Angels in MedCity Project Manager Joana Neves dos Reis helps exciting new life sciences start-ups access angels funding. Here she shares some of her top tips for preparing for that all-important first round of investment.
As a former scientist and PhD student I can relate to the feelings of being overwhelmed that many Life Sciences start-up founders experience when trying to finance an exciting innovation. You may well have put all your energy into this work, and here you have something capable of improving the lives of millions of patients in front of you – if only you could convince someone to invest. So where do you start?
To quote Henry Ford, nothing is particularly hard if you divide it into small jobs.
First things first. Are you ready for angel investment? Your first diluting financing round obviously comes with strings attached, beyond just sharing ownership of your company. Business angels come in for the long run and are very hands on, so expect having to frequently share management reports and input into your decisions.
In our upcoming Entrepreneurs Training Workshop we’ll be providing a useful tool kit for early stage start-ups in Life Sciences. Ahead of that I’d like to share some of the top things you should be thinking about when you start planning your first angel investment round:
1. Are you ready for angel investment?
Typically, angel investment in Life Sciences happens when there is already a minimal viable product, some traction (whatever that means for your particular product/ service) and a product launch expected in the next year or two. It should not happen when you are running out of money. It is common knowledge (and common sense) to start looking for funding when you still have some runway, i.e cushioning – funding rounds can take up to 6 months to close.
2. Where is the money?
You need to do your homework and research what angel groups/ networks are out there. And there are also a few important questions you’ll need to be asking. What do they invest in? How much do they invest? This might be hard to find out, but look up case studies on companies similar to yours. How often do they invest? Do they have the right expertise for your business?
3. How do you make contact?
A lot of business angels are ex-entrepreneurs and they may have more in common with you than you think. It is an unfortunate truth that many would rather look at a business proposition recommended by a friend or business partner, but nevertheless most are very happy to have a friendly chat with you if you meet them at an event. Conveying your passion for your technology, sharing your vision for your business and even asking for their opinion on the viability of your business proposition can go a long away without even mentioning funding.
“Conveying your passion for your technology, sharing your vision for your business and even asking for their opinion on the viability of your business proposition can go a long away without even mentioning funding.”
4. You have their interest, what now?
Be honest about the stage you are at and the journey ahead. Be upfront about your weaknesses and where your investors can add value. They don’t expect you to have all the answers, but they expect you to know your business well enough to know how to get them.
5. They’re in – time to negotiate.
In the Angels in MedCity programme, business angels typically take a set share of the equity in funding rounds. Make sure you ask for enough money to take you to a clear milestone, that you can easily demonstrate to stakeholders. You want to build credibility and be as transparent, forthcoming and approachable as possible throughout the process. You are not only raising a round, you are building a relationship with your new stakeholders.
The final step is of course, sealing the deal – and that’s down to you. Your determination and hard work will be a virtuous cycle for investors, that may even on to the next round of investment!