Funding Considerations for Startups

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Funding Considerations

Presented by Marie WesselhoftPresident and Co-Founder of MSDx

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Marie Wesselhoft, President and Co-Founder MSDx

Marie has over thirty years of business experience with a successful track record in Healthcare. Marie held positions such as VP/General Manager, VP Marketing, Area VP of Sales, Product Manager, throughout her twenty year career at Cardinal/Baxter/American Hospital Supply Company. In her role as General Manager of the Scientific Products, an $850 million business, her responsibilities included management of a national sales and marketing team comprised of more than 140 people. Throughout her career she has had opportunities to launch $100 million diagnostic product lines, negotiate partnership agreements, manage key accounts, as well as facilitate the integration of teams for acquisitions and divestitures. During her years at Humana Hospital she was both a Laboratory Director and Medical Technologist. She also has experience with several healthcare start-up companies in her work at the Arizona Center for Innovation. She graduated from the University of Wisconsin with a BS in Medical Technology and completed an MBA at the University of Chicago.

About the Presenter

2011 Arizona Center for Innovation #

Funding Varies by Type of Business

Solar CompanyGrantRestaurantDebtSoftware CompanyEquity

2011 Arizona Center for Innovation #

Funding Varies by Risk

New Drug

New IT Solution

2011 Arizona Center for Innovation #

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Team FormationProductSales & MarketingFunding

Pathway to Funding

2011 Arizona Center for Innovation #

5Clients form a community showing where in process clients are when joining AzCI and how we move them through the continuum

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GrantsFounderAngelVCsDebtFunding Needs Vary Over Time

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The Financing Pyramid

Source: Bob Fick, Small Business Development Center

2011 Arizona Center for Innovation #

Investigation Feasibility Development Introduction Growth Pre Seed Seed Early StageIPOMid Stage Late Stage 2005 Goldsmith

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Preparing to Seek FinancingBusiness PlanFinancial ForecastElevator SpeechPresentationAmount Required and PurposeValuationExit Strategy

2011 Arizona Center for Innovation #

2011 MSDx, Inc. All rights reserved.

Thank you for the opportunity to share the MSDx!

MSDx provides physicians with critical patient data for vital drug treatment decisions. Our company is commercializing simple blood testing products for neurological disorders. .disease that dont have simple blood tests. Our first area is Multiple Sclerosis. 10

The $1.0 Million Dollar Box

2011 MSDx, Inc. All rights reserved.

For Research Use Only- Not for Diagnostic Purposes

2011 Arizona Center for Innovation #

Thank you for the chance to introduce you to MSDx!

MSDx provides physicians with critical patient data for vital drug treatment decisions. Our company is commercializing simple blood testing products for neurological disorders. .disease that dont have simple blood tests. Our first area is Multiple Sclerosis.

My name is Marie Wesselhoft and I am one of the cofounders and President of the company.

We are here seeking capital to commercialize and launch our panel of products in 2011

We have a great deal of momentum. We have $1.0 million into the business. The first $600,000 from our founders & friends and $440,000 from two stimulus grants We are working raising a round of $800,000. Our first external investors comes from the Desert angels. All with the goal of commercialization of our first product in 2011

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The MSDx OpportunityPersonalized Medicine Solution-Panel of Blood Testing Products used in Monitoring Therapy Effectiveness

Laboratory Testing Market- $46 Billion world wide, growing at 7%

Proven Business Model- Recurring revenue model. Releasing a research kit in 2011 and an FDA product in 2013.

Innovative Technology- Window into the Brain- Applications in MS and other Neurological Disease

2011 MSDx, Inc. All rights reserved.

13I would like to start with the highlights of the MSDx opportunity

The Solution-The first personalized Medicine solution in Multiple Sclerosis

The large Blood Testing market called In vitro Diagnostics: $46 B dollar market growing at 7%

Our Business Model Blood testing products that offer a recurring source of revenue with high margins- Consumable product

Our Discovery: An innovative panel of biomarkers we refer to as Window into the Brain.

Founders, Family, Friends$600,000

2 Grants$430,00020072008200920102011Angels$200,000MSDx Funding

2011 MSDx, Inc. All rights reserved.

Lets look at the Roadmap to Revenue.our time line and financial assumptions. This reflects our activities relating to production, regulatory, and sales launch for this year.

So, what are our financial assumptions. Each product has been modeled for price, cost, and volume

Kits launch at a price of $500-650 depending on kits size Cost per test=$20-25 or 100 for panel.as compared to $2500 for MRIGross profit margins range from 50-70%Volume grows as the kits first launch as an RUO in 2011And then increase after FDA approval in 2012And then Licensing revenues in 2013 We are building our data bases. We have several institutions already interested.

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DosDontsFunding- Our Lessons Learned

2011 Arizona Center for Innovation #

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Founder, Family and FriendsNo one funds your jobThink before you leave your day job.Think about it long and hard!Credit cardYour assets are on the lineEstablish a process to handle cash and timeRepresents ownership percentageShare in proceeds from company saleNo obligation to repay?Very risky

2011 Arizona Center for Innovation #

Credit cardsObligation to repayInterest bearingLeasing equipmentPriority claim on assets vs. owners

Early Debt

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GrantsSBIR/STTRAllocated from Federal Agency BudgetsOver $2 billion availableMatching researchPhases I and II; Phase IIIExcellent pathway to VC or partnerGrant or contract; not debt or equityLittle concern about IP issueshttp://www.grants.gov/

Tip: Cast a broad net when researching grants. You may find new opportunities through your industry or affiliations; for minority-owned businesses; etc. Grants often bring added value and help validate your progress and are a critical part of your funding strategy.

2011 Arizona Center for Innovation #

$ 204,000QTDP Grant$226,495AZ Innovation GrantMSDx Receives Two Grants

Track Record- Currently 2 of 8

2011 MSDx, Inc. All rights reserved.

Lets look at the Roadmap to Revenue.our time line and financial assumptions. This reflects our activities relating to production, regulatory, and sales launch for this year.

So, what are our financial assumptions. Each product has been modeled for price, cost, and volume

Kits launch at a price of $500-650 depending on kits size Cost per test=$20-25 or 100 for panel.as compared to $2500 for MRIGross profit margins range from 50-70%Volume grows as the kits first launch as an RUO in 2011And then increase after FDA approval in 2012And then Licensing revenues in 2013 We are building our data bases. We have several institutions already interested.

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MSDx Goal-Grants for 30% of Cash

OurDos & Donts

2011 MSDx, Inc. All rights reserved.

Lets look at the Roadmap to Revenue.our time line and financial assumptions. This reflects our activities relating to production, regulatory, and sales launch for this year.

So, what are our financial assumptions. Each product has been modeled for price, cost, and volume

Kits launch at a price of $500-650 depending on kits size Cost per test=$20-25 or 100 for panel.as compared to $2500 for MRIGross profit margins range from 50-70%Volume grows as the kits first launch as an RUO in 2011And then increase after FDA approval in 2012And then Licensing revenues in 2013 We are building our data bases. We have several institutions already interested.

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Angel InvestorsFor consideration:Repay obligationRepresents ownership percentageVoting/nonvotingShare in dividends/distributions, if anyClaim on assets secondary to creditorsShare in proceeds from company saleOften received in stagesIndividual high net worth investorsAngel groupsMatch your marketExit timing and risk profile must fit

2011 Arizona Center for Innovation #

Angel InvestorsWho is an angel investor?SEC accredited investor>$1 million in net worth or $200K incomeGenerally invest $25-250K in a dealGenerally make several angel investmentsRoles: Lead investor, investor/advisor, passive investor

Typical angel investment:$250-1M in total (multiple investors)Valuation: $1-3MAngel equity: 20-40%Expected ROI 60% annual or 10xSource: Angel Capital Association

2011 Arizona Center for Innovation #

Angel InvestorsAngel organization statistics:Number of orgs 1999 = 250ACA memberships = 127 from 43 statesACA attendees 2002 = 35, 2007 = 330Average number of investments = 7.4Total $ invested per org = $1.8MAverage $241,000 per roundAverage per angel investor = $31,000

Investment Brackets:$0-250K Pre-seed P, F, F & F$250-1.5M Seed/start-up Angels$4-10M+ - Early/later stage VCsInvestment Gap $1.5-4M

Source: Angel Capital Association

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MSDx Angel Investors..

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National and Local Angel Groups

2011 Arizona Center for Innovation #

Investment Environment