1. Money Alone is No Longer Enough – Biotech’s Need These Types Of Strategic Partners
We’re on the verge of commemorating the 20th anniversary of the dot com bubble coming to a halt.
Although the reasons for the end of the internet’s swashbuckling days are complex, raising—and investing—money for money’s sake was a contributing factor.
Investors were often pouring cash into dreams, not much else. And executives were taking any money they could get. For what? It wasn’t always exactly clear beyond simply building a brand name.
The lessons from that era should be self-evident by now: invest cautiously and look for more than just money from your investors.
Today’s smart healthcare, biotech, and pharma executives carefully analyze the investors as much as the investors analyze their company, personnel, and prospects.
Whereas some biotech execs used to chase VC generalists and money at all costs, many are looking towards VC specialists today as a result.
WHAT TO LOOK FOR IN YOUR NEXT BIOTECH INVESTOR
When analyzing potential investors, look beyond the cash they can arm you with. Specialist investors can bring immeasurable—perhaps priceless—other factors to the table.
When choosing (yes – choosing) your specialist investors, consider the following:
What kind of strategic advice, deals, and partnerships can they offer based on their years of experience in your specific field?
Perhaps they’ll tell you that early stage biotechs don’t really need a CEO at all. But they do need a great CSO
The human capital they add to your company, including how (if) they can secure the best talent for your needs in the future.
Or, like Strata Oncology, they might tell you it’s better to train the talent you need instead.
The network of connections they open up for you.
“Central”, well-connected, biotech VC nodes are the ones you want to aim for.Check out this website to figure out the central investors in your area of expertise.
Their ability to help with future rounds.
This ties back into the VC’s network of connections. Your company is far more likely to receive subsequent financing if it’s part of a portfolio of a well-connected biotech VC.
All of these factors can be quantified or, at the very least, verified on paper.
But one thing that can’t be is trust.
Secure investors who trust you; because one day, you might need to pivot just like over 60% of digital health companies have. And if you do so, you have to be sure your investors will have your back.
Therefore, the ultimate lesson for the modern biotech executive is this: choose investors with experience in your field, products, and services. The more specific, the better.
And go after investors who will add value in good times and in bad ones, especially those with whom you actually enjoy working with right from the start.
Don’t just chase money for money’s sake. That didn’t work in the 90s and it definitely won’t work in today’s climate either.
WHERE TO FIND THE RIGHT INVESTOR
Of course, it’s easy to sit here and describe the things you need to look for.
A better topic for most, time-strapped, executives is how you can actually do so—and quickly.
How can you find the right investor?
Luckily, with a few minutes and a few more mouse clicks, it’s possible to find the right connection.
One obvious place to start your search is LinkedIn, either through your network or by typing in keywords into the search bar.
This can be an effective way to find an investor, or an individual who can connect you with one, in some cases.
The advantage of LinkedIn is its massive base of users, including investors. The disadvantage is that it’s not always intuitive to use and you might have to sift through investors who have nothing to do with your company.
A more visually-friendly platform, concentrated with investors you’ll want to talk to, is CipherBio.
Think of CipherBio as LinkedIn, but limited to biotech executives like yourself as well as investors already interested and experienced in your arena.
While the user base isn’t as large as that of LinkedIn’s, the hard work of finding people who are actually interested in what you have to say has already been done for you on CipherBio.
2. LOOK BEYOND THE VC – ALTERNATIVE SOURCES OF CASH FOR YOUR COMPANY OTHERS IGNORE
While VC is the traditional, go-to-source, for funding, there’s also another way to raise cash should the need arise. It’s called equity crowdfunding.
Equity crowdfunding is like Kickstarter, but for your company as opposed to a specific product.
In other words, equity crowdfunding allows you to raise small amounts of cash from a large number of people—usually online.
This concept seems too good to be true, maybe even crazy. But it actually works.
As of today,Venomyx Therapeutics has raised over $230,000 for its “antivenom EpiPen”. The amount keeps growing and it’s all thanks to over 380 investors and counting.
In Europe, where companies have had more time to practice the art of equity crowdfunding, the average biotech company raises 6 to 7 figures via this alternative method of financing.
The advantages of equity crowdfunding are many, namely that it can be a quick way to raise needed funds.
But it’s not without its downsides.
For example, it’s not enough to simply ask the crowd to empty their wallets. Like any product or service, you need to sell yourself, your team, and your company. If you can’t do this, or you don’t want to hire a marketing team that can, then equity crowdfunding isn’t for you.
3. WIN BY EFFECTIVELY USING ALL OF YOUR RESOURCES – TAKE THE PHD OUT OF THE LAB
Biotech executives know that the cash raised from VCs or crowdfunding is only one part of the story. Their human resources, played effectively, can sometimes trump (or prevent) the need for additional cash. It’s the lean startup mentality at play.
Gone are the days when scientists were stuck in a lab. Today’s competitive biotech firms rely on their PhDs for regulatory, financial, and strategic insights.
PhDs, and those with clinical backgrounds, make for excellent QA, QC, and regulatory affairs team members. Often through training and work experience, they have an intuitive understanding of these fields, where one mistake can lead to months of setbacks or millions in losses.
So why not rely on scientists who are trained to be detail-oriented from the very start?
Furthermore, plenty of scientists and medical practitioners make for excellent sales reps, business development managers, or medical science liaisons as well. They can talk to your prospective clients in a language they understand better than a traditional sales rep.
They can predict the qualms and questions your clients will have and can address them instinctively. These abilities can lead to increased sales, brand reputation, and even brand ambassadorship.
Moreover, scientists can conduct competitive analyses typical business school graduates simply cannot. It’s one thing to analyze a company’s balance sheet and to build financial models.
It’s a completely different story when you need someone to pore through the complex, scientific literature, from an evidence-based and biostatistical perspective. This can lead to invaluable, cost-saving, and strategic insights for your firm a financial model will never provide.
Clearly, while PhDs can push your R&D to new heights in the lab, the PhDs you take out of the lab can ensure your current products, services, and relationships are just as successful.
In sum: today’s smart, nimble, biotech executives are aware of three changes to the VC landscape. Here’s what you can do to join their ranks:
1. Focus on quality over quantity of investors. Find the VCs that suit your company, even your personality, for the best foundational and long term success. Look for these VCs on platforms like CipherBio.
2. When necessary, consider alternative sources of cash, like equity crowdfunding.
3. Don’t always rely on cash to solve your problems. Utilize your human capital, especially your PhDs, in areas you may have never thought they’d excel at. This can prevent problems, and the need for money to resolve them, before they start.