Worcester Business Journal

12 Worcester Business Journal | February 6, 2017 | wbjournal.com F OC U S B A N K I N G & F I N A N C E B ack in 2002, while working in a research and development laboratory for global bio- pharmaceutical company Pfizer, Paul Wengender noticed his employer was contracting out certain drug discovery services. Large pharmaceutical companies seemed to be looking to buy their cus- tom DNA, proteins and cell lines they needed to use as biological tools as part of the drug discovery process from smaller contract research organizations, instead of making them in-house. Wengender realized there was a busi- ness opportunity, and in 2003 founded Worcester contract research firm Blue Sky BioServices. When it came time to look for fund- ing, however, he realized the venture capital community didn't seem interest- ed in Blue Sky because it didn't present enough of the high-risk, high-reward value proposition venture capitalists were usually interested in. Plus, they only needed $1 million, which is not a lot of money for an investor. The company ended up raising just over $1 million from a group of high net worth individuals akin to angel investors. "We didn't have a drug discovery scheme or a strategy of our own, and we didn't have a unique technology platform that was a value add for the market either. We were a straight 'lab down the hall' service company with Innovation before financing With venture capitalists largely ignoring Central Massachusetts, the startup industry hopes new services keeps companies local BY LAURA FINALDI Worcester Business Journal Staff Writer intellectual assets and pharma-grade expertise that could be leveraged to help research-based drug discovery," he said. It's a common refrain for a startup company in Central Massachusetts. While resources in the area exist to house startups and connect them with industry partners who can help them grow both organiza- tionally and financially, Worcester is not a huge venture capital magnet, according to several people in the area who work closely with start- up companies. Local startup groups work to make Worcester a center for innovation, so companies will stay in the area as they grow. The allure of metro Boston Last year, just over $6 billion was invested in 397 venture capital deals in Massachusetts, according to PricewaterhouseCoopers/CB Insights MoneyTree Report. The amount invest- ed represents a 9-percent decrease in funding from 2015, but a 63-percent increase from total funding in 2012. Almost 94 percent of funding went into deals in the Boston metro region, according to the report. Usually when a company is first start- ing out, the founders raise money on their own from a network of friends and family. If they reach a point where they've exhausted those resources, but are able to move on to the next level, then it might be time to enlist the help of an angel inves- tor, or a high net worth individ- ual who's usually interested in helping the company grow in addition to making money, said Joe Vignaly, a member of Westborough angel investor group Boynton Angels and chairman of the Worcester Venture Forum, a network for technology startups and investors. Once the local support network has been exhausted, it's time for a company to find a more serious source of capital. That can mean money from a VC firm, or a bigger company in the same field, like a Johnson & Johnson, can acquire the technology without acquiring the company, said James C. Donnelly, a lawyer at Mirick O'Connell, who is also a member of Boynton Angels. It's good for Worcester when great ideas are imagined here, said Donnelly, but the challenge can be getting them to stay once they reach that funding stage, or when they reach breakout stage – like when they've achieved U.S. Food & Drug Administration approval or another big milestone. Kevin O'Sullivan, president and CEO of MBI Startups at Central Massachusetts incubators like Massachusetts Biomedical Initiatives in Worcester often move out of the region if they can't find funding here. P H O T O / N A T H A N F I S K E

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