Establishing a life science start-up can be both thrilling and challenging, especially when seeking valuable start-up funding from investors. Really understanding what investors are looking for can, significantly shape your start-up’s trajectory.
With this in mind, Pioneer Group shares some top tips directly from investors themselves on what they’re looking for in a life sciences company and highlights five key factors that life science entrepreneurs and start-ups should focus on to capture the attention and support of potential investors.
1. The Right People
When it comes to offering start-up funding, one of the primary factors that investors look for in life science companies is the team behind the innovation. A strong, capable, and experienced leadership team can make all the difference in steering a company towards success.
Investors often seek a balance of scientific expertise and business acumen within the leadership team. Teams that demonstrate a history of successful collaboration, effective decision-making, and resilience in the face of challenges are far more likely to garner investor interest and support.
Dr Sophie Dale Black, Director of British Business Bank (Midlands and North of England), says: “Most investors look at the people first. And not only do they look at those running the business, but the people advising in the business too. Businesses ultimately need to make sure they’ve got the right people around them at the right time.”
2. The Commercial Market
Understanding the commercial potential of a life science product is paramount for investors providing start-up funding. They want evidence that the company has thoroughly researched and validated the market need for their innovation.
A comprehensive market analysis, which includes the size of the addressable market, growth potential, and potential barriers to entry, can help instil confidence, as well as being able to articulate a compelling value proposition and a clear go-to-market strategy.
Sandy Rind, Venture Capitalist Investor at Mercia Ventures, said: “Beyond the management team, we really want to see a clear pitch that’s not only about the technology – we know you love it and we know that that’s your area of expertise – but we also want to see what the commercial market is for that business and what the root is for a return for our investment.”
3. Is there demand?
Early-stage companies that can showcase a strong demand for their product or service, backed by real-world interest and engagement, such as through partnerships, collaborations, pre-orders, or early customer adoption, are better positioned to secure start-up funding. Life sciences companies must establish a tangible connection between their innovation and its potential impact on patients, healthcare providers, or other end-users.
Line Gauteplass, Investment Manager at Foresight Group, said: “In this sector, you see a lot of very clever people and very clever products and technologies, but actually is there demand for the product in the market? That’s often where it goes wrong. We need to know what the go to market plan is, and how are we going to commercialise the products?”
Helping early-stage life science businesses predict where it could go wrong (so you can then get it right) is at the very core of what we teach on the Pioneer Group Accelerator Programme – an eight-week programme of entrepreneur coaching during which we help you test your theories and explore the possibilities in a risk-free environment. Find out more and check out our upcoming programmes here.
4. Return On Investment for Start-Up Funding
Investors are, naturally, going to be focused on the potential returns on their investment. Having clear and realistic financial forecasts, a sustainable business model, a clear path to profitability, and an understanding of the funding required to reach key milestones is essential.
Lewis Stringer, Senior Manager of the UK Network Team at British Business Bank, said: “It might feel strange to an entrepreneur that’s looking to raise investment, but ultimately, before any investor actually writes a check, they will be looking at what the return’s is going be. They are already looking at the exit even before they have invested. So, it is important that you have a clear understanding of where that exit is going to come from, when it is going to come, and some degree of certainty as to what the value of that return is going to be as well.”
5. Meet Your Investors
Building a strong relationship with potential investors is not just a formality but a critical aspect of securing start-up funding. Investors want to know the people they are investing in and understand the company’s vision, values, and culture.
Life sciences start-ups that actively engage with their investors, provide updates on progress, and seek input and feedback are much more likely to create a collaborative and supportive partnership. Investors appreciate being kept in the loop and having a clear understanding of the company’s strategic direction.
Line Gauteplass adds: “I think meeting founders and entrepreneurs is key. It’s their business, it’s their baby. Founders and entrepreneurs are so enthusiastic, they know the sector so well, their product, the market, so it’s really important that investors have the opportunity to meet with them.”
The idea is just the start.
Pioneer Group specialises in pre-seed and seed funding.