Five insights on how to become investor ready
The life sciences and biotech industry has always faced unique challenges in securing long term funding. Businesses in the sector are obliged to factor in extensive periods for clinical trials before being able to take a product to market. This is in addition to the often-protracted research, development and testing stages. Many venture capital firms are deterred by the length of time for which they are required to commit funds and it’s not unknown for projects to fail not because of a lack of scientific expertise but simply because the money dries up.
Yet the opportunities for innovation have arguably never been greater than they are today, with remarkable developments in AI, machine learning, robotics and other game-changing technology making the imaginable possible. While the US life sciences industry seems to enjoy access to generous funding, many early stage European biotech companies continue to struggle. Life-changing innovations are at risk of languishing undeveloped for want of venture capital support.
If your life sciences or biotech company is a startup or scaleup, then you will be well aware of the difficulties smaller enterprises face in trying to compete with the multinationals. Shortage of funds in the early stages can stall even the most promising projects but can be equally damaging later, when money is needed for validation and scale-up.
Venture capital firms tend to focus on key aspects of the operations of any startup or scaleup: business, commercial, regulatory, technological, IP and team constitution. There’s no hierarchy of priority amongst them, so if you’re seeking funding, you should consider them all. With this in mind we’d like to offer you five proven strategies to make your proposition attractive to investors.
Does the science behind the technology address a genuine need?
Venture capital investors need to be convinced by the purpose of a business or a particular project. Is there a significant problem not currently addressed by medical science? If there is, is it one for which a solution would have a wide application, sufficient to yield a worthwhile return on the investment? How sound is its biological hypothesis, its experimental design and its fit of solution to problem? Is the case you’re making too dependent on assumptions? A smart business will do everything possible to pre-empt these questions and the doubts they imply with answers that are, ideally, more extensive than the questions. Preparing your case with the support of market intelligence and comprehensive statistical evidence is essential.
Are you able to meet your regulatory obligations?
When it comes to compliance, there are no grey areas. Reams of documentation exist to regulate the development, testing, sale and use of new pharmaceuticals, treatments and equipment. IP issues and data protection are rigorously scrutinised. You won’t be able to argue this on the balance of probabilities because the issues, though complex, are ultimately black and white. In a sense, this makes it much easier for investors to decide the question – if your compliance program is inadequate, they will walk away. At the same time, it’s also easier for you to clear this hurdle by doing the detailed work required to ensure you meet your legal and regulatory obligations. You either do or you don’t. We can’t pretend it’s a simple task, but at least it has a certainty to it which many other issues do not. Devote the time and resources you need to eliminate this stumbling block.
Can you demonstrate a breadth of benefit?
This is partly related to our first point about whether you are addressing an unmet need. However, it goes further by considering the extent of the benefits your product will deliver. For example, if you are seeking to treat an extremely rare condition, then however well-intentioned your vision, if what you develop is of limited application, then the economics may not make sense to an investor. As in most business ventures, volume is where the profit lies. An investor will be much more prepared to invest in a product that will benefit millions than one which – however life-changing – will only help thousands. They are looking for measurable benefits on a broad scale, so you need to be sure that you can meet their expectations. If this means revising your plans in order to extend the eventual application, then you should consider this seriously.
Can you show a Proof of Concept?
Potential investors won’t take your word for the feasibility of a project. They will require proof of concept to reassure them that the technological risk they are taking is as small as possible. Consider the imponderables in your proposal. How confident are you that you can move successfully from preclinical to clinical studies and ultimately to the end user with appropriate product safety? You can’t offer cast iron guarantees, but the weight of the evidence needs to be conclusive.
Who do you have working on it?
After the idea, perhaps the two most important resources are funding and personnel. Your potential investors will be providing the first, so they will want to know that you have done your job and engaged appropriately skilled professionals to develop the product. However good the idea, the technology and the business plan, if you can’t demonstrate that your team has the hands-on knowledge and experience to steer the project to a successful conclusion, then you will struggle to overcome the doubts of the people with the money. Their investment is not simply in you and your idea, but in the individuals you have chosen to turn that idea into a reality. You need a balance of top-class technical, managerial and entrepreneurial abilities within your specific field.
As a general rule, don’t approach investors until you’re able to give an account of your plans that answers all these possible objections. Having done the preparation, you’ll be in a far stronger position to secure the funding you need.
If you are a life sciences startup and you have questions about improving your sales strategy, sales execution, sales operations or talent strategy, book a call with our experts today.
If you found this insight interesting, we recommend reading 5 Essential Parts to Your Business and How They Work Together