Next Phase Newsletter

By Michael Quigley, Director of Research, LSN

Last week, we discussed some of the tactics and tips used by the LSN research team to identify potential investors in the life science space. Identification is a multistep process, however. After you have a created list of potential investors from your personal network, the conferences you’ve attended, the databases and websites that report on financing rounds, and LinkedIn, for example, you need to go through the names one by one to determine who is worth contacting given your particular opportunity. There are several criteria that potential investors should meet to make it into your pipeline.

They Should Be an Investor

This may sound obvious, however, it is important to consider. Many companies with names like ABC Ventures or XYZ Capital may seem as though they are investors when in reality they are consultants, service providers, and investment banks—none of which allocate capital. Spending time contacting these companies for an investment is not worthwhile, as they will look to offer you their services, not capital.

They Should Be Actively Deploying Capital

Many investors in the space have elaborate websites and massive portfolios, however, they do not currently have capital to invest. To determine if investors are active, the first data point you should look for is when they closed their most recent fund. The term closed signifies the end of the fundraising period for a fund and the start of the investment period. Funds that have closed recently (within one to two years) are ideal, as they still have significant cash reserves and can hold new investments for a longer period. Generally, any fund that is six years old or older will be making investments only into existing portfolio companies or companies from which they can exit relatively quickly, which makes them less than ideal targets. If fund information is not available, then you should look to previous investments to see how recently they allocated. If they haven’t made a new investment in more than a year, then more than likely they will not be a good fit. It is important to note that not all investors make their investments known, so it may take some digging to uncover previous investments—if they are online at all.

They Should Be a Good Fit for Your Opportunity

Determining if an investor might have interest in your type of technology and its stage of development can take a significant amount of up-front time, but it will save you from wasting hours down the road. Even with referrals, it is important to understand if you fit the mandate of the investor, otherwise the meeting will likely yield nothing. There are a number of factors to consider, and the first place to look is the investor’s website. Some investors clearly spell out their investment parameters, including indications, stages, and regions of interests, as well as current and past portfolio companies. Other investors, often hedge funds and family offices, provide virtually none of this information on their websites. In cases where such information is not readily available on the website, it is best to check various news sources for reported financings rounds in which that investor was involved. You should compare your opportunity to the deals the investor has previously participated in. Look at the size of the round, the country, the type of technology, the stage of development, and the target indication.

These are all factors to consider when screening potential investors. If an investor isn’t a fit with your opportunity, it is not worth your time to reach out. If an investor has invested in your type of technology but at a later stage, it is worth presenting your opportunity and getting on the radar for when you are looking to raise further financing. However, if an investor fits all your criteria and is active, you have found a strong lead for your campaign.

By Nono Hu, Senior Manager, Branding & Messaging, LSN

At the third Redefining Early Stage Investments (RESI) Conference, LSN brought together experts from six major corporate venture funds that are involved in the early stage life science arena. The speakers shared examples of their recent investments and detailed their investment interests. The panelists also answered a variety of questions, including: What is your take on the resurgence of early stage pharmaceutical investment? How should I approach a corporate VC investor? Do corporate venture funds outperform VC firms, large pharmas, and other sources of investment? What is your advice for scientist-entrepreneurs?

Click on the video link below to hear the views of major players in the life science industry

Moderator: Vikas Goyal, Senior Associate, SR One

Panelists:

• Marian Nakada, Vice President, Venture Investments, Johnson & Johnson Development Corporation
• Jason Hafler, Director of Investments, Sanofi-Genzyme BioVentures
• Mette Agger, Managing Partner, Lundbeckfond Ventures
• Stephen R. Padgette,Vice President, R&D Research Strategy, Monsanto
• Tetsuro Iwata, Senior Manager, MP Healthcare Venture Management

By Michael Quigley, Director of Research, LSN

The research team at Life Science Nation is constantly identifying, interviewing, and profiling investors in the life science space. From Boston to Hong Kong, we leave no stone unturned in our efforts to uncover a variety of investors. This article shares some sources and tactics that we use to initially identify life science investors across the globe.

Investment Conferences

A great way to begin a search is by scouring the lists of attendees and speakers for various life science investment conferences. Investors who recently attended these types of events tend to be actively seeking new opportunities and therefore are ideal prospects for your campaign. With life science investment and partnering conferences taking place year-round and worldwide, there are a lot of potential investors to be uncovered.

Historic Financing Rounds

After pulling names from conference lists for the past year or two, look through private life science financing rounds for lead investors and co-investors. This can also yield a significant number of prospects. At LSN, we use our proprietary financing-rounds database for this purpose. However, databases and reporting sites that focus on more general financing rounds can be used for this as well. Such sources also grant you some visibility into the size and types of funding rounds an investor has participated in, helping you to determine if a particular investor may be a good fit for your company.

Company Websites

Other great and often overlooked sources of investor leads are the websites of early stage life science companies. Many companies list their investors on their website or have one or more investors on the company’s board. By reading the biographies, you can see which investment firm an investor is associated with.

LinkedIn

Finally, LinkedIn, when used correctly, can be a great source for uncovering investor leads. By taking advantage of its filtering capabilities, you can search for individuals by industry, location, and keywords. Although you may not be able to find investors for specific technology types or development stages, LinkedIn is a good place to start. It has helped our research team connect with some investors who we wouldn’t have found otherwise.

To do all of these things—and to do them well—is a serious time commitment and is only the tip of the iceberg. When you have your investors identified, you should take steps to validate them to determine who would be a fit not only for a life science company but also for your specific technology and stage. Without proper validation, you will waste countless hours calling and emailing investors who have no real interest in your opportunity.

Next week, we share our insights and tactics for validating potential investors. Stay tuned.

By Lucy Parkinson, Senior Research Manager, LSN

At LSN, we track both life science companies and life science investors located all over the world. We frequently stress that if you’re seeking capital in the life science field, you will have more success if you reach out beyond your own backyard and market your opportunity to global investors. Nowhere is this more apparent than in Asia, where a history of concentrated R&D funding has resulted in the flowering of new biotech start-ups in the region.

The LSN Company Platform tracks thousands of life science companies across Asia. As shown in Exhibit 1, some of these are contract research organizations, suppliers, and other outsourcing partners, but many are companies developing innovative biotechnology or medical technology products.

Exhibit 1

As in the rest of the world, government investment in R&D has resulted in a great diversity of new discoveries. A deeper dive into the data reveals the breadth of technologies that these innovators are pursuing. As shown in Exhibit 2, many therapeutic start-ups in Asia are developing novel biologics.

Exhibit 2

Exhibit 3 shows the medtech sphere, where diagnostic devices, imaging, and hospital hardware predominate.

Exhibit 3

So which investors are interested in investing in Asia-based companies? As shown in Exhibit 4, the LSN Investor Platform has hundreds of investors who are looking at opportunities in Asia. Some of these investors have a specific Asia strategy; others are truly global investors who would consider a good opportunity no matter where a company is based.

Exhibit 4

While institutional private equity funds predominate, investors of every kind show an interest in life science opportunities in Asia, in keeping with what LSN has learned from working with start-ups in the US and Europe. Whether seeking to increase their ROI or to move science forward, investors are willing to look far afield for the right place to allocate, and start-ups are discovering that it’s best not to limit their horizons when seeking capital.

By Dennis Ford, Founder & CEO, LSN

At LSN’s third Redefining Early Stage Investments (RESI) Conference, leaders from five family offices around the world gathered under the same roof at Fenway Park, answering questions such as: Why do family offices invest directly? How do they assess early stage opportunities? How do you find family offices? How do you build a quality relationship with a family office? Do family offices do deals with third party fundraising partners? How important is branding and messaging?

Click on the video below to hear the views of these five family offices. The video is 70 minutes, and well worth the viewing time.

Moderator:
Bill Brah, Founder & Executive Director, UMass Venture Development Center
Panelists:
Melissa Krauth, Principal, Claria Bioscience
Meredith Fisher, Director & Partner Investments, Private Investment Office
Christopher De Souza, Director, Broadview Ventures
Alejandra Paredones, CEO & Founder, BSI Capital Group
Todd Holmes, Director, Gurnet Point Capital

By Michael Quigley, Director of Research, LSN

As an entrepreneur in the midst of a fundraising campaign and all that it entails—networking events, conferences, referrals, and cold calls—you are going to meet with a substantial number of people who are either potential investors in your technology or who could connect you with someone who is. Following up with these new contacts after an initial meeting or conversation can make or break your campaign. Here are some key reasons why following up is so crucial and what it can do for your campaign.

It Shows Professionalism

By taking the time to send follow-up messages to recent contacts, you are demonstrating your aptitude and professionalism as an entrepreneur. You are going to be managing potentially hundreds of relationships, and most people you speak to will be aware of that. So taking the time to send a personalized follow-up message in a timely manner shows your level of organization. This ultimately reflects positively on your investment opportunity. With investors viewing management as one of the most crucial pieces of any early stage life science investment, you need to do whatever you can to demonstrate you are on top of things.

It Creates a Dialogue That Fosters a Relationship, Which in Turn Can Elicit an Allocation

The goal of your fundraising campaign is not only to get cash but also to find the right partners to help you grow your business. Therefore, whenever you’re meeting with new investors or other strategic partners, you should keep in mind that you are here to establish a professional relationship. Even investors who are not a fit for your opportunity today may be interested in speaking with you down the road as you hit certain milestones, or they may be able to refer you to other investors they know who might be interested. By maintaining a dialogue with these groups, you can leverage your network to gain more contacts, as well as stay on their radar for when you reach those milestones and are looking to raise an additional round.         

It Can Clarify Any Potential Miscommunication

By following up and mentioning some of the specifics from your conversation, you can bring to light any miscommunication between you and the person that you met. Whether clarifying the next steps in the evaluation process, the information they need to see from your firm, why they can’t invest at present, or who they would like to put you in touch with, by sending that follow-up message you help make sure that nothing falls through the cracks.

Now that we’ve discussed the reasons why follow-up is so important, here are some best practices for how go about following up after an initial meeting.

How you follow-up should depend largely on your current relationship, their level of interest in your opportunity, and where your conversation left off. For investors that have clearly stated a high interest, you want to follow up with haste. Ideally, you should be trying to set up a time for a follow-up call toward the end of the original conversation, if possible. If not, an email including your investor deck and proposing a call should be sent no later than the following day. If they are interested, they will be glad you have shown this initiative and will coordinate a time for further discussion.

If the investor seems interested but not highly compelled to fund your opportunity, it is wise to follow up periodically. By checking in from time to time, you remain on their radar for both referrals and a potential investment as you obtain more supporting data. Also, it is always a great idea to ask if they will be in your area or going to any conferences that you will also be attending so that you may meet in person. Face-to-face meetings are always the most valuable and could turn a mild interest to a more serious interest.

If the investor is not interested due to your level of clinical data, then it is wise to continually follow up with them as you obtain more data, even if is still under the level they are looking for. By keeping them abreast to your companies’ successes, the investor will grow more familiar with your technology, which may make them more likely to allocate down the road.

In cases where the investor is not interested in your opportunity due to the indication you are targeting or the underlying science behind your technology, then following up should be limited to a simple email thanking them for their time. In a best case scenario, they will refer you to someone they know that may be interested, but other than a single email, following up with these investors will only slow you down. This is why you should always try to identify the reasons behind an investor’s lack of interest; this information will help you better understand how to tweak your marketing materials as well as how you should or shouldn’t be following up.

Keeping track of all of these contacts as more surface and current contacts go cold can be a daunting task if not managed properly. Using client relationship management software can make this process much easier, however, it still requires a diligent effort if you wish to get maximum utility out of all the meetings you have.

By Shaoyu Chang, Research Analyst, LSN

Venture philanthropy investment is playing an increasingly important role in early stage life science innovation. More and more, nonprofit foundations are partnering with start-up companies to advance science and address unmet needs. At the recent Redefining Early Stage Investments Conference in Boston, leaders from five prominent foundations gathered for a discussion on the evolving landscape of venture philanthropy in life science research.

At a time when traditional funding sources for life science are on the decline, venture philanthropists are stepping in to fill some of the gaps. “We are looking at the emerging markets of tomorrow. They might not be big, but they are not inexistent” said a program investment officer with a leading foundation in global health. “We are trying hard to find the right mix of commercially viable companies that can serve our charitable goals.”

Unlike traditional grant-making foundations, to facilitate innovations, venture philanthropy investors offer science expertise and business management skills in addition to their investment dollars. “Money is not enough. It is essential that you are part of the process,” said the founder of a nonprofit fund dedicated to the treatment of rare diseases. The resources of this fund helped establish a biotech start-up that is advancing new therapies through clinical trials.

The risk involved in early-stage life science innovation makes it difficult to raise funds from increasingly risk-averse venture capital investors. By contrast, venture philanthropy investors are more willing to accept these risks. “Our goal is to de-risk early-stage research,” said the CEO of a foundation that focuses on autoimmune diseases. “Our measure of success is not the number of new therapies approved, but that new therapies are tested more frequently and quickly.”

To achieve the dual goals of social impact and business success, venture philanthropy investors are now expecting specific outcomes from their strategic partnerships. In addition to milestones in scientific development, many foundations are now sitting on management boards and are receiving returns on investment upon commercialization of the research that they have funded. The view on nonprofits as non-dilutive capital is outdated.

Besides funding, venture philanthropy can bring much more to the table, from access to top-tier research institutions to patient group connections. “We are fast, disciplined, and can get people started,” said the CEO of a fund devoted to neurodegerative diseases.

As venture philanthropy grows in significance for early stage investment, start-ups will find opportunities for new strategic partnerships. Scientist-entrepreneurs should feel encouraged to reach out to philanthropic funds, showcase the strength of their science, and demonstrate how their big ideas can align both commercial potential and philanthropic mission.