Engineering an Acquisition, Grant Funding, and Nanotech Pharma with Maria Flynn
Want to get acquired? Want money without selling equity? This episode covers two overlooked tactics: non-dilutive funding sources and positioning for acquisition.
Today’s guest is Maria Flynn, former CEO of Orbis Biosciences (a nanotech drug delivery company, which was acquired by Adare Pharmaceuticals).
Now, she advises founders and CEOs. Her specialties are winning grant funding and acquisition planning.
Links to Platforms:
Here’s what I learned from the episode:
Maybe you remember Bo, one of my partners in Rolling Fun. Bo and Maria met at Cerner. Then Bo co-founded Orbis Biosciences. After about a year, he hired Maria as the first full time member of the Orbis team.
Orbis had university IP, a microparticle technology that can control release of an active ingredient (drug). One use case example is if you were to get a shot with medicine that would release over the course of a year.
Small Business Innovation Research (SBIR) and Small Business Tech Transfer (STTR) grants are overlooked.
Every year, the US government allocates over $3 billion to universities or small businesses. The aim is to stimulate innovation.
There are 12 government agencies that divvy out grants, and those agencies are subdivided.
Sometimes the grant-giver develops into a client relationship, a huge win-win.
The requirements, reporting and auditing for getting a grant can be onerous, but it makes you a better company.
And, it's not much more work than is required to raise a round from investors.
And a few lessons about Acquisitions:
Companies are bought, not sold.
Acquisitions are more about the buyer's situation and being a solution to their key pain point.
30% of businesses plan to exit through acquisition. 10% actually do.
The sponsor for this week’s episode is Givewell
Many of us open our hearts and make donations during the holiday season. But when you donate, how can you feel confident that your donations are really making a big impact? You could do weeks of research to find charities, figure out what they do, how effective they are, and how the charity might use additional money. Or you could visit GiveWell.org : there, you’ll find free research and recommendations about the charities that can save or improve lives the most per dollar.
GiveWell spends over 30,000 hours each year researching charitable organizations and only directs funding to a few of the HIGHEST-IMPACT, EVIDENCE-BACKED opportunities they’ve found.
Over 100,000 donors have used GiveWell to donate more than ONE BILLION DOLLARS. Rigorous evidence suggests that these donations will save over ONE HUNDRED AND FIFTY THOUSAND lives AND improve the lives of MILLIONS more.
And using GiveWell’s research is free! GiveWell wants as many donors as possible to make informed decisions about high-impact giving. They publish all of their research and recommendations on their site FOR FREE, no signup required. They allocate your tax deductible donation to the charity or fund you choose without taking a cut.
Learn more about Maria Flynn:
Additional episodes if you enjoyed:
Andrew Wilkinson: De-risking Leverage, Investing vs. Operating, and the Best Part About Business
WaitButWhy and G64 Co-founder Andrew Finn on How To Acquire A Free Company
Episode Transcript:
Eric Jorgenson: Hello again and welcome. I’m Eric Jorgenson. I don’t know much, but I have some very smart friends who help me figure things out. And if you listen to this podcast, then no matter who, where, or when you are, you do too. This show explores technology, investing, and entrepreneurship to help you and the rest of humanity create a brighter more abundant future. This podcast is one of a few projects I work on. To read my book, blog, or newsletter or invest alongside us in early stage tech companies, please visit ejorgenson.com. Today, my guest is Maria Flynn. Maria was previously the CEO of Orbis Biosciences, a nanotech drug delivery company which was recently acquired which is a very interesting story. She provides coaching to several early stage startup founders and CEOs through networks like TechStars, Pipeline, and directly herself as a board member. And in this episode, we talk about Maria’s story, how she got involved in Orbis Biosciences very early on through Tech Stars, now how she supports founders specifically in getting grand funding which is non dilutive, so financially favorable for founders and investors, and positioning companies for acquisition. She’s got a wealth of experience here. If you are a founder looking for alternative funding sources or planning for an acquisition now or very long term, Maria took 10 years to plan for acquisition, Maria has plenty of advice for you. And before we get to our conversation, I want to quickly tell you about another podcast.
I am a superfan of the Founders Podcast. It is my most listened to podcast. My friend David Senra runs it. He is absolutely a biography reading machine. He has read hundreds of founder’s biographies from all across history, and this podcast is him talking through his notes, quotes, and key insights from each book. You may have heard previously it was a paid podcast; it is now ad based. You can find Founders for free in full episodes on any podcast listener that you use. So search Founders, find the podcast with the white script on the black background, pick an episode that sounds interesting, and dive in. They are all good, and no matter what you want to learn more about, what kind of company you are building, what era of history you are interested in, there will be something there for you. He has a super power of connecting stories between people like Steve Jobs and Charlie Munger and Estee Lauder and billionaire founders you’ve never heard of. It is absolutely an education unto itself that has changed lives, and I love, love, love learning from it. It is very hard to find the time to read all the biographies that you want to in daily life so getting David’s high quality recaps in one to two hours is the next best thing. Episodes I’d personally recommend: Ed Thorpe, Estee Lauder is truly a great one, and I love everything that he has done about Steve Jobs because he is a Steve Jobs superfan. You can learn a lot by going back through that whole history and getting an overview through all of the books. I highly recommend Founders Podcast. Thank you, David, for sponsoring this podcast.
Another sponsor for today is GiveWell just in time for the year end tax deductible donation this season. When you give to charity, you really want to know how much impact your donation will have. Not all nonprofits are created equal, and most charities, its not that they won’t tell you, it’s just that they can’t tell you quite how your money will be used and what impact it will have. So if you want to have high impact giving with the donations you are making, I recommend you check out GiveWell. They spend 30,000 hours each year researching charitable organizations and only direct funding to a few of the highest impact, evidenced backed, fully audited opportunities they found. They have hundreds of thousands of donors who donate more than a billion dollars through GiveWell and the research they’ve done shows that those donations will save 150,000 lives and impact millions more. GiveWell is free, as you might hope. So GiveWell wants as many donors as possible to use this information, make informed decisions about high impact giving. They publish all their research on the website for free. There is no sign up required. They don’t take a cut. And they allow tax deductible donation to the charity of your choice. If you’ve never donated to GiveWell before, you can have your donation matched up to $100 before the end of the year as long as their matching funds last. And that’s if you attribute this podcast as you refer. So go to givewell.org and pick podcast and enter my podcast. Make sure they know you heard about it from me. Your donation will be matched and, of course, attributed. Thank you so much for supporting the sponsors who help make this show possible. I’m careful, as you know, to only pick sponsors I believe in whose products I enjoy and think you will too. Now with both ears and everything in between, please enjoy this conversation arriving in three, two, one.
Hi, Maria, thanks for coming on the podcast.
Maria Flynn: Thanks for having me.
Eric Jorgenson: This is going to be exciting because I feel like I have known of you and known like the peripheral of your story forever. And I'm excited to sort of like get the firsthand account. So Bo, who we both know and love and who's been on the podcast before for Rolling Fun, and you have worked together for a really long time on Orbis, and I'm very excited to sort of like get your story from you from the beginning. So tell us sort of who you are, where you came from, and how you ended up starting to become the CEO of Orbis.
Maria Flynn: Sure. So Maria Flynn. I started off life as an engineer and then found that I'm more interested in the business side of technology. So I got to know Bo at Cerner. And we would have lunch and share stories. So I would help him with things, and he would help me with things.
Eric Jorgenson: Did you work on the same team or anything or you just kind of-?
Maria Flynn: No, we were both in different leadership programs. And I was coming out of a University of Chicago MBA, and he was going to go into HBS MBA. And so that's where we’d start to share stories of he would tell me how Cerner worked, and I would tell him what an MBA was like. And so we stayed friends. And then he went to Harvard and came back. And I was interested in doing something really entrepreneurial. But Cerner was a very important place to work, and it was a hard place to leave at that time. And so I left not knowing what I was going to do. And Bo’s door was one of the first ones I knocked on. Being at Kauffman Foundation, I know he saw a lot of interesting things.
Eric Jorgenson: Yeah, he's like the intersection you go to when you're like, I'm not sure what to do with my life or my company. I feel like he gets so many of those phone calls.
Maria Flynn: Yes. It's a great person to talk with. So little did I know what that call would lead into. And so it was a few months, I was just exploring, seeing what was around town, what new things were starting. And it was the same time Cory and Bo were bringing the technology out of University of Illinois. So they had already founded the company, Orbis Biosciences. It took them about a year to get the license out and get some angel funding. And then they got me and I was the first full time person.
Eric Jorgenson: You were hired as CEO at that point?
Maria Flynn: No, at that point, I was vice president of business development. So I would go see who could we get to partner with us. So it's very much a partnering story. And that's what I was doing a lot at Cerner. So it was a good fit. And I think that's really important for technology coming out of universities, that you have a full time person that that's what they get up and think about all the time.
Eric Jorgenson: Yeah. What about Orbis made it- Is that an industry thing? Is that a company thing? Like what made partnerships drive this company so much?
Maria Flynn: So it's a licensing business model. So, we had a platform technology that could improve their drugs, and so we’d partner with pharmaceutical and consumer product companies.
Eric Jorgenson: Yeah, so no partners, no customers, really is- Okay. Interesting. How involved were you in the like tech transfer process? That's a little bit of an interesting mystery to me. Do you want to speak to that at all? Or you kind of came after that, so that's not a-
Maria Flynn: So I came after it, but I managed it. And when you start things, things are always going to be easier and take less time than when you start. And so you do really want to have a good relationship with that party because they are the original owners. So if you need to make adjustments to the plan, that they come along with you. And they need you to succeed, otherwise, that's not valuable to them.
Eric Jorgenson: So is they in this case like the professor, the university? Like, what's the- because there's a bunch of counterparties over there, right?
Maria Flynn: Yeah, so that was- so University of Illinois, Urbana Champaign, and Cory was the inventor; it was his PhD work. And he had went on to University of Kansas. So a lot of times when you're doing tech transfer, you're still a part of it. And typically, there's favorable terms because they do want their innovation to be commercialized. So, this was another party. We had a good relationship. And when we won, they won, but just keeping that going.
Eric Jorgenson: They, the university? Okay. So, the university owns a share of the company by nature of the fact that they own the IP, where Cory developed it, even though he had then moved on. And did Cory, does he become like the, I don't know, I'm going to say CTO for lack of a better term? Is he like a part- full time role player at the company?
Maria Flynn: He's chief scientific officer. But he had a good day job at KU, University of Kansas. And Bo had a great job at Kauffman. So that's why having me come in and run with it. Then I could come back to both of them like this is what I found, this is- So that was a great structure to start.
Eric Jorgenson: Yeah. So they were like part time founders. And so when you say you were the first full time team member, you mean inclusive of the founding team really. That's interesting. Is that a tough role?
Maria Flynn: It's an exciting role. Because you know what can it be? It's more tough environment. So it was end of 2008. And that's where grants became really important to us because, so it was a $500,000 angel round, first 250 and then we needed to get four contracts to get the second tranche of 250. So we're very-
Eric Jorgenson: Very contract motivated, focused on those KPIs.
Maria Flynn: And we got those really quickly because we had this urgency. But we knew that money needed to last us as long as possible with the way the economy was.
Eric Jorgenson: Is the nature of those contracts that they cashflow right away? Or are you saying like, oh, this is a licensing agreement that will take a while to implement, and then we get sort of payment on some terms over the long run. So it's like this will pay off eventually, but we still need a bunch of cash to operate in the meantime.
Maria Flynn: So our structure was can we cover our costs in a proof of concept arrangement. So we would start with anything between 50 and 300,000 and anything between three months and a year. So we would take the pharmaceutical company’s product into our lab and apply our technology and see what we can do and if we could hit proof points. And then the licensing agreement comes later. And those are much more lucrative. But you need to have a lot of proof that it's worth it.
Eric Jorgenson: Yeah. Because they go- I mean, they're making huge investments and implementing all this. And I'm sure these are enormous sort of scale processes. I think we skipped over what the technology fundamentally is.
Maria Flynn: So it's a micro particle technology, very uniform, spheres and capsules, so you can control how the active ingredient releases out of it. So a lot of times when you first take a medicine, there's kind of a burst and a release profile that is not as well controlled as we could control because the particle is very precise and all of them are the same.
Eric Jorgenson: Of the sort of the capsule the medicine comes in specifically?
Maria Flynn: Well, no. So it's a powder format that you could then put in a syrup or a tablet or a capsule or a thin film or an injectable.
Eric Jorgenson: So you didn't necessarily- if you've looked at two pills or capsules next to each other, you wouldn't know which is the Orbis one, but you'd be able to see in sort of the pace of the drug hitting the bloodstream which-
Maria Flynn: So I can give you a couple examples. So a lot of times control releases in like a bigger tablet form. And there was a product I would always take, but it was too strong for me. So I would cut it and it says don't cut. And so it was really releasing quickly. So before I got into the space, I understood what I was doing. But it's very difficult to do it in a liquid format. So you get a four hour liquid in a 12 hour tablet where you can use our technology to do a 12 hour liquid, or an injectable in a contraceptive space that’s a very potent drug and you can release it out over a year. So think of going in for annual exam, getting a shot that releases for a year. So those are a couple of our licenses.
Eric Jorgenson: That's awesome. Yeah, I imagine, I mean, people trying to sort of self administer that could be dangerous in a bunch of ways. Like if you're cutting a pill, you're changing your dosage. Yeah, interesting. Okay. And what was the- What was Cory’s like discovery or method? Or how did that- What was the breakthrough that enabled that?
Maria Flynn: So his hypothesis was could you have very uniform micro spheres to really control how it would release. And it was originally for an injectable depo, so long acting pain relief. And then when we started, we realized it can be used for many things, and we had clients in gum and agro chemical and wound healing, a lot of different spaces. And we learned that was too big of an ask for a small team to know all those industries and our technology. But it helped us get those initial contracts that we needed. And we learned a lot. So, we learned stuff in gum that really transformed how we thought about oral drugs. So it was sometimes you make these decisions out of necessity because you need to, but you learn things. And so it's always a fine balance of enough balls in the air that something was going to cross the finish line, but few enough balls in the air that we are going to cross the finish line.
Eric Jorgenson: Yeah, that's a tension I see in a lot of startups is like the need to focus because you have a small team, limited resources, but also shit, we have so many market opportunities, so many applications for this technology. We've got customers maybe coming in from a bunch of different industries, but they all want something slightly different. I think it's a tough thing to manage, to know when to focus down incredibly hard and when to explore new opportunities because there's a local maximum over here or a bigger opportunity in this other market. So it sounds like- I mean, you balance that a little bit with like necessity of contract, exploration of market. But you eventually did focus back down on just the drug market. Were those tough decisions to make?
Maria Flynn: No, I mean, there's always the shiny object syndrome and how to prevent yourself from getting off track. But to me, it's a balance of listening for the right signals of where to go next but kind of staying true to where you're supposed to go and the steadiness of keeping the train going. But a lot of times, it's easy to stand on the outside and think you should know what people should do, but there’s a lot of competing factors, and one of them is cash to keep things going.
Eric Jorgenson: Yes. So let's go back to sort of that early, you had 250 grand seed funding. You had another tranche of a quarter million coming if you got the four contracts. I mean, that's- do you remember how many months of burn that was?
Maria Flynn: So at that time, it was me. But that first check, 250 comes in, you feel like, oh, that's great, but you need to pay Illinois. So because one of the main reasons versus wanting to have these license agreements because can they recoup some of their costs of the patents and their programs.
Eric Jorgenson: So, they want cash right away?
Maria Flynn: Yeah. So it'll be- there will be cash components.
Eric Jorgenson: That's pretty aggressive.
Maria Flynn: And it all depends on what you negotiate. But ours had a significant one, and it had minimums along the way so that there would be something and really to show that we were doing something with it. So if we weren't, you don't want it on the shelf somewhere, it would go back to the university. But yeah, we had cash components, and they had an equity component. And then they had a share of licenses. So there are a couple elements.
Eric Jorgenson: Wow. Interesting. Yeah, that feels like a risky thing. I don't know. Like, I understand they've got immediate cash lay they've got to recoup. But yeah, pulling cash out of a startup that just raised a quarter million dollars feels like a heavy burden.
Maria Flynn: Also legal fees. So the organizational setup. So we had two significant checks go. But then how we structured it was when we signed deals, we would outsource it to the university lab. So we had an arrangement where they wouldn’t retain IP. It was a services agreement. But that's how we could get started very small.
Eric Jorgenson: Yeah. Interesting. So what were the- what was the process of like running down those first four contracts? Did you start super broad?
Maria Flynn: So we would go to conferences, and one of our most important relationships we found at the World's Best Technology Conference in Texas. And so wherever there were technology scouts.
Eric Jorgenson: Is just called the World's Best Technology-?
Maria Flynn: Yeah, World’s Best Technology-
Eric Jorgenson: Is that the world's best technology conference?
Maria Flynn: You wouldn't have felt like it when you're there, like anything big was going to come out of it. But a significant relationship did come out of it. There are these challenges, Nine Sigma, an incentive where companies would put out some kind of technology need, and we'd respond to those. And that was pretty positive. A lot of companies would come through University of Kansas. And so it was a nice magnet of they want to see what's happening there. So we had a- and actually, through our website, people would find us. So we had a few market channels.
Eric Jorgenson: Some good scuttlebutt. Were those first four in different industries?
Maria Flynn: Yes.
Eric Jorgenson: So learning a lot about a broad set of market opportunities. And then you got your second tranche. Where did the grant funding sort of start to enter the picture? I know that's- and you're getting cash from each of these contracts, so you got a few different sources. Was it after that second tranche of seed funding that-?
Maria Flynn: We started working on the process before. But yeah, it was actually- So it takes a while to get a grant. And we had gotten the signal that we were in queue for it to be coming. But it wasn't there yet. So we actually raised a small bridge convertible note, which it ended up we didn't need it, but we thought we're going to run out of that 500 before that kicked in. So we had started the process. And when people come to me, and they need money now, this isn't a great mechanism for now but it's a great mechanism for six to nine months from now.
Eric Jorgenson: Yeah, I've seen a few times the small fundraise to bridge to a slow cash flow that's coming either from a big customer or a grant or something. And it's scary to wire two months of money into a company, but that can go good or bad, sort of either way. I know this is now sort of the focus of your career is consulting on grants, getting grants, and positioning companies for acquisition because these are both things that Orbis went through and you learned a ton about. So I want to sort of learn as much as we can about the grant funding process because who does not want non dilutive equity, non dilutive capital. It's scary and hard and slow. But man, if you get it, like that just feels like the cat's pajamas.
Maria Flynn: Definitely. And actually, I've got investor friends that are bringing their companies to me because they put some in, but if they can get extra, why not?
Eric Jorgenson: Yeah, I mean, the best case scenario is like you're an early equity investor and then there's a bunch of non dilutive funding that comes after and then the company sells or goes public or starts cash flowing. And you didn't have to get diluted by follow on investors who push you down or took better liquidity preferences or anything. So yeah, tell us everything.
Maria Flynn: So, I came in in August of 2008. And it was probably a month later, I was in a room where it was how to fund your startup. It was a couple hour, different speakers, and there was a lunch, and there were maybe 20 companies, 20 entrepreneurs in the room. And it was heavy in angel and VC, mostly venture capital is how the conversation typically goes. And a woman raised her hand and said, “Why aren't we talking about Small Business Innovation Research, SBIR, grants?” And the speaker didn't really know that space and said, “Well, it’s not applicable to all companies. But if you can do it, then go get it,” kind of patted her on the head. And I thought I want to know what she knows. And so I went up to her later. And her name is Donna Johnson with Pinnacle Technologies in Lawrence, Kansas. And she was a great mentor for me. So, she gave me some of her feedback. They were successful in getting grants. And she actually had some insight baseball knowledge because she had sat on the other side giving grants. And so, she gave me some tips and pointed me to some websites. And so that was a super important day, meeting her. Because having somebody that has done it before, some of those tricks. And you don't want to scare people off by saying will you mentor me, because that sounds like a lot of time. But can I follow up with questions? Almost everybody will say sure. So, one day I went over to her office, and she showed me some things. And so, one of the things she told me about was your specific aims, it's a one page kind of summary of what your application is going to be. And she said develop that and then NIH will go around the country and meet with-
Eric Jorgenson: NIH?
Maria Flynn: National Institutes of Health. So there are 12 federal agencies that will fund SBIRs. There's over $3 billion every year that goes to Small Business Innovation Research, SBIRs. And there's two acronyms: there's SBIR and STTR, which is small business tech transfer. And really the difference is how much of that award can go into a university or go outside the small business. So those are the two mechanisms that the government gives to small business. They've been doing this for 40 years. Every few years, there's a concern that it won't be renewed. Will it die? But it's been going on for a long time. And really, it's to stimulate small business innovation in our country. So it's a nice pile of money. But it's kind of a game of how to get to it.
Eric Jorgenson: Do you know even a range of like how many small businesses that goes to or what size sort of the grants are? 3 billion’s a lot, but if that goes to a small handful of companies.
Maria Flynn: So a phase one is typically around 225. And a phase two is typically around a million and a half. And it really varies by agency. Like I think USDA kept it at a million for phase two. So a couple 100 for phase one, and so that's a lot of grants.
Eric Jorgenson: That's a lot of grants. I mean, that's a seed round like instantly and 3 billion is a lot of those.
Maria Flynn: It is a competitive process, and that varies by agency, but typically 20 to 25% are awarded. So think about how many there are and then 4 or 5x that for how many is going for it.
Eric Jorgenson: It's a better odds than individual investor outreach, certainly. I don't know about sort of in aggregate, it depends what your sample size is. But 20, 25% is higher than I would have guessed actually.
Maria Flynn: Well, and think about how much time you spend in the investor trail and how many doors you knock on and the due diligence process. And so, when I see our rates particularly around our states are not as high for SBIRs. So when I drill down of why is that, raising money is an intimidating process that takes a lot of time.
Eric Jorgenson: Yeah. It's a little less sexy to get a grant from the government, but it shouldn't be because it's way better economics.
Maria Flynn: So a good story on that. So let's go back to, if we could, the road show. The National Institutes of Health would go around, and there was one in Omaha. And so we went there, I had my specific aims page. And I was going to go for the phase one 225,000. And she turns around, and she pulls out a page and said, “I think you'd be a great candidate for this labda marketplace grant,” and phase one was 800,000 and phase two was 1.8 million. And so this was our first grant. And I was like, okay, well, let's go for that. So that was our first award was 800,000. And so I went into Kauffman Foundation. And Bo and I were celebrating. And somebody walks by that's a mentor that I have a lot of respect for. And Bo says, “Hey, we just got a $800,000 grant.” And the mentor says, “Well, a grant does not a company make.” So I think there's a bias against grants that you can kind of poopoo that. Whereas if it was like an investor, we wouldn't have that same reaction.
Eric Jorgenson: There's a little more- is the understanding that there's more signal in an investor buying in because it's-?
Maria Flynn: I think that's right. But I think that's misplaced because if you look at the review panels that stand behind these grants, there's a long list of people on there from academia and industry, and they have deep knowledge in this space. Whereas you look at the investors, it's not always that they have deep knowledge in that space. So I think we do see a lot more signal if you can get an investor to write a check. But I don't think that's accurate.
Eric Jorgenson: Yeah, that's a really- that's a very interesting point. Because yeah, I think investors, with definitely some exceptions, tend to be more broad, more generalists, rather than- and I imagine that the review process is a little bit of a black box to most people. They don't know- they don't dig in to see like who is the panel that’s actually approving this and reviewing the technologies. And I'm sure it's a bit of a burdensome process. But it should- I think it's an interesting point that that should carry a lot more credibility than it seems to.
Maria Flynn: Then you think about- and where he's going is you do want to be careful from an academic perspective, you get these grants. And then if it doesn't work, it's okay, you go get another grant. And that doesn't work in a startup. So that's the difference is like you are leveraging this investment that the government's making to get you to the next stage just like you would any other investor. And it can't be a rationale of like, if it doesn't work, I'll go get another grant. No, it has to work.
Eric Jorgenson: So you get- So yeah, talk about sort of that journey. Like do you get- If you get a phase one grant, does that mean you cannot go get another phase one grant? Does that mean you either proceed to two or fail? You can- do go back to VCs after that? It's a great option. But I guess what makes it so that you can't sort of try to continue to live on after that?
Maria Flynn: Well, and so you've got a nice window in the beginning.
Eric Jorgenson: Especially 800 grand gets a long way.
Maria Flynn: And you are new and it's innovation. And that's what I work with my entrepreneurs is you want a grant program. What are all the doors you can walk through, and map that out, and walk through all those doors. Don't just walk through one door, and if it gets stuck, then go through another door. Because like the Department of Defense has many interests. A lot of them overlap with other agencies. So oftentimes, particularly if you have a platform technology, like there's a lot of things you can do with it, but looking at what you want to develop and chunking it into stages that are 225, million and a half, whatever. But it's also key that you're chunking them into things that you should be doing and you want to be doing and you don't get sidetracked of like, oh well, this is money. But you're working on something that's not propelling you to where you need to go. So it's a balance of the things you need to do to propel your company and what is interesting to those agencies.
Eric Jorgenson: Yeah, those grants are not revenue. They're just cash. And so, you still need to- you simultaneously build the function in the plan that gets you the capital but be building the company, the customer facing company, and sales channels and partnerships that you need to actually get the company to stand on its own later. And it's nice that you can get sort of a series or potentially, the analogy that is in my head that just sort of popped up is like scholarships. Like people can get multiple overlapping scholarships. Some of them have requirements. Some of them don't. Some of them care that you're overlapping them. Some of them don't. But like at the end of the day, it is better than a student loan economically. And if people can like help you along, they just they want to- that's what the money is there for. The money is there to like help you grow and move you along and build exactly the kind of business that the government knows will create jobs and foster innovation. So talk about I guess some of the process going into it. Like when did you- you said you met Donna Johnson. You attended a conference. You're like sort of seeing where these are- the sources of money. How hard was the process of like learning to apply? Because I think, as you said, it's intimidating. It's a little bit of a black box. It's a weird skill set, a lot of paperwork. So talk about sort of the learning curve around getting up to speed on these.
Maria Flynn: Well, and your first time, with anything, you're learning new, you don't have bio sketches and the things that they- but you do have, you're selling yourself. So a lot of the stuff that you do in the process you should be doing anyway. There's a competitive section and you should know that. So that's the other way of thinking about it. It's not- even if we don't get it, get the award, it's not time wasted because it's stuff you should be doing. And if you think of it in that mindset and don't get too bogged down, but your first time-
Eric Jorgenson: You are not like, oh, it’s more paperwork.
Maria Flynn: It's your first time and you're assembling all those pieces, and you're learning and you open up the application guide, and it's almost 400 pages. And I think that's why people don't- a lot of people who can use this mechanism aren't using it, it's because it becomes a little overwhelming, which is what I'm here to help them through. But the first question to answer is if you're eligible. And so we'll get you that link. And so there are a couple of keys. So it needs to be a small business, which means it's under 500 people. It needs to be owned by US. And sometimes there'll be people I'll meet that are a great candidate for that, but they might not have US citizenship.
Eric Jorgenson: So it needs to be owned by US citizens.
Maria Flynn: It can have some venture capital in it. That's something that came in new in the last 10 years. Before you couldn't. But there are certain percentages.
Eric Jorgenson: Sorry, not to get you off track, it needs to be owned in whole or in part by US citizens?
Maria Flynn: Well, and there's a whole matrix.
Eric Jorgenson: Okay. Yeah, I'm sure there's five pages on that alone.
Maria Flynn: But it's really, is it a small- is it defined as a small business, ownership and control, who owns it, and are they US and size, the 500. And then the other key thing is, your principal investigator, your PI, needs to be 51% in the business. So that's where a lot of like university folks will have a problem because they can't be in two places at once, which is where I came in.
Eric Jorgenson: The principal investigator meeting like the main operator business?
Maria Flynn: Well, the main person running the grant.
Eric Jorgenson: Okay. I had not heard that term before. Principal Investigator, that's a badass term.
Maria Flynn: And I don't have a PhD. I have an engineering background. I can certainly understand technology. But a lot of the times when you look at who the PIs are, they do have a PhD and rich credentials. And so I'm the PI on the first one. And then after that, we have PhDs. So I share that because don't let it stop you because we made it through that on the first one.
Eric Jorgenson: Interesting. So what was the- is there no credential around the technology itself? Or does that sort of live somewhere else in the documents?
Maria Flynn: Oh, yes. So that's deep in there. And you will be competing with a lot of important things and a lot of people who really know the space intimately. So it does have to be significant.
Eric Jorgenson: And what are some of the things that you see often as like the technologies that are coming up? So it is interesting, this is mostly tech driven. There's a split between tech transfer, so stuff coming out of academia, and maybe stuff that's totally independent of academia, although I imagine most of this is academic research that is starting to become commercialized.
Maria Flynn: No, I do work with people who are developing their own innovation. It's more of does that agency or institute or whoever has the pot of money, is what you're building aligned with what they want to see out there? And a lot of times they will put out, these are research areas we want to fund. But then they also have what they call general omnibus, which is bring all your ideas, which is what all of ours were funded under. So, even if you can't find the specific one to go for, they will entertain a lot as long as you fit into their mission, and there's a commercial need, and it's real.
Eric Jorgenson: And you're solving a problem that they have and see in their field. Okay, so you said that 3 billion of that money goes in and the umbrella term is SBIR or STTR. But they're actually, the individual decisions or the allocations are made by one of 12 different agencies I think you said.
Maria Flynn: Yeah, so there are 12 agencies. And then if you look, like the Department of Defense has 12, 14 within it. There's the Department of Health and Human Services. NIH is a big bulk of that. There's also FDA and CDC. So I'll get you this link.
Eric Jorgenson: Just acronyms and acronyms and acronyms and acronyms. Yeah, we'll put a few of the links sort of in the show notes here, or people can look them up, and Maria's website, I'm sure, has a ton of the posts and stuff breaking this down. So does that mean you're submitting to potentially a dozen individual applications? Like does each organization run their own process, even though the pot of money is the same?
Maria Flynn: Right. And you want to find a specific place for that grant to go. And that's one of the tricks you learn. After you submit it, you got to make sure it went to the right place because we had a time when we didn't do that, and it went to a different review committee who wouldn't have gotten what we were doing. So it's kind of a waste of a submission. And you want to talk to the program officer before, program manager before saying this- going back to your one page, this is what we want to do, does this fit? And I do talk with companies that will go there and they'll say no, so it'll save some time.
Eric Jorgenson: Yeah, you don't even have to apply.
Maria Flynn: But if you are just at all in their wheelhouse, they will encourage you because it's a bit like universities where the more applicants you get, the smaller award percentage, the more prestigious it is. So there is some of that. But it all depends program manager to program manager, but they can give you some really good feedback of what are the kinds of things that they're talking about that they're interested in.
Eric Jorgenson: So that's where you plant the seed or foster relationship with the decision makers and sort of try to- What's your sense of how many of these are just like straight thrown over a counter and out of 100, the top 20 get funded? Versus there's like a lobbying sort of like process that's going on and relationships determine this? Like, is it-?
Maria Flynn: I think it's more merit based from my experience of what does the review committee think are the best ones that cycle. But I have heard stories where there's a need they have, and because they know these people, they will call them up and say, hey, we really need this and you're well suited. So it does, it is worthwhile having those relationships, but I don't think it gets you to the top of the list.
Eric Jorgenson: Yeah. And even there's multiple iterations, and it still needs to be, whatever it is still needs to go to market. How often is the relationship of like grant funding and becoming a customer, like how often are those interrelated? I mean, the reason, the motivation for these agencies to be giving you the money is to make this technology available for them to purchase. So how often is that kind of- is that the same conversation? Is that a totally sort of like firewall separated conversation?
Maria Flynn: So for the US government to be a client?
Eric Jorgenson: Yeah, or any of these agencies individually. Or do you think of it the same way?
Maria Flynn: Well, and like the National Institutes of Health, a lot of it is creating research to better our health. And so, they wouldn't be a client per se, but Department of Defense, I can see them becoming a client. And so, the three agencies that we worked with are National Institutes of Health, Department of Defense, and the USDA. And the DOD, it became a contract versus a grant. So we entered our phase one, it was an SBIR, and then it became a contract. So that's when you can see more of the grant shifting into a client relationship.
Eric Jorgenson: Yeah. Do you have a preference as a founder and operator like whether it's revenue or grant?
Maria Flynn: There was a lot more requirements around a grant and a lot more auditing. So at the time, it felt onerous, but it all makes you a better company, so that when you get to selling your company, if you've been audited by the DoD, you can be audited by anybody.
Eric Jorgenson: That's the DoD’s motto – if you can make it through our audit, you'll be fine for everything else that comes after. Interesting. Okay, how much- I mean, if we can play a game of conjecture, how much of the funding came from equity investors and how much came from grant funding, and how might have the world of Orbis turned out differently if that pie chart was different?
Maria Flynn: So we knew we were a good grant story. And once we started it, we just kept going because it's really nice funding. I think it's healthier funding than traditional venture because- healthy in that you close your month, how much did you spend? You ask for that money. Whereas venture, you get this big pot, you got to spend it, it's kind of feast and famine mode.
Eric Jorgenson: So the grants are actually allocated sort of month by month based on your expenses up to a certain amount.
Maria Flynn: You only withdraw it after you've spent it. And there’s another way to do it. To me, that's the easier cleaner way. There a lot of requirements that-
Eric Jorgenson: Just assuming you have the cash, some cash already to float all your expenses.
Maria Flynn: And it's reliable. It's there. So I think it's a pretty healthy way. So we had 9 million through SBIRs.
Eric Jorgenson: Wow. Over what time period?
Maria Flynn: Six years. And so let's talk about what it did for us. Because I always felt the chicken and the egg problem where to really get customers interested or even investors interested, we needed to show these things. And we needed money to show those things. And that's what the SBIR grant filled. And so it helped us scale our technology from lab to a large skid and answered a lot of the questions that people had from a scale perspective. It helped us prove a couple of different applications. So face masking for pediatrics, inner ear therapies. It helped us get our first clinical trial and go to the FDA because there wasn't anything unusual- we were just a different way to make those particles, a better way. We weren't creating an extra FDA burden. But people would have that question mark. And we could go do that.
Eric Jorgenson: You still needed FDA approval?
Maria Flynn: Well, of course, on the products. But we could go to the FDA with our clinical trials and get that feedback. So then any client that came, they would have that as an example.
Eric Jorgenson: 9 million’s a lot. So did you raise any venture in that once you started getting those grants?
Maria Flynn: No. And we tried later, I mean, quite a bit later. And then we had product ideas. And that was pretty challenging because people want to fund things that are new. And once you've been around longer, that's a harder story to tell. They also- we were cashflow positive for a lot of years, which is hard for a startup to do. And that was just in the covering our costs phase. It was not in the license phase that came later. So, we had a much bigger financial story later. But I think people are worried that you're covering the cost that's- so there are a couple of reasons. So I think it was difficult for us to raise funding. But when it got to the end, and we're selling the company, it turned out to be a blessing because we could be much more flexible on how we structured that. So sometimes when you have these difficulties, and you're not crossing the finish line you want to cross, and then later on, you can look back and be like, ah, I'm glad I didn't cross that finish line because this would be much harder.
Eric Jorgenson: Not raising venture gave you the optionality to get acquired for what you wanted, rather than what the other equity holders wanted because you see fewer sort of stakeholders with different outcomes in mind. Is there anything else to sort of tell about the grant piece of the story before we smash cut to the acquisition piece?
Maria Flynn: Yeah, let's see. So like, if you click on this agencies, and you go into the NIH, it says access 1.2 billion in small business funding from NIH’s seed fund. So they view themselves as an investor. They're just seeding a bunch, even though they're not taking equity. And they're not breathing down your neck. You do- it's more of a financial are you spending money the way you should be, but you do have your reports at the end that you submit, but it's not like you got to prepare for board meetings. And then the other thing to know is to look into your state incentives because some states will, they call it phase zero. They will give you money to apply for these. And some states will match. I think about half of the states will match either phase one or phase two. So if you go get one-
Eric Jorgenson: It could double.
Maria Flynn: Not quite double, they might do 50% or a certain percent up to 150,000. But it's a multiplier effect. And so to be aware of that.
Eric Jorgenson: There's a ton of like local even economic development agencies. I had some experience in college working with one in Lansing. There was like the Michigan one and then the Lansing one. And it's like there's some people that were kind of able to layer over and over different things. And the layer zero is interesting, too, because a few times I was thinking man, it's a good thing you had that first half a million because you have to float cash, and it takes time to get these grants and apply for them. And it's expensive. And you're traveling, you're spending time writing, doing more research. So let's talk a little bit about the timeline before we move on. Like, how long does it take to prepare one of these, submit, wait on the answer, get the money? I imagine companies could live and die by that. And I can't imagine it's a fast process.
Maria Flynn: We would give ourselves about three months for one. And your first-
Eric Jorgenson: An application?
Maria Flynn: Because you're doing other things too. And your first one, you want to give yourself a little buffer because you're learning things. There's registrations. There's like four registrations that take a bit of time. I think they can take up to six weeks. And then it all depends on your agency. And so the most active ones are NIH and Department of Defense, and they have- like NIH for SBIR is three a year. So you could think about-
Eric Jorgenson: Three decision points?
Maria Flynn: Like January 5 is the next one, then April 5. And so they'll want to have their review cycle done before their next submission, so they don't get deluged. So you want to, after you submit it, you want to check it went to the right place. And then typically about six weeks, you will get some kind of a signal. The worst thing that can happen, well, the worst that can happen is you can be rejected for something like formatting, and there will be those kinds of stories. And I think people hear those stories and they're like, oh, it's not worth it. But then if it gets reviewed, they have so many to look through, the worst ones they won't score. So, if it's not scored, then that's the worst one. And then you get a score, and you will get a feedback sheet. And so typically, three reviewers, the lower the score, the better you did. And then they will have a pay line of- and that will fluctuate cycle by cycle.
Eric Jorgenson: Kind of a force curve.
Maria Flynn: But nothing is guaranteed until it's done. But once they start working with you on the next step, it's pretty much the funding is coming as long as you follow up with their requests. So once you get that signal, then you can- one story I have is we had two phase one's going, phase one grants, and we were applying for the phase two grants. And we didn't get them, and we were pretty down on it. And then we had somebody leave the company, and we just had a lot going on. And this person would typically have helped us apply for those. So two of us got together, and we're like, okay, let's take the feedback, let's make the changes that we can, but let's just resubmit it. And we got both of them. And they weren't that significantly different than the time before. Because it was just so much going on. Like, we got this many hours to do it. Let's just go do it. And so that just goes to like you never know, it all depends on like who are you up against? Who are your reviewers? Is there somebody in there that likes it enough to stand up for it? And what are their negotiation abilities? Some people just want to push it through because they can, where other people maybe don't have that personality. So I think there's so many factors in there that it's just more of a numbers game. So at the end of the day, we got 79% of the funds we went after. And I think if you look at it, we had talented people in there, but it was really a keep going, last person standing mentality.
Eric Jorgenson: Yeah, keep cash in the bank, keep resubmitting, wait until you find the right- I don't know if you remember this, it may be too detailed of a question, but like how much did the pay line move? How much did your score move? How many of these things are in your control to change? How many times does a funding come down to like a sentence in a deck with one sentence written this way and one sentence written this way, and who happens to read it and it just locks in with their lived experience and how they've been thinking about something. And it's amazing how small changes can affect an outcome. But also maybe they are like we rewrote the whole thing based on feedback they gave us and then we were up against a weaker cohort, and our score moved down 10 points. And like how much do you feel like you can change and how much is just like keep throwing darts?
Maria Flynn: I don't think a lot of it is in your control. I think you do your best as pretty much in anything. You put it out there and just see what happens. Because I think it's more of like who does this resonate with. And what I've seen with other startups is sometimes the investors that have the deep knowledge in that space also have the baggage. So it's really the adjacent investors that will go with you because I talked with an investor and they had a great outcome. They sold their company for a couple billion dollars. And when I looked at how much went into- like, there had to be a great outcome. But then he said, I'd never do that again. And it's just because you've got all this scar tissue of the ups and downs when it still is a good outcome, but you have that stuff that you carry.
Eric Jorgenson: Yeah, I can relate to that. I know too much to have started it again. Interesting. Okay. So talk a little bit about the process that you have that you walk entrepreneurs through. If they reach out to you and they say, hey, we think we're eligible for some of these grants. We'd love some non dilutive funding. We have a technology, we have an early team, and we could really use this money to keep going, how do you start to work with them, over what timeline? Sort of what do they tend to need the most help with?
Maria Flynn: So it's a 12 week program. And we start by kind of mapping out what are all the doors we can walk through and what are all the areas you want to develop your technology and then quickly you got to hone in on what you think is the best way to go first based on what you need to do and what you think the agency would like. And this assumes you've already met all the requirements and your able-
Eric Jorgenson: Somewhat prepared to put together a good application.
Maria Flynn: And you're able to apply. And then, try to spread out the jobs in your team so it's not so onerous on one person. You need one person driving the bus, but other people can carve off little chunks, particularly if you have like a technical person and a more commercial person. So we put together that plan of what would that look like. You want to talk with the program manager early. First you got to develop what your one page is of what you want to do. But that's really a good tool to take around because you want to get letters of support from people like buyers or experts in the industry. And you can make your team shinier by getting these friends that will come along with you either as advisors or potential customers. And then so getting the feedback from the program manager is really the fuel to go do the rest of the work. So there's a lot of-
Eric Jorgenson: If they're encouraging about what they see in you. Okay, cool. Very interesting. How much do people anticipate to invest in that process in hours?
Maria Flynn: Hours, what they had told me and was pretty true, I think, is your first one takes about 100 hours if you are efficient and ticking things off. And that's, sometimes when we get overwhelmed by there's so many things we have to do, I would always tell myself, perfect is the enemy of good. We’ve got four hours to go do this section, whatever it is, at the intersection, I'm handing it to my colleague who's going to review it or take the next step and not letting things just get out of control.
Eric Jorgenson: And I imagine if someone inventory to the process to raise a million dollar seed round, it's probably not too off. And potentially more value- depending on different structure, different feedback, different things. It's interesting to hear that there's so much feedback. And the burden on you to write an excellent document knowing that you can't be in the room when they're talking about your fate I feel like is a whole different game. But I'm sure, yeah, you put your heart and soul on that page and do everything you can to sort of make an amazing case.
Maria Flynn: I think the difference is when you go raise venture, you don't pull up this application guide that has the 400 pages, and oh. It's not so visible how long it's going to be typically.
Eric Jorgenson: You can trick yourself into thinking it's going to be- a few hours at a time, smaller iterations, I suppose. But yeah, that's a very different process. All right, anything else on the on the grant funding?
Maria Flynn: I don't think you can outsource it. So, I think yeah, a lot of times people will look for a grant writer to like, hey, go do this for me.
Eric Jorgenson: Yeah, there’s agencies and stuff.
Maria Flynn: A word on that. We had just started going for- because I had gotten the advice early on, like you can't outsource this. And I didn't truly believe it until we had gotten a $15,000 grant from the state of Kansas to go get help. And people had, these groups had pitched us on the support. And so, I was going to go with one of them. And then I was doing my reference checks. And I found a woman that said, well, yeah, they were okay, but I won't submit another application without using these people. And so then I started to look at those people and doing their reference checks and really high- recommended highly. And so, we worked with them. And it was one of our worst reviews. And it was a positive experience working with them and they were great to work with, but at the end of the day, the result wasn't. So that just goes to show like it's a very difficult to control process. But I do see, because a lot of times these are very technical things you're doing and you can find technical writers, for sure. But you spend more time communicating it to them and then coming back, like invest in Grammarly. Just get in there. And writing skills vary person to person, and so you can get somebody to help you with it. But you can't just outsource it to somebody.
Eric Jorgenson: You don't want someone else driving the bus, which I think is interesting. I think that's why your approach is really smart because it's not- it isn't very much- You're not saying you can't get help. You're saying you can't outsource the driving of the bus. Like the driving has to be internal inside the company. It matters more to you than anybody else. You've got to own it. But having a mentor can help a lot. Having a writer can help a lot. Having letters of support or expert reviews or program managers, like feedback and contribution from a ton of people, yourself possibly, highly recommended by me for helping with this process. And having an expert I think helps a lot because I can't imagine the gut punch of putting 100 hours into something and then being rejected for formatting.
Maria Flynn: Right. Well, that's where I think you have to look at it like whatever comes of this, I'm going to- my company is going to grow. And I'm going to take these sections to whatever the next thing is. Because you're talking about the significance of why this is important and the commercialization impact, and like so you have to look at it as like I'm going get something out of this regardless, hopefully some money too.
Eric Jorgenson: Yeah, amazing. Okay. Is the acquisition stuff- Do you pair those together? You sort of consult with people on getting grant funding and managing that process. You also consult on you call it acquisition coaching, like how to position yourself for acquisition or what that process is like or how to set up for success there. How often are those like overlapping and you do them together with the same companies? Or these are kind of separate offerings that you have just expertise in both?
Maria Flynn: Yeah, they're separate. And it's really I really like working with entrepreneurs. That's my tribe. And I feel like I've got an experience that can help them. And kind of 90 day marches up the mountain of like where do you want to be in 90 days? And how can we get there? And I’m modeling it after my mentor that I had, Terry, Tuesday mornings at 10 o'clock, every week was a great urgency builder to drive forward, because I'd be like, oh, I'm going to talk with Terry, I want to get this done. I want to be able to talk about this. And it wasn't like he was going to hold my feet to the fire. It was a helpful mechanism for me. So that's what I want to be for entrepreneurs of every week, how are we making progress? But when I looked back at what we did well, grant funding was, when you go and look at our numbers, we did that well. And then also, what I really wanted was vision into that sale. And so that experience, we learned a lot. And I see that missing, the education and expertise. And really, it's a lot of business development of how do you prepare for the sale? And so that's an eight week structured, these are the things you should be doing, these are the ducks you need to get in a row, these are the people you should be meeting. And it's really before- you can think there are business brokers and investment bankers, but it's really before that and really getting control of your destiny by getting to know those people that would be potential buyers.
Eric Jorgenson: Yeah, I think that's- a lot of entrepreneurs hope to be acquired or aim to be acquired. But there's very few that you meet that actually have a specific plan. It's kind of like, oh, we're going to get acquired. And then what's the strategy for getting acquired? Like, oh, we don't have a strategy for it, we just hope. Hope is not a strategy. So, how many of those do you think are, in that sort of eight week program, how many are I’m going to say like hard skills or to-dos versus soft? How many of them are like you need this kind of reporting that you're not doing or this or this or this? And how many are you want to tell this story, meet these people, position your company this way?
Maria Flynn: So I think you could put structure, and is this where the engineering mind, the structure seeker, into a lot of those things, just even by putting it into a list. So when you think about at the end what's your target list of companies, because we had an epiphany. We started building that list 10 years before we were acquired, and started to get to know- So, our acquirer we had known for a long time. And which are the companies that we really resonate with and we really fit well, there were many companies that that technology would have fit in. And it was one epiphany. Investment bankers are great people to know because they've got a lot of information that's hard to get. And they know a lot of things. And one advice I got was you haven't even been this conference in, it's called CPHI, this conference in Europe, and it's 40,000 people. And so when you go over there, you're like, oh my gosh, there's all these acquirers too. And we had certainly been global with our customers. But going there was like, oh my gosh, this whole hall, we could fit in this whole hall. And then the last time I went, there was another hall with more on the ingredients side that we started have conversation with, like, we could be in this hall too. So really, like what's the world of possibilities of where you fit, but then also having an understanding of like which are the most likely. And so, when I talk with my entrepreneur friends, we have this debate of like, do you need an investment banker or not? And a page that I had found is like, is your world of possibilities of where you fit, is it five or less? Then you probably don't. Is it 20 or more? You probably do. And if you're in the middle, it's kind of a gray area. But like how many of those people do you already know? And you should be doing that a long time before you start a process. And then really, what is the trigger that will start your process. Because companies are bought, they are not sold. So it's more about the buyer situation and what is the pain point they need? Do they have some money that they need to put somewhere? Do they need to show innovation? Do they need to get a new client base? Like, what is their pain point? And then if you can search for that trigger and then already know the other people you're going to call when that happens. And then there's things like taxes, but you can shift things to charitable trust, but you need to do that 12 months before. And so you can learn things through friends. It takes a lot of work in how you streamline that. And a lot of times, it's the first time we've ever done this. So how do you learn before you're there?
Eric Jorgenson: Yeah, you don't want to find out you painted yourself into a corner of a six figure tax bill, and there's no way out. That's an expensive lesson to learn the hard way one time. So did you know when you started at this company that this is a licensing business model, we have a technology, the only way out is acquisition, so let's plan for it 10 years in advance?
Maria Flynn: Yeah, except we thought it was going to be 3 to 5 years. And it was 12 years.
Eric Jorgenson: You talked a little bit about- you know the targets, you start relationships with them early. What turned out to be the trigger for the acquisition?
Maria Flynn: Because we had actually ran a process before and where we got to know- we had an investment banker and got to know a lot of people. And we did get a letter of interest. But what was more significant about that time period is we got license agreement done because they wanted to negotiate with us and not with the unknown buyer. So it was worth doing but it was another one at the time when it doesn't turn out exactly how you had hoped. You're like, oh, and you pick it up, and you keep going. But then a couple years later, so that-
Eric Jorgenson: What year was that? Sort of the you ran a process but ended up not selling?
Maria Flynn: I think that was ’17. And then late in ’18, we had the target list. And I think a lot of times when there is turnover within companies at the management level, like what are their new directives. And so, in the company, they had brought somebody in to go find new technologies. And he had mentioned us, so we were already on his radar. So that was like the oh, now's the time.
Eric Jorgenson: So the trick- yeah, I really like the line, companies are bought, they're not sold. And it's interesting how quickly things can change on your acquirer, potential acquirer’s side of a strategic initiative, a management turnover, cash infusion. So, just being at the right place at the right time, and just like the grant fundings, staying in the game, increasing your shots on goal, which I guess comes down to your engineer mindset of like you put it on the list, maximize your exposure to good events, and you stay in the game.
Maria Flynn: Yep. Stay alive.
Eric Jorgenson: Stay alive. And then, so once you got that, what was the sort of more step by step piece of that process? So your acquirer got interested, sort of started a conversation with you about this. And then, I mean, did you restart the grant, the more grant process with investment bankers? Did you shop that offer? Did you-?
Maria Flynn: No, we couldn't shop the offer and a lot of times, you can't. So once you're there, you need to decide are you taking it or not which is why preparation is key, because a lot of people will just say go get two more. It's all about your options, obviously, and what you can do if this doesn't go through. And so we did reengage the banker, and it was important, I was a female in a very male dominated space. The acquirer, entire management team was male. So I felt like that helped us and gave us some more experience.
Eric Jorgenson: Yeah, it's hard to go through something that you have never been through before when the other side of the table does it 10 times a year. You do it once in your life. So, yeah, which is, again, why the acquisition sort of coaching and mentorship and some people are lucky to have board members, like Bo, who've been through acquisitions before and sort of can take some of those phone calls and at least be oriented to the process, but not everybody does. And that's a good- where the value of some of that board and investor experience can really come in too. Which is I'm sure what VCs would say when they're pitching against grant funding, like take my money, you need my expertise. And it's nice to know that there's people like you who kind of freelance this expertise who can come in and help companies regardless of what else is going on. How can other founders- what is sort of common advice you give them to position themselves for a sale?
Maria Flynn: Well, you need to know where you fit and how other people need you and what you have that they need. And so really understanding it's just another customer of like what is their pain and how do you solve it? And then it’s all timing.
Eric Jorgenson: So just being able to- having agency to stay alive.
Maria Flynn: Timing is so important, and some deals get done in 90 days, some take 18 months. And one of the things our board would say was time kills all deals. And it was originally going to close March 31 of ’20. And we got the call the week before, with the pandemic environment that it was going to be pushed a month. And so that was just really ringing in my head, time kills all deals, but you think about like the Dot Com bubble burst where prior to March 10, the IPO of your dreams, afterwards, bankruptcy. So like so many of these things, it's a win one day, and it's not the next. So keeping your company, obviously, you build your company to be as good as it can be and stand on its own for as long as it can. But there's also the begin with the end in mind aspect because we only have so many years that we live. So however, we're going to- whoever we're going to hand that torch to, being clear and making sure that torch gets handed in the right timeframe.
Eric Jorgenson: Yeah, one of the things that always seems really tricky about this process is managing the team, keeping people focused, balancing the right level of transparency without bringing them on every twist and turn of the roller coaster that comes with some stuff like this. How did you think about that and find that balance?
Maria Flynn: And I think that really varies the size of your company and how long is the process. And we were unusual that we were very transparent because it was long and we were small. And so, I thought the biggest risk to losing people and not staying focused was a lot of uncertainty of what's happening. But you got to remember, like we did a process and it didn't go through. And then we did another process. So, there's an art to managing things. And that's the roller coaster; whenever you hit a dip, there's still good things. That's why the multiple balls in the air of like if that falls, well, we've got these other good things to go do. And it's just refocusing and getting energy. And sometimes I felt like a cat on my fifteenth life. But it's like, let's go.
Eric Jorgenson: Just keep holding on.
Maria Flynn: And if you're not doing that, then nobody else is going to be doing that.
Eric Jorgenson: Yeah. That's the founder’s job. Hold on harder and show everybody else how. Did you in that process that did not complete in an- did not end in an acquisition, did you bring- you were transparent with the team along that whole process? So you were all in it together.
Maria Flynn: And that's unusual. Most of the time, you have a small team that can handle it and everything else just functions as normal. But I just didn't think that was the right thing for us.
Eric Jorgenson: Yeah. I'm glad that worked out and worked out again the right way after. I'm sure you built a lot of trust in that, though, I'm sure it was a hard time. So you said there's a- How did the licensing sort of inflection point tie into the acquisition? I know you said that the trigger on the acquirer’s side was sort of the need to show innovation and leadership change. Was there anything on your side or like company maturity that made you be like, oh, now's the right time?
Maria Flynn: So we had two licenses come in. So that was definitely a much- Those are value add milestones. But I think we would have ran the first process anyway because it helped us get that first one. So I guess the moral of my story is when things don't go exactly like you want them, other good things can come out of it.
Eric Jorgenson: The first process you had no licensing agreements?
Maria Flynn: Right. It was eminent and we were trying to see if that license would flip into a buyer. And it's a bit of a risky strategy because who wants to sign this big agreement with people, might be other people there. But we were very thoughtful, and we thought that was the right thing to do. And we would do it again.
Eric Jorgenson: And by the time you actually sold, you had the two licenses. And that is, so if I understand the business model correctly here, there's like you spent 10 years sort of slowly like commercializing, expanding this technology, proving it out, getting approvals, running pilots, proof of concepts, more customers, more contracts, all in service of getting these big licensing agreements that are- that's where the cash flow comes in. And for a very long time horizon. How much can you talk about sort of what the- like characteristics of that licensing agreement or one of them maybe in abstract?
Maria Flynn: We were very thoughtful of how we thought about our intellectual property and the extensions that we could do. So it's really the life of what potential patents were. So, you're looking at decades.
Eric Jorgenson: So you have an agreement with somebody that you’re like we know we're going to get X percent of their sales for decades. In selling that company, you're actually selling sort of not just the cash flow of that licensing agreement, but the sort of the third, the fourth, the fifth- and so you're kind of underwriting like the agreements that exist, the other ones that might exist, the other ones that the acquirer can use the technology and saying just like pay me out a lump sum for the company from here, and now they own the IP, they own everything. That's awesome. That's a good- It's interesting. It's very unique. I mean, as tech as this is, it's distinct from most of the like consumer tech deals you hear about where it's like you're acquiring the team very specifically or the product or the user base. Like this is cash flows. And what happens with the team when it gets acquired? Like, are you- did you work for the acquirer at all?
Maria Flynn: I did throughout the rest of the year. And then I had a consulting agreement, and then I kept everybody and the site still is in Lenexa, Kansas, one of their sites.
Eric Jorgenson: This is a question that I feel like you might have a good answer to. What are some facts or stats that everyone in your industry knows that would blow normal people's minds?
Maria Flynn: Well, for the grants, I think certainly the $3 billion amount.
Eric Jorgenson: Yeah, that's a lot of money.
Maria Flynn: On acquisition, I think about a third plan to exit through an acquirer, and 10 to 20% do. So when you ask the question of like are these the same people, really getting the grant is early stages. It’s in your first year or two of life and planning for it, it's a couple years before, so somewhere north of 5 years. But I think there are two really important things that we need. So, if I could go back in time and have somebody walk with me, those are the areas, and that's why I'm doing those as my programs. So Orbis was definitely a strategic acquisition. There were not the traditional multiples. And so that's why it's a harder, longer mountain to climb but a very important one because it was important technology that we wanted to bring in the world. And we knew our place of what role we wanted to have in that and handing the torch to somebody else who had like- we weren't interested in building tons of stainless steel, but we know people- because that's not where we thought our value really was. We were more on the intellectual property building side of things and demonstrating that it can be done.
Eric Jorgenson: Yeah. So you built just enough with the technology of a lab to show what somebody who already had all the infrastructure, the value that they could get out of it, and just had to sort of go through the process of 10 years of de-risking your IP, showing them the value of it and the applications of it. And that's when it sort of flipped.
Maria Flynn: And get it into a home with bigger business development teams, bigger formulation teams, bigger commercialization and quality.
Eric Jorgenson: How far can the technology go? Can I take like 10 years of multivitamins?
Maria Flynn: Oh, oral, it passes through you, so like 24 hours. But injectable, a year or more. So it's all compliance. How do you make it easier for people to stick with a regimen, not have side effects?
Eric Jorgenson: I mean, I imagine there's so many applications that I can imagine that are very, very cool for this.
Maria Flynn: Yeah, I think there's more applications than what we've explored. Because think if it’s a really tight range that you can get that. We’ll see what happens.
Eric Jorgenson: Yeah, I mean, you could imagine- you could test for deficiencies and inject like a very slow sort of different compounds that like rebalance you, that degrade, I don't know, what's the word? Degrade? Decompose? Enter your bloodstream very slowly. It's a little heartbreaking to think about all of the applications that might exist in, as you said, like gum and agriculture and any other technologies that because the IP is owned by one company that happens to be a pharmaceutical company that it might not enter the market. Or did they- What happens to an IP like that? Does it get sort of like fragmented by market? Do they own it just for a specific world of applications? Could we start another company that goes and takes it in a different direction?
Maria Flynn: So they own it exclusively. But they, in the future if they wanted to sublicense out, they could. Typically, though, people don't like to do that because in the drug space, if it's a new drug, there's multi billion invested in that. And if you're on the same process as somebody over there, and they have a problem, that contaminates what you're doing. So you'd rather draw, if it's financially viable, draw a circle around it and own it, then have that possibility of somebody else messing up your path.
Eric Jorgenson: And that's part of the strategic piece too, I suppose. We don't want anybody else messing up the marketability of this drug or our technology or anything like that, because there's definitely some spill over in some of this.
Maria Flynn: But that was our- in the beginning, that was our hypothesis, could we create enough proof of concept for gum that Wrigley would license it or agro chemical, that Monsanto would license it. And so when we had that, learning that it was just too much industry specific knowledge that we would need to have, that we needed to focus. So I’d draw a line between focus and options. If you're too focused, if something bad happens, you don't have anywhere to go. If you have too many options, you're never going to cross the finish line. So like, where is- so we started more on the option because we're testing that hypothesis. And then we learned, and we moved on. And I still think that's better than a lot of thinking, thinking, thinking, thinking. Because the industry taught us what we needed to know.
Eric Jorgenson: Go bang into the walls. Yeah. The explorer, exploit cycle or focus, opportunities. Yeah, that's a really interesting one. I mean, this has been so interesting. I think the- I still hold hope that the technology makes it into the gum industry and that we get everlasting Gobstoppers and permanent flavors of meal gum. Willy Wonka is real, and you invented it. And we can't have it because you were acquired by a pharmaceutical company. But someday, maybe, when the patents expire. I think it's just so interesting to go deep on some of the inflection points of a company, like big funding rounds, big grants and acquisitions. And this has been a fascinating conversation. This is so- like, it's outside my normal internet world. But it's a fascinating technology and story. And I thank you for teaching me and I hope to hear many more stories of founders that you helped through these inflection points in the future.
Maria Flynn: Hey, thank you so much.
Eric Jorgenson: I appreciate you hanging out with us today. Thank you for listening. If you liked this episode, you may also enjoy my earlier episodes with Andrew Wilkinson, the founder of Tiny, and Andrew Finn. They are both kind of similarly tactic driven, detail oriented founders and investors, and just like Maria, will share some things that you might not have heard before that can help you build a great business. Again, please check out Founders Podcast and please check out givewell.org, both sponsors of this episode. For a free way to support the show, please leave a quick review or text the episode to a friend you think would enjoy it.