Red (and Green) Flags To Look for With Biotech’s Buyside Investors
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marked it up with questions and comments, has read background papers, has probably talked to some experts, has thought about it, and is ready to make the most of your time and theirs. To share an experience of a colleague: “We met with most of the eventual IPO buyers several times. That said, one of our best experiences was with an investor that we met for the first time on the IPO roadshow. They had read our S-1 and our key papers, which we highlight for easy access on our website. This investor asked about five truly salient questions from a science-meets-business point of view. The meeting was relatively short, maybe 30 minutes. What’s the lesson? Good investors invest the time and effort to THINK about the company and the investment. It leads to a much better roadshow interaction and more importantly to an effective long-term relationship.”
2) Positive comments from fellow CEOs & CFOs. You know we talk to each other, right?
3) Constructive Feedback. As a small private company matures and raises capital from new kinds of investors, there’s a learning curve. Private companies approaching public investors need to understand how different kinds of investors think, and direct, critical feedback from them is invaluable. It’s a green flag when an investor tells you their concerns as well as how the investor views the competitive landscape for products and for investments. It gives the company a better opportunity to try to address those concerns.
4) The LaGuardia meeting. The poster session meeting. You run into an investor at the airport, your flights are delayed, and you end up poring over data together. You run into an investor at a competitor’s poster presentation at a scientific conference like the American Society of Hematology and the three of you talk about the science and what it means. These kind of investors really want to understand their investments.
5) Focus on relationship-building. Biotech will inevitably have ups and downs, and an investor isn’t in the midst of the decision-making about how to handle those events. The management team is. It’s a sign that an investor has a long-term view when they are interested in understanding who’s running the companies they invest in and having an effective relationship with those people. This does take time, but investors thinking about long-term value get that.
6) Track record. Perhaps as with anything in life, past behavior says a lot. Those investors with a track record of success investing in companies that are similar to mine in both challenges and opportunities are more likely to be a good match for my company.
7) Excited about the mission. An investor’s job is to earn a return on the capital they invest, but there are infinite ways to do that. An investor who also recognizes and cares about the consequences of investment decisions in biotech— the potential to help patients—definitely gets a green flag.