A Field Guide to an Introductory Investor Meeting

27 Jul

By Michael Quigley, VP of Investor Research, LSN

mike-2For early stage and especially for pre-revenue companies, introductory meetings with investors are one of most critical situations that entrepreneurs face. Saying it is important to prepare is an understatement. With this article I aim to provide guidance on what exactly entrepreneurs should understand about a prospective investor before they begin a meeting, the questions they should be asking in the meeting, and how to use that information to guide the conversation and prioritize leads.

The world of life science and healthcare technology is large and differentiated, and so are the investors that allocate to the sector. There are several defining characteristics of a company in this space that ideally should match with what an investor has interest/experience in. It’s important to research an investor’s focus areas in the life science and healthcare space, and understand their outlook as best as possible prior to a meeting. You can think about these key company characteristics in the following way:

  1. Sector
      • Therapeutics, Medical Devices, Diagnostics, Healthcare IT, R+D Services
  2. Subsector
      • Molecule type/MOA, Type of Device/Diagnostic, Type of/End Users of Software, etc.
  3. Indication Area
      • Oncology, Neurology, Orphan diseases, etc.

Understanding the level of comfort and familiarity that the firm and person(s) you are speaking with have with your technology and market can help you steer the conversation in the most productive way possible. For example, if your startup is an oncology company and the investor has invested in a number of oncology therapeutics, then you should prepare to spend a significant amount of your time highlighting your unique approach and diving deep into the science. With an investor less familiar with the oncology marketplace, you might need to spend more time and slides describing the market and competitive landscape. If the investor is not familiar with your space, you will need to spend more time highlighting the problem you are aiming to solve and relatively less on your solution until they recognize and appreciate the significance of the problem.

Other pieces of information you should be looking to gather, more to qualify the investor as a real potential than to guide the conversation, revolve around their typical investment size and stage in terms of dollar amount, Seed Series A,B etc. as well as the clinical development phase you are in or your level of commercial traction. Investors that invest in later stage technologies will often take meetings with earlier stage companies to build relationships for future rounds or to gather intel on what is coming next and by understanding this you are able to understand their likelihood of participating in your current round.

Another key datapoint to consider when dealing with VC or PE fund investors is the fund vintage or the year the fund was raised. Funds that were closed more recently, say within the past 3 years will have more dry powder available while the older funds may down to their last one or two investments before they need to raise their own capital again. You should also look at their historic investments to try and determine if they tend to lead or co-invest. Anyone who has raised capital will tell you that securing the lead is the hardest part. Many investors, particularly with those less experience in your space, will want to see a lead and a term sheet in place before they will commit to an investment.

By doing this research it shows to the investor that you have done your homework. I can’t stress enough how much that really resonates with them. If you expect them to invest millions of dollars into you and your company then they certainly expect you to take the time to become familiar with them and their organization as well. An investment is the start of a long-term relationship, and any strong relationship should be a two-way street.

Finally, and this is the point I see missed most frequently: It’s important to take the first 5-10 minutes of the meeting to go through proper introductions and try to connect on a human level. Investors are often keen to know why the entrepreneur was motivated to start this business and to understand their personal commitment to the startup’s mission. Before you jump into the slides and go through your pitch, ask questions not just about their fund size or indications of interest but also their background, and how they got to be where they are today. At the end of the day, people invest in people. By making the effort to get to know who is on the other end of the phone or table, you may uncover similarities in your past or common goals to connect over, which helps to build trust and a stronger relationship. Taking the time to build this rapport could lead to them helping you in other ways, even if they don’t invest in your current financing round.

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