By Michael Quigley, Research Manager, LSN
After recently sitting in on several angel panels and company presentations, and supplemented with my own research, I have developed a strong understanding of what angel and early stage investors are looking for in a pitch, and what puts them to sleep. With this article, I aim to shed light on what I have learned in hopes to aid companies in their fundraising efforts. Angels, like other early stage investors have been burned by bad returns over the past decade, and those who are left have tight grips on their capital. In order to loosen that grip your pitch must immediately catch the investors’ attention by engaging them, not drowning them in slides of text and data.
Tell Your Story
Who are you? Why did you start this company? How did the management team first get together? Where did the initial idea come from? These are all questions that can be answered within the first few minutes of a presentation that angels can relate to regardless of their understanding of that within your management team science and technology that is driving the company. Another crucial point to make here is that within your management team, you have both creative scientific visionaries with significant experience in the field, as well as business-minded leaders who have experience in scaling companies and closing deals. Seeing that kind of bilingual management structure is extremely attractive to investors. When investors have a foundational understanding of the roots of your organization, they get a better feel for the drivers of the company as a whole, and can more easily put their trust into you.
Address the Market
Discuss the medical need your product is addressing, and what treatment options are current available for it. Here, you have the opportunity to get the investors’ mouths watering by showing them the potential revenue your firm may realize if your product reaches the market. It is important to stay grounded and logical in your revenue projections, however – investors can be quickly turned off if they feel the numbers you presented to them are inflated and lack rational expectations. It is important to note here as well that if your market is very well understood, investors most likely already have an understanding of how much potential there may be. With this section, only a brief description of the market potential may be necessary, unless your market is particularly underappreciated. Furthermore, you should mention some of the struggles that companies targeting this indication have had in the past that you can later on show how your technology directly addresses.
Hit Them with the Technology
This is the section of the presentation that all too often can remind investors of an academic chemistry lecture and have them checked out within minutes. When addressing how your device functions, or the pathways your therapeutic is targeting, you need to show enthusiasm and passion. Having high energy and excitement when explaining the technology shows that you yourself believe in the product, that what you are working on is innovative and investment worthy, and it will keep investors awake. It is important to not get too deep into the science as to lose investors, yet deep enough to show your product’s differentiation from what is currently in trials or on the market, as well as what data you have so far to support you. A good way to do this is to practice by explaining the tech to someone with a less extensive science background in order to simplify and streamline your explanation so that any investor can understand it.
Know What You Want
More than just understanding how much capital you need to get to clinical trials, you should have diagrams in your presentation highlighting exactly how much of the requested funding is going to be spent on the various activities you company must perform. As previously stated, angels have been tightening their grip on their capital and they are going to want to know exactly what it is going to be used for if the give it up. Additionally this kind of forward financial planning shows your company has strong direction and organization making it all the more worthy of investment.
Have a Clear Exit Plan
Whether it be to out license the technology, get bought up or even IPO, you need to show your potential investor when he will be getting his money back. You should include research on potential buyers currently interested in technologies such as your own and the amount of money going into the kind of deals that align with your company’s strategy and technology. What is the demand currently like for assets such as yours? How might that demand change? These are questions that investors will have when thinking about their potential ROI and investment time frame.
Sources:
http://money.cnn.com/2013/09/17/smallbusiness/angel-investors/index.html
http://lifescivc.com/2011/05/starting-a-biotech-advice-for-pitching-vcs/
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