Episode 84: Find Funding for Your Biotech Startup – What Investors Look For

The current state of biotech funding may be incredibly confusing, but there are still solid principles you can employ. Listen today to learn them.

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Welcome back to BIO from the Bayou. I'm James Zanewicz, your host, and today's guest is a Elizabeth Schaub. She's the CEO of Hightouch Group, a business that specializes in helping science, engineering, and technology companies communicate their value to customers. Her work has been featured extensively in avenues like the New York Times, Entrepreneur, and CNBC, among many others. She's actually going to join us for 2 episodes, so we're super lucky. And today we're gonna first dive into the topic of funding strategies, which is really timely. So I wanna welcome you to the show.

Thanks for having me.

So glad to have you here, 'cause your journey, in my little background and light professional stalking, is really impressive. You started your first business when you were 9, which is crazy, and you began college at 12. And I'm really curious how these early experiences shaped your approach to kind of funding and supporting emerging companies. And, and as you know, most of our companies are biotech, but the principles cross all across the spectrum.

It's such a great question. I think starting young, whether we're talking about college education or we're talking about my entrepreneurship journey, it got me really comfortable with being underestimated immediately. And this is a familiar place, I think, for a lot of biotech founders, honestly. It taught me how to make ideas legible or understandable to people who don't already believe in them. And that skill turns out to be central when you're helping a scientist or an engineer secure funding. You need to translate deep technical value into commercial relevance without dumbing anything down or losing credible with your more technical investors. My grandfather took me aside one day when I was probably about 7, and he said, you know, Elizabeth, as an intelligent woman, you are going to have the trouble of being underestimated almost at every turn. Don't worry about it. Just keep going. And I took that to heart. And, uh, I hope, I hope anyone who's listening, especially the biotech founders who are feeling disheartened in this moment, you're probably not wrong. You're probably onto something and don't let anyone underestimate you.

That's incredible. And I love that you had a family member who saw that in you and was like, don't let the world keep you down. And as we know, often companies and CEOs will feel that way about their investors sometimes and need that advice because investors are really looking for specific qualities. biotech ventures, and sometimes it's hard to understand exactly what they're looking for or even to get their attention. But you kind of have worked with a lot of companies in this space and probably have some top factors that you've noticed or top qualities that really attract their attention and make them give you that, that deeper look into a company. What are some of those?

I'll, I'll give 3 quick pointers on what I've seen consistently open doors for new investors. And then I'm also happy to talk about once you have your investor onboarding, how to manage that relationship further. But, you know, there are 3 main points here I think that are, that are consistent door openers. The first is a credible and well-defined use case tied to a real-world unmet need. This is important because especially if you are spinning out from an academic lab or a national lab, you might be unfamiliar with this idea That you're not trying to get your technology funded, you're trying to get your application funded. And that's kind of a mind shift, right? From the basic science world or even early lab work into the applied world. And that translation can obviously have some problems. This is where we see scientists get their first, maybe an SBIR grant, and they think, oh, that's great. I'm going to do a great job attracting early investors. And then they sort of hit a wall trying to get those angels and VCs in the door for seed or Series A funding. So that's really important, that credible, well-defined use case tied to a real-world unmet need.

Mm-hmm.

The second is a team that understands the path to regulatory and reimbursement milestones, not just product development. And obviously we're speaking biotech generally, you know, we could be talking about medtech, we could be talking about a therapeutic, but in any case, Making sure that you have somebody on your founding team, your advisory board, or even a CRO that you contracted in advising on your regulatory strategy, your reimbursement milestones, because your investors are going to ask. They want to know that you have a pathway to market, and regulatory relationships can often be seen as a hurdle that a pure scientist, quote unquote, doesn't understand. I don't think that's true necessarily, but some founders sometimes have to take a step back and do a little bit of extra work to understand what their regulatory strategy is going to be and often bring in an expert to help advise them there. And then sort of lastly on the opening doors to investors point is, you know, these clear signals of traction. So this can be early data that you can obviously interpret and tell a story around to your investors credibly, a strong advisory board. Which is often the easiest way for an academic to spin out of a university and start and show some traction because you typically already have connections either with industry partners or industry associations, scientific consortia, or your own university or university partners, or abstracts accepted at a major conference, some publication history around the baseline tech, something that shows That the science is real and this is the team that can move it forward.

I love that you said that, 'cause we just actually were recording this the day after, or day of, the day that we did drop an episode on how to form your board with Dr. Elaine Hamm, our executive in residence. And so it's like, it fits right in with kind of the story we're telling right now. And she talked about both your full advisory board and your scientific advisory board and the difference and what you should look for. So I need to hook the two of you up so you two can talk because you're gonna love each other. I can tell already.

You know, just like a bonus tip for the current moment that we see ourselves in, I do a lot of work with venture boards as well and venture directors. There is a global context here. You know, I assume most of the listeners are listening in from the United States, but right now in this funding moment, I'm seeing investors light up when a company says, hey, here's where we also fit into the competitive pipeline in China or Japan or Germany.

Mm-hmm.

We don't talk enough about that and we need to start talking about it more. I think one of our clients in Singapore closed a Series A after a year. USBC saw how they'd mapped their strategy around regional biologic manufacturing gaps. And that's the kind of thinking that really cuts through the noise and a lot of what investors are hearing. Oh, wow.

This is fascinating. So we, we've kind of gone through some of your really great advice on the qualities people are looking for and what you should show them. But what advice now do you have for biotech entrepreneurs who want to communicate their complex scientific ideas to investors who don't always have the deepest scientific background, many of whom may not have any sort of technical background at all? They've just done really well, and they need them to convey that story in a way they can understand. And I hearken this back to what you said before, where it's not about advancing the science, but it's about advancing the business. How do you coach them on doing that?

It's a great question. There are a couple of ways that we can talk about this. One, if there are any founders listening or future founders listening who are maybe still in the student phase of their life, maybe they're postdocing and they're thinking, hey, I want to go down this entrepreneurial road, marketing to investors or an end user of your product Is just communicating with a commercial intent, but really it's about good communication skills. And when you think about how do I communicate something complex to any audience, an investor, the public, we do a lot of media training as well for our scientist founders. You have to strip your concept down to first principles. So instead of saying, you know, our assay uses a monoclonal pair for detection of low abundance biomarkers. You could say, we catch disease earlier than current tests. Already, okay, you're relevant. Now you bring it in maybe to what disease, you know, what's, what's the competitive market look like? Then you build up to the mechanism. You're not simplifying the science necessarily, you're sequencing it. So you start with the stakes and then you bring in the specificity. This doesn't mean that you never talk to your investors using scientific terminology. But you have to frame it up for them first and kind of walk them through point by point. Your investors aren't children, but a great way to practice doing this when you're thinking about your, how do I go into the pitch room and answer questions when I'm asked? Pretend you're speaking to a middle school student. Maybe you have one of your own that you can practice on, but just strip it down to first principles. Start with the big picture stakes and then bring it back to the science because An investor sitting there hearing a pitch from a scientific founder, they want to understand that you have the scientific credentials too. So they want some of that, right? You just have to lead into it well.

Speaking of leading into things, that kind of leads us to regulatory strategy, and that's a significant next step. And it's also really important, in addition to being able to convey your science in a way that everyone can understand and telling that story and leading them up to the deeper dive, It's important for them to understand the regulatory strategy when they're seeking investment and what that pathway is going to be. And you alluded to that earlier, but I wonder if you can expand a little bit more about your thoughts in this area.

Yeah, this is really important. It's definitely not optional. If you are seeking investment, you need to understand what your regulatory options are in the US or more broadly. We do a lot of work with cell and gene therapy startups, so I'll pull some examples there. But, you know, if you don't have a regulatory pathway as a cell or gene therapy, startup, that's a deal breaker for almost every investment conversation you're going to have. In the medtech space of diagnostics and other devices, if you don't understand CLIA, LDT rules, PMA timelines, you're going to look completely unprepared going into those conversations. So every early stage biotech needs a regulatory narrative. So let's say you're developing a novel oncology therapeutic. Have you engaged with the FDA? Do you understand the fast track or RMAT designations? Do you know what CMC data is required for your IND? A pitfall that I see constantly, especially in academic spinouts, is treating the FDA like a hurdle, right? You know, regulatory strategy right now, especially, it's a key differentiator. It's not a chore. And globally, countries are streamlining regulatory approvals across the biotech industry. And so if US companies want to stay competitive, you really have to show investors immediately that you can navigate both the US and non-US regulatory pathways and you're up to speed there.

And probably I'm going to guess you're going to advise even more the non-US now because at least those are fairly certain. And in the US, we have so much change happening right now with, with so many employees being let go and a shift in function and focus, which, you know, the messaging is it's intended to streamline, but we don't know where that's headed yet. And do you have any additional advice on how to navigate kind of the, the US changing market right now for regulatory pathways?

Show that you understand the strategic risk by bringing in a partner either on your advisory board, if you don't have enough seed capital to invest, or if you do, a respected regulatory consultant or CRO, if you're at that stage, to make sure that you have a thoughtful strategy that to your commercialization plan. I mean, you can't go in that room without it. And you can get fairly far these days on your own. I think there are a lot of tools and resources available to you. There are great podcasts like this that talk you through why you should be doing these things early. But bringing in a partner who has contacts within the regulatory agencies who can kind of say, hey, yeah, we're actually, it's not published yet, but we're at waiting time of whatever, or your some, getting your PMEs filed. I mean, there are so many things that you need to do earlier than maybe you needed to 3 or 4 years ago. And this is only going to get more important because I think we're going to start to see more of a dependency on early stage biotech funding from the private sector as opposed to public sector. And so you just really need to show that you know you're talking about in that room.

That's, I think, some of the best advice we've heard in a minute, and I think it's something that will really resonate with a lot of our listeners. And I want to thank you for giving us the compliment, but the only reason that, you know, our podcast is so good is because we're able to attract top talent like you guys. We just give you a platform to share your information. And even before we get to the end, I want to encourage folks to reach out to you, to look at bringing you on to help them, because this is a time of tremendous uncertainty. And I can already tell that you are an expert at helping people navigate that. And so, I'm really excited that people are going to hear from you and be able to get a little bit of advice. And then, then, you know, we're of course going to have in the show notes how they can engage with you directly, which I think is fantastic for our listeners because you work globally, right?

I do work globally. You know, our business model is kind of interesting. We pick 12 to 15 companies a year that we work with. And so, we have a 3-year waitlist to get in. Even more important than reaching out for that sort of thing, I would highly recommend if you are a founder, especially if you're a student and you can't purchase my book, shoot us an email and we will email you a free PDF copy. Especially in the climate we're operating right now where research budgets are going to be increasingly constrained, I wanna make sure that all of us in the science marketing communications sector are doing everything we can to get founders prepared for their early raises, which they're likely going to need to do sooner than they expect. That we're getting them media trains, that we're encouraging them to run for office, and that we're giving them the communication toolkit that they need to feel confident and not necessarily overprepared, but at least comfortable with what they're communicating.

Before we shift more to a question on funding, I'd like to ask you to talk a little bit about your book. Like, tell us a little bit about it so that people understand what they're looking for and what the title is, all the good stuff.

Sure. So the title's The Giant's Ladder, and I wrote this book based on years and years and years of being an academic researcher myself, running research programs, and then helping so many researchers spin companies out of academic or national labs and into small businesses and incubators and out of incubators into companies that get acquired or merge into larger. The goal with this book is really to help encourage more scientists to start companies. Something that I've heard in the last 5 or 6 years, especially in academic labs, is almost less interest in founding companies than what we really need in our pipeline nationally to stay competitive internationally. We need to be funding more science and engineering startups, not less. We can't just see large companies buying up IP, which is sort of what's As opposed to starting and kind of having these homegrown entrepreneurial ecosystems, which are so important for economies across the country.

Because those large companies don't want to compete with themselves. They're going to pick a horse and put the rest in the stable. And we want all those horses, you know, running around the field and seeing if one can learn to run faster.

Exactly. Incentivized, essentially, especially if you are a postdoc and you're out of grad school with grad school debt. Maybe you didn't have everything paid for. And it can be much more appealing for an early exit where you're getting a decent IP licensing deal that your university or whatever is organizing for you. And you have, you're fairly hands-off and you're just going to reap a reward every month. That can be really tantalizing. And so I'm here with this book in another race to try to encourage more scientists to found companies themselves, to get out there and to commercialize their important technologies.

And to learn how to communicate about that, which I think is great. And we actually, we have a book club with our team, and Ian has not had his week yet. You may have just gotten in his head about what book he picks. You never know. That could be nice. That could be nice. So moving back to our kind of our topic for today and funding, I just got off a call earlier today with the bullpen where we had a VC on there who talked about how this was the nuclear winter of biotech, which was so uplifting. And it's still amazing. I came in with you. a good upbeat mentality. But, you know, then they did say, except for like seed and early stage funding, they're flush with cash. There is money there. You just have to know where to find it and be smart about how you do that. But even as we record this, the funding strategy is shifting. Like, I feel like every day something changes and we never know. And so pulling out your crystal ball, which will be a retrospective ball by the time this airs in a couple weeks, but, you know, pretty close. What trends do you see on the funding horizon and how can startups prepare themselves in a period where, Funding has always been uncertain, but it's more uncertain than ever before about what they should look for in the future. What advice do you have?

So I'm full of advice, James, but—

What good advice do you have?

I'll be a little, not confrontational, but I'll make a slight counterpoint to the doom and gloom.

I love that.

The biotech industry, so many different science sectors, let's just be honest, have had their ups and downs depending on administrations. I mean, I remember some of my first research programs were almost essentially Department of Defense funded because they were the only ones with pockets deep enough to fund certain advanced materials projects, even transportation infrastructure, all sorts of foundational science that we now see applied everywhere. You look at DARPA, right? And where, where did GIS come from? Where did all these foundational tech platforms and applications come from? They came out of defense funding primarily because that's where the money was. We have seen an expansion in NIH funding over the years, which has been great for biotech and so supportive of the industry. And so it is heartbreaking to see that funding compromised, to see funding to some of our most important academic institutions, research institutions getting compromised. But money's still flowing. It's just polarizing in 2 spaces. One is Platforms with massive upside. So think health technology for the masses as opposed to a very specific therapeutic in the rare disease space. It's unfortunate, but that is essentially what's happening. So if your platform has the potential for massive upside, especially in the consumer health space, I think that you have good raise potential.

Also, Mm-hmm.

If you are further along in your product development, then you could potentially secure funding even in this environment because you're much closer to commercialization. I think what investors are being very cautious of right now is essentially being the stand-in for federal entities and that research that they fund at the, at the basic and almost translational scale. But that said, I think that if founders are surgical, so either position your startup as a smart bolt-on within an acquirer's pipeline, or go bold and show how you're building something that's category-defining. I think there's just a little less room for the vague, we're the next-gen oncology therapeutic. That sort of narrative, I think, has gone the way of the dodo. You know, and lastly, I'll just say the US market isn't the only market. I think investors, especially some of our larger biotech VCs in the US, they want to see technology commercialized here and not in China. But it's okay for founders to look at other potential funders that aren't just US focused. And it could be that you have a longer runway if you develop your company in Germany or Japan, for example, than in the US starting out.

Well, in the EU, because we just got back from BioEurope, and I'll say the funders there are finally coming along more and more, where for years it was, you know, the US is where you went for funding, and it was much more nascent there. And they actually did a poll. So I was at BioEurope, then at BioTrinity in the UK. And at BioTrinity, they actually did a poll where people raised their hands. And for the first time in the 7 years I've been going, more people in that room said they would look towards Europe for funding than America. And I think there are interesting opportunities for American companies and American innovators to partner with European, either scientists or companies, and get access to funding where it may flow to them and a huge chunk may stay in Europe or in Japan or wherever they are. But there are still opportunities to get some of that work done in America and keep our stuff moving forward. It just requires people to think differently than they've thought before. And that's why I love everything you've said. You're like, let's break the model and figure out what we can do to make this work, because it is where we are. So don't hand-wring, just be strategic and Creative, right? Absolutely.

You can't hand-wring. That's such a good point because if we want more scientists founding companies, if we want more scientists on TV explaining to the general public why an innovation is relevant, and if we want more scientists running for office, they can't hand-wring. They have to meet the moment. They have to be strategic. And, you know, I love working with scientists and engineers because ultimately they have been so strategic in the way that they're planning their lab operations, their teams, their strategies for discovery. They're used to being strategic in a slightly different way. So we just have to kind of have them think about this more from a business and public policy and communications perspective as opposed to a more scientific one.

Yeah. And I, I know we're gonna hit another topic in our next podcast we're gonna record right after this of public-private partnerships. But before we wrap this one up, I wanna ask if you had to give kind of a key final piece or pieces of advice on securing funding, What would you tell people to do?

You know, I would stop pitching from the technology outward. I'd start with your ideal acquirer, partner, payer. What do they need? What are they looking for? And work backwards. So, we talk a lot about storytelling in science marketing because we're often asked, well, how do we tell a story around this product? Keep in mind, it's not about telling your story. It's about proving your relevance. We're telling a story to prove your relevance, not just to tell a story and make somebody understand the details a little more clearly. And so making sure that you're not just talking about your technology and what makes it great, but that you're really thinking about who you're talking to. Another way to say this is to build from the future and not from the bench. And sometimes stating it that way resonates more with a bench scientist But envision who hires you or who licenses from you in 5 to 10 years. Work backwards. What do they need to see in your data? What do they need to see in your IP? What do they need to see in your team? And those investors, they don't fund science. They fund those strategic outcomes.

Yeah. And I'd say Carolyn Schofield, who is our assistant director of marketing communications, has picked up a term from a conference she really loves. And then I think you just encapsulated it. Instead of calling that storytelling, she calls it storymaking. Where you're making your story and making it relevant. And I think if you're telling your story to prove your relevance, that is what storymaking is. And she's like, you're basically saying, hey, think with the end in mind and then backpedal your story into it instead of looking at what your story is and tell it because it shifts your narrative. So maybe we should hook you two up too. You two should brainstorm. I have so many, so many people to introduce you to, like Carolyn, Elaine, and then Dr. Kimberly Graham, who's our Chief Innovation and Entrepreneurship Officer. We have to connect you with her and her team too, because She pulls in folks to help her companies all the time that she's starting. And then you'd have to come to New Orleans. And it's just so sad to come here and have to eat and hang out and get a meal. It's terrible.

Yeah, New Orleans is awesome. Absolutely.

Well, Elizabeth, I want to thank you so much. As always, we're going to have all your contact info, your book, your notes, everything in our show notes. The Giant's Ladder. I encourage everyone to go out there and get that right now. Listen to these podcasts, but get your book and do a deep dive into what you have to offer. And maybe one of you can be one of those 12 or so companies Well, thanks so much for having me.

And, um, I hope people do shoot an email to inquiries@elizabethshaub.com and somebody there will get your email and shoot you a copy of the book. If you're a founder and you don't have enough funding right now to start your company and you're bootstrapping, please reach out. I'd love to get you a free copy.

You are so generous and I really appreciate your time. Thanks for joining us for Bio from the Bayou, and we hope you'll join us again.

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