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Want biotechnology venture capital? Use a shotgun!

On returning from a meeting with a small biotechnology firm in which I serve on the advisory board, I was reminded of a novel strategy for attracting venture capital.

One of the challenges is attracting investment is finding an investor aligned with your company’s future directions. Venture capitalists may be interested only in large companies, in small companies, in diagnostic firms, in drug development, etc. One of the challenges, and opportunities, for small firms, is that their future is very uncertain. This makes it difficult to decide how to pitch the company to potential investors, but it also makes it possible to pitch more than one version of the company.

Using a shotgun approach, it is possible to craft several business plans built a common set of resources, each aimed at a different kind of investor, and simultaneously pitch these different plans to appropriate VCs. The reality is that most investors will realize that there is a great deal of flexibility in the business plan, because there are so many unknown elements in a young company, and pitching more investors increases the likelihood of attracting an investment.

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  1. This is an interesting start to an article or blog, but needs more development.

    The venture capital strategy described here is also outlined on Evelexa.com in a document called “The Entrepreneur’s Guide to a Biotech Startup.” The document is a bit dated (2004), but speaks of a similar venture capital technique, minus the shotgun approach.

    It seems that in finding venture capital partners, you should go with someone you know and trust — both for the investor and the startup company.

  2. Mrs Hartmann

    More developmenet of that article?

    I dont think that the article needs more improvement, because the last sentnce of the last paragraph, leaves us an important message

    “The reality is that most investors will realize that there is a great deal of flexibility in the business plan, because there are so many unknown elements in a young company, and pitching more investors increases the likelihood of attracting an investment.”

    More investors a biotyech firm/ company has, more investments it receives. This is important for the company’s survival,

    But You are right in your last paragraph about joining with a trusted partner for a start. Just one more thing to add: When the firm/ company turns to be a big one, try to keep a limited number of partners, to prevent major disputes, and losses of large sums of money

  3. The reality of the situation is that since VCs receive hundreds of plans a year and only fund 2-10 new companies a year depending on the size of the fund, the odds are against you. Pitching to as many VC as you can get introductions to makes the most sense. Attorneys and other portfolio company CEOs are good sources of trusted referrals. If you really have trouble getting in, placement agents are the your best bet. Getting a placement agent to take your company before you receive your Series A, however, will be very difficult given the low probability of success, the low potential fee, and the large amount of work required.

    An unreleated question…why are there no biotech finance blogs not dedicated to public equity investing? I’m trying to buck this trend with my new blog “The Biotech Finance Blog (http://thebiotechfinanceblog.blogspot.com/)” but would love some company.

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