Why BioSig Shuns Venture Capital Investment
The chief executive of a Twin Cities-based med-tech start-up with strong ties to the Mayo Clinic says that when it comes to attracting dollars to fund an expanded research program, BioSig Technologies’ philosophy is, “no venture capitalists, please” – at least it has been so far.
Gregory Cash, whose experience spans from early-career stints at Medtronic and Boston Scientific to C-suite roles for a half-dozen med-tech start-ups, announced last week that BioSig (OTCQB: BSGM) had raised $4.5 million through a private placement, shortly after it also revealed it had tripled funding for a Mayo Clinic research program on its PURE EP electrophysiology technology platform.
But rather than tapping VCs at this point, Cash said, the recent funding instead came from company insiders, such as chairman, former CEO and biggest stockholder Kenneth Londoner—a move to retain value for its current base of 650 shareholders as well as control for management.
“Our approach to capitalizing the company is a little bit different than that of your average start-up,” he told TCB. “Most of the start-ups in the Twin Cities use venture capital – we’ve never taken any. The founder, Ken Londoner, actually bankrolled the company himself for the first two years.”
Londoner, whose 4.4 million shares comprised 24.7 percent of BioSig’s outstanding common shares as of Dec. 31, is a Los Angeles investment fund manager and a med-tech start-up consultant.
“Ken and the board participated pretty significantly in this particular transaction,” Cash said. “The reason we didn’t want to have VC money, and nothing against VCs, but we wanted management and the board keep a controlling interest. Leading into this deal, we still held around 50 percent of the company, and we want to retain maximum value for existing shareholders.
That approach, he added, also fits how BioSig sees its future in the electrophysiology (EP) market, which is growing quickly. A steady stream of positive clinical data is convincing doctors to perform more catheter ablation procedures to treat stubborn cases of complex heart arrhythmias – indeed, ablation is becoming the fastest growing procedure type in the EP market, increasing at an average annual rate of 16 percent from 2012 to 2016.
BioSig’s PURE EP tech platform is aimed at improving the efficiency and safety of catheter ablation. The company says its technology, which can be added onto existing EP equipment, uses proprietary hardware, software and algorithms to make sure electronic cardiac data collected during electrophysiology studies are not distorted by electromagnetic interference from nearby lab equipment.
Cash says he and other company insiders feel BioSig can make a significant dent in the market as an independent company, and taking that route is easier when venture capitalists are not among your investors.
“With VCs involved, there may be pressure to sell the company before management and the original shareholders are really ready to do so, and when doing so may not be in the best interest of those shareholders,” he said. “Rather, we’re fully prepared to build the company out.
“My particular experience was with Medtronic’s cardiac rhythm management unit, which is closely related to the electrophysiology we’re doing with BioSig, and also with Boston Scientific’s interventional cardiology-type technology. My strength is taking complex cardiac technologies through the development cycle, introducing them to the marketplace and building a business for them.”
Cash said the recently announced private placement is part of a “Regulation D” shelf registration for up to $7 million filed last year. The company earlier raised $1.87 million through that same filing. The seven-year-old, pre-revenue firm has spent $1.79 million on research activities since 2014 according to its SEC filings. It is aiming for 510(k) marketing clearance for PURE EP by the first half of 2017, followed by marketing and commercialization of the system.
The new proceeds will help fund an expanded research relationship with Dr. Samuel Asirvatham of the Mayo Clinic. The company announced in March it had tripled its funding for a research program with Asirvatham after a set of initial pre-clinical studies of the PURE EP platform carried out last year proved encouraging.
Asirvatham is recognized as one of the country’s top practitioners of catheter ablation therapy. In addition to his roles as a professor in Mayo’s departments of internal medicine and pediatrics, he is the program director of its Clinical Cardiac Electrophysiology Fellowship (electrophysiology is the study of the electric activity of the heart) and director of strategic collaboration for its Center for Innovation.
The India-born doctor has also gained a certain level of visibility as a medical consultant for ABC News on the subject of heart health and arrhythmia.