Tips for preparing for your life sciences fundraising pitch
Raising money isn’t just for tech startups out of Silicon Valley. Realistically, any company with a significant market opportunity will be able to get the attention — and money — from a respectable investor. After all, their job is to return value to their partners. They do that by investing in ideas that will generate a lot of value, regardless of the industry
Life sciences, in particular, is one where the lines start to blur a little bit. You might consider yourself a traditional life sciences company in the scope of creating products like pharmaceuticals. Or you might consider yourself a tech company if you are applying machine learning techniques to do that. It might be difficult to know where to draw the line, especially when you’re trying to clarify that to a potential investor.
Still, your product may faces a few different challenges compared to your typical tech startup in San Francisco. You might have to deal with regulatory hurdles if you’re touching anything remotely close to health care. Your suppliers may be completely different, with more capital going to lab equipment rather than cloud servers. And your unit economics may also be obviously different.
To convince investors to hand over a big check after a meeting, you just need to be crystal clear on the value you’re creating. Here are some things to think about going into the meeting.
Pitching for early-stage life sciences funding
When you’re walking into a meeting, there are four key things you need to hit: your strengths, your weaknesses, the opportunity, and the threats to your opportunity.
Make your vision clear. Like any founder, you need to show that you have a clear mission and vision for how you’ll get there. Having a great idea isn’t good enough. You need to show you have conviction and you’ll be able to execute on it. Lay out your ten year plan on how you’ll get there.
Show you can get people on board. As a CEO or top executive, a lot of your time is probably going to be spent recruiting. You’ll have to convince smart people to take a huge risk and join your company. You’ll also have to retain them. Talking about your existing team and how you’ll sell that vision to others shows you’ll be able to put together the right group to execute.
Show you have partner support. Starting a company, regardless of industry, is always easier when you aren’t doing it in a vacuum. If your products are very technical or require complex supply chains, it helps to show that you either have those supply chains lined up or locked down. Partners also show that you’re being thoughtful about distribution. If you don’t have partners, talk about how you’re going to get them.
Identify your customer. You could dive into the technicalities here, talking about the lifetime value of your customers and the cost it would take to acquire them. But you also have to show you understand their pain points and their needs. More importantly, you have to show why they aren’t being served right now. They might not realize it’s a pain point, or maybe it’s prohibitively difficult. That you can serve this customer is what makes your company a real business.
Provide points of reference. You should talk about the market value you’re attacking, but also how you’ve derived that market value. Dig into acquisitions in the space, overall product consumption, or the size of the potential customer base.
Pitching for later-stage life sciences funding
It’s easy to try to give the same pitch that got you funding in your seed and Series A funding rounds. It was successful, after all. But as you start to mature, you theoretically get less risky and investors are going to be looking for more of a guaranteed return. That means you’ll have to show traction and growth, which means providing some concrete points. You have to show you’re well on your way to the mission you set out when you raised your first round of funding.
As you get into later-stage pitching, a lot of your competitive advantage will probably start to fall under your protected assets, like intellectual property. As you start to prove out the value of your market, at bare minimum you can make the case that you have a minimum value based off your intellectual property. That shouldn’t be the foundation of your pitch, to be sure, but it does give you a nice competitive advantage.
Talk about your customers. As you start to mature, you need to show that you’re demonstrating product-market fit. The best way to do that, regardless of industry, is to show that you have customers that are either lined up or already paying for your products.
Show the IP you’ve gathered. A lot of complex technology becomes commoditized over time — just look at how quickly machine learning is now widely available in a lot of applications. You should show that you’re being thoughtful about how you defend your position and warding off other companies that might want to unseat you.
Demonstrate real revenue. There are a lot of industries that take a while to start generating revenue. The chips industry, for example, takes a long time before your product even enters the market. The faster you can show you’re generating revenue, the better — as it means you understand the urgency of getting a product to market.
Have a Plan B. You might not make it through trials or get approval for your products. Your experiments might come up with a completely different result for some reason. You might even end up running up against an incumbent you didn’t anticipate. Ensure that you show you’ve thought about all that and demonstrate alternatives.
Other important things to include in life sciences fundraising
A good rule of thumb is to think about the SWOT analysis: strengths, weaknesses, opportunities, and threats. You want to be able to talk through all of those very clearly. There may be regulatory hurdles or massive players that could derail your mission — and you have to have the ability to overcome that. You might have some holes in your expertise, but you have to show you can fill them.
Do your research on the investor you’re pitching. They may have invested in some companies that have followed a similar storyline as yours, or have a similar team. Try to identify patterns if you can and find the firms that’s the best fit. You might need help with finding customers or talent, and some firms are better at some things than others.
As always, ask questions. You’re auditioning for funding as much as they are auditioning to be your investor. You want to know if they’re able to help you in the same way they are analyzing you as an investment opportunity. Plus, it gives you an opportunity to provide some clarity on points you may have missed or want to revisit.
Most important, you need to show that the market actually needs your product. That’s the difference between running a real company and just a science experiment in a lab. Explain why no one has owned the market, what’s getting in the way, and how you’re going to overcome that.
At the end of the day, remember what it is you’re about to do: present your mission and vision and ask for a ton of money. The latter part is probably something that comes very naturally if you believe in what you’re working on. The former is all about preparation and practice, and you should still take the time to do a good job. Neither you nor potential investors want to waste their time and a little bit of preparation goes a long way.