Three Ways Early-Stage Companies Can Attract Investors

Three Ways Early-Stage Companies Can Attract Investors

BY Jim Anthony, Executive Vice President, and Global Head, Parexel Biotech - 2.3.22 -

During decades in this industry, I've seen biotech funding fluctuate. Right now, financings, deals, and M&As are blazing hot. In my experience, companies that raise money when they can but maintain the disciplines of sound science, high-quality data, and a well-vetted commercial plan have the greatest chance to succeed in the long term. 

Emerging biotech companies need a development strategy to help them raise funds from the earliest stages. But what are early-stage investors looking for as they assess opportunities? Parexel's recent market research report answered that question. It confirmed what I've learned working with our biotech clients: Investors, venture capitalists, potential partners, and acquirers want to see a rigorous, multi-faceted analysis of unmet needs, a realistic development plan, and a clear, time-delimited path to the next value inflection point. Here are my top three takeaways from the report: 

Think about the unmet need from multiple angles.  

Most companies know that their products must address an unmet need and demonstrate value to secure market access. This is also critical to raising funds. 78% of investors we surveyed said a solid commercialization plan was either very important or extremely important to their investment decision. Investors know that regulatory approval without reimbursement, swift or steady uptake and sustained commercial viability won't deliver an attractive return on investment. 

Patients are the most important stakeholders in drug development, but there are other critical components of unmet medical needs in today's market. For example, physicians are increasingly strapped for time and resources. They may be open to new treatments that are easier to prescribe and administer. Will your new product's practice economics and logistics be advantageous for them? Are payers likely to provide favorable access terms, such as low co-pays? And will they reimburse for a broad or narrow set of patients?  

One venture capital (VC) respondent told us he specifically avoids companies that offer "handwaving" about the "total addressable market" of their new product. Instead, completing diligent research even if you can't prepare solid answers to every question about a commercial opportunity is crucial. Show that you are aware of the complexities.   

Be credible.  

Investors in our industry do their homework: they will conduct due diligence on your assets, science, and development plans. If they uncover issues you fail to address, they will walk away. So don't try to hide or gloss over potential obstacles. A poor or incomplete presentation can damage credibility, especially if it overestimates your probability of success. If, for example, you underestimate how much time and money it will take to get to the next product milestone, investors may question the reliability of other elements of your strategy.  

Even for very early-stage assets or platform technologies, your business plan should rely on sound science and data. Companies that invest in comprehensive preclinical proof-of-concept (POC) work can gain an advantage. Savvy investors and buyers look for pharmacological modeling and simulations of patient response as hallmarks of a high-quality, data-driven program. 

Understanding risks and planning for contingencies convey competence: don't be afraid to discuss your backup plans if Plan A doesn't work out. 

Make it easy for investors.  

Investors want to understand your exit strategy, including the projected timing of significant value inflection points. Biotech companies can have different aspirations: some single asset companies look to be acquired before late-stage development, while some platform companies shoot for an IPO. Other companies want to be acquired before clinical testing begins so that the principals can move on to their next endeavor. A well-defined exit strategy will highlight your planning and preparedness for development and commercialization.  

Make it easy for investors: Help them consider how much capital is needed and how long it will take to get to the next value inflection point. If you are doing a seed round or Series A, you don't necessarily need to specify whether your aim is an IPO or an M&A. But in later funding rounds, you may have to discuss these plans. If you are upfront about your strategy, investors can determine whether they will be right for you. At the same time, be flexible about your exit thinking in investor meetings; present a plan and show you've thought about it while signaling a willingness to consider other options. 

As one VC told us: "To the best of your ability, display value inflection points like this; 'X millions of dollars will get us to this point, and this is the data that you'll see.' Nailing those down is extremely important." 

Helping emerging biotech companies articulate the value of their products and platforms is one of the most rewarding aspects of my job. Delivering the right data at the right time is critical to getting new treatments to the patients who need them. I welcome the chance to meet with you – virtually, of course – to learn more about where you are in your journey and how we can help you achieve your goals. Please email me if you would like to connect. 

We are always available for a conversation.


We are always available for a conversation.


Communication Preference

Communication Preference