Angels vs. Venture – $17.7B vs. $18.7B. Who to talk to if you’re a startup.

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Over the last few years, my company (essentially Ben and me) has been trying to raise dilutive capital through venture capital, corporate venture groups, and strategic partners. Although we’ve been able to raise money through non-dilutive sources such as government and foundations, in biotech, grants can only get you so far. We are trying to move our well-established proof-of-concept, which includes significant safety data, into clinical evaluation by running a formal preclinical study. Anyway you slice the numbers, this takes several million to do.

Unfortunately, the traditional mechanisms for this funding are moving towards later-stage, lower-risk, deals. As an example, in the 3rd quarter of 2011, venture capital spent 2.57% of their total investments on seed-stage companies (like a company in preclinical). Compare this to nearly 70% going to late-stage (think Phase III clinical trials or later) and expansion deals. Go here for more resolution on these numbers. This undoubtedly has to do with the overall economic climate. Nevertheless, it is essential that new, innovative products move forward. Just ask big pharma and biotech.

Fortunately, a new financial player has stepped up – the angel investor. Certainly an old mainstay of startup investment, their influence and effect in decidedly increasing. For the sake of this post, I’m grouping super-angels into this category. A new report, reported on by WSJ, states that $18.7B was invested by venture capital in 2009, compared to $17.7B by angel investors. Hard to say, but I’m going to assume that more than 2.57% of angel investing is going to seed stage companies. Speculating, I’m guessing the time-to-deal is also faster with an angel, assuming you find the right person. Note: you should generally avoid traditional angel groups (see why here). Super angels and high-net worth individuals that share your vision are the right folks to talk to.

Would love to hear about your stories of success (and failure) with angels. Please add them in the comments.

Leber’s Congenital Amaurosis (RPE65)

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In the last few years we have seen a significant move forward with gene therapy, particularly in sight restoration. Leber’s congenital amaurosis (LCA) is a rare inherited eye disease that appears at birth or in the first few months of life, and affects around 1 in 80,000 of the population. A gene replacement therapy that replaces the RPE65 gene in LCA patients has shown a significant restoration of sight. Several studies using this approach have made progress through the clinical trial process, up to Phase III (see clinicaltrials.gov for more info).

The RPE65 gene (the protein goes by the same name) is involved in the conversion of all-trans retinol to 11-cis retinal during phototransduction, which is then used in visual pigment regeneration in photoreceptor cells. Without this conversion, you get a build up of all-trans retinol which leads to a break down in the function of the retinal pigment epithelium (RPE), the cells that support the photoreceptors. This, in turn, leads to a slow, but steady, degeneration of the photoreceptors and subsequent vision loss.

The success of this approach has been reported by several media groups but the videos showing these treated patients in action is what is most compelling. See them here and here.