Pittsburgh’s efforts to grow its regional health-tech and life science startup sector haven’t paid off as much or as quickly as city and business leaders would like, but Jessica Gibson believes there’s still a path forward with more collaboration.
“We all should be able to agree that we’re not where we want to be,” says the CEO and co-founder of Ariel Precision Medicine. “Young companies like Ariel, we’re starting to get some success. We are a cloud-based company, so essentially our system and solution could be based anywhere. I love Pittsburgh — the cost of living, the affordability, the wealth of talented people in the region. There’s no reason it shouldn’t be successful, but the investors and the capital just aren’t there.
“I’m not interested in moving to San Francisco or Boston, but most of the investors are saying if you want to be in this space and be successful, that’s the play.”
On top of that, as a young company with a health-tech solution, it’s been difficult to get plugged into a mammoth organization like UPMC or Highmark. Ariel has had more success working with institutions in other cities.
“I wish that there was a way to do this more with some of our local health care systems,” Gibson says. “I think that there have been a number of initiatives to do that, but I haven’t encountered one that has locked down how to do that really well yet.”
Jessica Gibson is one of the 40 host committee members who is shaping the Smart Business Dealmakers Conference (formerly ASPIRE), presented by Metz Lewis, which will be held March 5, 2020, at the Wyndham Grand Pittsburgh Downtown.
The investing environment
Ariel, which delivers precision medicine solutions for the diagnosis, monitoring and treatment of complex chronic diseases and disorders, recently closed the first part of its seed round. The company also launched a commercial product last year.
Not only do some outside investors want the startup to move, Gibson has discovered angel investors have moved further downstream, and they aren’t as interested in investing in seed rounds.
Ariel’s lead investor, Pittsburgh-based Coal Hill Ventures, actually has a robotics-focused fund, she says. This applies to Ariel because it uses artificial intelligence and machine learning in its enterprise software platform.
Gibson has found many life science investors in Pittsburgh already have money wrapped up in a few companies and cannot deploy capital in that space until those companies exit. But once Ariel hits its milestones and can go out for a Series A, she anticipates raising capital will become a little easier.
“We’ve made a really solid foundation with a number of investors that, once we get over this initial hump, will put us in a much more streamlined process to get larger amounts of capital,” she says. “This seed stage, for almost everybody we’ve talked to, has been very difficult for anybody raising capital. I think there are a lot of things politically and within the economic environment; there’s some instability and some concerns about where things are going to go within the next 24 months, so people might be a little bit more conservative than they would have three years ago.”
Even with these difficulties, Ariel has a lot going for it. A positive response from the physician network has created a sticky factor, and the startup’s tools are utilized in more than 50 institutions across the country.
“We’re clearly creating a product market fit, and that’s helped with meeting some the milestones that we need to raise capital at this stage,” Gibson says. “You have to grow and show revenue, show customer base, show product differentiation and how you’ve derisked the investment as much as possible for investors to even look at you.”
Gibson also has benefited from engaging with the community of entrepreneurs. For example, Pittsburgh Life Sciences Greenhouse’s Hank Safferstein has connected Ariel with potential collaborators and partners and helped the company’s leaders structure business relationships.
Gibson sees the Innovation Institute, LifeX Ventures and other endeavors as steps in the right direction for making meaningful progress in the growth of life science companies and commercializing them on a national and global level.
“We just have to remove some of the roadblocks, and there has to be a more efficient way to vet and highlight the technologies that are coming out within the region,” she says.
Gibson is grateful for how the local community has worked with startups like hers, even as she hopes to see more networking, collaborating and joint ventures or solutions.
“We’re four years old now, so we’re still a small business, but we have 15 employees and about 20 consultants we work with,” she says. “We’re growing, but it is not for the faint of heart. Fortunately, we have a very tenacious and persistent team that’s passionate about what we’re doing.”
She’s also taken one piece of advice to heart. She’s tried to simplify Ariel’s story for investors so that a potential investor can go back and easily communicate it to his or her team.
“They basically have to, on your behalf, be able to communicate the story and the product offering and the value prop to other investors that they work with,” Gibson says. “If it’s too complicated or in the weeds of the technology, you lose the momentum of that conversation.”
Rather than talking about all the different ways Ariel’s technology can be used, Gibson is focusing on standardization and scalability.
“Don’t jump right into the details of this or that product offering,” she says. “Keep it more general and then let the conversation or their interest guide where you home in on.”