Nine Things Animal Health Start-ups Need to Know Before Pitching to Investors
Animal health is currently witnessing exponential growth in its start-up scene, with an increasingly large number of new businesses attracted to the sector every year. Dr Meghan E Burns used her skills as a veterinarian, communicator and marketer to found Connect Veterinary Consulting – an agency dedicated to helping animal health companies stand out as industry thought leaders. She gave IHS Markit Animal Health an insight into her advice for start-ups.
So, you have a great technology and a dream? Congratulations but, in some ways, that’s the easy part. The real challenge is making that dream a reality.
Often, that comes down to one thing – funding. How you get it, where you get it and, for that matter, whether you get it depends largely on what you need to accomplish, how you present your opportunity and what you’ve accomplished to date.
It has been my experience in coaching teams for various animal health or agriculture forums that a well-crafted pitch deck with the right amount of science interlaced with the right amount of financial data, realistic revenue projections and a realistic view of the regulatory path forward will help attract the investors you seek. Here are some key points in preparing for such a pitch:
1. Get your pitch on point
Before you get up in front of a large investment forum audience or present to a small group at a family office, investment bank or business development staff at a pharma company, you need to refine your pitch.
While that pitch varies slightly based on your audience, all will want to know about the science supporting your technology, your current stage of development, work remaining, timeline to completion, current financing, the future investment required, potential obstacles (regulatory, financial, scientific), intellectual property protection and, of course, a realistic assessment of the size of the opportunity.
Know who you are pitching to. An investment banker looking for equity and a profitable exit in an operating company, and a pharma company executive seeking to acquire promising but early-stage technology will be looking for different things in your pitch deck. Do you go deep with the financial data or devote 12 presentation slides to scientific detail? It depends. This is where hiring an experienced consultant to help refine the pitch deck is money well spent.
2. It’s all in the delivery
Of almost equal importance is pitch delivery. We have all slept through lectures and boring presentations. Make sure you are represented by an engaging, persuasive speaker who can confidently answer all questions and who can adapt the pitch to a wide range of listeners. Mark Twain with a science degree might be an ideal model.
3. Realism versus ‘all or none’
Be realistic about the sum of money you seek from investors and have an appropriately detailed plan for its use.
Many start-ups naively ask for the full amount needed to complete the work required to get their product market. Unless your needs are unusually modest, that’s bound to be a daunting sum to raise in one round. Instead, it’s best to correlate financial needs with critical steps in the development process (considering, of course, the need to meet payrolls, pay rent and support the other activities that keep a company afloat).
Do you need cash to open a file with the US FDA? Complete proof-of-concept studies? Run pivotal trials? Pay for contract manufacturing? At every stage of development, there are landmarks that are indicators of decreased risk and increased chances of success.
So, instead of looking at all the money you need to get to the finish line, what would it take to get to the next step (or steps)? Precise ‘asks’ attract new investors and encourage current ones to fund the next round. Getting to the finish line is the goal but, as the saying goes, it’s vital to not over-reach your headlights.
4. Don’t oversell or undersell your revenue estimates
It’s easy to crank up your revenue estimates but pie-in-the-sky projections will send investors running for the exits. If you insist your activity-tracking dog collar will achieve $80 million sales in five years when the current total market for similar products is <$20m, investors’ eyes will likely roll.
By the same token, don’t be unduly pessimistic. Undercutting your sales projections will, of course, also leave investors with questions. An honest appraisal of your prospects instills investors with confidence.
5. Not diluting control and ownership
Make sure what your investors want in return for their cash is something you can live with. Companies that desperately need money to stay afloat or reach their next milestone may be tempted to give up more equity and control than is wise. Know what you are willing to relinquish in equity before you begin to negotiate with a funding source. Act in haste and you may regret at leisure.
6. Be realistic with your timeline to market
Know what progress you’ve made and the distance yet to travel. Do you have encouraging proof-of-concept data? That’s great but chances are you are still many miles from the goal. Starkly evaluate what still needs to be done and don’t minimize it.
You will be asked these questions regularly. Where are you in the approval process? Have you met with the FDA? Received approval for pivotal trial protocols? Have you evaluated CMC concerns? If not, why not? You can count on delays and setbacks. Funding sources will want to know how you plan to navigate them.
7. Know your regulatory path
It’s essential to know the path to market and how to leverage a relationship with the appropriate regulatory body. If the FDA regulates your product, do you have the funds necessary to open a
New Animal Drug Application? Have you met with the agency or are you merely guessing about what will be needed for approval?
Don’t underestimate how complex, lengthy and expensive the arduous path to approval will likely be. The facts may be hard to face but wise investors will be aware of them and will expect you to recognize them too in your pitch.
8. De-risk, de-risk and de-risk
The more de-risked your product is, the better.
Solid data, progress to date, market potential and a talented management team all help win investors’ hearts and wallets. So, it’s essential to look for any reasonably fast and inexpensive steps you can take to bolster investor confidence.
Will a second, more robust proof-of-concept trials show unequivocally that your compound is effective or safe? Will the addition of a trusted, veteran industry professional to your board build confidence? Are there additional product indications that you can target to expand your revenue potential?
9. Know your unique selling proposition
It’s critical that your pitch underscores your unique selling proposition (USP). Surprisingly, many start-ups and even early-stage operating companies, don’t understand (read point four) their potential competition, the potential demand for their product and how any differentiation they bring to a given category will or will not drive sales.
Can you compete and win on price, form factor, innovative mode of action, safety, efficacy, flavor, and convenience? Whatever your advantage may be, have a concise and robust USP at the ready for investor meetings. Interrogate your product until it confesses its strengths.