Will $28M in Debt Financing Push Good Start Genetics to Big Finish?

Will $28M in Debt Financing Push Good Start Genetics to Big Finish?

Six years ago, Good Start Genetics was just an idea in the genetics research labs of Harvard. Today, it is a full-fledged company with more than 85 employees, a diagnostic testing system on the market, and now another $28 million in its pocket to continue growing.

Capital Royalty, a Houston, TX-based investment firm that works with biopharmaceutical and medical technology companies, has given Cambridge, MA-based Good Start a $28 million loan that will help the company continue to roll out GoodStart Select, a system that couples can use to get screened for genetic diseases before they decide to have children.

The financing brings the total Good Start has raised to date to $60 million since its inception in 2007. It raised $18 million through a Series A round in 2010 backed by OrbiMed Advisors, Safeguard Scientifics, and SV Life Sciences, and followed that up with a $14 million Series B round from the same group in April 2012, the same month it officially began selling GoodStart Select to fertility clinics in the U.S.

Good Start CEO Don Hardison says that the company hasn’t worked its way through all of its venture cash just yet, but was able to go the debt route this time because the company now has a track record of selling products, expects to be profitable around August or September, and to break even on operating cash flow before the end of 2013—roughly three years after raising its first round. Good Start is on a run rate this year of about $25 million, he says.

“Because we were on a good path to profitability, some of the debt providers came to us and said we’d be interested in this and we can offer very flexible terms for a company such as your own,” Hardison says of choosing a loan over an equity financing package. “We would not have been in a position to do something like this a year ago.”

Good Start will use the cash for three key initiatives: to continue research projects that could ultimately expand the number of diseases it can screen for; to get its foot in the door in other settings such as OB/GYN offices, as well as select international markets (likely through partnerships); and to use its system for other applications, such as pre-natal or newborn screenings.

Part of that process of scaling up the business will be hiring people for its R&D staff, boosting its sales force as it makes its way into New York (Good Start has applied for a license to sell its tests in New York, but hasn’t received clearance as of yet), and adding genetic counselors as its client base increases.

What happens after that—including finding a finish line for Good Start’s investors—isn’t what Hardison is focused on.

“I think companies can … Next Page »

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