Funding within the Life Sciences sector is influenced by many factors, and as we all know, the last few years have been increasingly difficult for companies to secure investment or raise the much-needed capital to advance their products and technologies (however there have been some amazing businesses emerging and acquisitions happening!).
While on my travels and during my conversations with those supporting entrepreneurs, I was shocked to learn from one venture builder that 95% of health innovations never makes it to the patient, a staggering figure. However, it’s important to note that this isn’t always due to the inability to raise investment.
It was important for me to gain a deeper understanding of the intricacies behind exploring the journey from an initial idea to raising the capital needed to bring scientific and technological advancements to the next phase and really understand the process for everyone involved. I will be honest, this area is new to me, and I’ve had to upskill myself, but it is learning that is essential for us to better support our clients.
There are so many factors that influence funding, such as economic conditions and market dynamics (venture capital trends and M&A activity), and this is so important in helping stakeholders in the Life Sciences sector navigate the complex funding landscape. However, from speaking with those involved in supporting health innovations, to the investors and the stakeholders actively raising funds, I really noticed an increasing interest in understanding the story behind a product or should I say the idea. It’s the Scientists, Surgeons, the Tech Gurus and beyond, who need that all important buy-in, but they often lack the time to fully develop and launch their ideas, which really is a shame, as ultimately its those on the ground that know what they need and can bring an innovation to light, but the resources to do so is often limited!
So…despite the challenges being faced in what has been a more difficult time for activity, it’s not all doom and gloom. There seems to be a positive shift, with promising businesses emerging and businesses making significant advancements. The landscape is evolving, and with the right approach, there are still plenty of opportunities for success.
But how do companies achieve the all-important funding? Now before I continue, I am not saying this is how it is done or by any means claiming to be an expert here, what I am telling are my findings and the trends that have emerged and the recurring theme for the want to understand the journey and the story.
Below we explore the frequent conversation points:
Understanding the Value Proposition
- Clarity of Vision: A powerful narrative helps investors understand the vision and mission of the product. It explains the problem the product addresses, the solution it offers, and the potential impact on patients’ lives.
- Market Need: Investors want to see clear evidence that there is a genuine market need for the product, as it is such a competitive space! A well-articulated story can demonstrate how a product or health innovation fits into the current (or future) market landscape and its potential to address unmet needs.
Differentiation and Competitive Advantage
- Unique Selling Points: The story helps highlight what makes the product unique compared to existing solutions. Investors need to understand the competitive advantages and the differentiators that set the product apart in a crowded market. What are your differentiators and how can this be brought to life?
- Barriers to Entry: A detailed narrative can illustrate the barriers to entry that competitors might face, reinforcing the product’s competitive position and being transparent from the off.
The Risk
- Development Milestones: By detailing the journey of the product or ideas development, including any past milestones and future plans, investors can better assess the risk and likelihood of success. This transparency builds trust and confidence.
- Regulatory Pathway: Understanding the regulatory strategy and progress is crucial (of course). However, a clear story can outline the regulatory hurdles already overcome and those anticipated, providing a realistic timeline for approval and the hopeful commercialisation.
Emotional Engagement
- Human Impact: Stories that emphasise the potential human impact of a product can be particularly compelling. Investors are often drawn to products or ideas that have the potential to significantly improve patient outcomes, ultimately it is all about bringing the innovation to the patient.
- Personal Connection: A well-told story can create an emotional connection, making the investment opportunity more relatable and engaging. This personal touch can sometimes be the deciding factor in securing funding.
Commitment and Expertise
- Team Credibility: The narrative often includes the background and expertise of the team, showcasing their commitment and ability to bring what they are wanting to achieve to market. Investors need to trust that the team has the skills and experience to execute the business plan.
- Strategic Vision: A comprehensive story demonstrates that the team has a shared strategic vision and a clear plan for achieving their goals, which reassures investors of the products possibility.
Long-term Potential
- Scalability: Investors want to know that the product has long-term potential and scalability. The story should outline how the product can evolve, expand its market, and drive future growth.
- Exit Strategy: Understanding the endgame, whether through acquisition, merger, or IPO, helps investors see the potential return on investment and the timeline for realising those returns.
In summary, a compelling story provides a complete view that includes the scientific, commercial, and human aspects of the idea or product. Now as I mentioned, I am not saying any of the above are the ‘rules’ to success. But as with anything, language is emotive, and relationships and trust sell. From my findings, the ‘story’ helps investors make informed decisions by providing a comprehensive understanding of the potential, the team’s capability, and the overall strategic direction. This approach appears to be quite fundamental in building investor confidence and securing the necessary funding to bring health innovative to the market.
We would love to continue learning and engaging in discussions about investment within the Life Sciences sector. Please feel free to reach out to kirsty@nexalifesciences.co.uk to keep the conversation going.
