Life Sci VC (see here) provides a list of the lessons learned from early stage biotech investing. Investing in early stage biotech is complex, unpredictable and very risky. However the field is filled with investors and people running research companies who are naïve to this reality, especially here in the UK. One of the purposes of this article is remind our clients of issues they need to think about in an investment sector which is presently getting more difficult. Life Sci VC’s lessons are summarised below:
1. Management is a key part of success. It needs to change as a biotech company goes through different stages. It needs the right relationship with the Board. It needs to be changed quickly when things go wrong, and resumes for the management team need to be read very critically.
2. Ensure you have the right co-investors. Don’t have too many, and those you do have need to possess the same vision.
3. Technical diligence is key. Do your own.
4. Pick the right investment model. In general go in early, tranche around milestones, don’t assume late stage is less risky, don’t believe stories of imminent success, remember that diversification can destroy value and that lean virtual models have their disadvantages.
5. The legal aspects are important. Take care with IP diligence, reading the deal contracts and don’t expect deals with pharma to happen quickly.