- Jackie Ross
- 3 min read
Hi Gang,
I’m fresh off the annual BioCom Partnering & Investor Conference and wanted to share some key takeaways for those who couldn’t make it. Despite the fog (literal and psychological), it was thrilling to see such an impressive turnout (500+ attendees…overflow room required!). The tone was cautious and empathetic, meaning CEOs, investors and bankers alike acknowledged the challenging fundraising environment, unpredictable public markets, and confounding geopolitical circumstances. Panels covered the usual topics – dealmaking, the path to M&A and/or IPO, AI in drug discovery.
A majority of the attendees came to pitch their wares to investors, so I will concentrate this update on comments by venture capitalists overheard in the halls and on stage. It was standing room only for the VC panel discussion with Westlake Village BioPartners, Red Tree Venture Capital, TPG Life Sciences Innovations, Venrock, and Avalon Ventures (in order of appearance below).
Photo credit: BioCom California
I really enjoyed this panel, and not just because they were kind enough to address my question (why aren’t you guys spending more money?!) with good humor and specific rationale. I also really appreciated panel discussions with investors from corporate VCs, including Roche, Boehringer Ingelheim, and Sanofi, and partners from Versant, Pivotal, 5AM Ventures, venBio Partners, Vivo and more. (See agenda for details.)
Here are some highlights, direct from the mouths of investors.
Market Realities
The herd mentality in a bull market can be even stronger in a bear market. Many investors are still hungover after livin’ large in 2021.
Venture capitalists have to generate returns to their LPs. In order to do so, they want to see at least a 3x return on an investment.
Understand that, as a result, a typical fund size of $300M-$450M fund will only make 10-15 investments per year, tops.
Investor Mentality
Ultimately investors are asking: “Can the business plan support the financing plan?”
VCs assess risk across three measures:
Market risk
Commercial risk
Execution risk: This comes down to talent. Do we have the right team to execute against the plan?
In the platform vs. product company debate, platforms well-done are “both/and,” meaning they are strong platforms AND capable of generating products. It’s products that generate real returns for investors. They want to see medicines, not just engines.
As a result, investors want line-of-sight to a program, even with early-stage platform companies, and that should be with a $10M-15M investment. $30M-$50M should get you close to the clinic.
Raising too much too early will create valuation challenges for your next round.
The Approach
Educate yourself before approaching an investor. Did this person invest in areas like this previously? Are they, and is the fund, a good match for your business based on their size, number of investments, track record and the problem you are addressing?
The most effective investor presentations immediately cover the problem and how your approach addresses the solution.
Different investors within the same shop may have different passions and areas of expertise. Your company may not be interesting to one but in the bullseye for another. So don’t assume that because one individual has passed, an entire fund has passed.
You will receive many No’s (these guys see hundreds of pitches per year at least). Ask for feedback when you receive a no. Some will give you a generic reason, but if you are persistent and ask for guidance, you will continue to improve each time.
Leverage your network to get in front of investors. They are much more likely to take a meeting through a warm introduction. And if you do not have a strong network, why weren’t you at the BioCom conference this week? 😊
As always, chat back with questions, observations, complaints, memes…
Stay hydrated,
Jackie