How To Stop Investors From Falling Asleep In Your Science Pitch
Your initial R&D concept is compelling and the science backs it up, but how do you convince investors to fund your project without having them fall asleep during your pitch?
Battery technology expert Professor Jose Alarco learned how by trial and error over 12 years building an R&D consultancy before re-joining academia to secure new funding and industry collaborators in pilot-scale research.
Over his career Alarco has helped attract more than $30M in research and commercial investment. He holds around 70 patents in 13 patent families on nanomaterials and their applications and is a former co-founder of ScienceWorks and the Very Small Particle Company Ltd.
He now leads both fundamental and applied research into new battery technologies through the QUT Centre for Materials Science, Clean Energies Centre, Future Battery Industries CRC projects, and the ARENA H2Export program.
What’s in it for them?
Money. Investors are interested in money.
Alarco started his private R&D business with fellow researcher Professor Peter Talbot, in a tin shed, and their first job was to contact investors.
Funds raised would be used to develop scalable, commercially viable processing of nanoscale complex metal oxides, and incorporate the materials into applications for current and future global markets, such as vehicle exhaust and industrial catalysts, batteries and electronics.
“Initially we presented how great the science was, how great the potential technology could be,” Alarco said.
“We had wealthy investors just falling asleep in front of us. This happened about four or five times before we thought we were doing something completely wrong.
“Telling them about the potential dollars they could make woke them up.
The duo found that providing a good balance between the technology and potential markets and profit margins — similar to a business plan — kept investors engaged.
“Over time and with more experience in raising capital, this balanced pitch seemed to work best. The morning after one later event in particular, investors had subscribed half a million dollars.”
This approach was very different to his first one but, according to Alarco, you learn in the process and really need to be self-critical.
“For academic researchers, going into business is not very common, however, understanding similarities between business propositions and grant applications can be very useful.
“You can get it wrong in the beginning but need to be self-critical and have faith that it will be alright.”
Sometimes it’s just not for them
Creating investor confidence is a big part of commercial and industry funded R&D but some investors, in Alarco’s experience, avoid the risk of future markets, including one large investment house which told his company there was no business in batteries.
“We were asking them to position themselves ahead of the battery market, so they would be in the best position five years down the track,” Alarco said.
“The signs for battery markets were everywhere with the advancement of electric vehicles and renewable energy storage.
“Those technologies needed batteries which might have been costly then but soon, with larger scales, those costs would have dropped and batteries would have become everyday products.
“Some companies will only focus on a market that is in their near future. And, sometimes you just need to let them be wrong.”
Don’t oversell
Because experienced industry investors can read through preliminary results and understand the true form of data, overestimating your results will just make you look bad.
“It can be misleading to present results that look great in theory but won’t actually perform the same way in a product,” Alarco said.
“I’ve seen this happen with claims of new battery materials competing with lithium-ion energy storage in batteries.
“It looked impressive academically to claim 100 per cent of the material’s stored energy capacity when discharged over a large voltage window, but when used in a battery only 50 percent or less of that energy was useable, so the figures didn’t add up.
“It’s a result of experience to be able to read through results and filter misleading claims.”
Invest in good packaging
If the objective is to attract industry funding, show investors a product that will make them feel comfortable about giving you a lot of money.
“Industry needs to generate income — to have a product and sell it. The closer your prototype is to an actual product and more reliably the cost projections leave a healthy profit margin, the easier their business decision becomes,” Alarco said.
“If you can show them a product and have some preliminary data about the manufacturing costs, sale prices and the potential margin that makes it a good investment, the easier it will be for them to invest.”
Very early crude prototypes don’t really work either, according to Alarco, who uses his own work in optimising battery materials as an example.
“The black powder we use in batteries would look like a dirty pile to an investor. Instead, we show them how to make that into a battery they could use in a radio or their house and they find the product appealing and understand its value better.
“Likewise, scientifically and technically we have very good work in terms of sensors and devices, for example. But a laboratory prototype might look like a board with many wires and connections going everywhere.
“If you can afford the design work to package your device as a neatly presented commercial product, that prototype is going to be seen differently, taken more seriously and be more likely to attract funding.”
Scale up
If your initial concept is good, then increase your smaller sample sizes and consider the economic viability of production at a larger scale.
Alarco had received feedback from senior managers at larger companies with more than 5,000 employees. The companies worked at a scale suitable to their workforce and markets, and most would not make investments based on tiny product samples.
“When we had our company, we had a lot of discussions with senior people in some very large chemical industries and other industrial companies,” Alarco said.
“These industries get approached by thousands of people showing milligram product samples but are only willing to talk when you can show them 10kg or larger samples.
“If larger companies can’t cover costs with profit at a commercial scale or because the market isn’t big enough, they are more likely to work with start-ups or smaller companies to develop products.
“As that start-up grows from $10M to over $50M or $100M turnover, for example, larger industries are more likely to just buy that small company.
“They can then take over production and sales in the market because they have the manufacturing and marketing infrastructure and distribution ready to go more cost-effectively, and production is at the right scale for the size of their business and number of employees.”
“So, my advice is to achieve one scale and cover the basis for viable economic projections for product manufacturing costs, then strive for the next scale — with each milestone the next one won’t seem so hard, and before long you could prove the scalability of your product.”
Make sure you are on the same page as your investor
Whether your skills are in research, experimentation development or elsewhere, making sure you are on the same page as your investor, client or collaborator will avoid mistakes.
In developing new and customised nanoscale materials, Alarco recounted the importance of understanding a client’s goals.
“We were asked to develop a catalyst material for a large company. It was a very difficult and complex task they didn’t want to do themselves.
“We made an industrial catalyst material so nanoscale and with a super high surface area for a complex composition of several hundred m2/g.
“They told us our material didn’t perform at all and did not display catalytic activity, but we knew it had an excellent surface area and great particle characteristics.
“They never told us they were going to press the powder into pellets that needed robustness to be packed into large process columns. Our super fine powder was 100 per cent compacted with no porosity left. This is where having constant communication with industry experts and listening to their industry needs, specified in the greatest detail, becomes most relevant.
“The problem was we were exploiting the materials, not the application. We needed to make a pellet with strong porosity left behind.
“If you don’t get involved in actually demonstrating the application you might not find out what is actually required.
“Communicating back and forth with your client or collaborator is important to solving the real problem.”
