Archive | February, 2014

Getting Non-fits Off the Plate

20 Feb

By Dennis Ford, CEO, LSN

Dennis 10*10After the launch of an outbound fundraising campaign, sooner or later a number of dialogues begin to take for with various investors. Meetings take place and relationships form. This is one of the most exciting parts of the fundraising process, and everything seems to be off to a great start.  Unfortunately, this is also where many life science funding executives lead themselves astray.

Let’s face it; life science fundraising executives are beholden to a board, and they often feel pressure to put something on their forecast.  Because they are anxious to turn a target into a prospect, they often begin to see things that aren’t there, try to force a fit, or use every skill they have to push along a relationship that isn’t going anywhere.  It’s an easy trap to fall into, and can lead to a lot of unnecessary churn, eventually slowing down the fundraising process. You need to be equally focused on getting prospects on the plate and getting them off the plate. So how do you avoid being caught in this situation? Two easy rules can help you significantly.

Be direct: This is often a very hard thing for a fundraising executive to do, but it is a fundamental requirement in getting non-fits off the plate. Many entrepreneurs are so excited at the prospect of someone being interested in them that they are afraid to ask a question that could stop the dialogue. However, the alternative is wasting time on a non-fit. Always check in to see if the investor is actually interested in making an allocation, and ask what would prevent them from doing so. This will get every question answered faster and will get non-fits out of the conversation faster. This saves everyone time.

Listen to your gut.  Opportunities can change direction, be postponed, stumble and fall off a cliff, and flat-out die.  They are very tricky creatures. They prey upon your optimistic nature. They can get you in a fix. The importance of listening to your gut cannot be overstated. When in doubt, your gut will tell you what to do.

It’s imperative to concentrate on the good prospects and move on from investors who aren’t, pronto! It is also the reason to set everyone’s expectations at the outset of the process.  Let those in your company know that a potential investor is ready for the forecast list only when you’ve made it halfway through the allocation process with them.  A forecast list is composed of investors you have qualified who have also qualified your firm, and who may give you money. Stay focused, direct, and honest (with yourself). These are the key elements to efficiently navigating your way to an allocation.

The Long Tail of Life Science Investment

20 Feb

By Lucy Parkinson, Research Manager, LSN

lucy 10*10Every day at LSN, our research team is confronted with a vast amount of information about investment activity in the life science sector; this comes in the form of investor interviews, analysis of headline news, as well as conversations with partners and clients. LSN spends a lot of time in dialogue with the marketplace, and parsing this overwhelming amount of data is what we do for a living.

News stories often focus on the big names in the sector on both sides of the table – revolutionary disruptive technologies and the early-stage investors who were backing them in their seed rounds.  But these are the superstars of the industry; they’re not representative of the tens of thousands of biotech and medtech startups out there, or of the thousands of active investors in the sector. We’ve touched on the principle of parsing technology before, and how important it is to understand where you fit in terms of disruptive, breakthrough and iterative technology. However, rarely do companies follow through and select the right investors that fit their technologies.

When you’re looking for investors to support your emerging life science company, you need to turn over every stone.  It’s possible to start your fundraising campaign by working your own network, exploring local options such as your region’s government programs or angel groups, and sending proposals to big-name VCs – but where do you turn once those options have been exhausted? This strategy tends to waste time, and results in unproductive meetings that don’t move forward. The key is identifying fits and creating a global target list that is targeted with an institutional style outbound campaign. This should be done from the onset, to maximize campaign efficiency and win an allocation as quickly as possible.

There are a lot of investors out there who don’t have top-flight, headline-making funds.  They might even be deliberately flying under the radar, or maybe they’re across the world from you.  That doesn’t mean they aren’t actively looking for opportunities in your field, in your location.  Indeed, it’s in this long tail of potential investors – including investors that weren’t formerly known for backing startups, such as family offices and big pharma – where the equally long tail of biotech startups will find the investors who are a perfect fit for what they’re offering.  What we’ve found at LSN Research is that the only way to know for sure if an investor is currently actively seeking new life science opportunities is to make a phone call or write an email, and ask them.

Researching Your Investor Prospects

20 Feb

By Phubes Asavasatitporn, Research Analyst, LSN

PhubesAt LSN, we talk a lot about having an “up-to-date roadmap” when it comes to navigating the changing life science investment landscape. This means not only understanding who the new entities in the space are, but also how their investment strategies have changed, what type of technology each is interested in, how their investment timelines have been reconfigured in the churn, and so on. One topic that is less frequently taken into account, however, is the idea of actually mapping out an individual investment firm before a big meeting.

Fundraising executives will handle the process of mapping out a company in different ways based on a variety of variables – not the least of which is personality type. Some like to approach the problem much like a case study, spending weeks doing research on the prospect (and their peers’) management team, portfolio companies, investment interests and past deals. Others may prefer to simply go in with a general idea of a firm’s investment category, and then gather the rest of the relevant information first hand. Either tactic has its advantages, and more than likely, your actual efforts to plan for an initial meeting with an investor will be some combination of the two.

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While the investigative angle helps you to align your perception with prospective investors as prepared and informed, and may lend itself to stronger long-term relationships, it does have its drawbacks. For one, a fundraising executive’s primary goal should always be towards creating as many qualified investor relationships as possible. For this reason, spending too much time researching targets – and therefore not enough time making calls or knocking on doors – is taking away from the main task at hand. Incremental to this is the fact that too much research can lead the focus of a meeting towards verifying data and away from actually talking with the prospect. The key is striking an effective balance.

None of this is to say that data shouldn’t be verified, because it must. On the other hand, one of the worst mistakes an executive engaged in the fundraising process can make is to assume that their initial research on an investor entity was 100% correct. Information – especially regarding corporate structure and hierarchy – is constantly in flux. Indeed, it is hard to gauge how much time you should allocate to researching your prospects, but some general rules are to not mistake “less” for “none,” and try to find a happy balance between “too much” and “not enough.”

Whatever approaches you do take to investor meetings, keep in mind that the most important piece of any meeting is to lay the groundwork for a good relationship. Too many entrepreneurs make the mistake of believing that technology is not only the most important part of a deal, but the only piece that really matters. On the contrary, it is real conversations that lead to real relationships, and real relationships that lead to allocations. Do – but don’t overdo – your due diligence on your prospective investors, and approach each situation with a confident and friendly demeanor, and with enough attempts, the correct fit will eventually come along.

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