Mapping Out the Early Stage Fundraising Dilemma

17 Jul

By Dennis Ford, Founder & CEO, LSN

Dennis bookAfter decades of government, nonprofit, and private funding of translational scientific research, there is a glut of early stage life science companies with great deal of promising data ready to go on to the next stage of preclinical and clinical development. However, many of these life science start-ups lack the capital to take the next steps toward commercialization for three main reasons.

Developing Relationships with New Categories of Life Science Investors Is a Challenge

The migration of VC dollars to later-stage investments has disoriented early stage fundraising executives, even though a new group of investors has surfaced to fill the early stage life science investment void. How to identify and market to these new investors remains a conundrum for fundraising executives. There is no easy solution to match up the thousands of early stage life science companies looking for capital with the thousands of early stage life science investors who have capital to invest.

A Regional Approach to Fundraising Limits the Chance of Success

Fundraising executives typically are using an outdated playbook. Thus, they are focusing on obsolete investor categories and paying little or no attention to the new categories, which in most cases are better fits. Early stage life science firms are typically confined to a strategy of regional fundraising instead of employing a global investor strategy. Raising capital is a game of finding investors who are a fit for your stage and sector, and like all marketing and sales, it’s essentially a numbers game. By limiting the eligible investors to a region or a country, you are limiting your audience and therefore your probability of success. Canvassing the world substantially increases your chances of finding an investor fit for your stage and sector and obtaining financing.

Poor Branding and Messaging Materials Deter Potential Investors

Compounding the problem is that early stage life science executives typically do not take the time to adequately develop their branding and messaging. Investors are inundated with requests for meetings and have little time to peruse and decipher marketing collateral or a website. It is paramount and the ante into the game to concoct a crisp, cogent brand and message that clearly conveys your team’s and technology’s value proposition. Taking the time to get your messaging right means investors can quickly determine if there is a fit for a particular investment mandate when they do get a chance to look at the materials.  If investors are interested, then they will take a deep dive and go through all your material and your website, so you have to cover all your marketing bases.

Life science executives must address this fundraising dilemma if they hope to commercialize their research.

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