Part 3 of 3: Follow up
Here are a few of my ‘follow up’ observations after attending the OneMedForum 2014 (OMF2014) last week:
In the medtech world of 2014 it is probably good to caution on the side of overpitching. In your follow-up with investors who were not so kind during your pitch (hint: that’s probably a good sign) and actually asked questions, it is probably wise to not let your stage of development make you timid. Investors seem to like your device application, and you know it will get to phase 4 and be applied in a clinical setting. That’s the attitude and message you need to transmit.
If there are more conversations after your pitch they are all part of the bargaining and bartering. Project the vision as if the next milestones are almost done when you negotiate. There is a fine line between confidently over-pitching and foolishly over-stating and exaggerating.
All accelerators I know pretty much teach their entrepreneurs to say the same thing about ‘communicating traction’ and most startups are getting good at it now. Good is not good enough in the changed medtech world of 2014. Life science investors are watching very closely your development, implementation, and pathway for delivering value to all stakeholders. Demonstrate that value with evidence and use metrics that show the increase in quality of care and the reduction in cost.
Go into negotiations with a clear and concise BATNA and assume you are in control of the driver seat. And you do not want to give up even parts of the controlling equity, but you are willing to hear an investors offer. Have you considered starting with a convertible note that is treated like a loan? A convertible note will entitle the investor to the seed investment + interest (10-12% probably) converted into preferred equity once your company closes a series A funding round.
A convertible note allows an founder to get funded without giving the startup a specific value. But if you have to, start dealing with the valuation cap. The valuation cap is often a negotiation game, however for early seed money of $200,000 a valuation of $2 million is probably appropriate. And use your bargaining skills in regards to the discount to next fund raising. Often 20% is mentioned as the standard. (read more…)
BTW, how can you help when an investor follows up on your pitch and does the due diligence (DD)? By simply answering questions to the best of your knowledge in a confident and direct manner. After a pitch, investors frequently uncover issues that were not brought up in the meeting and about one out of five deals fall through in the DD phase.
Ever wondered how your entrepreneur life would change if you’d have a valuable framework of tools, techniques and resources designed to help early-stage companies identify key customers and iterate their products quickly?
acroMIS is a MedTech Value Analytics company. As a service provider, my company’s mission is to advance the commercialization of sustainable medical technology solutions. Our clients are entrepreneurs, CEOs and life science product investors who use our proven go-to-market methods and tools, such as the Product Value Analysis (PVA) process, to quickly execute commercial success. Call or text me for an initial assessment of your needs: (650) 336-8641.