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Berkeley Haas LAUNCH 2019

Bullseye these Ten Slides and Get Funded

Darren Cooke
Sep 6, 2019 · 9 min read

Over the past few years I’ve read more than a thousand fundraising presentations and heard hundreds of live pitches from seed-stage life science companies.

In 2017 and 2018 I chaired the Medical Device and Digital Health screening committee for Life Science Angels. Each year, the committee receives about 200 applications, and from there (with tremendous help from our LSA Fellows) we invite 40 companies to pitch live, in search of the five companies that we recommend for seed-stage investment.

I am also the advisory chair for the Bio Track at UC Berkeley’s SkyDeck. Companies accepted to SkyDeck’s accelerator cohort receive a $100k investment (in addition to curriculum, mentoring, office space, and a huge demo day). Coincidentally this vertical also gets about 200 applications each year, to fill a handful of spots (that’s just the Bio Track — the rest of SkyDeck gets many times more).

So I see a lot of fundraising presentations, but it wasn’t until I read 100 decks in one sitting for an investor conference — with the goal of choosing five companies to meet with — that I understood what made a compelling life science deal pitch.

I’ve distilled it to ten slides:

1. There’s a problem

2. It’s a big problem

3. You have a solution

4. It’s a great solution

5. Your solution is irresistible to someone, who will buy it at a profit to you

6. Your team can do this

7. The regulatory pathway is known and achievable

8. IP gives you a competitive advantage and FTO has been considered

9. The requested investment will take you to a major value-inflection point

10. There is a history of exits in your space at enticing valuations

Makers and Breakers

For a fundraising pitch to succeed you must explain and prove the first five points. How you do that is up to you, but investors must be convinced that what you’re saying on these first five slides is true, or they will move on to another opportunity.

This seems obvious, but many companies start with something else (in my experience leading with a team slide, your technology, or touting your patents usually leads to a pass). And again, it’s not enough just to say there’s a problem, you have to prove it.

Here you show the costs of the problem and how many people are affected by it, or any other metric that makes sense. Are there different costs to patients, payors, hospitals, or government entities? Who bears most of the burden? Investors are looking for scale, scope, and market size here — there has to be a huge pain point for somebody.

This slide is where you prove that your solution (whether it’s a medical device, research tool, therapeutic, diagnostic, SaaS platform, digital app, etc.) actually fixes the big problem. Imagine you’re explaining your solution to colleagues in your field in a way to convince them that you’ve solved the big problem. What would you need to show them? This slide is where you put that information. Investors want to see the data too.

Don’t assume that the reader won’t understand the details of your technology or the proof that it works. Odds are that some will, though if they don’t, investors will find experts to evaluate your data. It’s not enough to say you’ll follow up later with details (on this or any other point). Every extra step added to the process increases the chances that the deal won’t happen.

Here you prove that your solution trounces the competition. By that I mean it is at least ten times better than any other option, including the current standard of care. Keep in mind that the competition is not just other solutions from large and small companies, but also the status quo and/or doing nothing. Investors will assume that existing and coming-soon technologies are constantly improving in secret laboratories somewhere. If you’re going to win, you have to leapfrog them, hence you need to be ten times better right now.

Don’t be afraid to put the competition up front. Not only does it give you the chance to prove how great your solution is relative to other players, but healthy competition helps prove your point that the problem you’ve solved is a big one.

This is the trickiest slide, and where most pitches fail. Unfortunately, many companies have only a “field of dreams” business model — if we build it, the (customers) will come. Don’t assume an interested investor will follow up on this — it is likely your only chance to prove you have a real business.

On this slide you explain how everyone in your stakeholder ecosystem makes money from your solution — not just you. And it needs to be enough money that each party can’t resist doing something different from what they’re doing today. Remember every change comes at a cost, whether it’s financial, switching, or opportunity costs (and most likely all of them). Figure out what those costs are and prove that the benefits of adopting your solution eclipses them. And identify which party will pay you enough money for your solution that it will eclipse your costs of providing it. (If you’re struggling with this, time to take a Lean Launchpad or I-Corps course.)

As an aside on life science company business models, if you have a “pay for savings” or “pay for revenue” model — where a person, payor, provider or business pays something now with the promise that they will save money or make money later — this is almost always a deal-killer. The hurdles for adoption are higher than you imagine, no matter how tempting the logic behind the model. Consider carefully if there is a reimbursement pathway, a regulatory requirement angle, or a “share of savings/revenue” model that you can pursue. If you can’t, then understand the level of proof around an ROI that your customer will need before they pay anything up-front for a promised future benefit — and then multiply it by ten. Same advice for a “patient pay” model. In the US, people don’t pay for healthcare except in unusual cases — if you’re one of them, prove it.

I recently wrote an article about how to nail this slide — see more here.

Value-Changers

If the five items above are not addressed and proven, the rest of the pitch doesn’t matter. If you don’t have a solution that really works, or a profitable business model, you can’t save the deal with a stellar team, robust IP portfolio, or an easy regulatory pathway. The following five items just affect the value of the deal — sometimes to the point of making it or breaking it — but usually the calculus is a bit more subtle.

Who are you and why should an investor believe you can run and scale a new company that solves the big problem? The most compelling teams of course are the ones that have done it before, have a track record of execution, have unusual expertise in the space, and complementary skills. But if that’s not you — if you’re first-time founders or are experienced but it’s your first time in a new space — who are your stellar advisors to help keep you on track?

What will you need to do to get the regulatory clearance required for your business? Who have you consulted on this and what is the timeline, required experiments and trials, and predicted costs? Referencing that you’re working with a regulatory expert and have a detailed plan is usually sufficient here. Most investors are not experts on regulatory issues and will be assured that you’re handling the issue professionally, but they do need to see that you are.

Most people are surprised to see IP this far down on my list, as I’m an IP attorney. (Aside: usually a life science company’s IP is based on patents, so that’s what I’ll discuss in this section. If you have significant IP in trade secrets, exclusive data, or copyrights, please consult with your counsel on how to pitch it.)

Having patent claims that cover what you do are crucial for the success of most life science companies, and mandatory in therapeutics. But remember that a patent position gives you a competitive advantage by letting you try to stop others from doing what is in your claims. This means that, if your claims cover your solution, your patents should dissuade others from copying your technology, and that’s great for business. If your claims are broader than your solution, that’s even better, as they may give you a competitive moat around your technology. However, many companies mistakenly think patents do more. Specifically:

  • Patents do not give you the right to do what’s patented or licensed. This is confusing to most people, especially when a patent is licensed to the company, because in common parlance a license gives you the right to drive, fly, treat patients, practice law, etc. But a patent gives you only the right to stop others from doing what’s claimed. It’s possible and not uncommon that there are patents owned by third-parties that could affect your freedom to operate (aka “FTO”), which means you still need to search for and carefully consider third-party patents.
  • An issued patent does not mean your solution is a good one, that someone wants to buy it, or that it works. Patent offices don’t assess any of these questions. An issued patent is not an endorsement of the patented technology or solution, it is only an indication that you’ve claimed something new, useful and non-obvious over anything that had already been published. If you have a bad business model or a mediocre solution, great patents can’t save you.

A note on FTO. It can be an expensive and nearly endless endeavor to search for and understand every patent and published application in the world that could affect your business. To makes matters worse, the review can never conclude because new patents and applications publish continually, usually eighteen months after filing. Many fundraising companies see an FTO search as only an annoying requirement of investor due diligence. But it’s actually most important to you. As a founder you’re investing your time and resources in your endeavor. A bad IP position may hurt your competitive advantage, lower the odds of success, or reduce your valuation, but a bad FTO issue could kill your company. If you don’t have unlimited time and money, the best practice is to do a thoughtfully tailored FTO analysis that significantly reduces your risk (e.g. searching for patents of your closest competitors, or using a limited set of keywords, with a geographical scope). And then explain the scope of your FTO search to potential investors with an explanation of why it makes you comfortable that you have freedom to operate around third-party patents. If you’re comfortable, investors usually are too.

Here is where you set out your investment “ask” — including all of the relevant deal terms. State how much you are raising and your valuation. Note that if you’ve based your valuation on press releases you found on the internet, there’s a good chance that you’re looking at outliers and/or dumb money investments. Smart early-stage investors expect to have a 25% equity stake in your company post-money, so you can do the math (hint: valuation is about three times the size of your raise). Anything outside of that framework will usually lead to a pass on the deal no matter how compelling the rest of pitch. If you’re raising on a convertible note or a SAFE, even though a valuation cap is not the same as valuation, be aware that it’s enough of a guidepost that most investors will treat it that way.

Next, explain where your requested investment gets you. It should be a major milestone, such as regulatory approval, first-in-human, beta tests, or clinical trials, which if achieved will significantly increase your company’s value. It’s helpful here to show a timeline and details of when and where the investment money will be spent.

Remember that investors are looking at your pitch because they want to make money. Even with people who are knowledgeable in the field, it helps to give concrete examples of companies in your space (or which are otherwise similar) that have had big exits and made money for investors. Here’s where you can show your projected sales growth, but the main use of that hockey stick graph should be to overlay possible exit points — based on actual sales multiples from actual exit comparables of similar companies.

Conclusion

Remember that a smart investor is considering dozens of deals other than yours, and a single omission, unaddressed topic, or lingering question can move you right to the pass pile. To succeed where the odds are slim you have to stand out from the crowd. If you nail each of the ten slides above, you probably will.

The Startup

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Darren Cooke

Written by

IP Attorney and Investor | UC Berkeley SkyDeck | Faculty for NSF I-Corps and Berkeley Haas LAUNCH | Life Science Angels

The Startup

Medium's largest active publication, followed by +752K people. Follow to join our community.

Darren Cooke

Written by

IP Attorney and Investor | UC Berkeley SkyDeck | Faculty for NSF I-Corps and Berkeley Haas LAUNCH | Life Science Angels

The Startup

Medium's largest active publication, followed by +752K people. Follow to join our community.

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