What Makes a Good Life Sciences Investment?

How to get an investor for your business and the definition of a life sciences company.

is now a well-known fact in the venture capital and private equity industries that the world of life sciences is a booming space, ripe with potential — but how do they discern what companies are worth the investment in the long run, and what qualifies businesses as life sciences entities?

The potential of the company foretells its success

#1 Having a great management team

It’s okay if you don’t have a complete team, but you must have enough key players with the relevant skills and experience. Always remember that great ideas will turn into great success; surround yourself with strong and well-balanced team members and you’ll be making great progress towards success. As an example, a credible Chief Executive Officer will secure financing if supported by a wise and experienced Chief Financial Officer, a knowledgeable Chief Technical Officer, and a well-known Chief Marketing Officer.

#2 Risk management

Understanding your business and the future it holds is key to garnering investors. Have a well-documented plan, which shows them that your business has a great strategy and know ahead of time that venture capitalists will convert the information you share into numbers. Facts and figures help them to see if your venture makes sense. Also be aware that investors know that startups tend to overestimate their targets, and this makes investing in you a risky endeavour. As such, only written and proven milestones are credible to them, and if you have traction — meaning you’ve achieved one or more significant milestones — you’re ahead of the game.

#3 The reward

For investors, your venture needs to make money, and it will only be a success story when it makes financial sense and the money they’ve invested isn’t tied to your business for too long. Simply put, the capital they invest in you should support your business for as long as it’s needed, and the revenue you make will help them to reinvest their capital in another company.

#4 Market potential and size

Have you stopped to ask yourself whether your product has potential? This is a key step in building the authority of your company, and you cannot build it behind lousy products. Ensure the quality of what you’re creating and offer your users a great experience; people will buy it, talk about it, endorse it, and build its influence, thereby solidifying your place in the market. It’s also about how big your market will be. What is its potential market size? Can your business scale across regions? From the investors’ perspective, once they see that the growth will outdo the cost of their investment, they will be confident that it will be a successful venture.

#5 Product’s value proposition and strengths

Venture capitalists always look for products that are not just a commodity: it has to be something strong, attractive, and hard to replicate. Ensure that your product has a great value proposition, with efficient processes, a reasonable pricing structure, high barriers for entry (for competitors), and that it is something that your target market will be dependent upon.

#6 Deliverability

Ideas alone have no value, so you’ll need to have some form of commercialization plan in place. A big help would be if you have begun gaining real revenue from credible organizations that have faith in your product.

The categories of Life Sciences companies — producing innovation for the betterment of humanity.

Prior to even approaching an investor, it’s important to define what your company does and under which life science category it falls. The categories can range from pharmaceuticals and biotechnology to medical devices and biomedical tech, nutraceuticals and cosmeceuticals, to food processing. Above all, your mission should involve the creation of products that improve the lives of human. Here’s a look at the broad sectors in the life sciences industry:

Pharmaceuticals

A vital part of society, these entities research, develop and distribute medicines to cure, treat, or prevent diseases and conditions. They produce generic or brand medicines or medical devices.

Biotechnology

Biotechnology firms research, create and manufacture commercial products with most having medicinal applications. What sets them apart from pharma companies that they use the processes of living organisms to manufacture products or solve challenges.

Medical Devices

These companies develop medical surgical instruments to diagnose, prevent, monitor and treat medical conditions. Devices can come in the form of an instrument, apparatus, machine, implant, software, or similar formats.

Contract Research Organizations and Contract Manufacturing Organizations

CROs and CMOs support the pharma, biotech, and medical devices industries; they help to test, refine and market their clients’ drugs and medical devices.

Plan ahead and plan well to get that investment. Know your space.

At the end of the day, creating a product or service requires capital, and if you follow the above, your company should have a worth chance of catching an investor’s eye. Equally important is the categorization of your business as a Life Sciences entity. Research your space, know the competition, and make it your goal to forward innovation that stands out.

Currently the Head of Strategic Research for Xeraya Capital, Kumar has more than 25 years of experience leading business development roles in global companies.