Life science companies make up a significant portion of the market these days, and former CFO David Johnston sees more and more emerging daily. Due to their uniquely challenging design and focus, these companies often have a steep financial hill to climb. As a result, he recently discussed several strategies that can help these companies thrive in what can be a dense environment.
Strategies David Johnston CFO Thinks Can Help Life Science Companies
Finding a financing strategy requires a life science firm to understand its scope of operation and its potential monetary needs. For example, many tech companies need money for things like expansive computer systems, incubators, microscopes, testing equipment, and much more. As a result, David Johnston suggests strategies that bring in the most money at the lowest potential risk.
In this way, life science companies should focus on grant money early to fund their major development phases. Earning grants requires identifying organizations that may be interested in their products or services. For example, the Department of Energy is often interested in businesses developing greener energy courses and may provide grant funds for emerging life science firms.
David Johnston states that writing a grant is a challenging process and requires carefully outlining a company’s scope and what they hope to accomplish. It also requires examining what a life science firm has already achieved, such as what developments they’ve completed and what processes they’ve perfected. Grant organizations want proof that a company is a worthwhile investment before proceeding.
In some cases, life science firms may need to seek private funding before getting grant money. For example, angel investors or venture capitalists can be a great financial strategy. These individuals will not only invest a good amount of money into a firm but will seek others who can help. Naturally, this kind of investment comes with a price, typically as equity.
Often, the early stages of a life science company’s development will require giving these investors some equity in the firm to get the necessary money. This trade-off must be carefully balanced to ensure that it goes smoothly. For example, you can give them some shares in a company when it goes public, let them join your team as board members, or even get a say on who gets hired in your company.
For a life science firm, it is probably best to focus more on shares because angel investors as board members may try to steer the company in directions that go against their nature. After all, they may only vaguely understand the science behind the company, former CFO David Johnston says, and may try to make decisions that go counter to its development. Instead, try to find investors who prefer company stock or equity and less of a heavy hand in development.
When seeking out venture capitalists like these, there are many potential sources. These include hedge funds, family offices, institutional ventures, and sovereign wealth funds. Try to find hedge funds for a life science firm because these provide a broad array of different financing options and are often easier to find in the early stages of your company’s challenging development.
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