Nebraska angel investors make their first pick
BYLINE: MATT OLBERDING, Lincoln Journal Star
DATELINE: Lincoln, NE
Surgical Solutions produces small robots used in laparoscopic surgery
Adam Bock knows the value of angel investors.
As the chief executive officer of Nebraska Surgical Solutions, a start-up company producing small surgical robots used in laparoscopic surgery, Bock needs money to pay for things such as designing and manufacturing prototypes and doing clinical testing.
Venture capitalists, though, tend to shy away from companies still in the development stage, and they aren't usually interested in investing less than $2 million, Bock said.
So for a company like Bock's, needing a few hundred thousand dollars up to more than $1 million, there are very few options.
That creates what Bock refers to as the "cap gap" - the period between getting initial investment and loans from friends and family and growing enough to catch the eye of venture capitalists or institutional investors.
That's where angel investors can become saviors.
Bock says angel investors - wealthy people who invest in small start-ups - and angel networks play a very important role.
"For an early stage technology company like ours, it can be very beneficial," he said.
Bock is speaking from experience. His company is the first one to get financing from the Nebraska Angels, a group formed last spring to provide seed money and early-stage capital for start-up companies.
It's the first organized group of angel investors to reveal itself publicly in Nebraska.
After Nebraska Surgical applied and made it through the group's thorough vetting process, five members of the Nebraska Angels, signed on to help finance the company, said John Brasch, associate vice chancellor for technology development at the University of Nebraska-Lincoln and president of the Nebraska Angels.
Brasch would not identify the five investors because members of the group choose to remain anonymous. One of the reasons for that, he said, is because they don't want people soliciting them individually for money.
Neither Brasch nor Bock would disclose how much the company got from the group, but the Angels' guidelines call for members to invest at least $25,000 per deal, making the minimum investment in Nebraska Surgical $125,000.
But the investment is likely higher, as an overview on the group's Web site says it targets investments in the $150,000-$750,000 range.
Because of the risk involved, Brasch said angel investors are typically looking for high-growth companies that have the potential to produce a large return on investment.
Nebraska Surgical, an Omaha-based collaboration between University of Nebraska Medical Center surgeon Dmitry Oleynikov and Shane Farritor, a mechanical engineering professor at UNL, looks like it has that potential.
In traditional laparoscopic surgery, a surgeon makes a number of small incisions in a patient's abdomen and then works with surgical tools inserted through those incisions.
Nebraska Surgical's robots, however, are inserted into the abdomen and controlled remotely, a process the company says on its Web site could lead to faster surgeries with fewer incisions.
The company also says its robots may eventually expand the range of surgeries - now mostly abdominal surgeries such as gall bladder removals and gastric bypasses- that can be done laparoscopically.
Bock says Nebraska Surgical is in a "very early stage"with its products at least 12-18 months from hitting the market.
Despite its potential, Nebraska Surgical should consider itself lucky to get money from members of the angels.
Bock said his experience with angel networks has shown him that only about 2 to 3 percent of companies at this stage get any financial help.
"The reality is that a good angel network will say no dramatically more than it says yes," he said.
Brasch is hoping his group will say yes a little more often.
So far, he said, the group has gotten 14 applications and has been able to "give a good close look" to half of those.
Though only Nebraska Surgical has thus far piqued investor interest, Brasch said he sees more investment on the horizon.
"Ihave every reason to think that that's going to happen sometime soon with one of the companies that's being considered," he said.
But, as Brasch pointed out, the Nebraska Angels are a lot like the companies they seek to fund:They're in the start-up phase.
And that means it will take some time to get off the ground.
The group, which started with 18 members, had about 30 at the end of the year, Brasch said.
Most of those people, whom Brasch referred to as "blue ribbon" investors, are from Omaha and Lincoln, but he said the group is working to recruit members from other parts of the state.
While the initial interest has been good - "we've got just a huge, great start,"Brasch said - the group knows it needs to add more investors and keep growing.
"It's real important, in my opinion, that Nebraska has this," he said. "But it's also real important that we sustain it."
Reach Matt Olberding at 473-2647 or molberding@journalstar.com.
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