As a start-up in life science looking for funding, you need to sell a story and a vision. However, before you approach any investor, it is important that you prepare in order to maximize your chances of success. That is why I want to give you five things to contemplate before you even start thinking about fundraising.
The first thing to think about is what your product, service or treatment is bringing to the market. When potential investors peruse your proposal, they need to ‘get it’ right away. What’s your hook? Why should we care? Answers to these questions should come across loud and clear on the first slides with the rest of the presentation supporting your key points to make a strong case. Your (clinical) unmet need should be unambiguous about the gap in the market you are trying to illuminate.
Traction refers to your position or involvement within the industry. For instance, if you are already working with a medical research university, have interested customers lined up, and business partners that believe in your vision, you will more easily generate trust among potential investors. Traction shows how you’ve positioned yourself within the industry before your product is even on the market.
In order to create a solid investment appetite, there needs to be enough interest and growth potential in the gap you are trying to fill. Since the development of products and services within Life Science carries significant risk for clinical success and approval, the basics of Markowitz’ Modern Portfolio Theory kick in for the investor; high risks should mean high potential returns. Consider also the growth potential in your market. If your obtainable market has a low or even negative compound annual growth rate, you should contemplate whether the clinical unmet need will be economically attractive by the time you generate revenue.
Having an on-point business plan is great, but even more important are the people that carry out the plan. Your team needs to fit your product – that generates trust amongst investors. Most investors would rather invest in a great team with an imperfect plan than a great plan with an inexperienced team.
Entrepreneurs often envision the ultimate cure or product that can combat all diseases or unmet needs in every vertical. In the early stages of VC funding, it is important that your scope focuses on limited indications to first provide solid clinical data. Investors are more interested in this outcome than having a marvelous strategy plotted out. We see this happen often with companies that focus on a platform technology. Your lead indication should provide an entry point to the succeeding ones.
Give these five issues careful consideration before traversing the valley of death, which is the phase between starting the business and generating the first revenue or return. To attract investors, you need to demonstrate that you’re a good investment, so make sure you have a clear selection of indications. You can always venture out farther in the future, of course, but start with a specific vision.