What Do Seed Investors Look For In A Medical Startup?

Investors look for ideas that are big, doable and profitable.

When it comes to looking for money, keep in mind that different strokes attract different folks. Most investors, be they private equity groups, venture capitalists or angels, have different approaches, styles or sweet spots when it comes to parting with their money. At a minimum, they will look for :

• An investment that is comfortable for them and fits their risk and domain profile
• A project that satisfies a large, growing unmet need
• A solution that works
• Something that is different
• A good story
• Something that has the potential to make a lot of money in the shortest time
• Good management
• Other sources of cash

A related article on About.com

During my work with www.headwatersmb.com , I"ve identified some others characteristics of growing companies that are not as obvious.

The structure of the capitalization table.

The "cap table" describes how the company has been funded to date, who owns what and how much do they own or owe? For example, it is not uncommon for early stage company management to get money from many small investor family and friends. Multiple people owning relatively small amounts of the company in stock or other claims complicates the cap table and makes subsequent investments by large investors more complicated , though certainly not impossible. You are better attracting a few large investors than a lot of small ones.

Scalability of the business

Congratulations. You've made a workable prototype or sold and shipped an item on the internet. Now you have to make and sell a thousand a month. Does your plan describe how you intend to do that?

People are messy. The fewer the better.

If your business plan calls for hiring a lot of people that adds costs, re-think the model. Internet companies are easy to grow and scale with a few people. Just ask Jeff and Greg, the cofounders of this site and others like it. Craig's list has 8 employees.

Finding early stage investors is never easy, particularly in this economic environment. Put your business plan together so that it pushes the right buttons. If you do, the cash-meisters won't be able to resist.

Comments

[Arlen D Meyers, MD, MBA]

Here's a very informative article that talks about how to structure your new company, something investors will want to know.
http://www.nature.com/bioent/2006/061001/full/bioent913.html

[thuc huynh, md]

it's hard for me to ask for money from friends and family, let own alone thinking about asking angels or VC's. i didn't get accepted for the Kickstartr fundraising. and that kicked my hopes of seed money downward. i think i'll be okay with money for now on my own, but i hope to learn how to approach and successfully talk to investors just in case that's the right direction for my company in the future.

[Arlen D Meyers, MD, MBA]

Some people are great at asking for money and others are not. At this time you have four options:

1. Get someone on your team who is better at this than you.
2. Get better at it and do it again
3. Self fund
4. Find another non-clinical career alternative