Rules for selling biotechnologies to investors
How to make an investor believe that biotech is better than IT
Valery Ilyinsky, CEO of Maksigen, the company that developed the mobile DNA diagnostics system, told why business angels do not invest in biotechnology and what a jackpot venture funds can break in this market.National Business Network
Of course, investments in biotech are considered to be "long", but at the same time, they allow the fund to count on a great return.
Let's say the sensational success of Facebook, whose value was estimated at several billion dollars. and whose triumph is considered the pinnacle of what an IT startup can achieve does not impress biotech investors too much. Because a large number of pharmaceutical companies are worth much more than Facebook.
So for about the same shares, venture capitalists who are ready to give money to biotech startups provide large investments - after all, it takes a lot of money to conduct serious tests in modern laboratories.
The fact that developments in biotech require large investments explains that business angels do not play in this industry. And this is natural: private investors, as a rule, give investments in the amount of several million rubles – this is not enough for a biotech prospector at all. Individuals simply do not have the money that could ensure the effective development of an early-stage company in the same pharmaceutical industry, and even business angels who are ready to invest together (usually this capital consolidation tool allows angels to make large investments), alas, biotech does not "pull".
On the other hand, there are funds in Russia that invest not "only" in biotech, but in biotech "in particular". Basically, this is the policy of regional funds that are ready to diversify their portfolio as much as possible by investing any specific preferences.
Such investors face the difficulty associated with finding professional experts who could confirm the prospects of the project, which seemed interesting to the fund itself. After all, biology is an extensive science, and it is usually extremely difficult to find a person with knowledge of technology and the market in a narrow area.
And if specialized biotech funds work with an already established pool of expert partners, then funds that have decided to invest in biotech, although they previously worked only with web innovations, will not be easy in terms of a qualitative assessment of a startup.
The team of developers who came to ask for money in a non-specialized fund needs to show what are the key advantages of biotech, in comparison, with the same fast-firing IT. After all, the investor in this case will make a choice between projects in different industries – and this needs to be emphasized, although if you came to a specialized venture institute, it would not be worth talking about the profitability of investments in biotech.
So, if you want to enlist the support of an investor who just wants to try to invest in a company in a new area for him, you need to clearly demonstrate all the strengths of biotech investments as a whole class of investments.
For example, it is worth drawing attention to the fact that intellectual property can be protected in biotech. So if IT is easy to copy a business model in IT and because of this, the IT business is forced to constantly fight with competitors and rely on speed, fearing that it will be "overtaken", in biotech, the invented drug formula is unlikely to be reproduced by anyone else at all. And even if someone dares to "steal" an idea – as a rule, umbrella patents provide reliable protection from the fact that such attempts will succeed.
Of course, another question is the format of the project development in the market. IT projects are almost guaranteed to create a niche for themselves or adapt to one or another established area of the market – while biotech startups have to go through a lot before they can start "aiming" at the market.
But the main thing is that the fund that took care of the project, which managed to quickly capture the market, will receive a lot of money – on a good biotech innovation - if the company goes international or even sells to a competitor for a lot of money at the beginning of its journey, the investor will be able to earn tens and hundreds of millions of dollars, and sometimes billions.
So draw in front of investors pictures of their future – quite far away – where they will be able to get rich, and most likely they will decide to take a risk by investing big.
Portal "Eternal youth" http://vechnayamolodost.ru03.09.2012