By Tom Ballard, Chief Alliance Officer, PYA
Raising investment capital is not an easy task. It requires patience, persistence and, on much rarer occasions, a polite “no” based on a philosophical disconnect. That’s the gist of a several year process that just ended successfully for one Knoxville start-up.
Five years after its founding, Arkis BioSciences has reached a major milestone with the completion of a $3.4 million Series A funding round that not only met its goal, but exceeded the target by about 15 percent.
“The oversubscription validates the confidence of investors in what we are doing in the marketplace,” says Chad Seaver, Arkis Chief Executive Officer.
We have followed the start-up’s evolution since we first met Seaver at a pitch event at Cherokee Mills in March 2013 and wrote our first teknovation.biz article about the start-up later that year.
All of the paperwork related to the Series A was finalized earlier this month, culminating a process that included the producer of neurosurgical tools and implantables backing-out of a deal with a New York venture fund and eventually choosing between two other funds that wanted to lead the round.
This is certainly not the traditional path that many start-ups take – moving away from a deal at the 11th hour due to last minute changes in terms or having two new but competing term sheets to consider at the same time.
“We walked away not knowing what was next, and our seed investors supported us,” Seaver said of the decision regarding the New York fund, adding that “having two term sheets after that allowed us to make the best choices for the company.”
These decisions that the Arkis executive team and Board of Directors have made reflect the importance of finding the right investment relationship to advance the company.
In the end, Arkis chose a proposal from Innova Memphis to serve as lead investor over the competing term sheet from a fund located in Connecticut. The Knoxville-based Angel Capital Group and the Lighthouse Fund have also been a part of the Series A.
“We would have had to relocate to Connecticut,” Seaver said of the competing proposal to Innova’s. “Moving would have separated us from Dr. (James) Killeffer, our Chief Medical Officer, and it would have added to our operating costs.”
The decision is good news for the Knoxville region as well as a growing group of medical device start-ups in East Tennessee.
“We are very grateful to our investors of two seed rounds who enabled us to advance this far,” Seaver says, noting their patience as Arkis found the right fund to lead the Series A round.
He added that Innova’s background and success with medical devices and the professional relationship with Ken Woody, the fund’s President, “really sealed the deal for us.”
Arkis is focused on better treatment for patients with intracranial hypertension issues including hydrocephalus, traumatic brain injury, and strokes. It is currently taking orders for its Arkis Tunneling GuideiwreTM, a device that reduces by one-third the number of incisions needed to implant a ventriculoperitoneal shunt in a patient.
With the Series A funding secured, Seaver says the company will focus on operations, marketing, and further product development for EndexoTM, an anti-fouling additive for shunts inserted into humans that Arkis licensed from Interface Biologics, Inc. The Knoxville company will also relocate from the University of Tennessee Business Incubator into the new privately-developed building at the Cherokee Farm Innovation Campus.
“This is a big deal for us,” Seaver says of the move. “We do a lot with materials and are excited about the opportunity to be able to collaborate with scientists in JIAMS (Joint Institute for Advanced Materials).”
When we asked him if he had learned anything as he pursued investors, Seaver got a big smile on his face and simply said, “You bet . . . so many things.”
His key piece of advice: “Think far and broad about funding . . . it is not easy.” For companies like Arkis, the increased scrutiny in healthcare economics made fund raising particularly challenging.