Mr. Cashman, You're On

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Now it's time for the formal question session. Mike Levinson, who built a successful computer training and support software business and is now a full-time investor, is first. "Can you just give us a little more background with your last company: Were you a founder? When did you get involved? What were you hoping would happen? What did happen?"

"When I left Pfizer," Cashman replies, "one of the first meetings I had was with Brenda Gavin, who was [then] the president of SR One [a health care VC], and we talked about what opportunities were there. She said, 'Listen, I've got a company, the CEO walked out, it's in a tough situation, but if you really want to cut your teeth, step into that and see what you can do.' And I did." Eventually it was determined that Message's drug platform was so broad, covering everything from Alzheimer's to bacterial infections, that it had to be broken up and sold in pieces.

Weber asks, returning the discussion to Protez, "How entrepreneurial is management?"

"I think two of the four are very entrepreneurial. The two others are getting there. They're out of Big Pharma, so they're learning."

The inquiries range around for a while. Then a key question: What kind of exit will there be for investors?"

"The exits are multiple. I think once we get our lead through Phase II, get it into Phase III, it opens up a lot of avenues for M&A."

"Are there any operational guys on staff?" asks Levinson. The VP of technology has operational experience running labs at SmithKline. Cashman has been taking care of the financial stuff himself, with help from a consultant and a board member.

"How much experience do you have bringing drugs to market?" someone asks. The chief scientific officer did that with several antibiotics while at Glaxo, and another board member has a good background there as well.

After a few more questions, Cashman gets a round of applause and leaves the room. The whole thing has taken about 45 minutes. He thought the presentation had gone well enough, he says later, but he considered it unlikely that Robin Hood would invest. He had been told that the group had little appetite for life science deals. Nevertheless, he was encouraged by the quality of the questions, which indicated that the group at least understood what his company was trying to do.

Now it's time for the members to, as Rob Weber puts it, get out their bows and arrows. With Cashman headed to the airport to fly west for a couple of days of R&R skiing, the group tries to shoot holes in the deal.

Robin Hood has an unusual setup: It asks companies seeking funding to identify the group member whose expertise best matches the company's business. (Members' bios are on the Robin Hood website.) That member does the initial research on the company and, if he or she finds it promising, agrees to introduce the company to the group. Maria Maccecchini, a small, elegant woman originally from Switzerland, who started a biotech firm in the early '90s, is this deal's sponsor.

Weber asks Maccecchini to start. She would personally be willing to invest from $50,000 to $100,000, she says. "I think that they're not hyping their numbers. I really think that these drugs might have a quarter of a billion market apiece."

For the bridge financing he is seeking from Robin Hood, Maccecchini says, Cashman is offering a 20% discount. That's a discount on what participants in the next round, the B round, will pay. So if the B round players pay a dollar a share several months from now, Robin Hood members would pay 80 cents a share investing today. Maccecchini says she has told him that she thinks 20% is not very good. If he really does close on the B round in two months, then 20% is reasonable. But she's skeptical. What if it takes six months, a year? Then, he's said, it's negotiable.

Mike Levinson returns to the issue that concerns him most: Cashman's lack of experience in running a successful start-up.

A member of the group notes that Cashman is looking for half a million, "but he'll take what he can get." There's some laughter.

Someone points out that Cashman did run a sales force at SmithKline and that he ran a division of Pfizer. Maccecchini says that his management of Message "really wasn't that bad. I think he did a wonderful job of salvaging whatever was salvageable, which really wasn't a lot." She notes that Cashman is looking for half a million from Robin Hood, "but he'll take what he can get." There's some laughter.

Now it's time for the members to go on record as to how much, if anything, they'll consider investing. A spreadsheet with all the members' names is projected. There are two blank columns, representing the minimum and maximum each member would commit. It's standard practice here for the members with expertise in the field in question to go first. Maccecchini reiterates her range of $50,000 to $100,000. Two biotech people put in $25,000 as both their minimum and maximum, and another says zero to $25,000. Then all the other names in attendance are called; two members, including George Marks, say they'll invest $25,000; the rest are split between those who will invest nothing and those who will consider zero to $25,000. At the end, the totals show that Cashman is looking at a minimum of $150,000 and a maximum of $375,000.

Marks asks to hear from those who weren't interested. Why not? Rob Weber is one. "I just don't get it," he says. "I get electronics; I get the Internet. I don't understand biotech, and I don't want to invest in something I don't understand." Mike Levinson says he's not comfortable with Cashman's experience level.

Marks determines there is enough interest to proceed to the next step. They'll want to talk with the VC firms Cashman has said are onboard. They'll put together a SWAT team to do further due diligence on Protez. That's it on Protez for today.

Fast forward to May. It looks like Protez will receive $500,000 from Robin Hood, in the form of convertible debt, in a matter of days. As of presstime, the deal documentation process was under way. Members who weren't at the meeting have come in, and Rob Weber and Mike Levinson decided to invest after all, having received, as Weber says, additional "comfort and enthusiasm" from other members. The B round still hasn't been nailed down, but the amount has increased to $13 million after one of the VCs decided to up its investment. If everything stays on track, Protez should get that money the next month. Chris Cashman and his investors are just starting to get to know one another.

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