Medical Device Daily

ATLANTA – A PowerPoint presentation showing off an image of President Barack Obama in a pose similar to J Howard Miller's "We Can Do It" poster, often known as Rosie the Riveter, set the tone of this year's annual meeting of the South Eastern Medical Device Association (SEMDA; Norcross, Georgia) conference Tuesday at the Georgia Aquarium.

Faced with a badly slumping economy, start-ups have no choice but to wade through the turbulent waters to secure funding, according to speakers during a panel on "Early Stage Financing. "

The speakers were Kathy Lee-Sepsick, CEO of Femasys (Atlanta); Joe DeLapp, CEO of Visioneering (Willoughby Hills, Ohio); and Peyton Anderson, CEO of Affinergy (Durham, North Carolina).

The association has an early financings panel nearly every year, but this year's tone was a little different and a bit bleaker than before.

"It's not easy to get money at all right now," DeLapp told the audience. "These are some very difficult times. Out of 1,000 business plans, about three are going to get funding."

DeLapp's company went through the venture capital route to secure money. Visioneering develops products to treat presbyopia.

"We targeted certain venture capitalists with experience in the ophthalmic industry," he said. "The space was hot, so we just took a shotgun approach. If we had any lead we followed it."

DeLapp said that in all, the company must have talked to more than 60 venture capitalists, which is a more than fair number when trying to secure funding.

"If you go to any VCs, get as much feedback as possible," he said.

The company tried other endeavors to raise money but just wasn't successful.

"We tried angel funding but could never stay ahead of past bills," he said. "We just weren't fortunate enough."

Lee-Sepsick was, however, and managed to bring in nearly $1 million in funding from friends and family. She also raised a little more than $7 million in preferred stock.

Her company develops a non-surgical female contraceptive system called FemBloc and caters to about 10 million women in the U.S. alone. There are 11 patents pending and Lee-Sepsick said the company, which was founded in 2004, was looking at a clear regulatory pathway.

She stressed that if companies wanted to follow the same route in garnering funding, then there could be no secrets and that they would have to be upfront and realistic with investors.

"I told my family and friends that this was a Class 3 PMA device and it's not something to turn over quickly. I sent out newsletters to keep them abreast of the financing and kept them updated as much as possible," she said. "That reduced the phone calls and the concern."

For the second round of financing, Lee-Sepsick said that the company looked for experienced investors and warned that not all money is the same money.

"Our most preferred investor is one who has been in our shoes before," she told the audience. "We're looking for experienced people that had exited their company."

An audience member asked how the company developed a price model for each investor.

"We negeotiated a price and we did discounting models just to get to a reasonable number that worked for us and the investor," she said. "I feel it was a really good development for us."

Of the companies presented on the panel, Affinergy took perhaps the most risky route.

The company said that it relied on Small Business Innovation Research (SBIR) grants as well as partnering with companies.

"We just weren't going to get picked up by venture capitalists," Anderson said. "Our business was too early and we were on a 7- to 10-year model ... not an attractive thing for VCs."

Affinergy develops a biological glue, which is a peptide linker system with unique abilities to kick-start and control biology on medical device surfaces.

"We'd go to companies and ask them their needs and learn about their technology," Anderson said. "We never asked them for money. We told them that we have raw technology and asked what applications we could help them with. They would tell us and we would take copious notes. We then would apply for an SIBR grant regarding the application. We would then come back to the company and see if they wanted to partner with us. It's a process we've used often."

He said Affinergy applies for six to eight SBIR grants a year and has a person whose sole purpose is to apply for grants for the company.

"It's a lot of work and a lot of time goes into applying for these grants," Anderson said. "Companies can't expect to just apply for one a few weeks before the deadline. This is a year-long process."

Turnout was strong for this year's conference, which boasted a 40% increase in attendance, according to organizers. Some suggested the high turnout out was a result of companies eager to gain insight on how to deal with the slumping economy and the challenges it presents.

Whatever the case, during her keynote speech, Linda Alexander, founder/CEO of contract research organization Alquest (Minneapolis), summed up in just three words what she thought the industry's state of mind should be: "Yes We Can."

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