How my chosen biotech startup was dissolved and why
I “invested” $88,208 in this POS (piece of s***). It could have been worse. I tried to invest $100,000, but it was oversubscribed and I got cut back. Amazingly, there were other idiots. The date on my senior convertible promissory note was June 29, 2007. It took the company four and half years and many millions of dollars to go broke. But broke it went.
In my files I have a very impressive 44-page PowerPoint from the then president and CEO, Harold H. Shlevin. The first slide contained Tikvah Therapeutics’s “Highlights.”
Looking back, I now especially love the lines “Proven, experienced management team” and “A focused strategy emphasizing risk reduction.”
I spoke to Dr. Shlevin this morning. He said the company needed to raise more money during 2008, but funding for biotechs dried up completely during the financial crisis. The company drastically cut expenses. And in the process, the majority shareholder, namely Paramount, fired Dr. Shlevin, who actually didn’t know about the Dissolution Certificate, until I told him this morning.
The obvious lesson here is that startups are dicey, with biotech startups perhaps the diciest (but also among the most rewarding).
I’m writing this now because I had warrants in the company which were expiring today, May 15. And Muriel, my CFO, wondered what we should do with them? (Answer: frame them and hang them in the bathroom.)
The second lesson is that startups coddle and love you until they have your money. Then you’ll never hear from them again — ever. In all those years, Tikvah had never sent me a quarterly report, an annual report or even a copy of the Certificate of Dissolution. I spent several hours yesterday on the phone and the web checking into what happened to Tikvah. The web was useless. I finally got a copy of the Certificate from the salesman, Harris Lydon, who sold me the stock in Tikvah while he worked for Paramount Bio-Capital, the investment banker who created Tikvah, stuffed it with three drugs, found the management to run it and then promoted Tikvah to unsuspecting investors (like me). Paramount was and is still headed by a fellow called Dr. Lindsay Rosenwald. There’s a glowing biography on Lindsay on Wikipedia, which fails to mention his many failures, like Tikvah and some of the others of his I sadly invested in. Many apparently went down in 2008.
I mention Tikvah not because I want your sympathy, but as a lesson in what might happen to you if you invest in startups.
Yes, startups. Even with my Tikvah wipe-out, I still think it’s reasonable to have 10% of your portfolio in startups, with the following caveats:
+ When choosing which to invest in, the key element is the quality of the management, their brilliance and their hunger.
+ You’ll never see the quality of startup which professional VCs see. Hence, you’re already at a disadvantage.
+ Say NO to 99% of startups you see. OK, 98% if you want to be gutsy.
+ If you invest in ten startups, expect nine to go bust. You won’t be disappointed.
+ Make sure your startup has enough money to take it through the economy’s next boom-and-bust cycle. Most startups underestimate their marketing costs. Biotech companies are a money-suck beyond anything you ever imagined. It can take 10-15 years before the FDA approves your compound. Most likely, they won’t. The FDA is increasingly risk adverse — afraid of off-label abuse and disasters that might happen after years of use — e.g. Thalidomide and its affect on pregnant women.
+ Get a written agreement to be sent regular quarterly and annual reports. Get monthly reports if you can.
+ Become an advisor to the company. But check that management listens. Most don’t.
+ Don’t get involved with startups if you’re over 60. You don’t need the agita. And you won’t be around before yo get a dividend or get taken over, or go IPO.
Harris Lydon Reviews
How my chosen biotech startup was dissolved and why
I “invested” $88,208 in this POS (piece of s***). It could have been worse. I tried to invest $100,000, but it was oversubscribed and I got cut back. Amazingly, there were other idiots. The date on my senior convertible promissory note was June 29, 2007. It took the company four and half years and many millions of dollars to go broke. But broke it went.
In my files I have a very impressive 44-page PowerPoint from the then president and CEO, Harold H. Shlevin. The first slide contained Tikvah Therapeutics’s “Highlights.”
Looking back, I now especially love the lines “Proven, experienced management team” and “A focused strategy emphasizing risk reduction.”
I spoke to Dr. Shlevin this morning. He said the company needed to raise more money during 2008, but funding for biotechs dried up completely during the financial crisis. The company drastically cut expenses. And in the process, the majority shareholder, namely Paramount, fired Dr. Shlevin, who actually didn’t know about the Dissolution Certificate, until I told him this morning.
The obvious lesson here is that startups are dicey, with biotech startups perhaps the diciest (but also among the most rewarding).
I’m writing this now because I had warrants in the company which were expiring today, May 15. And Muriel, my CFO, wondered what we should do with them? (Answer: frame them and hang them in the bathroom.)
The second lesson is that startups coddle and love you until they have your money. Then you’ll never hear from them again — ever. In all those years, Tikvah had never sent me a quarterly report, an annual report or even a copy of the Certificate of Dissolution. I spent several hours yesterday on the phone and the web checking into what happened to Tikvah. The web was useless. I finally got a copy of the Certificate from the salesman, Harris Lydon, who sold me the stock in Tikvah while he worked for Paramount Bio-Capital, the investment banker who created Tikvah, stuffed it with three drugs, found the management to run it and then promoted Tikvah to unsuspecting investors (like me). Paramount was and is still headed by a fellow called Dr. Lindsay Rosenwald. There’s a glowing biography on Lindsay on Wikipedia, which fails to mention his many failures, like Tikvah and some of the others of his I sadly invested in. Many apparently went down in 2008.
I mention Tikvah not because I want your sympathy, but as a lesson in what might happen to you if you invest in startups.
Yes, startups. Even with my Tikvah wipe-out, I still think it’s reasonable to have 10% of your portfolio in startups, with the following caveats:
+ When choosing which to invest in, the key element is the quality of the management, their brilliance and their hunger.
+ You’ll never see the quality of startup which professional VCs see. Hence, you’re already at a disadvantage.
+ Say NO to 99% of startups you see. OK, 98% if you want to be gutsy.
+ If you invest in ten startups, expect nine to go bust. You won’t be disappointed.
+ Make sure your startup has enough money to take it through the economy’s next boom-and-bust cycle. Most startups underestimate their marketing costs. Biotech companies are a money-suck beyond anything you ever imagined. It can take 10-15 years before the FDA approves your compound. Most likely, they won’t. The FDA is increasingly risk adverse — afraid of off-label abuse and disasters that might happen after years of use — e.g. Thalidomide and its affect on pregnant women.
+ Get a written agreement to be sent regular quarterly and annual reports. Get monthly reports if you can.
+ Become an advisor to the company. But check that management listens. Most don’t.
+ Don’t get involved with startups if you’re over 60. You don’t need the agita. And you won’t be around before yo get a dividend or get taken over, or go IPO.