Do You Have the Right Investor List?

11 Dec

Marlo GalvezBy Marlo Galvez, Business Development, LSN

Companies often tell us that they were given a “qualified list” of investors by their investment bank, board, or consultant. And just as often, companies are surprised when LSN staff tell them that from our experience such lists typically have tenuous value, as they’re not truly qualified. Recently, a potential client asked us to a review a list of investors that was provided by his investment bank.  One must remember that data comes in two states, out-of-date and very-out-of-date. When an entity boasts about their investor stable or network the most important question is “How up to date is that data?” The next question should be “How many of the investors in your network have current, actionable mandates?” Those questions will quickly separate the real players that truly understand their investor base from those that simply talk a good game.  To prove out the aforementioned point we actually asked for a list and then vetted the list against the LSN investor database and then showed the difference in share numbers that you get when using a real investor database versus a list that isn’t curated.  Please read on to get the LSN assessment.

LSN Assessment

The bank had provided the company with a list of 62 investors for its Series A round. Using the LSN Investor Platform, LSN identified 14 investors (23%) who were not a fit based on the company’s asset type and the stage of development. (See Figure 1.) An additional 15 investors (24%) had informed the LSN research team directly that they were not presently allocating. Of the 62 investors the bank provided, we found that only 33 were truly qualified fits for the company’s investment profile.

Cross-Matches

LSN then used the LSN Investor Platform to search for active investors who match the company’s investment profile:

  • Main Sector: Diagnostics
  • Indications: Infectious Diseases
  • Phase of Development: Clinical
  • Investor Geographical Exposure: U.S.

LSN identified 339 investors who are a fit for this opportunity, including all 33 of the qualified targets who appeared on the investment bank’s list. (See Figure 1.) Our list provided the company with an additional 306 qualified targets. This is almost a tenfold increase in the number of potential investors for the company to canvass.

The LSN Takeaway

What the company learned from this experience is that while many investment banks and consultants claim to offer exclusive, qualified lists of investor contacts to life science companies raising capital, in truth, these lists can be unqualified and not representative of the universe of possible investors. It could be a potentially fatal mistake for an entrepreneur to waste his or her time with such a list. Performing global outreach to active, qualified investors grants you the greatest possible chance to find and connect with an investor that understands your technology and fits your capital needs.  At the end of the day finding qualified investors is a numbers game and the fundraising executive should not rely on lists that are not current and have no staff curating the investor profiles.

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