital row, home of more VC money than anywhere else on the plantet). Phone # 415/854-7100, Fax # 415/854-5700. Have your dad call and talk up the idea and request their articles on starting biomed companies. They are excellent and will give a lot of unbiased guidance on the subject - they are not just hype tools for Medicus.
If Angels are the chosen path, one good start is a club of Angels in the Menlo Park/Atherton area who get together monthly or so for presentations by inventors and then fund some of them. It is one of the highest concentrations of exposures to seasoned angels that you could ever get. There is a lot of money and expertise in this group. I don't have the exact name or a phone number, but the SJ Mercury News did a big article on them here's the lead paragraph and date, you can get the full article on line for a small fee. The site is:
newslibrary.infi.net
ANGEL FINANCIERS WATCH OVER THE VALLEY'S UPSTARTS
Published on 02/09/97,
PAGE: 1E
MORE than 100 nattily dressed men and women met at a tony Atherton country club after work recently, where they sipped wine, munched hors d'oeuvres and quietly chatted with each other and their hosts, men decked out in tuxedos with red or white carnations in their lapels.
In other parts of the country, the bash might have been a fundraiser for an important political candidate, or perhaps a meeting of potential buyers of luxury boxes in a new football stadium.
Personally, I would avoid going to the manufacturing companies until after you have a company and funding with some clout behind it. Manufacturing companies have too much of a tendency to screw the little inventor, steal ideas and lead you on for ever. And, to play the field of them you really multiply your exposure to this. So, what if you have a patent, they'll bleed you dry in the legal battle if you don't have the big deep pockets behind you, and then buy you out for peanuts when you get really desperate years down the road. The company you start with the angels or VCs might just be to sell the invention to the companies, more of a virtual shell company, but VCs will be able to open the doors to the companies, and can provide significant protection from being taken to the cleaners by the unscrupulous. A current business model in vogue is the "virtual company", which might be good for this kind of invention. You are essentially setting up a company with just a hand full of key employees to market the idea to the big Cat Mfgs, with no intent to setting up a vertically integrated high overhead mfg. company.
Here is the premier source of VC's who are funding deals in this country. Look in the biomedical category for fund names who are doing lots of similar types of companies in first round fundings.
sjmercury.com
I'd love to go on for another hour or so, but I've got to go feed the kids. E-mail me and I'll send you my phone number and talk with you or your father. Sounds like a lot of fun. I love to help fellow entrepreneurs and who knows, maybe I'll help him set up the company, it wouldn't be my first time. Although, I'm having so much fun playing stocks and playing on SI, it might be tough to tear me off of my computer. If you want to know more about my background, I've posted my life history on post #75 of the INCY thread, and also have done a full SI profile, where you'll find my email address.
Hope this helps for starters, I really could go on for hours, start up bio/meds are something I am truly interested in.
Later,
Dave
Uh oh, now I'm in trouble, the wife is pissed, I haven't started dinner yet, it's my turn on the schedule, c'est la vie. |
