By Dennis Ford, Founder & CEO, LSN
Five years ago, the universally accepted investment path was to write a proposal for grants, hit up a list of friends and family, and canvass the local regional angel groups to help get you on your way to commercialization. After the first wave of funding, the second wave was to canvass the venture capital entities or find strategic partners, each coming with their own unique set of challenges and outcomes.
The good news is the investor landscape has morphed and the goal of enlightened scientist entrepreneur should be to find the investors that are a fit for his or her technologies sector and stage of development. This entails putting aside some of the old dictums regarding fundraising and separating the facts from fiction as it applies to fundraising today. Let’s dispel some of the out-of-date notions regarding fundraising and commercializing technology. Below are some of the old myths that circle in and out of the conversations around funding updated for how the reality has changed. A lot of these items below setback scientists before they even have a chance to get into the game.
The old myths
The funding choices are limited to SBIR grants, friends & family, angels, VCs and strategics.
- Update: There are 10 categories of investors to go after.
You must limit yourself to regional players.
- Update:It’s a global marketplace and once you get past the regional angels and VCs, its global.
The average fundraising process takes 6-9 months.
- Update:After interviewing more than 300 firms, LSN has uncovered that it generally takes 9-18 months from start to finish.
It is not necessary to understand how each category of investor works, just go after them all.
- Update:Each investor category has its own personality, strategy, and motivations. Knowing the nuances and subtleties of each is imperative.
The science/technology is the only thing that matters to healthcare investors. You can convince or finesse an experienced investor with your science.
- Update: Investors buy you, your team, and your technology. It is imperative to showcase you and your team in your marketing materials as well as your technology.
Scientist entrepreneurs are smart people; therefore you should scale based on your technical knowhow and prowess (founder blindness).
- Update:Basic marketing and sales skill-sets are needed.
A scientist’s empirical training should augment and compliment the overall effort when moving into the commercial arena.
- Update:Some capability translates but you need to augment your knowledge with experienced professionals to build a well-rounded team.
Science is the hard part and it is easy to learn the business side.
- Update:Both science and business are complex disciplines that need to be learned.
You need to be referred to an investor in order to get a meeting.
- Update:Investors care about fit for their investment mandates. Referrals help, however being a fit for what the investor is looking for is crucial and enough to get meeting.
Scientists are the rock stars and don’t need the business executive on the team.
- Update:Having a business person with the technology mavens creates a well rounded team.
The major revelation to understand is that when you step out of the laboratory, you have entered a world that does not necessarily play by the rules of the scientific method or basic and applied research. You are entering a fuzzy world where learning to create dialogue and foster relationships are as important as having replicable data. You leave the analytic domain and head into the world of the” buyer”— potential investors and partners — and the “seller”—you. Like it or not when you are raising capital you have to start by marketing your product, your team, and your company. When you are sitting across the table from a potential investor you are selling yourself. Welcome to fundraising 101!