Chemical reaction

Chemical reaction

Katya Tsaioun, 44
Watertown, Mass.
Lesson: Help investors see that taking a chance on you is not that big a risk after all
 

Chemical reaction

Katya Tsaioun found her own investors to start her drug-testing company.
 

Katya Tsaioun saw her perfect business perfectly clearly, but to the investors she approached, it might as well have been a mirage. Banks pointed out that as a scientist, she had never run a business. Venture capitalists assured her that the drug-testing company she wanted to start would never grow fast enough. "There was a lot of skepticism," she recalls.

But Tsaioun saw an opportunity in pre-clinical testing on new drugs for
big pharmaceutical companies. It was work she had spent a decade doing,
including at her most recent job, where the entire R&D team had
been laid off after a drug flopped. In what she considered a stroke of
luck, at the same time she found used equipment for sale – for
$200,000. With that she could open shop.

Brainstorming with
her husband Doug Bates, Tsaioun tried to figure out how to sell her
concept. After all, she had no prototype to show investors, no
sketches. The novel strategy that Bates and Tsaioun came up with to
bankroll her venture was this: Have funders – mainly relatives and her
husband’s friends – buy the equipment and then sell it back to her over
the next five years. On top of principal payments, she offered them 15%
interest and assured them that if her company went kaput, they could
recoup more than half of their investment by reselling the equipment.
"The downside was not bad for them," she says. Not that they’ve had
reason to think about reselling the equipment. With revenue hovering
around $1 million, Tsaioun’s company, Apredica, is expected to turn a
profit this year.

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