From the last blog, you figured out how to get the attention of Angels (or a group of Angels) for your life science venture. The next goal is to receive a favorable evaluation.
An Angel group noted that 86% don't get the chance to make a pitch [Clark Paul, Banks Charlie, Dunbar Matt, Lackey Mac. Perfecting Your Pitch: VentureSouth’s 101 Tips for Pitching to Angel Investors. April 23, 2017]. VC funding is worse probably. Per How does deal flow apply to VC firms?, only 30 of 650 scanned executive summaries will make it to the stage where the VC samples the financials and management; that's 4.6%. You have your work cut out if you want your life science venture to get funded. Keep in mind that there are many funding sources, so the numbers aren't as bleak as that figure would imply.
So how do you increase your chances of funding from a specific Angel?
At the early stage, Angels are looking for evidence of
- a value proposition for a life science problem,
- validity regarding potential clinical impact, and
- use of appropriate technology in the implementation
(see Soenksen Luis R, Yazdi Youseph. Stage-gate process for life sciences and medical innovation investment. Technovation. doi:10.1016/j.technovation.2017.03.003.). Those criteria are probably not a surprise to you.
Is this a hot topic?: Since the focus is the life sciences, consider how hot your topic is. Medicine is not neutral in its attention to a disease. And what is "hot" is not based on scientific fact (e.g., years of life lost, incidence, lifelong prevalence, cost to treat, etc.). If "impact" determined funding then almost all funding would go to prevention and basic science breakthroughs. In comparison, NCI receives more than any other institute at the NIH, over $2B. Cancer wins the prize probably because it is scary. If you want to get funded the topic must be one that an Angel sees as critical. Thankfully Bill Gates has shown light on health issues of 3rd world countries; hopefully, such neglected topics will soon be seen as worthy of investment.
So what is hot right now? Orphan diseases? Biologics? Related to the opioid or obesity epidemic? Zika virus? May sure, your topic is hot. And that you highlight how your topic is hot. And of course, hot topics come and go. Yesterday's "bioterrorism" issue is cold until it becomes hot again when evidence of the use of a biological weapon is demonstrated.
Next consideration is the team, but since we are talking life science, the team has to be more than a competent bunch of folks who can launch a business. You need to have a team that also has mastery over the topic and the competition that is also addressing that problem. If FDA approval is required, in addition to lawyers you need folks skilled in that labyrinthine process. But don't go too crazy with details, it is possible that your venture will be purchased early in the process (per Evaluating Life Science Companies for Investment, 9/6/2016). It is unlikely that an Angel has no life science expertise; don't fudge.
It's about health - and honesty: Outline the upside in both the financial return on investment AND the impact on health; the Angel wants you to achieve positive health outcomes. Finally, the problems of Theranos are fresh on everyone's mind. Be scrupulous in your development and presentation of the product. Any hint of deception and your venture will be in the 86% that go nowhere.
Where will more money come from?: Finally, an Angel understands how complicated a life science venture can be and you will most likely need additional funding. The Angel needs to know that you intend to eventually access additional funding [Styhre Alexander. Valuing and Investing in Life Science Companies. In: Financing Life Science Innovation. Vol Palgrave Macmillan UK; 2015:107-136. doi:10.1057/9781137392480_5.]
Hopefully, with the above, your new venture is on its way to a successful evaluation.