Roundtable Review

Navigating the health care funding landscape
by Guest
Posted 19 December '14

Guest contribution by Nooman Haque, Director of Life Sciences at Silicon Valley Bank & OneStart mentor, @NoomanHaque@SVB_UK

Silicon Valley Bank is a partner of OneStart, the world’s largest life sciences & health care accelerator, organised by SR One and the Oxbridge Biotech Roundtable. Applications for the 2015 programme have now closed, with submissions from 638 startups representing 50 different countries. Click here to read more about this year’s 70 semi-finalist teams.

Fundraising is one of the most challenging aspects in your role as an entrepreneur. There are a myriad of options available to finance your business and enable its growth from an initial idea through to a business success story. There is much to think about in choosing the right partner.

In this blog, I address the critical factors that will guide your choices, from grant applications to venture capital investment.

If you are interested to understand more about the sources of finding that are available to life science entrepreneurs and their businesses, please read my earlier blog post on the OneStart website.

There’s no mechanistic approach to this, as your own circumstances will dictate how you proceed. There are some established ‘truths’ in the industry which are certainly worth considering. The biggest challenge remains in managing fundraising through life stages: past decisions have future consequences on valuation, management and exit potential.

In the beginning…

Unless you’re very unusual, come May 2015 you’ll still be the corporate equivalent of primordial goo; ill-defined IP boundaries; shape-shifting organisational structure, and of course, very limited resources. Your biggest issue at this stage is likely to be getting ‘investment ready’. This typically includes:

  • Getting the company itself setup – establishing directors and bank accounts, and assistance with some strategic and administrative functions.
  • Having clarity over the IP position;

Most companies therefore start out in some sort of incubator or tech transfer function where a host of legal, financial and administrative resources are available to help with these early challenges.

Quality can vary, so think beyond your current institution and do your homework. Be mindful about how ‘locked in’ you might become. And what does that institution’s ‘graduation’ rate for companies look like, especially in obtaining further funding?

Many universities may be able to provide financial support but some early sources of funding may only be available if you’re still seen as university affiliated.


You will ultimately leave behind your university or incubator and start to look like a ‘real’ company. At this point you will broach the valuation issue as you raise equity.

Determining what your company is worth at this embryonic stage is somewhat a black art. Suffice to say that valuation will have a huge impact on the number and type of investors you attract.

The single biggest mistake is to charge in with large valuations in the belief that this demonstrates value.

Your path to success is long and laden with risk. Realism won’t hurt and remember that because of your different objectives, you and your investors are likely to view valuation very differently.

Angel and VC investors especially will be looking to make a significant multiple on their investment; they can’t always control the exit prices but they certainly can control the entry economics.

If ownership is important to you and you’re really looking to be involved in the company long-term, utilise non-dilutive sources of funding such as charities or grants, alongside a smaller amount of equity. This sort of funding is especially relevant in de-risking propositions. You can effectively remain under the radar and move things to the point when a science project begins to look more like a commercial proposition.

Be wary of building substantial value through grants, donations and masses of non-dilutive funds alone – it’s unlikely you’ll be funded to an exit so you’ll need a VC or another equity option at a later stage.

And, if you really have built up enormous value without dilution, then that can be great for you but it’s difficult for equity investors to get the upside they expect in their investments.


The first significant sources of equity tend to be angel investors and VCs. Angels are becoming increasingly important to the sector and are moving from loose coalitions of disinterested, wealthy individuals to organised collectives who will utilise many practices traditionally seen in VC.

In practice, the line between more organised angel groups and VCs can be a little blurred, but a key difference between them are time horizons.

We have seen many companies actively pursue an angel investment strategy, completely disregarding VCs, even for large funding rounds. This may be surprising if you’ve been led to believe that VC is The Promised Land.

The strict timescales governing VCs impose management discipline to achieve value-driving milestones. Is your business plan consistent with this? VCs also have limited funds and if things don’t go to plan, then raising additional money may require brining in new investors, which can lead to tensions over valuation.

However VCs play an essential role not just in direct funding, but paving the way for either public exits (IPOs) or sales to other companies.

VCs’ experience in managing companies like yours will help guide strategy in way that angels can’t. Many times we have seen technologies require repurposing or a refocus of a drug towards a new indication and the very best VCs have a level of insight into these issues that can help you achieve the best valuation and commercial strategy. Sector-specific VCs can always call upon additional investors as well – it’s a small world.

Angel funding may be a little more flexible in comparison. They certainly don’t have the same time constraints, but they are definitely more limited in the money they can deploy over the long-term and they do not have infinite patience either.

With potentially more funds at their disposal, corporate VCs look attractive. However, many corporate VCs work alongside traditional VCs so in reality they are tied to the same timescales.

If your interest is ultimately in securing a deal with the corporate venturing parent company then explore how well the VC is linked into them. Many operate at arm’s length. Also, be aware that getting very close strategically to a particular corporate investor may deter future acquirers, and if your chosen partner changes their strategy several years down the line and doesn’t conclude a deal, think what message that might give to the wider industry.

The Commandments

And if that wasn’t enough to consider, here are some other decisions you must make:

  • How is funding provided from your investors? Some angels may ‘drip feed’ money, leading to uncertainty but providing strong (and sometimes stressful) discipline. Traditional and corporate VCs are likely to provide funding over two to three years, broken up into meaningful chunks or tranches. They will usually be focused on achieving a certain milestone that drives value.
  • Most equity investors will seek a board position to exercise control, so think carefully about their reputation and experience. What sorts of exits have they achieved? What other investors do they work with? What else are they investing in?
  • Who are the individuals behind the money? Even in large VC firms, the success and continued funding of an investment depends on the champion. In large corporate firms similarly we’ve seen deals die because the champion has moved onto another role and the replacement often has different perspectives and wants to make their mark with their own deals.
  • The importance of human relationships can’t be underestimated. Managing and investing in early stage companies is exhilarating and tumultuous. You must be able to get on with each other.

I said that many companies follow a ‘typical’ funding path. Whilst true, it shouldn’t obscure the important distinctions between the sources and the factors to consider. Above all have a sense of the journey you’re going on as a company and how funding supports you at key staging posts.  The kind of company you want to be, and the people you are will be important drivers of who you work with.

In my final post, leading up to the February bootcamp, I want to discuss some of the implications of funding for management further down the line. This may seem a world away to those of you eagerly waiting to hear if you’re semi-finalists but it’s worth hearing.

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