The challenge of securing sufficient funding to push a promising product through the pipeline or develop a novel technology idea into a successful platform is difficult enough in a large or mid-sized pharma company, but for small biotechs, spin-outs and start-ups, that challenge is so much greater.

It is not just the holders of the internal purse strings they have to convince that an idea, a new therapeutic target or a lead compound has promise, it’s those all-important external investors. Whether you’re looking for angel investors, venture capital firms, or even a Big Pharma company looking to bolster its own pipeline or technology capability, what do they want? And how can a company make itself more attractive to potential investors?

Perhaps the most important factor to consider is the quality of the company’s management. The first place an investor will look—particularly for a very early stage company at the pre-revenue stage—is the management team. If they don’t trust the people in charge, they will not invest, and will likely walk away before they get much further through the due diligence process. What is their background? Do they have a track record of success (or failure) in bringing products to market, ideas to fruition, or companies to float or buy-out? It’s all very well having a good idea, whether for a new drug target or a technology platform, but will they actually be able to make it a reality?

Then, there is the business plan. This needs to be well thought through and clearly expressed, if it is to garner credibility among potential investors. Does it get across the idea and its potential in a clear, concise and readable way? Does it highlight the potential rewards to investors? What about the risks? Have these been considered and realistically addressed? It is vital to spend time on carefully developing a credible and realistic business plan that sets out the proposed way ahead for the idea, and answers most of the questions the investors might ask. It may be worthwhile seeking out professional help from an external expert.

It is also essential to pay careful attention to the facts and figures. How big is the target market, and what share do you predict you will achieve? Strong growth equates to high valuations, and hence high returns on investment. Any prospective investor will pay close attention to the target market, and how well the company will be able to make inroads into it.

The ideal market to be moving into will be large and partially untapped. Here, even a modest prediction of market share would lead to significant sales, and provide the opportunity for sustained growth over a number of years. Conversely, if you are looking to create a completely new market, this is much less predictable. The real size of the market will be uncertain, and it will be unclear how well a product would be accepted. These factors combine to make it difficult to extrapolate how long it might take to reach peak sales.

If a company is to gain investment, it needs to be visible, and known to potential investors. The chances of an unknown investor coming along out of the blue ready to hand over cash are pretty slim. That’s why it’s important to start building relationships with potential investors long before money is required, and remaining visible to them throughout this time. Also try to develop a thick skin—investors may initially seem uninterested, but their investment priorities can change dramatically, and quickly.

As with so many things in life, who you know can be as important as what you know. Prospective investors will cast a keen eye over who has already invested, particularly if you are looking to access the capital markets. And if you can build an impressive advisory board so much the better. These are people who are prepared to put their names and reputations on the line, and investors will take a close look at their backgrounds and the skills they offer as advisors. Similarly, if you have managed to build partnerships with large, established players in the market, this adds credibility to your proposition as they validate your product, technology or service. This is particularly important for an asset-based biotech company, who often finds it difficult to go it alone.
Securing funding in the current environment is never going to be easy. However, by paying careful attention to the make-up of the team, the business plan, and the company’s visibility, it is possible to maximize the chances of attracting those all-important investors.

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Brigitte de Lima
Results Healthcare

Brigitte de Lima, manager, Results Healthcare, joined the company in April 2013 from a long/short start-up investment fund focused on healthcare. She has nine years of experience in the healthcare sector, with particular expertise in biotechnology. Brigitte started her career as a healthcare analyst at Datamonitor. She then worked as an equity research analyst at Merrill Lynch and then Bank of America Merrill Lynch.