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Making Its Way

Greg Doyle

Earlier in his career, Leading BioSciences Inc. CEO Greg Doyle started and sold four businesses, raising more than $60 million in seed and Series A and B funds for his startups.

He went about that the usual way: reaching out to interested venture capitalists.

In 2009, he joined Leading BioSciences as a member of the board of directors. After serving four years as chief financial officer and two years as chief operations officer,he was tapped this summer to be CEO.

Since then, Doyle has helped the Solana Beach-based biotech raise $23 million — all in private capital.

The company’s lead drug candidate, LB1148, halts multi-organ failure caused by hemorrhagic, septic and cardiogenic shock; multiple Phase 2 clinical trials are ongoing.

To fund Leading BioSciences’ work so far, “we’ve taken a somewhat nontraditional route,” Doyle said.

Instead of making deals with venture capitalists, the startup has raised financing solely from private investors.

“This is pretty unusual,” said Avalon Ventures partner Jay Litcher, an experienced entrepreneur and investor in pharmaceutical and biotechnology companies.

“It’s somewhat common to raise a seed round from friends and family and other non-VC sources,” Litcher said, but raising more than $20 million without venture capital funds isn’t.

The Strategies

Doyle said his guiding principle has been to minimize dilution — that is, to raise capital while forfeiting as little equity as possible.

Getting stockholders involved was the key.

“Everybody’s got to be on board because you have to know going into this that this makes funding more challenging,” he said. “You have to be willing to bring more chefs into the kitchen.”

The company employed three strategies:

1) Identify activist stockholders. “You have to be able to identify and nurture your stockholder leaders. We have 200 stockholders, but there are clearly 12 to 18 who are not passive investors.”

2) Form a Business Advisory Board. “They’ll come from very eclectic backgrounds, but the board needs to include the activists I mentioned. This is distinct from a scientific advisory board and the board of directors. In our case, some were doctors, some came from oil and gas, some had M&A experience.”

3) Set up stockholder-led syndicates. “These are single-purpose funds with a GP/LP structure (general partner/limited partner). The GPs, the stockholders on the Business Advisory Board, receive a portion of the carry of that fund for going out and raising money.”

Leading BioSciences has a trio of such groups that have pulled in $14 million from dozens of investors — but added only three line items to the company’s capitalization table.

While “you can’t do this forever,” Doyle said, “this worked for us from seed through Series A and Series B.”

Sticking with private investors has allowed the company to justify a bigger pre-money valuation, he said. 

The company is now raising a $25 million Series C round.

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