As a serial entrepreneur with three previous life science companies to his credit, Craig Shimasaki raised millions of dollars of investment capital for his past ventures. He's successfully pitched business concepts to individual investors, venture capital groups and fund managers.
In May 2012, Shimasaki found himself standing before investors who comprise the SeedStep Angels investment group. It was his first time to pitch a concept to an organized angel investment group composed entirely of fellow Oklahomans.
Shimasaki had 15 minutes to make the case that his latest venture, Oklahoma City's Moleculera Labs, has an answer for the devastating challenges that families and health care providers have in diagnosing a neurological condition within the autism spectrum that afflicts thousands of children across the U.S. each year.
When the presentation was over, four of the SeedStep Angels members were sold on its potential. They invested a collective $155,000 in the company as part of a $600,000 overall financing round.
“I was excited to see an Oklahoma group come together and be a part of what we are doing,” Shimasaki said. “It's always a pleasure to present business-based opportunities to Oklahoma investors, because the goal for us is to grow and build organically in Oklahoma.”
Angel investment was crucial to Moleculera Labs. Capital was needed to develop a certified clinical laboratory housed at the University of Oklahoma Health Sciences Center to begin implementing a diagnostic test for the autism condition.
In addition to the SeedStep Angels investments, co-investment included out-of-state investors and $300,000 from the StartOK Accelerator Fund managed by i2E Inc., the Oklahoma-based nonprofit economic development corporation.
“That was a critical investment,” Shimasaki said. “Without that $600,000, we wouldn't have been able to open the laboratory, begin clinical testing or develop the regulatory protocols. We wouldn't be starting.”
Founded in 2009 and managed by i2E, the SeedStep Angels group is composed of successful Oklahomans who make investments in innovative, high-growth companies such as Moleculera Labs. The group was created to address the “capital gap” that exists in Oklahoma for startups that are typically too risky to attract traditional bank funding, and too new for larger venture capital dollars.
SeedStep Angels has grown to 27 members in three chapters — Oklahoma City, Tulsa and Ardmore. Its members are attracted to the organized investment group in part because the deals brought to them are prescreened by i2E's investment professionals.
i2E provides deal flow, due diligence and best practices for the angel group. With funding from both state and federal agencies, i2E manages $40 million across five staged funds that typically invest alongside the SeedStep Angels.
“It is sophisticated deal flow, which you don't typically get if you are doing angel investment on your own,” said Michael Kindrat-Pratt, who manages the SeedStep Angels for i2E.
In a typical year, the angel group receives about 100 applications from entrepreneurs. Out of those applications, about 12 get to present in front of the group each year. Since the group was founded, 35 companies have made investor presentations.
SeedStep Angels members have invested in 17 companies totaling $2.69 million since the group was launched.
“We are an active angel network,” Kindrat-Pratt said. “We encourage our investors to make at least one investment each year.”
Hitting a ‘home run'
All 17 companies that received SeedStep Angels investment are still in business, which means each has the opportunity to eventually provide investors with the “home run” of up to 20 times their investment through some type of exit, most likely an acquisition.
Historically, only about one in 10 investments in high-growth startups are home-run deals, although some portfolio companies may return one to two times the dollars invested. Often, angels lose their entire investment in a deal, so they need that one big hit to cover the losing investments.
“You have to kiss a lot of frogs to hit a few princes,” said Rod Whitson, president of Oklahoma City's Bank2 and a SeedStep Angels member.
Whitson has invested in four ventures through the SeedStep Angels, with a fifth investment pending. Most are life science companies, including Selexys Pharmaceuticals, the Oklahoma City company that is developing a promising treatment for sickle cell disease.
Last year, Selexys received venture capital investment of $26 million, with an acquisition by Novartis Pharmaceuticals that could be valued up to $660 million pending successful results from a Phase 2 clinical trial.
That's the home run he is seeking as an angel investor.
Lab gets 300 orders
In the wake of the investment round that included the SeedStep Angels, Moleculera Labs has established a certified laboratory and received 300 orders within the first 60 days to conduct its autism tests.
Now the company is raising a new round of $1.5 million to $2 million that will include angel investors and groups from out of state. Shimasaki points to the SeedStep Angels investment as the trigger for the avalanche of test orders and further investor interest.
For information on joining SeedStep Angels, contact Michael Kindrat-Pratt at 813-2418 or mpratt@i2E.org.
I was excited to see an Oklahoma group come together and be a part of what we are doing. It's always a pleasure to present business-based opportunities to Oklahoma investors, because the goal for us is to grow and build organically in Oklahoma.”