Article preview from Start-Up - May, 2012
Breast-implant start-up Sientra recently raised a $65 million Series C round at a time when venture capital for medtech is scarce, particularly for mid-stage companies pushing toward important milestones. Using a new kind of “stand-by” financing, it was ready to hit the ground running upon the recent FDA approval of its breast implants.
Article preview from Start-Up - May, 2012
In this era of economic uncertainty, more and more venture capitalists are looking to minimize the risk of investing. This climate of caution is driving early-stage investors to invest in later-stage companies where the travel time to regulatory approval and commercialization is shortened by years. But even investing in late-stage companies with big ticket clinical and regulatory costs comes with risk ( well, in most cases anyway. The investors in Sientra Inc.’s $65 million Series C round managed to all but eliminate the risks associated with investing in a company awaiting approval from the Food and Drug Administration.
Abingworth Management Inc. led the financing, and all of the company’s inside investors returned, including Clarus Ventures and OrbiMed Advisors. As of the recent round, Sientra has raised a total of $151 million since it was founded by CEO Hani Zeini just five years ago.Founded in 2007, the company’s start was based upon the opportunity presented when the FDA lifted its 15-year moratorium on silicone-filled breast implants. The early rounds of capital enabled Sientra to acquire all the assets of the North American business of Silimed, which had a 33-year history of success. Even the earliest funding rounds were substantial: the Sientra Series B round raised $85 million in 2007.
The company needed a sizable Series C to sell the implants, but investors were staring at a wall of uncertainty at the FDA, which hadn’t approved silicone breast implants for six years when it gave the green light to Sientra’s competitors: Johnson & Johnson’s Mentor division and Allergan Inc.’s Inamed are the other two players. To satisfy both sides’ demands, several months ago the company and its investors crafted a new kind of “stand-by” financing. The investors were lined up in advance, the terms were agreed upon, and binding documents were signed, so that immediately upon FDA approval of Sientra’s portfolio of Silimed brand silicone breast implants, the company could call down the money.
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