As part of a series in which we ask leading venture capitalists to answer a question of fundamental importance to entrepreneurs, Syncona Investment Partner Gonzalo Garcia explains how to choose the right VC.
Forward: features are independent pieces written for Mewburn Ellis discussing and celebrating the best of innovation and exploration from the scientific and entrepreneurial worlds.
Gonzalo is an Investment Partner at Syncona. He is active across the life sciences world – for example, having built Resolution Therapeutics, which develops macrophage cell therapy for inflammatory organ disease. Prior to Syncona, Gonzalo was a management consultant at Boston Consulting Group. He has a PhD in protein biophysics from the University of Cambridge and a master’s degree in physics.
When choosing a VC, I would recommend looking at three things. The first is whether the VC in question is aligned with your vision. When investors sit down with founders, it may become apparent there are different views on the best strategy. In biotech, for example, the founder may want to develop a drug and take it to market. An investor may believe that it is preferable to sell to a big pharma company at an earlier stage. That is a significant difference in vision. It is important for the founder and VC to sit down and really examine how they align. A good VC will help the entrepreneur think through various concepts and both parties may change their minds during this discussion.
Think about the scale of the project, the ambition, the time horizon and how the company will respond to setbacks. You will want a VC that is able to back the founders when things get tough, otherwise there’s a danger of asking management to compromise their view and support a vision they do not really stand behind.
The second thing to ask the VCs is how they can help you build your vision. Are they just there to offer money and disappear? Or are they willing to be ‘value-add VCs’ and open their contacts book? If the vision is to raise money through multiple funding rounds, it is important to know whether the Series A investors are going to disappear or whether they’ll be sticking around to help during later rounds.
The third thing is whether you trust the individuals in front of you. Put aside the reputation of the institution and the deal metrics. Do you trust the VCs as a group of people? Do you understand their motivations? Can you imagine a scenario where something has gone wrong and you need to phone them to discuss it in a constructive manner? Will they be your advocate inside their company?
The focus of the industry is so often on the hard stuff, the money, expertise and vision. However, trust is also essential. You are about to embark on a long-term relationship and you need the human element to be as productive as possible.
To get these three factors right, I would recommend talking to a variety of VCs. In a deal, there may be five or six VC houses prepared to engage. The more the merrier! Naturally, any VC you talk to needs to fit the criteria, so do not just play the numbers game for the sake of it. However, you will get a better feel for who you can work with after speaking to a variety of investors.
When auditioning these VCs, feel free to ask difficult questions. What do they want to achieve? What are the horizons for an exit? To what extent can they offer things in addition to their money? Ask for concrete examples. Do not let VCs hide behind the cheque and the allure of immediate funding. Good VCs will respect you for asking the questions. The process also helps build alignment and understanding.
There are questions for the founders too. What really matters and what are you willing to compromise on? Where are there gaps in your abilities? Where are you hoping for VCs to come in and fix those gaps?
Overall, make sure you are not just chasing money. If you do that and ignore issues or tell the investors what they want to hear, then you are baking in problems for later on. Given the choice between a VC that aligns but offers less money, and a bigger cheque and poor alignment, go for the deal with the better fit, even if it means more work in the short run.
The right investor can mean more than an injection of capital: it is the start of building something valuable. It is worth taking your time to ensure the relationship is built to last.
Strong and effective relationships with VCs
Nick Sutcliffe, Partner, Patent Attorney and Litigator at Mewburn Ellis comments:
Raising money is a huge challenge for the founders of biotech companies and relies on strong and effective relationships with VCs. A robust IP portfolio that is ready for due diligence by VCs makes an important contribution to the value of any biotech company, helping to sway investment decisions and leading to successful funding rounds.
Sign up to our newsletter: Forward - news, insights and features
We have an easily-accessible office in central London, as well as a number of regional offices throughout the UK and an office in Munich, Germany. We’d love to hear from you, so please get in touch.