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New York Angels Step Up to Fund Local Biotech and Medtech Startups

Xconomy New York — 

Shortly after Milena Adamian joined the San Francisco office of Easton Capital in 2007, she got involved in two local angel groups, Life Science Angels and Health Tech Capital. Adamian, who is a cardiologist by training, was drawn to the opportunity to support fledgling entrepreneurs—some of whom were developing new drugs and devices that she knew doctors might embrace, if only the companies could get the funding they needed. “Angel financing is a very different mentality because you look at early stage companies,” Adamian says. “The part that’s the most fun is helping companies get off the ground.”

So when Adamian transferred to her VC firm’s New York office in 2010, she started looking for life-science angel groups to join—and found none. “I didn’t believe it,” she says. “I looked at it as an opportunity to build something in New York that didn’t exist.”

Hence, one woman’s love of angel investing led to the creation of New York’s first angel group focusing entirely on biotech, health IT, and medical devices. The organization, called Life Sciences Angel Network (LSAN), launched in October with 25 angels, a half-dozen or so sponsoring organizations, and an initial mandate to screen 50 business plans that streamed in from entrepreneurs who were eager to tap into the new funding source.

Adamian’s goal is to grow LSAN to include 100 angels. And she believes the city is ready to embrace the idea of investing in early-stage life sciences companies. “In New York, the whole financing landscape has significantly evolved in the last three years. All of a sudden people are pursuing deals,” she says.

Most of the seed money in New York is still being poured into tech startups—a problem that’s more about impatience than lack of opportunity, Adamian observes. When she was starting up LSAN, Adamian visited a variety of angel groups, including the tech-focused New York Angels, and Golden Seeds, which invests in women-led companies in a variety of industries. Though some were dabbling in life sciences, none had truly focused on it, she says. Part of their reluctance, she believes, stems from the fact that the payoff can take longer to materialize in life sciences than it does in technology.

Adamian believes that patience will pay off for LSAN’s angels. As proof, she points to a recent PricewaterhouseCoopers report showing that in the first quarter of this year, New York was second only to San Francisco in venture capital funding for life sciences. Granted, it was a far second—New York companies raised $190 million, while San Francisco companies pulled in $381 million—but the Big Apple still beat San Diego, Boston, and Research Triangle in North Carolina. It’s a sign, Adamian says, that New York is moving in the right direction. “Life sciences is where technology was five years ago,” she says. “There’s still a lot to do, but the entrepreneurial spirit is here.”

As LSAN was taking shape last summer, Adamian began looking for a home for the new group. A friend suggested she talk to the New York Academy of Sciences (NYAS), a 200-year-old organization that promotes science education. Adamian balked at first—NYAS isn’t exactly a player in the business community—but she quickly realized that the organization’s goals matched those of LSAN. “They talk about promoting life sciences and healthcare, and figuring out why New York is lagging,” she says. “I had to give them a course in Angel Investing 101,” Adamian jokes, “and then we decided to get married.”

LSAN is a multidisciplinary group of physicians, tech-transfer officers, intellectual property attorneys, and venture capitals. A selection committee meets every month to screen business plans and pick companies to come in and present their business plans to the larger group. The average investment, Adamian says, is between $600,000 and $1.5 million, though LSAN will assemble syndicates of investors for companies that need bigger financings.

Everything in Adamian’s career has led her to this point. Adamian was trained in clinical cardiology at the Russian Academy of Medical Sciences, and worked for many years in interventional cardiology at Lenox Hill Hospital in New York. The experience, she says, made her realize the value of healthcare innovation. “As a physician, you’re very happy to use a slightly better catheter, or a slightly smaller needle,” she says. “Small improvements make all the difference in healthcare.”

Adamian transitioned into the business world by joining Boston Scientific as an associate medical director for the Taxus stent program in 2003, before joining Lehman Bros. as an analyst in 2005.

LSAN has evaluated five possible investments so far, all in the fields of medical devices and healthcare IT. The angels are in the process of closing investments with three of the companies. The group will fund biotech startups, Adamian says, but because that’s riskier, it’s taking more time to find the right prospects. “It’s a very capital-intensive category, and 80 percent of the companies are failures,” Adamian says. “We have to pick carefully.”

Part of LSAN’s mandate is to provide mentorship and support for entrepreneurs. That’s why Adamian selected sponsors for the group that could help young companies get off the ground. The sponsors include law firm Wilson Sonsini Goodrich & Rosati, Meditech Strategic Consultants, and VC firm Ascent Biomedical Ventures. “Entrepreneurs need help figuring out a clinical strategy, regulatory path, and so forth,” Adamian says. “One of the reasons we have sponsors is to provide that level of operational support to the companies that come to us.”

There’s an educational mission, too. On June 1, for example, LSAN is teaming up with NYC Health Business Leaders to present a panel discussion for entrepreneurs on how to navigate start-up challenges in the city.

With LSAN officially off the ground, Adamian is now turning her attention to recruiting the 75 additional angels she needs to give the group some heft. She invites potential members to the group’s meetings, and meets personally with every prospective candidate.

To each prospect, she makes a convincing case that New York is the ideal home for life sciences angels. “Most of the big pharma companies are here,” she points out, as well as medical device makers such as Becton, Dickinson, which is now one of LSAN’s sponsors. “If we go back to Silicon Valley in the ’80s, all the big tech companies were there. That spurred startup growth,” Adamian adds. “It’s not going to happen overnight, but I firmly believe we’re on that path.”