Setting up a commercial entity:
Going far beyond the seed capital without giving up equity

Debt financing is not uncommon in the start-up world. In certain cases, investors may commit seed capital to a start up in exchange for part ownership or an equity share. Early-stage Angel Investors or first-round VC are aware that early-stages of product development proceed in a relatively unpredictable environment, and that the risk of failure is far higher than that for advanced stage products.

Therefore, the prudent usage of seed capital is crucial for the longer-term survival of a start up. We were assigned the task of expeditiously adding value to a start up such that the transition from seed-funding phase to the inevitable follow-on financing and the need to give up a share of equity, was delayed as long as possible. An aligned task was to build a solid foundation of empirical support data, which could be used for business development with collaborators and partners – that is, the start-up’s prospective customers.

We pulled together a strong team of core scientists and external advisors to design and execute the best studies to ensure swift transition to the “in man” Proof of Concept phase of growth. We stressed the importance of asking the right questions, defining the appropriate goals, and then, coming up with the most realistic action plan. Experiments were designed to include all the necessary quality controls and reference standards, such that we could use the data to convince external reviewers that our findings were reproducible and consistent, and, would give us the needed confidence to use the same data sets to generate Standard Operating Procedures (SOP).

As soon as we had accumulated sufficient scientific support information, we elected to go after public funding in the form of grants and contracts. Our applications were successful and we were awarded essential SBIR / STTR grants, in partnership with leading University academicians. Thereafter, having done the necessary background research, and having made first contact with a very select group of prospective collaborators who shared mutual interests and research goals with us, we set out to add value and grow the company. To this end, we negotiated and entered into a series of Contract Research and Development Agreements (CRADA) with the Centers for Disease Control & Prevention, The US Army, The US Navy, and Homeland Security. Thus, the availability of the R&D funds served us well to maintain operations at a reasonable burn rate for the following three years.

Further, via this series of CRADA’s, we successfully transferred our protocols and technology, scaled up, and received independent validations and verifications from 3rd Parties. The scientific support data that was derived from this multitude of studies was packaged and used to showcase the key technologies upon which the company was founded – all of which served to add value to the company. Importantly, all this occurred without the need for additional investor involvement.