Perfecting the Pitch: Learning to Attract Investor Funding

The last decade has witnessed a boom in life science start-ups, and that pace is set to continue as the search goes on to find improved treatments for diseases including Alzheimer’s and cancer. Although the market is cooler at the moment (1),the science has been backed in recent years by record levels of funding, with investment into life sciences in the United Kingdom reaching a record £4.5 billion (approximately $5.73 billion USD) in 2021 (2).

Yet for early-stage companies, as well as those recently spun-out from universities, obtaining that first tranche of funding remains one of the biggest challenges that they have to face. Very often the issue is not the science, but the fact that these young businesses are unprepared for the realities of dealing with investors. Too often they lack clarity, fail to talk the language that investors need to hear, or provide insufficient evidence that they understand what it takes to make a commercial success out of a new scientific discovery.

Since its inception just over a year ago, Discovery Park Ventures’ (DPV) management has listened to over 50 pitches from early-stage life sciences companies, many of them recently spun-out from universities, all of whom have big hopes for their fledgling businesses. Of that number, Discovery has backed seven, with one more deal going through completion. This funding has generally gone to companies working in strategic areas of particular interest to DPV— such as neuroscience, advanced therapies, and artificial intelligence—and finding out the target areas of different funds is one of the most basic pieces of research that start-ups can undertake in order to give their applications more chance of success.

Significantly, in a climate where women are woefully excluded from venture capital finance, six of the companies that DPV has so far funded have female founders and/or CEOs. This includes Vitarka Therapeutics, which is creating combination medicine using RNAi therapies for patients with late-stage cancers and, most recently, BoobyBiome, founded by scientists Dr Lydia Mapstone, Dr Sioned Jones and Tara O’Driscoll, to develop a novel product for babies who do not have access to the beneficial microbiome in breast milk.

The first round of funding may not quite be a lottery win, but the sums involved— at DPV, that’s usually around £100,000 (approximately $127,000 USD)— are enough to help companies to achieve proof of concept. This allows them to concentrate for a while on gathering the data they need to take their ideas forward without becoming sidetracked by the demands of generating additional early funding. Typically, there may be just two people in the business at this stage, so relegating one to just chasing down finance can severely inhibit progress.

Meanwhile, the task of scrutinising so many applications and listening to pitches has provided DPV with an important level of insight into what these young companies need to do in order to be considered seriously by funders. Those that have made the grade are the ones that have demonstrated that they have thought about every aspect of their product and not become over-enthused by the joy of discovery. Of course, the science must be strong, the hypothesis exciting, and the product with the potential to scale, but that in of itself is not enough. Investors don’t just look at the science, they want to know that the people whom they are backing have the skills to deliver what they promise, and for prospective start-ups that means demonstrating that their business ethic is as strong as their laboratory know-how.

Successful start-ups are the ones who identify mentors and collaborate with peers to facilitate the network building necessary for one to flourish. These companies recognise that listening to sound advice and learning from other successful start-ups can help them to navigate obstacles and overcome hurdles. If they are serious about obtaining funding, then they will also learn to look at their pitch from the perspective of an investor, using effective language and explaining their proposal in a way that demonstrates their understanding of what problem their process or application can solve.

Let's be clear: it's the job of investors to probe for weaknesses, to identify where new technologies are adding unnecessary complexity, or where start-ups have failed to research their competitors. For instance, earlier this year Discovery Park Ventures was amongst the sponsors at BioSeed 2023. This annual rapid-response event provides early-stage life science companies with access to potential investors, offering them the opportunity to get their ideas heard by those who have the power to move them to the next stage.

For participants, the five minutes provided for setting out their store may not seem like sufficient time to explain the principles behind their ideas and convince their audience that they are worth funding. However, in reality, if they can’t sum up their proposal in less than half that time then they could struggle to find the backing that they are looking for.

Harnessing the wealth of exciting science emerging from universities across the UK must be a national priority. Backing is available for the right companies, but only those who have done the work to make themselves into a fundable proposition will earn it.

References

1. UK BioIndustry Association. Venture Deals Continue to Flow for UK Biotech Under Dark Clouds. Press Release, April 23, 2023.

2. UK BioIndustry Association. Investment in UK Biotech Jumps 60% to £4.5bn in 2021. Press Release, Jan. 26, 2022.

About the author

Emma Palmer Foster is a Director at Discovery Park Ventures.