Next Phase Newsletter

By Danielle Silva, Director of Research, LSN

Time after time, I’ve noticed that many brilliant scientists continue to deliver the wrong kind of pitch to investors. The most common blunder that life science entrepreneurs make when raising capital is delivering an overly technical presentation to potential investors. Although this is usually the most frequent mistake that scientists make, another common issue some entrepreneurs run into is misunderstanding who their audience is and actually not digging deeper into the technology. So now you’re probably thinking the solution is to have your presentation lay somewhere in between. The answer, however is not as simple as one might think. If you are a life science entrepreneur who is raising funds, the key to pitching to an investor is understanding who the investor is.

Pitching to Venture Philanthropy Firms/Family Offices

The first fallacy I mentioned (getting too technical during a presentation) often occurs when firms pitch to family offices and venture philanthropy firms. These investors are often times indication oriented, meaning that their specific mandate focuses on the disease that the technology is targeting, and these investors are typically agnostic in terms of the mode of delivery. Therefore, when pitching to these investor groups, life science entrepreneurs should stress the indication their product is targeting as well as any subindications that may be applicable. Since both of these groups focus on philanthropy as a part of their mandate, the entrepreneur should focus on the social return on investment.

Pitching to PE, VC, and Hedge Funds

Firms will also often focus too much on their technology when they are presenting to private equity groups, venture capital firms, and hedge funds. In terms of how in-depth you cover the science behind your product, your pitch to these firms should lay somewhere in between your pitch to family offices/venture philanthropy firms and big pharma – a happy medium if you will (I discuss the pitch to big pharma/corporate VCs in the next section).

These investors are very hands-on, so stressing that you have a great management team is more important to them than the science that goes behind your technology. Side note: for more on this topic see my article from last week’s issue What Qualities Investors Look for in Founding CEOs. Where this does not apply is when you are speaking to a venture partner at a venture capital firm, or an entrepreneur-in-residence at a private equity or venture capital firm. Individuals in these roles are typically industry veterans who are ex-CEOs or current executives of biotech firms themselves who often times hold PhDs. Thus if you are presenting to these individuals, it is appropriate and necessary to take a deeper dive into the technology than you normally would with other individuals at a VC firm, PE group, or hedge fund.

Pitching to Big Pharma/Corporate Venture Capital Firms

Scientists for the most part get it right when they are pitching to big pharma and corporate venture capital firms. These groups of investors are looking for a highly technical overview of the product that you are developing. What they want to see is an in-depth overview of the mode of delivery, and generally the indication is important as well but it is the former that is most important to stress. What some scientists do forget though is that it is still important to stress the management team in presentations to big pharma and corporate VCs as well, as these types of investors often work very closely with the companies they invest in.

At the end of the day, what is most important is to do your due diligence on an investor before giving your presentation. Find out who specifically at the firm you will be presenting to – and what their background is – before you start putting together your pitch. There is no one-size-fits all presentation that your firm can create to tailor to every audience, each investor is unique, and consequently, you should never delivery the exact same presentation twice.

Tags: biotech, biotechnology, CMO, consulting, CRO, family offices, Fundraising, investor, Investors, issue, letter, life, Life Science, life science nation, medicine, nation, news, newsletter, pharma, Pharmaceutical, private equity, research & development, science, startup, venture capital

By Dennis Ford, CEO, LSN

Recently, I have been interacting with a lot of startup incubators and accelerators, revolving around fund raising boot camps that LSN teaches for scientists.  Basically, LSN’s “Discovery to Distribution Boot Camp” stays away from the strategic and concentrates on the tactical aspects of commercializing and raising capital. The marketing task is all about doing the research and finding a list of investors that are a fit for your products or services. It’s really a marketing 101 exercise: the first step is LSN helps them identify all the companies on the planet that look like their firm. In marketing parlance, this is identifying and sizing the competitive landscape.

Why is this important? This exercise – when done properly – will not only include most of the look-alike companies, but also the look-alike-companies and their lead and co-investors that have invested in the past and present. This über list of investors is quite valuable, as we know that these investors will understand the company, the market and the product, service or technology. I refer to this list as the global target list, and the reason is that these investors are a fit.

The next aspect is finding even more investors that are a fit based on present mandates to invest in the future. These investors have dry powder (investable capital), and are looking to allocate. When done properly, LSN can help them aggregate a list of relevant investor targets in their orbit that have shown a distinct past, present or future investment interest. Sounds simple enough, but here is where the world of the scientist collides with the world of the generic sales and marketing.

Time and time again when we put on these boot camps, the inevitable questions arise. The list is great, but am I allowed to call these investors? I hear that if someone doesn’t refer you, investors won’t talk to you. Can you prove to me or give me a reference of someone that has actually called an investor cold? I want proof that getting a list of investors that are a fit is how entrepreneurs actually raise money. On and on, the skeptical scientists create a thousand reasons why getting a list of investors that are a fit for their particular market segment or indication won’t work, and how in the past it worked like this (the old, outdated map). Enter the sequel to the Valley of Death version 2.0: The Chasm of Skepticism.

I make no bones about who I am and where I come from; I am genetically a sales person. I have been selling for decades, I am a selling CEO, I am an entrepreneur with 8 startups under my belt. Of the 8 startups I have been involved with, I have been part of the executive management team, the CEO or the founder. I have been part of 2 IPO’s and 4 acquisitions, with 2 more in the wings (I hope). So please imagine my reaction having spent my life in sales, marketing and business development when I have to debate whether a person who is a startup entrepreneur is allowed to make an outbound phone call to a complete stranger to move his/her company along.

What is even more chilling is this ethos is passed around in the life science marketplace as some sort of rule. Entrepreneurs shun rules. Entrepreneurs break rules. Entrepreneurs don’t listen to the status quo out-of-date dictums, and they don’t use old antiquated maps! They create new ones they do whatever they have to do. They jettison their comfort zone. They embark on hideously uncomfortable journeys. They do whatever it takes and making a blind cold call to a complete strangers who are a known fits for their product or service isn’t even the ante into the game. So here is how to get across the chasm of skepticism: get a list of investors that are a fit for your firm, do an email introduction, and then call and set up an intro meeting, then rinse and repeat.

Tags: biotech, biotechnology, CMO, consulting, CRO, family offices, Fundraising, investor, Investors, issue, letter, life, Life Science, life science nation, medicine, nation, news, newsletter, pharma, Pharmaceutical, private equity, research & development, science, startup, venture capital

By Danielle Silva, Director of Research and Innovation, LSN

Many entrepreneurs make the assumption that investors are solely looking at their technology when they consider taking a stake in their firm. However, this is typically very far from the truth; at the end of the day most investors are investing in the individual and the management team – not the entrepreneur’s technology. This is why almost all investors require a number of face-to-face meetings prior to making an investment. As traditional sources of capital in the life science space continue to dry up, it is becoming more and more important for CEOs to stand out and show investors both their personality and the qualities that will make them a successful founder.

One of the most important things investors look for is a clearly defined vision. A startup’s CEO needs to not only have knowledge of their target market, but also needs to fully understand the individual customer’s problem and how to tackle it. The biggest turn-off for an investor is the “panacea presentation” that details the 27 indications a pre-clinical asset has the potential to cure. You need to have a targeted and focused concept of exactly where you are headed in the market. This vision is especially important because as the company scales, the founder needs to ensure that the company does not stray away from it’s core competency and mission, and that everyone in the firm is aware of the CEO’s vision. Nobody wants to invest in a schizophrenic business.

Founding CEOs also need to have the ability to surround themselves with strategic partners that are not necessarily investors in the firm. Forming these strategic relationships early on can be invaluable down the road. Founders should, however, also seek advisors that are willing to put skin in the game, because advisors who have a stake in the company will represent a vote of confidence in the eyes of other potential investors. Furthermore, founders need to be able to both find and retain talented individuals to help them build their companies, not only give advice. Networking with talented people that have a passion around your target indication or technology can help CEOs identify senior professionals that they can bring in later in the development of the company to fill roles necessary for growth. This is vital because, at the end of the day, the investor is investing in people.

So what does this all mean for founding CEOs? If you do not possess these qualities, find someone who does! The business side of advancing your technology should be managed by someone who can manage the networking role and show investors a focus on getting to market above all else. You should always embrace the opportunity to meet investors in person, but make sure you are prepared to do so. Also, you will always be more compelling in a one-on-one meeting where you can start a real dialogue, rather than lecturing to a room of potential investors. Speaking with (not at) investors at length about your company and your vision will not only help you demonstrate these qualities to the investors, but will also help you determine if the investor posses traits that will help you both work together in the future.

Tags: biotech, biotechnology, CMO, consulting, CRO, family offices, Fundraising, investor, Investors, issue, letter, life, Life Science, life science nation, medicine, nation, news, newsletter, pharma, Pharmaceutical, private equity, research & development, science, startup, venture capital

By Max Klietmann, VP of Research, LSN

LSN research spends a lot of time speaking with investors in the life sciences space. As such, I wanted to share some insights gleaned from medical device investors over the past several weeks; specifically, I’d like to highlight two major investor interest trends in the device space that follow a common theme: cost reduction. As medical costs have risen over the past few years, hospitals and care providers are under increased pressure to reduce costs while improving outcomes. This has created a high demand for devices that can not only make an improvement in a patient’s condition, but also make a business case for a hospital’s bottom line. Here are the areas of the highest interest:

Infection Control

Hospital acquired infections (HAI) such as MRSA constitute a major issue for care providers, as these (usually preventable) conditions can massively protract hospital stays and drive up costs, due to complications and the need to treat a secondary indication. Tools and systems that can aid in early detection or prevention of these infections are in high demand, and are a compelling investment opportunity for investors in the space.

Home Care/Remote

Getting patients out of the hospital as quickly as possible is a primary way of reducing hospital cost. One way to safely accomplish this is via remote monitoring and other ways to allow a patient to continue receiving medical care from home earlier than usual. Furthermore, the less time spent in a hospital, the lower the risk of secondary complications such as HAI, further reducing the risk of incremental cost. Finally, remote monitoring often pairs existing technologies (heart monitors and wifi, for example), and can have a relatively inexpensive R&D process – all good things for an investor seeking fast time to market and proven demand.

Though these concepts may be intuitive at first glance, most entrepreneurs in the device space are too heavily focused on an improvement in patient outcomes at any cost. However, at the end of the day the improvement needs to make sense from the standpoint of a hospital’s investment and the likelihood of insurance reimbursement. Device entrepreneurs should consider how strong their business case is to the end-user, and in doing so, can be better aligned with investors’ critical need for return.

Tags: biotech, biotechnology, CMO, consulting, CRO, family offices, Fundraising, investor, Investors, issue, letter, life, Life Science, life science nation, medicine, nation, news, newsletter, pharma, Pharmaceutical, private equity, research & development, science, startup, venture capital