*Guest blog by Kat Arney, PhD. Founder and Chief Creative Officer, First Create The Media.

If you would like to submit a guest blog please email [email protected].

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"The recent biotech funding environment has been horrible."

That was the blunt assessment from Altar Munis from Lifespan Vision Ventures, speaking at a recent Ones To Watch early-stage pitch event run by One Nucleus. I don’t think anyone in the room would have disagreed.

IPOs have been thin on the ground for several years, creating a liquidity crisis. And although there are signs that things are starting to pick up a little, especially in the US, the picture in Europe and the UK is still tough.

In particular, there’s still a painful lack of funding to support scaling companies. Some of this is structural: Altar made the point that the SEIS/EIS system sucks money away from larger funds, while Brexit certainly hasn’t helped the UK’s ability to attract and deploy serious scale capital.

Whatever the causes, the resulting 'Valley of Death' is familiar to anyone working with innovative life science companies. They may have strong science and real potential, but are trapped in the gap between early promise and a company that can make it to the clinic, reach commercialisation, or become attractive enough for a serious buyer or partner.

Build with the 'customer' in mind, and market to them

For Altar, it's imperative that founders think about their route to exit from the start. Are you aiming to get bought? Are you aiming to partner? Are you building towards pharma interest? Are you creating an asset that another company will want to take forward? These questions shape the whole company story.

A biotech CEO is often thought of as someone whose job is to raise money, hire and lead a team, and drive the strategy forward. All true. But there’s another role that founders can’t afford to ignore: attracting the future 'customer' for the company or asset.

That means doing the market research to understand what pharma or other strategic partners actually want, and then positioning the company clearly in that landscape. All too often, it's this second bit - nailing down the positioning and messaging, then communicating it to the people who need to hear - that early stage companies ignore.

Some founders don’t see the need for any of this ‘comms and marketing’ stuff at all, especially for R&D-focused companies developing therapeutic assets.

But even though they’re not conventional customers, you’re still ‘selling’ your company and your ideas to potential investors, partners, or your ultimate exit buyer. You still need these people to see, understand and believe in what you’re doing in order to attract and hold their interest. And in a world where AI is increasingly being used by VCs and pharma to search for companies, clearly articulating your message and getting it out into the world is no longer something that can be dismissed as a 'nice to have'.

I know I say this all the time, but I will keep repeating it until it sinks in: the data does not speak for itself. We must speak for it.

That doesn’t mean rolling a turd of weak science in the glitter of superficial storytelling or puffy PR. Post Theranos, I'd like to think we're all a little smarter than that. It means being able to explain your science and strategy clearly and credibly, and explain what sets you apart from the competition.

For a therapeutics company, that means staking out the territory around your target, your mechanism of action, your data, the unmet need, and why the whole thing makes biological sense. This is especially true for first-in-class therapeutics, where investors and potential partners are being asked to believe in something genuinely new.

For a diagnostics, product or platform company, you need to clearly articulate the problem you solve, who needs it, how your solution fits into existing workflows or decision-making, and why it is better than the alternatives. The tech matters, sure, but investors and partners also need to see a realistic route to adoption: who's going to use it, who's prepared to pay for it, and what changes because it exists.

(I've written a lot more about how your biotech startup story and comms need to evolve as you grow over on the First Create The Media blog.)

The three risks biotech investors balance

According to Altar, there are three areas of risk that biotech investors will balance when looking at companies:

• Team  Is this a team that can be trusted to execute effectively on their ideas, pivot if they need to, and hold it together when things get difficult?
• Commercial Can this asset, product or platform actually return value, and what does the competitive landscape look like?
• Biology Is the underlying science is plausible, do the data stack up, and does this looks like something real?

Different investors will balance those risks differently. Some will be more comfortable with biological risk if the commercial upside is huge. Others will want stronger validation before they get the chequebook out. Founders need to understand who they're talking to an adjust the pitch accordingly, rather than giving everyone the same deck and hoping for the best.

Another thing that investors consider is who else is at the table. Are the other investors people they can work with? Who's likely to put in follow-on funding or pony up for the next round?

A cap table crowded with angels can become a problem for a VC or fund investor. If there are too many small investors who won’t or can’t follow on, the next institutional investor may worry they will be left carrying too much of the burden when the push towards the clinic or commercialisation comes.

Again, this comes back to clarity. Where is the next cheque coming from? Who is going to support the company to the next meaningful inflection point? What exactly is that inflection point? And how do the story, the strategy, the science and the syndicate all line up behind it?

'Right now' versus 'One day'

One of the biggest questions investors ask is: why invest now? What gets unlocked by putting in money at an early stage, rather than waiting until later when things have been de-risked?

That question is about more than milestones on a slide. It’s about the story you’re telling, the big vision you’re selling, and the specific moment. Investors need to understand the opportunity in front of them and what becomes possible if they back you now.

At the same time, founders also need to think hard about the small stuff. If everything fails, what's left? What is the minimum viable product, minimum viable idea, or minimum viable asset? What is the hard kernel of value that remains if the broader vision doesn’t play out exactly as planned?

Your realistic value proposition sits somewhere between those two extremes: the big picture vision and the defensible data-backed truth that is still real if everything else falls away. Good biotech storytelling has to hold both the ambitious 'one day' vision of the future, the realistic description of where you're at right now, and the path between the two.

Are we ready to be optimistic about biotech funding?

There is reason to be hopeful. The funding environment does seem to be moving, and I'm seeing an increasing number of companies announcing raises.

The recent $140 million Draig Therapeutics Seriees A and $2.1 billion (yes, billion) Isomorphic Labs Series B are obvious examples, although we shouldn’t be fooled into thinking that a few huge rounds mean the whole ecosystem is suddenly fixed. Access to scale capital in the UK is still hard, and there's much more than could be done by the Government to support the life sciences (a topic for another day...)

At some point we have to accept that this is the 'new normal', and get on with it. The companies that thrive in this environment will be the ones that are clear-eyed about their positioning and value.

They will know where they are going, who they need to attract, and what story they need to tell at each stage. They will be able to articulate their science without drowning people in it, understand what investors, partners and acquirers are looking for, and build a cohort of investors who can support them to the inflection points they need to reach along the way.

Brilliant science will always matter. But in this market, brilliant science wrapped in muddled messaging, vague positioning and a hand-wavy 'Underpants Gnome' approach to commercial value is going to struggle. And once you've got those nailed down, you need to get them under the noses of the people who matter.

The companies that make it across the valley of death will be the ones that can demonstrate how they answer the three questions that every investor and partner is really asking:

Why you, why this, and why now?