Investments Follow Scientific Breakthroughs… but what else?

10 Jul

By Jack Fuller, Business Development, LSN

LSN has written extensively about the repurposing of drugs, virtual pharmaceutical companies, and the benefits of developing products that have a well-defined pharmacological profile. This trend continues with basic research at established companies often gets squeezed out by small, short-term projects, which promise an incremental improvement or a patent extension. Conversely, it is the goal of every emerging biotech and medtech company to develop the next great technological innovation and secure the capital financing to bring the product to commercialization. This sentiment was recently summed up by a panelist on emerging trends in neurological diseases: “the investment follows the scientific breakthrough,” he said. This got me thinking about the ways in which investors qualify potential opportunities for investment; while the quality of science is a major factor, many fundraisers neglect or downplay other factors that can easily make or break a deal.

LSN often engages both investors and capital seekers, and has seen several trends and common mistakes when talking to investors. This is by no means a complete list or a guide to fundraising, but rather some key observations and comments. Each type of investor and each individual presents a different challenge and requires a high level of finesse, tact, and persistence.

The life science investor landscape has fragmented in the last five years, but often times even experienced fund raisers are stuck trying to raise capital the same way they did before 2008. If you are reading this, you might recognize that updating your fundraising strategy and understanding the current investor landscape is one of the most important and certainly the first step in raising capital today. It does not matter how experienced a fundraiser you are, everyone needs to understand the current investment landscape and how it is changing.

If you are fundraising for a company, you are actively engaged in an outbound marketing campaign. Congratulations! Every PhD, MD, MBA, and individual in your company must know the message you are sending to investors. This should be reflected the information you release to the public, as well as in what you tell investors. When was the last time you updated your website? An investor will look at a company’s website and will make an instant, if sometimes unconscious, decision as the legitimacy of the company and management. The message of a company must be clear, concise, and uniform among all public and private forms of communication with an investor.

Investors can go from interested to apathetic over the course of a single sentence. This can take several forms; the most common we have seen is the tendency to stray from the primary asset under discussion, trying to oversell an asset, or anything that would put into question the dedication of the management team. Many times, people will be working on multiple projects, assets, or even companies. Similarly, a product may have several possible applications beyond the focused indication currently in development. Bringing attention to either of these can immediately sour an investor, as they want the undivided attention and focus of all aspects of the management team. Investors need to know the technology is breakthrough, and the team behind the product is utterly and completely dedicated to its success.

The points highlighted above are only a small cross section of the total package required to run a successful fundraising campaign. Most people in the fundraising process are acutely aware that an investment will never happen if the science is not well-presented. Unfortunately, many people neglect some of the basic marketing and presentation aspects that can just as quickly sink a prospective deal. However, these pitfalls are easily avoidable with a little bit of foresight in the form of a legitimate, calculated marketing effort.

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