Dreams and ideas don’t attract investors but tractions do. It doesn’t matter whether it is a business traction or scientific discovery traction; any traction counts. It shows that you have a momentum going forward and there are things progressing out of those momentums. In other words, you can showcase something tangible or intangible to the investors. Of late, there seems to be a trend in the start-up world that business owners are in the hunt for funds despite just have a ‘great’ idea.
Here’s a list of top 5 indicators that will tell you right now whether your life science start-up is fundable or otherwise.
Document a thorough and well-thought business plan. Building a business is very similar to building a building. It requires a detailed and well-thought plan. Some prefer to use a business plan method for it, while others like to use a much more aggressive methodology called Lean Startup Canvas. Only with a detailed version will at least give you a shot at funding from investors, and the document must address all potential questions that the business needs to overcome. These very questions could be the same questions that those investors might ask. With a properly documented plan, it showcases to the investor that your business has a great strategy and know how to make the brand to be huge and successful.
Realistic milestones and achieving some already now. You can’t measure results if you don’t have a yardstick. On the other hand, if your objectives are off the chart, you look bad when you set them, and you look even worse when you miss them. Only written and proven milestones are credible. Traction means that you have achieved one or more significant milestones, which will give you credibility with investors. Don’t expect them to believe your $50 million revenue projection, if you are still waiting for the first revenue dollar. You must understand, from an investor’s point of view, only real results count and nothing less.
Well-balanced team members and credible advisory board. A great business often starts with one person, but it doesn’t end there. If you are strong enough to surround yourself with a strong and well-balanced team member, that’s a great progress toward success. Investors will likely consider investing if they acknowledge that you are a credible CEO who is being supported by another credible, wise and experienced Chief Financial Offer, a knowledgeable Chief Technology Officer and a well-networked Chief Marketing Officer. These are the substance investors are looking at. A team of friends and family that work for free on weekends is not likely to impress investors at all.
Credible names as real customers. If you give away your product or service to the first 10 customers, that’s a good learning experience, but it’s not real traction. It doesn’t prove your business model of pricing, distribution, and support. Sell one. Real customers give you real feedback, rather than just tell you what you want to hear. Funding for pre-revenue start-ups used to be the domain of angel investors, but they have moved up-stage. Without real incoming revenue from credible organisations as your paid customers, your investors will eventually notice that most of your existing paid customers are largely limited to your friends and family only.
Market authority. Credibility in life science is very much similar to other industries. People are trusting your inventions. They believe in your vision, your journey, your struggle, your story and your products. In other words, they trust you. This is where authority begins. In order to acquire a great level of authority, you need to have two things; a good product that people talk about and good awareness initiatives that can quickly amplify that news. According to Guy Kawasaki, the former Chief Evangelist of Apple, 90 percent of the authority will come from great products and not others. While 10 percent of the authority will be generated from awareness programs being implemented. His reason is simple; you just can’t hack growth of a lousy product because it will remain lousy. You can’t build your authority behind lousy products. It won’t work. On the other hand, if your product is great and able to offer users a great experience, people will not only start buying it but they’ll talk about it, endorse it and influence their network of friends to consider buying it. That’s how you build your brand’s authority.
All of these elements play a critical role in determining how fundable your start-up is. From your pitch, they can easily smell whether your adventure here is just a story or worth moving forward.
