What’s it like to back a life sciences company? What should investors expect before investing in the bio/health sectors? Who’s entitled to be called an “angel investor”?
These are some of the questions Thealzel Lee will answer in this interview.
Lee is the senior partner of Rocket Builders, a management consulting firm that sponsors Vancouver Angel Technology Network (VANTEC) and Vancouver Enterprise Forum. The firm also actively supports the annual Canadian Financing Forum.
Previously, Lee was an advisor at Science Council of Canada and a management development consultant at United Nations Development Programme (UNDP). She’s also worked on the technology portfolio at CIBC Investment Banking Division.
* Edited interview
VH: You took over the VANTEC’s Life Sciences portfolio in 2006. How did you first get involved with life sciences and subsequently with the angel network? What’s your story?
TL: I was originally in pursuit of an academic career in life sciences – having received an undergraduate in microbiology and seeking a doctorate in biochemistry and immunology – but was seduced by the business world so I obtained an MBA from the Richard Ivey School of Business at the University of Western Ontario instead.
It’s been a great ride since, with stints in public policy, biotech companies, and third world development. I later became an entrepreneur and an investor in real estate.
I began to delve into the world of angel investing almost a decade ago, first as an advisor to local startups, then as a senior partner with the Vancouver-based management consulting firm Rocket Builders, and recently as an angel investor with “skin” in the game.
Together with VANTEC-founder Mike Volker, I manage the monthly angel investor meetings and the pre-screening sessions with entrepreneurs.
VH: What are the unique characteristics of life sciences companies? For example, how are they different from technology ventures? What advice would you give to investors interested in backing life sciences companies?
TL: Life sciences encompasses many different types of products and services in the bio/health sectors – such as biopharmaceuticals, medical devices, bioinformatics, health IT – and bioenergy and other bioproducts in the environment, agriculture, marine and other resource sectors.
These companies operate in heavily regulated environments; and hence, investors in life science companies face longer timelines to exit than investors in not so regulated sectors such as social media and Internet companies.
The metrics for success are also different for life sciences. There’s a strong emphasis on proof-of-concept, which highlights the significance of the science behind the products and services.
The success of the life science company is tied to the achievement of the next regulatory hurdle, which is akin to receiving customer orders in businesses that don’t face the same types of regulatory controls.
Exit opportunities for investors in life science companies often occur when these companies reach a tolerable investment risk and valuation commensurate with their regulatory achievements – and often before revenues are generated.
My advice to investors interested in backing life science companies is to be
VH: A reader asked:
“Would you advise folks against becoming part-time angels, i.e. maintain a day job and be an angel investor during evenings/weekends? Has this worked for anyone in the past?”
What would you say to this reader?
TL: It depends. Different individuals have different personal reasons to become an angel investor, and these reasons affect the way they participate in the angel investment community.
So, if someone wants to be an angel investor part-time, that’s fine. What’s more important is that everyone understands and accepts the roles and commitment levels of everyone involved in the venture.
If the motives of the angel investor and the entrepreneur aren’t aligned, the relationship – and the venture – will sour very quickly.
VH: Brad Feld of Foundry Group recently wrote a post in an attempt to “define the parameters that qualifies someone to call themselves an angel investor.”
Opinions vary. Some believe the term “angel investor” should be strictly defined. That is, one shouldn’t call himself an angel unless he’s invested a certain dollar amount in a certain number of companies per year for a number of consecutive years.
Others disagree. One argued that some angel investors simply invest quietly in companies they like, however often they like. Not meeting the so-called minimum threshold doesn’t diminish the fact that they are angel investors.
What’s your opinion on this? How would you define an angel investor?
TL: The key is that an angel investor invests his/her own money (unlike VCs and other institutional funds) and isn’t part of the entrepreneur’s “friends and family” source of funding.
It’s not the size or the check that matters either. In my own experience with the local angels, I’ve frequently found that angels who are most capable of writing big checks don’t, and a surprising number of lower net-worth investors do. Go figure!
VH: Agreed. Another thing: Some people invest in their own company and call themselves an angel. No, investing in your own venture doesn’t make you an angel investor. So don’t call yourself that if you don’t want to become a joke.
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