Gideon Eden

For Ruth and Gideon Eden, BioLumix is their second startup. They began their careers as employees. As they found their jobs buffeted by corporate takeovers, they decided to launch their own businesses in industrial biology. The first business succeeded well helping them establish a track record in the venture community.

In this segment, we continue our Financing Innovation series by focusing on how they used angel investments to fund their current startup. Angel investors are individuals who typically contribute less than $1M to a company's capital. Highlights include:

• An important motivation for Gideon and Ruth was maintaining control of their company. Because angel investors put up less capital, they are willing to accept a smaller ownership stake.
• Angels also look for less risky investments than venture capitalists who can spread risk over a larger investment portfolio. As a result, angels are less likely to push a company take business risks that might lead to very high payoffs but also carry a significant chance of failure.
• In Gideon and Ruth's perception, angels value the following items when considering whether to invest: a compelling story, a good track record for the management team, commitment from the management team often signaled by the team investing their own money first.
• BioLumix has signaled to its investors that it expects to sell itself in five years to a larger company.

 We follow up Gideon Eden's elevator pitch for BioLumix with a few clarification questions:

• Competitors vary by segment. In larger segments, like food, pharmaceuticals, and cosmetics, BioLumix is competing with other rapid testing technologies. In nutraceuticals, BioLumix is competing against external labs.
• FDA's testing mandate for nutraceuticals is rather loosely defined. These companies are mandated to test but the precise tests themselves are left to the company to justify.
• A nutraceutical can easily run 100's of tests per day.  These companies have multiple products and each product can require multiple tests.  For instance, a company with 20 products, each requiring 5 tests per day, would consume 100 test vials per day.

This interview with Gideon Eden, CEO of BioLumix, is the first in our New Enterprise Forum series. In this series we are looking at early stage technology companies. At the heart of these companies is innovative intellectual property coupled with a potential business model. The goal of these interviews is to understand how the entrepreneurs got to where they are now and why they think they can succeed.

BioLumix has developed a product to detect bacteria and microorganisms on-site in production facilities. Its target industries include food, pharmaceuticals, and nutraceuticals. BioLumix estimates the total testing market in those segments to be $2.2 B/year. Its initial focus is on the nutraceuticals segment estimated at $250 M/year.

The nutraceutical segment has recently been subjected to new regulatory requirements by the FDA that they test their production processes for contaminants. These firms typically have neither testing labs nor trained microbiologists so must outsource their lab work at great time and expense. The bioLumix product reduces both the cost and time associated with testing. Recently, over the course of two major industry gatherings, the firm garnered 150 qualified leads and 10 definite orders.

BioLumix operates off of a "razorblade" financial model. Their product comes in two parts: an electronic tester and disposable testing vials. The tester costs $15,000 and the vials $2 to $3 apiece. Over time, the financial outlay for the vials far exceeds that for the original tester.

In future segments, we'll explore the details of the business model, get a demo of the tester, and discuss with Gideon and his co-founder Ruth Eden how they founded BioLumix.