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  • Dr. Elizabeth O'Day

Angel Investing Drives Innovation



It feels like an appropriate time to talk about angels. Not those that adorn the top of a Christmas tree but rather angel investors.

With biotech financings getting ever larger (the average Series A increased from $8.1M in 2010 to $27.8M in 2019, and jumped an additional 30% in 2020 to $34M), there has been debate about the role of angel investors capitalizing new companies. I firmly believe angels are a critical piece of our ecosystem, as major drivers of both innovation and diversity. It is for this reason that I have started my own angel fund, O’Day Capital- more on that later.

The term “angel” is borrowed from the arts and was originally used to describe philanthropists who kept playhouses afloat. In 1983, William (Bill) Wetzel professor and founder of the University of New Hampshire’s Center for Venture Research is credited with applying the term to describe how entrepreneurs raised seed capital. Right around this same time, the biotechnology industry was heating up. Cetus Corporation (1971), Genentech (1976), Biogen (1978), Amgen (1980), Chiron (1981), Genzyme (1981), Regeneron (1988), and Vertex (1989), were some of the earliest biotechnology companies. All followed a similar formula—scientist entrepreneur (often the inventor) who brought the technology to high-net-worth business experts (the start of angel investing) and venture capitalists who together provided financing and operating expertise. This combo worked- leading to some of the most successful ROIs and more importantly innovative product development like human insulin, Rituxan, and Enbrel.

Contemporary biotech financing has shifted to “VC-backed company creation,” wherein venture groups ideate on emerging technology, recruit seasoned management teams, and now either as individual firms or through syndicates raise Series A/B rounds in the multiple millions to often hundreds of millions of dollars (2020 saw seven Series A financings over $100M). Jeffrey Tong at Third Rock, Josh Resnick of RA, and Noubar Afeyan of Flagship are just a few of the folks that have repeatedly successfully executed this strategy. Under this model, companies are “raising enough capital to take them all the way to a public offering” Afeyan has noted. This contrasts with more traditional step-wise funding, where entrepreneurs often first sought angel or smaller investments to firm up the science before seeking larger venture rounds to scale. Data suggests that this “traditional model” is becoming less of an option. Jeff Behrens, the former CEO and Founder of Siamab examined funding patterns in biotech and observed only 4.5% of biotech startups that started with angel money ever got VC funding. That was despite having published papers, world-class SABs, and actual products. He found the pivot towards internal venture creation “left great science unfunded”. This is a disservice to all of us. While the new model of biotech financing is clearly working (Atlas Venture partner Bruce Booth was quoted “Median IPO valuations this year are north of $400M; post-IPO valuations have never been as high”), as an industry I think we can do even better.

We need ideas coming from all over. With the company creation model, it is often the same people (typically older white males, 80% of biotech CEOs are male and 90% are white) creating and managing companies. While experience is important, we need to expand the idea pool. Study after study has demonstrated that diversity (of ideas and people) breeds innovation and success. According to a McKinsey report, companies that ranked in the top 25% for gender diversity and top 35% for racial diversity were more likely to have better financial returns than companies that were less diverse. Startups with at least one female founder have shorter timelines to an exit and diverse companies are 70% more likely to capture new market share. Further, while VC company creation is heavily dominated by therapeutic companies, the power of biotech innovation is far more expansive. Diagnostics, devices, wearables and sensors, agriculture, fuel, cosmetics, and more absolutely deserve funding to be brought to the public.

If we use Olaris as an example, we have followed the tried-and-true model of bringing together the entrepreneur/inventor of the technology, angel investors, and now venture partners (we are part of the 4.5%). As first-movers in the metabolite precision diagnostic space, I have been pragmatic about our capitalization and valuation at each stage of development. I raised enough capital to demonstrate the power of the technology while preventing unnecessary dilution (for myself, employees, and early investors). The disciplined spend of Olaris has made our science even more robust and honed my abilities as a CEO. Now we have our first product heading into commercialization and a robust platform that can repeatedly deliver clinically impactful diagnostics. To support this growth, we will be raising larger rounds and have plans to IPO. Thankfully the investors and bankers we are talking to see our early angel-funded days as a plus- our valuation is reasonable, and our technology has been vetted.

The critical role of angel investors in my own story led to the formation of “O’Day Cap,” an angel fund that invests in exceptional entrepreneurs. I firmly believe entrepreneurs/inventors deserve the chance to turn their ideas into companies. No one knows your tech better than you or where, how, and why it can change the world. And no one will fight harder to see the promise realized more than the entrepreneur behind it. And because I believe that the winning combination is one that brings entrepreneurs, angels, and venture together, my investments will also be supported by Pillar VC through their scout program. I hope the lessons I have learned will help others leapfrog to success.

Angel investors have played a critical role in biotech from the beginning to the modern day. Yes, dilution and time to return are different than other industry but there can still be big payoffs (financially and impact-driven). Look at Moderna, it started with technology from Harvard and a mere $2M of funding from angel investors and Flagship. Now it is leading the way with world-saving mRNA vaccine technology and its stock is trading at ~$276/share. When the NASDAQ bell rings for the next biotech IPO, I can’t promise Clarance Odbody will get his wings, but I am confident that if entrepreneurs, angels, and the venture community work together, we will continue to develop well-vetted technology that can transform the world.


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