Archive | February, 2014

Formulating the Introductory Email to Potential Investors

6 Feb

By Michael Quigley, Research Manager, LSN

mike-2Having personally scheduled and held several hundred interviews with Life Science investors over the past year, I have developed and refined a formula for getting “in the door” with an introductory email. As anyone who has embarked on a fundraising campaign knows, initiating the dialogue is often the hardest part of the process. Few introductory emails ever get opened, and even fewer earn a reply at all. However, there are a few concepts and tactics that can increase your efficacy substantially when it comes to initiating a dialogue and locking in that first meeting. This article will share some insights from my personal experience that may be helpful in your email outreach.

The first thing that you need to understand when drafting an introductory email is that the entire purpose of the email is just that, an introduction. You will not close a deal with one email and this should not be your target. The ability to concisely introduce your technology in a professional and compelling way is what you should be aiming for. Drowning the investor with blocks of text and attachments may as well be a wasted effort. Investors are busy, and they don’t have the time to read through stacks of data. From the subject line to the signature, the email needs to be short, sweet, and to the point. A good rule of thumb is that if your email requires that the investor start scrolling to read all of it, then it may already be too long.

The subject line is crucial. The subject should be clear, and include information about your company that is relevant to the investor. For example, “Meeting Request: Novel Cancer Therapy Preparing to Enter Phase I Trials” is a great subject line for an investor with a declared interest in early stage cancer therapeutic development. Now assuming you are reaching out to investors in a targeted manner based on fit, they will naturally be attracted to this subject. Moreover, it shows you aren’t spamming and that you understand their interests. All of these factors increase your odds of getting opens and hopefully a positive reply. With larger investment firms, make sure you are targeting members of the team with backgrounds in areas similar to that of your technology. A little research can go a long way in terms of increasing email efficacy.

The body of the email should be a boiled down paragraph or two encompassing your team, a high level explanation of your technology and recent milestones, and your interest in having an introductory conversation. Keeping a few simple concepts in mind secure your greatest change of earning a positive response:

  • Your email should show you are knowledgeable, trustworthy and thereby credible. This can be done through a brief description (one or two sentences) of your personal background as well as a reference to the investor’s interests. Also, by keeping your email concise and targeted, you increase your credibility by demonstrating to the investor professionalism and respect for their time.
  • Your email should make further communication a logical choice for the investor. This should be achieved by demonstrating that your investment is a fit for the investor’s mandate. Research your targets well and explain why you are the ideal fit for what they are seeking.
  • Personal touches enhance your chances of getting a response. You need to demonstrate that you have put as much if not more effort into this email than the investor is taking to read it. Some ways to do this are mentioning something that recently happened with the investor that is relatable to your proposal. For example, “I noticed your firm has recently raised a new life science fund this spring” or “I recently read an interview you gave on the potential of personalized medicine.” This shows that you have done some research into the firm, and this is not a blanket email you are sending to every investor you can find. By showing the investor you took some care in your outreach and are already in context will greatly increase your odds of a response. On the opposite end – avoid starting emails with “Dear sir” or “to whom it may concern”- this screams mass-email and can be a big turn-off.
  • Calls to action get the ball rolling. You should offer the investor a few clearly laid out suggestions as to how to move forward. These should include the option to send the investor more information via email if they desire as well as some times to set up a potential meeting or call. By laying out options for how to move forward, you are bringing the horse closer to the water than by just saying something arbitrary like “look forward to hearing from you.”

By utilizing these recommendations you will greatly increase your odds of getting positive responses from investors. So develop your target list based on fit, identify the right contacts, and send out some introductory emails!

Interpreting Unsuccessful Investor Conversations

6 Feb

By Jack Fuller, Business Development, LSN

Jack 2

Let’s face it, much of the time a fundraising executive spends courting potential investors leads to rejections. If the opposite were true, our writers and researchers here at LSN would have much less to talk about, and CEOs of biotech and medtechs would be able to spend a good deal more time on bringing a product to market. However, most savvy entrepreneurs understand that fundraising is a numbers game, and eventually their perseverance will pay off in the form of an allocation. However, few entrepreneurs spend enough time thinking about the investors that have said “no.” However, they are often not all saying the same thing, so paying attention to these rejections can be a helpful guide in improving your fundraising efforts going forward.

Let’s look at a typical scenario and break down what could actually be behind a negative response:

The Scenario: Let’s assume the investor appeared to be a good fit based on your research, and showed enough interest to listen to an initial pitch either in person or over the phone. Things seemed to go quite well, but after the initial conversation, the investor simply replies they have “considered the opportunity but have decided to pass.”

An ambiguous response like this will require you to reach out to the person to pinpoint the exact reason for passing.  Several factors may be at play, so let’s take a look at what may have happened.

Possibility 1: You were speaking with a gatekeeper and were disqualified before being passed on to a decision maker.

Understanding whom you are speaking with in the firm is of utmost importance.  Many times associates and junior deal sourcing individuals have less flexibility in how they evaluate opportunities as compared to senior partners.  These gatekeepers often act as filters and operate within certain boundaries to manage the deal flow going to the senior staff. They will often want to see certain materials such as a well-crafted pitch deck and executive summary that hits certain key points. However, their rejection may not mean you aren’t a fit in the decision maker’s eyes. If you think this may be the case, a polite and concise email directly to the decision maker may be an effective strategy. However, you should be very confident that you are in fact a fit, otherwise you may be pushing the recipient’s patience.

Possibility 2: Strong interest was expressed, however several aspects of the company did not match with the firm’s investment mandate.

Often the reason a dialogue with an investor fails is due to an identified mismatch between the company and the investor’s mandate.  The mandates of investors can range from ultra-specific to highly opportunistic. Many objections can be traced to several high level points: phase of development, indication, technology, management team, and capital structure requirements. While this may be a stumbling point for many discussions, it can also be used to your advantage if understood properly.

Before approaching each investor these mandate components must be identified and properly emphasized.    For example, you identify an investor looking for biotech companies specifically in Pre-clinical and phase 1 of development with a special focus on neurological disorders.  You then find out they are technology agnostic and will evaluate small molecules and biologics equally.  The emphasis in the initial discussions should then be placed on the indication and phase of development rather than the type of technology.

Possibility 3: They were never seeking to invest in the first place

It’s surprisingly common, but the truth is many investors look at deals even when they don’t intend to invest. They could be out of deployable funds, but want an ear to the marketplace or they could just be interested in doing some more research in a sector they are looking to invest in. These can be conversations that go on for a long time, because the investor genuinely wants to learn more. However, they end disappointingly, so don’t be afraid to be straightforward from the getgo – Ask whether or not they are actively seeking investments in your space and how many placements they seek to make over the next few quarters. This will keep expectations accurate and let you know if it’s worth spending your time on.

The reality is that fundraising is a numbers game, and inevitably, there will be a certain percentage of rejections (even with a targeted campaign). However, it can be extremely valuable to take some time to look at all of your investor conversations to see what you can learn. Understanding why you may not have been a fit for one particular investor will give you a leg up with future investors. Moreover, taking the time to examine rejections could potentially reveal some missed opportunities that could be rekindled with the proper approach.

Update on the FDA’s Breakthrough Therapy Designation

6 Feb

By Maximilian Klietmann, VP of Marketing, LSN

Max Smile 2The FDA launched its “Breakthrough Therapy Designation” program just over a year ago, and the initial data is in. Though results are mixed, the BTD could have a significant impact on investor behavior in the near future, as major indications could become as attractive as orphan therapies when it comes to time-to-market. This article will dive into exactly what the BTD is, what the initial program results look like, and what it means to the industry at large.

The BTD, as it is often referred to, is a program intended to accelerate the development and review of drugs for serious or life-threatening conditions. According to the FDA, an asset with at least some preclinical data showing “substantial improvement on at least one clinically significant endpoint over available therapy” qualifies for BTD. A company that has secured BTD is granted all of the FDA fast-track benefits as well as more intensive FDA guidance on an efficient drug development. Basically, this allows a drug with the potential to outperform existing therapies in a significant way to have the same shortened time to market that orphan therapies are able to secure. In short – FDA approval timelines for significantly improved cardiovascular drugs could be fast-tracked just like rare disease drugs.

So how does the data look on the first batch of applications to the program? So far the FDA approved 30% of the 113 applications for the BTD it has received, and about 60% have been denied from the program or voluntarily withdrew. However, the picture is still not clear on what the impact will be on actual drug approvals and whether the program will significantly reduce time to market. So far, the non-orphan BTD beneficiaries of the BTD have been mostly oncology treatments and anti-infectives, but the potential for other therapies to take advantage of the program is huge.

It will be important to keep an eye on this program, because the implications could spell some changes in terms of investor interests. This is especially true for investors in orphan diseases who are motivated by the fast-track to market. However, this is only true if the program can actually deliver what it promises, so watch for the first wave of program graduates. If approval rates are high and development time is short, it could spell big things for investors and entrepreneurs alike.

Source: http://www.fda.gov/regulatoryinformation/legislation/federalfooddrugandcosmeticactfdcact/significantamendmentstothefdcact/fdasia/ucm341027.htm

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