Every start-up team ponders the all-important question: how to convince investors to fund their idea? Currently, the fundraising landscape is particularly challenging for most early-stage biotech ventures. A fortunate few are raising exorbitant rounds, allowing them to advance their products through preclinical development, but many others are struggling to find the funding they require. In this article, we share our investor perspective on what can help companies to stand out from the crowd, given recent advancements in drug development.
There is a plethora of advice available to start-ups on how you spin a story, engage your audience, and paint a picture of your company’s potential. When approaching investors, you have a slim window of opportunity to convince them of your chance of success and how you’re going to reward early financial backers with return multiples on their initial investment.
V-Bio is an early-stage venture capital fund, so we’ve been closely involved in shaping the story of multiple academic spinouts over the years, empowering young management teams to develop and tell their story and build sustainable companies. There are a few integral ingredients to this success: the quality of the management team and their technology, as well as having addressable markets and patent protection. But we think there are a few more factors that help companies tickle the interest of investors and give them a leg up in the steep competition for funding.
Knowing your place
The identification of new biologic targets remains an essential pillar for truly disruptive innovation. New biology and revolutionary science can proffer clever solutions to challenges that, until now, were unsolvable.
Unfortunately for smaller companies, big pharma and larger organizations are simply better equipped when it comes to scouting for later-stage programs, drafting clinical development paths that ensure regulatory approvals, and putting marketing organizations in place.
These major players can finance the clinical trials combining existing drugs and develop improvements on existing approaches by tweaking half-lives and developing convenient administration methods, etc. In most cases, it’s very hard for start-ups to compete in this arena, especially when budgets are limited. So where do younger companies have an edge?
A strong foundation for innovation
There are many examples of areas that are important to pharmaceutical companies, where these big beasts need fresh blood to sustain themselves. For example: despite the ever-growing development of treatments for metabolic disorders and obesity, there’s a lack of internal innovation in the area. The market for these drugs is enormous, yet the clinical pipeline is currently relatively uniform, primarily comprised of various combinations of incretin hormones (e.g.. GLP-1, GIP and Amylin) or agonists of their respective receptors. The space for new targets and biology is wide open and begging for input.
It is situations like this where academic spin-offs can seize great opportunities. Small and agile, start-ups can explore new biology, identify new disease-causing targets and rapidly develop technologies that make undruggable targets accessible. Of course, competition among the start-ups themselves is fierce, especially as many investors don’t dare take a leap of faith and fund an early-stage endeavor. This is why it is crucial for start-ups to query the fundamentals of their business ideas and validate each step of their approach along the way.
How to preempt the skepticism
True innovation is simultaneously promising and risky. Subsequently, there is a growing emphasis in drug discovery on picking the right target from the start. Here are some of our recent observations on how new technologies can derisk novel targets, thereby positively swaying a VC’s decision.
Advanced technologies – such as spatial transcriptomics, iPSCs, statistical genetics and computational AI/ML tools – are transforming our ability to identify and validate drug targets based on human biology. The focus in drug development is shifting from the reliance on biochemical assays and animal models towards the use of human-derived data, based on the growing awareness of the limitations of translating cell- or animal- derived results into patient efficacy
This human-derived data can come either from genomic, epigenomic, transcriptomic and/or proteomic analyses of liquid samples or biopsies of patients with specific diseases, ideally collected longitudinally before and during disease progression, or from human cells undergoing certain perturbations that mimic the disease state. Although some industry-standard animal models will still be required, start-ups can stay ahead of the curve by deciding to look to human-derived data right from the start.
Causal Biology – i.e. establishing causal relationships between a target and disease – is critical to ensuring that a treatment will actually benefit the patient. While genetics plays a significant role in this, non-genetic evidence from proteomics and patient-derived cells can also help to validate a target’s relevance to the disease. For example, autoantibodies can indicate causality in autoimmune diseases without a direct genetic mutation. A solid grasp of causality is an edge for a company wishing to preemptively derisk a drug candidate.
Once a target has been discovered, the important work of pre-clinical target validation begins. Here, advanced validation tools are revolutionizing preclinical testing, including patient-derived primary cells, iPSCs, organoids and human cells implanted in animal models. These tools offer improved insights into disease mechanisms and human relevance, as compared to traditional animal models. For example, organoid models (which replicate tissue-level complexity) are gaining traction in fields like neurology and immunology.
Get ahead of the revolution
Management teams must keep their pencils sharp when drafting their business ideas and pre-clinical development plans. Faster is not always better, if speed leads to stumbling blocks down the line. Think transformative: utilize multi-omics platforms and genetic data to identify novel targets; develop therapies targeting specific pathways or processes with clear causal links to the disease; and leverage patient-derived iPSCs or organoids to validate your early discoveries.
Drug development skills go beyond the target identification and validation, and remain critical assets for start-up teams looking to move to their next phase. At V-Bio, we believe the ‘human-first drug discovery paradigm’ has arrived. Early-stage companies positioning themselves at the forefront of this revolution will benefit from significant growth opportunities down the line, particularly start-ups that prioritize precision medicine and targeted therapies. The convergence of genetics, proteomics and human-based validation tools is creating a new playbook for biotech investment, offering a promising future for investors who are prepared to back
