Understanding how to secure necessary life sciences funding is paramount to the success of early-stage start-ups and businesses. In this comprehensive guide, Pioneer Group shares a step-by-step strategy to navigate the funding landscape.

Step 1: Understanding Different Funding Options

Venture Capital

A form of investment for early-stage, innovative businesses, Venture Capital (VC) generally comes from well-off investors, investment banks, or any other financial institutions seeking to back start-ups or small businesses with great growth potential.

Although it can be provided at different stages of a company’s evolution, VC is becoming an increasingly important source of funds for new labs with limited operating history.

When researching funding options, always look for VCs with a track record in providing life sciences funding to comparable companies in the industry; it’s not just about the money – VCs can also provide backing through technological expertise and/or managerial experience.

For instance, our Ventures team here at Pioneer Group comprises scientists, entrepreneurs and investors. Using our life sciences expertise, we, and our network of coaches and mentors, can support companies post-investment, whether that’s through offering direct advice, introductions to key people or access to our wider network.

Everything we do is targeted at helping to build business success. Check out this recent case study to learn more about how we like to work, or visit our investments page.

Angel investors

Angel investors offer crucial seed capital to kickstart innovative start-ups within the sector. In return, they receive ownership equity in the company and, therefore, have a vested interest in the project’s success.

Angel investors may comprise individuals with a professional interest in life sciences or can often be found within your personal network, including family and friends. Their support may involve a one-time injection of seed funding to initiate a project or an ongoing financial commitment to propel a life sciences product to market.

Unlike traditional loans, angel investors in the life sciences funding landscape are not primarily seeking repayment; instead, they invest in promising ideas anticipating  rewards only when the venture achieves its full potential.

As with VCs, try to seek out angel investors with an interest in life sciences. They may offer not only financial support but also valuable industry knowledge and connections.

Grants and awards

Grant funding in the life sciences typically comes from various sources,  including government agencies and private foundations to non-profit organisations and industry-specific groups. Grants are awarded to support research, innovation, and advancements that have the potential to benefit public health and expand scientific knowledge. Most grants in the UK are publicly funded by the government’s Department for Business, Energy & Industrial Strategy (BEIS), though there are some opportunities available with EU partners.

Innovate UK is the UK’s main agency for providing grants to small companies. Its flagship grant funding mechanism is Biomedical Catalyst, which enables small and medium-sized businesses to test and develop innovative health and care solutions across life sciences, including therapeutics, medical devices, and digital health. Pioneer Group is a neurotechnology accelerator provider for the Biomedical Catalyst Accelerator Programme. Find out more here.

Keep an eye out for relevant competitions you can enter. For example, Pioneer Group runs a Golden Ticket competition, where winners receive 12 months’ free lab bench workspace for one scientist at a Pioneer Group location and access to specialist R&D scientists, business leaders and entrance into our partner network.

Other funding options

Entering into corporate partnership with other pharmaceutical or biotech companies can also provide funding, access to resources, and expertise, and is therefore an option worth thinking about. These partnerships could come in the form of licensing agreements, collaborations, or equity investments.

Another life sciences funding route you may want to consider is crowdfunding. In the last decade, an increasing number of start-ups are turning to crowdfunding platforms to raise capital, which can be especially effective for projects with a compelling story.

Although early stage biotech companies will often need many millions of pounds before a product can be launched to the market, equity crowdfunding can be (and has been for some) an important and quick source of capital at the start of that journey, when venture capital or other institutional investors may otherwise be less inclined to participate in that stage of funding.

Step 2: Crafting a Compelling Investment Proposal

An investment proposal is the document or presentation you create to seek life science funding from potential investors. It serves as a formal request for funding and outlines the key details of your business and what makes it an exciting investment opportunity. The primary purpose of an investment proposal is to convince investors to provide capital in exchange for a stake in the business or project.

Key components you should look to include in your investment proposal are:

• Executive summary: A concise overview of the proposal, summarising your business, the funding amount you are seeking, and the expected return on investment.
• Business description: A detailed description of your business, including its mission, objectives, key personnel within the team, and the problem your product or service aims to solve.
• Market analysis: An assessment of the market, including its size, growth potential, trends, and competitive landscape. This should highlight the business’s unique value proposition.
• Business model: An explanation of how the business generates revenue, including the pricing strategy, sales channels, and distribution methods.
• Financial projections: Detailed financial forecasts, including income statements, balance sheets, and cash flow statements. This section demonstrates the business’s growth potential and profitability.
• Use of funds: A breakdown of how the requested investment will be used, such as product development, marketing, hiring, or expansion.
• Key milestones: Details about the company’s progress and achievements to date, as well as the milestones that the investment will help the business reach.
• Risk assessment: An acknowledgment of potential risks and challenges, as well as strategies for mitigating them.
• Marketing and sales strategy: An explanation of how the business plans to acquire and retain customers, including marketing and sales tactics.
• Exit strategy: Information on potential exit strategies for investors, such as acquisition, initial public offering (IPO), or buyback options.

As part of Pioneer Group’s Accelerator Programme, we support early-stage companies with drafting a business proposal and creating compelling slide decks that can be used in pitching for life sciences funding. Find out more.

Step 3: Building Relationships with Investors and Securing Life Sciences Funding

Having a well-thought-out, detailed pitch document is, of course, essential, but to successfully secure funding, you also need to combine this with building strategic relationships with prospective investors.

As mentioned above, try to identify investors whose interests align with your specific field within life sciences (e.g. biotech, pharmaceuticals, medical devices). Tapping into your existing professional network can help here; your mentors, advisors, and other industry contacts may be able to introduce you to potential investors or provide valuable referrals.

Getting a personal introduction or referral through your network may not always be feasible. In this case, you should look at other ways to get yourself and your business in front of your target investors. Industry-specific events, conferences, and seminars are excellent opportunities to establish connections, and many regions now have start-up pitch competitions, where you can showcase your venture to potential investors. Attending (and hopefully winning!) at these events can increase your visibility and credibility.

On the subject of credibility, assembling a team with a proven track record, relevant expertise, and a history of success can also help boost your standing. Investors will want to know that you have a capable and experienced team to drive the business forward. Ideally, you will already have advisors or the equivalent in the form of non-executives with appropriate sector expertise. You can mention their involvement as a form of endorsement.

Likewise, you should mention evidence of any milestones you have achieved, such as successful pre-clinical studies, partnerships with research institutions, or positive feedback you’ve received from other experts in the field.

Funding Tips From Our Partners

“We really want to see a clear pitch that’s not only about the technology, but what the commercial market is for your business and what the root is for a return on our investment.”

“One of the things that investors are looking for that perhaps isn’t obvious from the start is that they need you to be looking at least one round ahead. You don’t just need to think about what your current target investors are looking for, but also what the next investors are looking for, in order to find the right investor.”

“Much as it’s a bit of a cliche, the relationship is like a marriage. Theoretically, you’re going to be working together for the next 10 or 20 years depending on how the business goes. As such, you need to get on with each other, make sure that you’re on the same pathway, have the same vision, and an understanding what you want to get out of the company. Being clear on this helps avoid having conflict later down the line.

“It might feel strange to an entrepreneur that’s looking to raise investment, but ultimately before any investor actually writes a check, they’re looking at ROI and exit strategy, even before they’ve invested. It’s important that you have a clear understanding of where that exit is going to come from, when it’s going to come, and some degree of certainty what the value of that return is going to be for them as well.”

“It’s very important to raise enough money to take your business to the next milestone. If you fail to do that and you have to go back to your investors to ask for more, that additional money is very expensive. So you might in the beginning think you don’t want to raise too much and dilute the company, but it’s actually better always to raise too much money.”

Persistence is key

Don’t forget securing funding for a life science start-up is an incredibly competitive process; not every interaction will result in investment. Be prepared for rejections, and always use any feedback you receive to refine your pitch.

With persistence, a strong value proposition, and a well-prepared strategy, you can increase your chances of building investor relationships and securing the life sciences funding you need.