By Scott Meacham
Copyright © 2019, The Oklahoman
I always tell every new company that I talk to: You have to crawl before you walk and walk before you run. The same thing applies to the capital path.
The great thing for startups in this state is that The Oklahoma Innovation Model, which is unique in the U.S., has funding available for each of those steps. With the Oklahoma Center for the Advancement of Science & Technology’s (OCAST) as the hub of the Innovation Model, here’s how that continuum of capital works to provide a pipeline to the market.
For Oklahoma innovators starting in the research and development (R&D) world (which is where many ideas are born) OCAST’s Applied Research and Oklahoma Health Research programs provide early stage R&D awards to stimulate unproven, high-risk concepts and innovation.
Then at the far end of the capital continuum, the Oklahoma Seed Capital Fund and the Accelerate Oklahoma Fund provide concept, seed and startup equity funds for startups with demonstrated high-growth potential. These deals also attract additional investment from angels and venture capitalists.
And then there is the in-between — the gap in the capital pipeline between where state R&D funding ends and traditional commercialization funding begins.
For some companies and researchers who have promising results from R&D but do not yet have the prototype or market validation required to attract traditional equity investment need capital to bridge this gap, it is very difficult (nearly impossible) to find institutional investors or even angels willing to invest until there’s a prototype and some degree of market validation.
The Technology Business Finance Program (TBFP) has become the way Oklahoma fills that gap.
“Researchers these days have to cobble together funding from many different sources,” Dan Luton, Director in the OCAST Programs Division, told me. “OCAST is that first funding. To attract other funds, an innovator needs to be able to show the results of that OCAST-funded R&D work. A relatively small TBFP investment to fund a prototype can keep projects moving toward commercialization.”
TBFP has made 142 awards ($12.22 million) to 126 companies — companies like Selexys Pharmaceuticals, which was acquired by Novartis for up to $665 million, and Novazyme Pharmaceuticals, the source for a ground-breaking FDA-approved treatment for Pompe Disease. TBFP provided Selexys’ initial proof-of-concept funding and was the first investor in Novazyme.
For the last seven years, TBFP has been self-sustaining. Potential investments are put through a rigorous due diligence process and state review. The success of TBFP companies makes the program successful and that success has provided the return on that funding that has allowed TBFP to be self-sustaining for a number of years, but that money is finally running out.
The timing is right to reinvest in TBFP. It works! It has been a proven catalyst for jobs and revenue for more than a decade.
All really big technologies start with baby steps. If it weren’t for TBFP, Oklahoma would be missing a critical step in the capitalization path. Our pipeline of innovation would be disrupted, and we could miss a Selexys or a Novazyme.
There’s no reason for us to stumble and fall when we’ve proven that we can sprint.
Scott Meacham is president and CEO of i2E Inc., a nonprofit corporation that mentors many of the state’s technology-based startup companies. i2E receives state appropriations from the Oklahoma Center for the Advancement of Science and Technology. Contact Meacham at i2E_Comments@i2E.org .