Overview
During this session, the panelists shared alternative capital-raising financing strategies, including venture capital (VC), accelerators, spin-outs, bridge financing, licensing, and government agency support. They also discussed the competitive environment facing life sciences companies when trying to secure traditional investor-backed financing. Lastly, the panelists explored methods for developing a strong management team and how to raise valuation through financing strategies.
Session panelists:
- Ayah Hamdan, Head of Health, Plug and Play Tech Center
- Partha Paul, PhD, MBA, Director, Business Development & Licensing, Cleveland Clinic Innovations
- David Soria, Senior Vice President, Biotech & Pharma Investment Banking, Jefferies LLC
- Brad Stewart, Life Sciences National Leader, BDO USA
- Moderator: Todd Kornfeld, Partner, McDermott Will & Emery
In Depth
Top takeaways included:
Life Sciences Companies Are Seeking Cheaper Alternative Financing Methods. Life sciences companies are increasingly relying on alternative capital-raising methods instead of pure equity financing. Moreover, great scientific work does not necessarily equate to raising capital. Life sciences developers and entrepreneurs continue to face a difficult financing climate, longer deals, and less equity financing to go around. While traditional methods of equity and debt financing are tight in the current market, alternative financing methods driven by reliable clinical data can attract investment opportunities. For example, investors are looking for a step-up in value at the pre-initial public offering stage. Reliable clinical data at this stage justifies higher valuations in the market and can expedite access to traditional and alternative financing methods. Alternative financing may be available when traditional financing is not. Additionally, companies can use a mix of traditional equity financing and nondilutive funding to raise capital.
Contemplate Using VC Incubators and Accelerators Early On. VC incubators and accelerators can aid early-stage companies in securing capital while increasing valuation for future investment opportunities through more traditional financing methods. First, when assessing whether to partner with a VC incubator or accelerator, outline what the company’s strategic value will be when choosing between accelerators. Certain accelerators can provide lab space and equipment while others can assist in later development stages. Second, continue to push toward company milestones to raise asset value and convince accelerators to partner with the company. Strong partnership opportunities provide access to the accelerator’s client book and raise valuation in the investor-backed financing market.
Adapting a Company Strategy to Particular Investors Raises Valuation. Investor appetite for particular indications and mechanisms of action can mean the different between success and failure in capital raising. At any given time, some indications are more, and some are less, popular with investors. Companies should consider positioning themselves so that their indications and mechanisms of actions are in an areas with strong investor appetite. Expense Control and Cash Reserves Provide
Advantages Within the Market. Cash is essential for market control and valuation. A greater focus on consistently raising a cash reserve while also investing the cash and limiting expenses accelerates partnerships and investment interest. Companies should enter the deal market before their cash reserve is depleted. Waiting for a superior deal raises the potential for drastic changes in the market or to the company’s cash flow. Often, a six-month cash reserve is insufficient, so companies should consider a long-term plan in addition to more immediate goals to achieve greater cash value.
Geography Influences a Company’s Success. The right ecosystem, board of directors, and scientific advisory board are more likely to survive in certain geographic locations. Opportunities, however, exist everywhere and avoiding major life sciences hubs can save costs.
