Guest content Contributed by Jayme Norrie, Chief Strategic Officer, Incite World
From what we have experienced, angel investors are shoring up the gap in new innovations coming forward. However, they seem to be more naive than VC’s in terms of due diligence prior to investing. Scientists from the company march in with charts and scientific graphs 99% of angel investors don’t know anything about. The rule they seem to forget is: there is ALWAYS a patient market, and there is ALWAYS a scientific platform – that undoubtedly has competition. Will any new life science innovation get a percentage of the whole market? Absolutely not. They will get a percentage of a percentage based on third party reimbursement and their label. We end up doing this work for our clients and typically the results are startling to them.
Angels and VC’s tend to think that some phone calls to scientists to provide insight will help. This also hurts investments in the long run as they are asking strangers to give them financial advice. And most of these strangers – albiet with great CV’s – have never seen the data on the platform, or on other similar platforms that will ultimately compete with the innovation. More so – how can those “experts” who are brought in for evaluation on a particular scientific technology know everything about so many varying therapeutic areas? They can’t. So companies depending on a handful of “experts” to give them advice aren’t playing with a full deck – of common sense or investment strategic advice.
What I find the most amazing in the life science investment sector as a whole is the lack of investment review by true experts. Professionals who work for big pharma, biotechnology (of companies we’ve heard of), or big device. When interviewing “experts”, ask them how many successful products they’ve put on the market – Do they understand all of the nuances that lead to a successful life science product? Ask them what actual burn rates are to include FTE’s, clinical trials for THIS particular product, manufaturing and distribution costs – Do they understand and have they demonstrated their understanding above “costs of clinical trials = {blank}”; based on what? In other words, do they understand the regulatory path, the manufacturing, how this product will differentiate its label, and what strategies will be required to secure rapid product uptake?
It concerns me to look at the long term viability of the life science market as investors will continue to shy from it if they continue to get burned. The rate of new innovation discovery is tremendous; finding those that will attract IPO’s and licensing agreements means looking at them as ranking industry would – the big boys – and the only people that can do that are those that are internal to these organziations, or those who have been recently. When looking for advice on life science investments, start with the whole teams experience and make sure – if they have a cross-functional team – that its from a company you’ve heard of.
We’re grateful for the Angel community; without them emerging innovations wouldn’t get a chance in these days of upswing with tech investments. And we support the VC community as well. In the long run it will require better due diligence by ranking professionals and looking beyond level of education to level of documented experience.