The investment paradox: How can start-ups crack it? – Med-Tech Innovation

Raising investment is one of the most important objectives for a start-up, not least because of the vast expense involved in R&D, patenting and conducting trials. Yet many founders and CEOs find raising investment difficult and struggle to connect with investor audiences.

They are therefore surprised to discover that investors also struggle to find companies to invest in and spend considerable time seeking out promising medtech start-ups.

One senior investment manager I spoke to at a mid-sized venture capital firm told me he receives hundreds of pitches a week and just doesn’t have time to read them all. Unless he has already heard of the company or has been personally referred to them, emails often go unanswered.

This paradox – companies struggling to find investors, while investors struggle to find companies – is the result of huge amounts of ‘noise’ in the market. Thousands of start-ups are claiming to be innovative and tackling multi-million-pound problems, making it hard for investors to differentiate between them and know which to shortlist. Investors either use referrals or ‘signals’ to help them decide which businesses to investigate further.

These ‘signals’ include visibility and credibility. Many start-ups don’t demonstrate either, and very few demonstrate both, so businesses that can skilfully create and articulate these stand out.

So, where does this leave a promising start-up and how can they show investors that they are different?

Tactically, I advise clients to explore profile raising through PR, to create authoritative content, and to develop a digital presence that reflects their offline reputation. The best methods vary from business to business and depend on factors like whether the business is in medtech or biotech, how much it is looking to raise and its commercial pipeline. The ‘what to do’ isn’t the important bit. How is.

A press release or two isn’t going to suddenly solve the investment riddle. Management teams and boards need to think broadly about external communications and consider brand building as a serious strategy for growth that helps to attract investors, build pipelines, and create shareholder value. Some leaders get this, but others reject it immediately.

I can understand why. There is a misconception that brand building is about lots of marketing, new logos, expensive campaigns, and brochure redesigns. It’s not. It’s about being distinctive and memorable, and demonstrating how your innovation is different and how you are uniquely placed to commercialise it. This can be done on a budget, but it needs to be strategic and executed by someone who really understands the sector.

I handle the public relations activity for some genuinely cutting-edge medical device, pharma, and digital health start-ups, and advise them on how to attract investment through brand building and investor communications. I recommend focusing on two things – creating visibility and demonstrating credibility.

On visibility, the target audience needs to read, hear, and see the business regularly in print, online and in person. This isn’t about an investment manager reading one article and calling them up, but about building and refreshing memory structures so that they start to recognise and remember the business. It’s also part of the due diligence process – when someone researches the business, what will they find? By securing industry, national and business media coverage for clients, I help them prove to investors that others take them seriously and that they have momentum behind them.

In healthcare, credibility matters much more than it does in other industries because of the scale of many claims. It is established gradually and over time helps to build a powerful reputation. Tactically, this might be done through thought leadership, speaker opportunities or white papers but in essence, involves showing investors how knowledgeable and sophisticated the team are, without just saying ‘we’re experts’.

After all, which start-up isn’t claiming to have a revolutionary innovation with an expert team?

Join me at Med-Tech Innovation Expo 2023, where I am delighted to be speaking on why a brand is important and how medtech and life science businesses can stand out and avoid failing at the early due diligence stages. I’ll also be giving practical advice on how start-ups can develop the momentum that piques investor interest, whether you’re on your first round or third.