Key Takeaways from Gearing Up for Fundraising: Conversation with Biotech Investors

Last month we partnered with First Republic Bank for an exciting event to help founders understand how to approach fundraising strategically. We invited early stage biotech and medtech investors to share how they evaluate companies.

Sharing their insider advice were Lan Fong from Berkeley Angel Network, Marc Appel from Orange Grove Bio, and David Abraham from Launchpad Venture Group. Here is a summary of the major takeaways:

-Research your potential investors. You are asking them to invest in you and your dream. Asking the right questions will help you understand who they are and what they want. This will allow you to develop the best pitch.

  1. Are they sophisticated enough in your industry to understand the technical details of your product or service?
  2. What types of products do they tend to invest in or get excited about?
  3. What is their typical expected Return on Investment (ROI)?
  4. What is their dilution tolerance, especially if they are angel investors

-Know the market trends for your product and the area you are located.

  1. Create a financial plan for deploying capital in line with providing a satisfactory expected ROI while maintaining operations.
  2. Understand the market landscape and potential alternatives to your solution. How are you different?
  3. Being in a life science hub is helpful as they have a strong concentration of fellow entrepreneurs and investors, but the move to remote work has led to emerging hubs outside the coasts and in the Midwest.

-Consider the potential funding pitfalls. Don’t sabotage future funding opportunities by making poor choices early on.

  1. Early investigators may dictate who your later investors can be.
  2. Find out if your early investors have a good reputation in the industry from other founders.
  3. Understand the CMC costs that will be associated with your work, so you can be realistic about how much funding you will need. Founders often underestimate this cost and don’t understand this process as well as they need to when the start out.
  4. Get an accurate valuation of your company early on. Underestimating or overestimating the value of your company will hurt you later on.

-Set up your operational team with the right expertise to make sure your work and money go toward your business goals. Know what you don’t know and find who you need to guide you.

  1. You should know the regulatory requirements that will be needed to get your product to clinical trials.
  2. Be realistic about the time it takes to run toxicology studies and other preclinical work.
  3. Get expert advice from consultants or CROs, rather than trying to learn everything yourself independently.
  4. Study the consultants or vendors you work with closely, and work with those who have the years of experience to fill your own knowledge gaps.

-Build and cultivate potential investor networks early. This will allow them to see your progress and help you build relationships with your eventual investors.

  1. Go to investor networking events or conferences when you can.
  2. Take the opportunity to show your progress, as many track potential future investments.
  3. Show commitment because investors are looking for entrepreneurs willing to make their business a priority.
  4. Practice refining and rehearsing your pitch to this audience.
  5. Ask for your peers’ honest opinions about your business or product without pitching it to them. It will build a positive reputation for you among your professional community.

We hope this has helped you plan to approach investors. If you have any questions or would like to find out how Scismic can help your company hire and grow with the right talent, you can reach out at [email protected].

Scismic is a tech platform that helps biotech companies find qualified scientists and grow diverse scientific teams. Our specialized algorithm accurately targets relevant candidates for faster hiring, and is 2x more effective in bringing in underrepresented scientists. Learn more about us here.

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