Paul Garofolo is CEO of Locus Biosciences, an RTP-based entrepreneurial company transforming the way that drugs are developed to treat and cure the world’s most deadly pathogens. In July 2017, Locus Biosciences announced that the company secured a $5 million convertible note, an investment led by Chinese tech giant Tencent with participation from the North Carolina Biotechnology Center. As a first-time entrepreneur, Paul started seeking investment for the startup in December 2015. Here is his story and fundraising lessons learned.

Leaving Big Pharma

After over 25 years working for pharmaceutical and biotech companies, Paul Garofolo was looking for a new opportunity to grow in his career. While he was in an executive role at Patheon, Paul knew that it was unlikely that he would be promoted to president of a division without a PhD. In early 2013, he had the opportunity to participate in Harvard Business School’s Advanced Management Program, a two-month intensive MBA program with over 170 executives from around the world. In Paul’s words, “That experience made me realize that I was only ever going to get the opportunity to run a company if I started one myself.”

"I was only ever going to get the opportunity to run a company if I started one myself.”

Upon returning to RTP from Cambridge, Paul began working on a merger opportunity for Patheon but also laid the groundwork for a shift into entrepreneurship. He reached out to his network including a VP at Hitachi Data Systems who told Paul about CED’s Venture Mentoring Service (VMS). After having lunch with CED Director of Entrepreneurship Jay Bigelow, Paul decided to become a VMS mentor. Around the same time, he connected with the Kenan Institute which then introduced him to North Carolina State University’s High Tech Entrepreneurship program (TEC). Paul signed up as an Entrepreneur in Residence for TEC which is how he met Dr. Rodolphe Barrangou. Rodolphe is touted by many as the “Father of CRISPR” – a discovery that would be the foundation of Locus Biosciences.

Founding Locus

In spring 2015, after a year as an external consultant for the $2.6 billion Patheon merger, Paul had his final meetings at Patheon and was reaching the end of his Entrepreneur in Residence with the TEC class. Along with NCSU’s Office of Technology Transfer, Paul and Rodolphe knew they were going to start a company. Paul decided to fund it with his own money, enough to get incorporated, file provisional patents, hire legal teams, and ultimately get the company off the ground. Locus Biosciences was founded in May 2015.

By December 2015, it was time to start raising money as they needed to move the company off NCSU’s campus to accommodate a new lab and manufacturing. Paul knew from the start that it wouldn’t be easy finding the money they need in North Carolina, compared to bigger life science hubs like Boston. So, he decided to go outside of RTP. He had lots of business development connections at big pharma, so he leveraged his own network, along with help from CED’s Connections to Capital program, for introductions to venture capital firms.

  • Fundraising Lesson #1: Bring Data.

In his first round of VC discussions, Paul was told by multiple investors that he had a great idea, great IP, great founders, but they needed data that the CRISPR Cas3 technology worked in animal tests. He couldn’t raise VC money without the data. But the company needed more than Paul’s initial seed money to get the testing done. In January of 2016, Paul asked the board of Locus Biosciences for help and in 60 days he had raised $1.5 million from his own network along with the board members and their networks. That money would finance Locus operations through 2016, getting the animal data that would then drive the next round of funding.

  • Fundraising Lesson #2: Never Open a Round in the Summer.

In July of 2016, Paul opened the Series A round. Initial conversations during the first few weeks seemed promising, then August came. “And the entire world inside the VC community goes on vacation in August.” So those conversations stalled.

  • Fundraising Lesson #3: Don’t Expect VC Money Right Away.

While summer timing didn’t help, Paul also felt that he opened the round too early as the animal data wasn’t in yet. Paul experienced that venture capital firms rarely invest in you right away. He had to provide company updates and show staying power. As Paul puts it, he “took a great swing, learned a lot, met tons of people who were really happy with where the company was”. But, ultimately, he needed a new strategy.

  • Fundraising Lesson #4: Find Partners to Support You.

The animal data broke in November 2016, and Paul decided to open a $5 million convertible note in December. At that time, they decided to lean on the company’s strategic partnerships for support including the North Carolina Biotechnology Center (NC Biotech). Paul was introduced to NC Biotech through CED as he was consulting with CED on the Life Science Conference in 2015. NC Biotech became an initial supporter of Locus Biosciences, providing loans and additional capital early on which was “hugely valuable”. With participation in the convertible note, NC Biotech remained side by side with Locus and has provided over $800,000 of funding to date to the company. Paul also notes that he found strong supporters and trusted advisors at Rho, Smith Anderson, and of course NCSU where it all began.

  • Fundraising Lesson #5: PR Matters.

When Locus Biosciences first launched, the company was forced to be in stealth mode from a PR standpoint because of its affiliation with CRISPR technology. In Paul’s words, “IP was more important than press.” In hindsight, Paul would have gotten help sharing the company story earlier. But in late 2016, the decision was made to hire media relations firm French West Vaughan (FWV). In February 2017, FWV helped Locus Biosciences get covered by Gizmodo. Someone on staff at Tencent read the article, and that is how Tencent found Paul.

Raising a Moonshot

According to a recent Bloomberg article, “Tencent’s ‘Chief Exploration Officer’ David Wallerstein is tasked with finding moonshots: big ideas with indeterminate short-term returns that could in theory usher in monumental changes.” Paul’s response to that statement? Locus Biosciences is a moonshot. Tencent isn’t scared of RTP (own a significant minority stake in Cary-based Epic Games). And according to Paul, Tencent was “as tough as diligence for any VC in the bio space.” But he couldn’t be happier that they are leading the charge with this convertible note. He can already see that it is opening more doors, which will be very beneficial in plans to close the second half of their Series A round later this year.

As Paul experienced, it’s harder to raise money in the Triangle versus in the leading bio cluster of Boston. But he doesn’t believe you have to be in Boston. “RTP is one of the world’s most powerful bio clusters as all the major CROs and CMOs are here. It’s a real advantage for entrepreneurs in this area provided you tap into our ability to execute.”

“There is power in the cluster. We can change the world if we work together.”

“Execution throughout the life sciences industry is clustered in RTP as most of the major players are headquartered inside NC. Our theory of keeping the company here: if we can raise the right kind of money, we can harness that execution power that is centered here … and you’ll never be able to catch us.”

“There is power in the cluster. We can change the world if we work together.”