Name: Sarah Johnson, PhD
Description: Sarah Johnson completed a research project while a PhD graduate student several years ago in which she engineered a unique peptibody. After several years of working at an established biotechnology company, she wishes to launch her own business based on an idea she has for rapid development of antiviral peptibodies.
Sarah continued to work on the side to develop her unique process for quickly developing peptibodies that recognize and destroy RNA viruses. She started learning about investors for her business in her spare time. The COVID-19 pandemic brought new interest in antiviral biologicals, accelerating the timing for launching her business. So she is trying to learn all she can about investors, reaching out to the biotech community for advice on finding them, and learning which type of investors she should engage first.
Scenario, Part 2A
A friend from Sarah’s local Women in Bio group, Monique Aster, lets Sarah know about a seminar on finding biotech investors for early entrepreneurs that’s being presented by a local biotechnology incubator. They have been sharing advice since they found out at a meeting last year that they are both developing something for pharma and are at a similar, early stage of developing their businesses.
The seminar on finding investors is being offered by the Biotech Shot incubator. They have federal and state funding called FAST that supports research.
What does FAST funding do?
It helps state or regional organizations produce programs that increase the number of SBIR/STTR proposals and awards locally.
Scenario, Part 2B
Sarah attends the seminar and learns a lot about different types of investors. She meets a number of scientist entrepreneurs at various stages and asks lots of questions in a gathering after the presentation. She talks with a successful biotech entrepreneur, Mandy Jones, PhD.
Hello, I am just starting a peptibody business. I was intrigued by your talk when you recommended early communications with strategic investors, such as pharma companies that might be interested in a product with pharmacological potential. Can you say more about what you mean by “early”?
I mean very early. If you have a concept that you think is a good idea, it’s not too soon to start building relationships inside a pharma company or other organization that might be interested. It takes a long time to build these relationships and make your way up the hierarchy to the decision-makers.
I didn’t realize that! I might have waited until I had preliminary data for example.
Yes, if it’s a strong concept and your background is strong, you can get started at the idea stage. Then keep coming back as you reach new development benchmarks and show them the progress you are making.
That’s good to know, thanks! How do you go about it? Do you just send a concept description by email?
They get a lot of emails, so that is usually not enough. Try to get a warm introduction. Even a lukewarm introduction can help your request for an appointment rise to the top. For instance, you could reach out to an alumnus from your school who once worked at the company and still has some connections in research and development and see if they would be willing to make an introduction. Try to get a face-to-face 30-minute appointment if possible. It’s better for starting a relationship.
These are great tips. Thanks.
Here’s another. It helps to learn about who you will be meeting with before you go in. One way to do that is to attend virtual bio partner meetings.
Scenario, Part 2C
Sarah next approaches Sasha Thomas, PhD, a molecular geneticist with a successful company that was featured in this month’s Investments in Biotech*, as one of the top ten companies in the genetics sector to watch.
Hello, Dr. Thomas. I read your interview in Investments in Biotech this month. It sounds like you have had a lot of success in attracting venture capitalists to invest in your genetics company. I just learned some information about how to position my company to be bought out by a pharmacological company, but I am also interested in starting a business of my own. I was wondering if you could share any tips on how you established an independent business? I’m still at the proof of concept stage and will soon form an LLC, but I want to learn more about the whole process of investments. When do you start looking for venture capital investments?
It’s quite a ways down the line. First, you need enough money to finish your proof of concept. That’s typically some combination of government grants like SBIR and accelerators. Then, you may even have to resort to crowdfunding or friends and family to get to the point where you can launch your startup and start attracting more funding.
Oh no! Is that when you talk with venture capitalists?
Usually not yet. You’ll need to incorporate so you can give your investors some ownership, and then you can try to attract some angel funding. Angels invest earlier and take bigger risks and therefore expect to end up with a larger share of your company, like say 25%. A lot of them give you useful advice, too, based on their experience. You can find them by looking at who invested in companies like yours or by looking for angel groups that invest in your industry on the website www.angelcapitalassociation.org.
I found the best way to meet investors is to attend investor meetings where investors are talking with people in your industry and to network as much as you can. Have lots of business cards available.
To answer your question about when you will be talking with venture capitalists, they usually want your company to have a value of around $10 million before they invest.
Yes, I think that will take a while. Thank you. This has been a great overview.
My pleasure. We all started at the beginning, and so many people helped me along the way. I am happy to do the same for the next person.
49 Biotechnology Accelerators and Incubators – List of the best accelerators and incubators in 2022 developed by Failory, a newsletter for startup founders.
Angel Capital Association – Find angel investors in your area.
National Venture Capital Association – Organization for venture capitalists.
*Investments in Biotech is a fictional publication.
View Sarah Johnson Case: Part 1 – Invention Disclosure