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Entrepreneur says quality of venture capital as important as quantity

January 2, 2010

Jim Pearson knows a thing or two about raising money from venture capitalists. And he has some advice for BioCrossroads: Teach entrepreneurs the value of money.

Pearson was CEO of locally based medical-device maker Suros Surgical Systems Inc., one of the fastest-growing companies in Indianapolis history. Just six years after starting that company, which makes a system for automated breast biopsies, he sold it for $248 million.

Pearson

Today, Pearson leads another fast-growing medical-device startup, NICO Corp., which raised $10 million in 2009’s third quarter. NICO makes a promising machine for minimally invasive brain surgery.

Neither Suros nor NICO ever received any venture capital from BioCrossroads’ $73 million Indiana Future Fund in 2003 or its $58 million successor, INext, formed last month. Even so, Pearson is a big supporter. He said BioCrossroads’ fund raising has definitely made life easier for every local life sciences entrepreneur who’s looking for funding. So have the increased efforts of just about every major local life sciences firm, from Eli Lilly and Co. to Clarian Health, Pearson said.

“Indiana’s come a long way, and it’s a lot easier now to raise money,” he said. “That doesn’t mean it’s easy.”

Most observers focus on the quantity of venture capital available and raised periodically in Indiana. And while that’s important, Pearson said he’s learned through hard experience that the quality of that money is just as important.

To be successful, he said, life sciences entrepreneurs—many of whom are scientists unfamiliar with high finance—must learn when to accept venture capital and when to turn it down. Otherwise, they can quickly lose control of their companies.

“It’s like that old saying, ‘You name the price and I get to name the terms,’” Pearson said. “Most people say, ‘I need money,’ and they should say, ‘I’m looking for this type of money.’ Early entrepreneurs don’t know the difference.”

 

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