Non-dilutive funding: Altis case study

Michael Biron, CEO : Altis Biosystems, Inc. 

Non-dilutive funding can be a great way for a company to offset, or in some cases eliminate, the dilutive funding required to develop a new technology and build a company.

There are a variety sources of non-dilutive funding, both federal and private. The most common federal sources are Small Business Innovation and Research (SBIR) grants and Small Business Technology Transfer (STTR) grants. The major difference between them is that the STTR requires the small business to partner or collaborate with a U.S. non-profit research institution, while this is optional with the SBIR. Both are for research to commercialize a specific idea; they are great for taking a concept and developing it into a commercial application that can generate revenue.

A Phase 1 SBIR award is typically between $150,000-$250,000 and a Phase 2 SBIR is typically greater than $1M. Some SBIRs can be worth tens of millions of dollars. Private sector grants can be used for commercial needs, such as patents, marketing, business development, etc., since the federal grants are primarily for research funding only.

The combination of federal and private grants may not eliminate the need for dilutive funding, but the grants can certainly reduce the need for it and allow a company to receive a much more favorable valuation, since investors will be funding a prototype or product with a company that has a facility and employees, instead of an idea.

Altis Biosystems, Inc. is a biotechnology company that has developed a patent-pending stem cell platform which recreates the human intestinal epithelium, in a high-throughput format, for compound screening and microbiome research for pharmaceutical and biotechnology companies. This is important because right now the pharma industry uses cancer cells and animal models before human testing, neither of which are physiologically relevant to normal human biology.

Altis provides a variety of contract research services for customers and also sells the platform as a kit. Services include Inflammation, Barrier Function, Toxicology, and Drug Disposition. Our goal is to reduce the time and cost of drug development with a platform that more accurately reflects native human biology and reduce the need for animal testing.

Altis has had success receiving both federal and private grants. As a recipient of multiple phase 1 and phase 2 SBIRs, non-dilutive funding is integral to Altis’ funding strategy. These grants have been used to fund the development of a new platform, modifications to the current platform, and offset the cost of employees, facilities, and more. Without these grants, it is unlikely that Altis would have been able to make enough progress to generate significant interest from customers, and later, investors.

Altis has also received non-dilutive funding from the OneNC Matching funds grant, NC IDEA, and UNC KickStart. Funding from these grants was critical for certain aspects of research that SBIRs did not fund and commercial use for patents, marketing, and business development.

Altis’ grant strategy has allowed the company to grow its facility and headcount, as well as work with more than half of the Top-20 pharmaceutical companies.

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