January 25, 2018

Five Ways to Run Out of Money

Cautionary tenets for biotechs and their investors

Cautionary tenets for biotechs and their investors

Build a really big list of potential buyers.

Consultants tell me all the time how proud they are to have assembled lists of 200+ prospective deal partners for their client.

They buzz around conferences talking to everybody chatting up the deal.

Here’s the thing - Most of those companies aren’t going to transact. They were never going to transact. And a thoughtful analysis would have shown you they weren’t going to transact before your team wasted months of executive time and company dollars flying to conferences and pointless meetings.

Who cares how many companies you can talk to, if talking to them is a complete waste of time?

A consultant who receives a monthly fee may not mind lighting your money on fire, but you should be alarmed by this process if you want to see your science get to patients.

Rely on pre-existing relationships to get the deal done.

Pre-existing relationships can help you get a conversation, but dealmakers won’t transact just because your CEO is the son of so-and-so at Top Pharma Corp.

I meet executives who swear to me up and down that their access to high-level meetings means that they don’t need to be thoughtful about strategic outreach.

My question to them is always the same, “But did you get a deal done?” I’ve yet to be surprised by their answer, it’s always “Uh… well, no.”

Make it hard for the buyer to understand what you do and why they should care.

An individual dealmaker may see 600-700+ deals per year.

They have a lot more to do than think about you and your science. It might feel frustrating and unfair, but it’s up to you to make it easy for them.

Make it easy for them to understand your science, and how you fit with their strategic priorities.

If you don’t, you’re leaving a lot to chance.

Ever receive a 40-page deck? Even the really good ones take considerable time to understand.

If you haven’t made it easy, here’s what the person on the other end is thinking,

“Sure, I could put in the 2-hours to really understand the deck, but why would I? I’m busy with existing commitments and opportunities I already understand and believe will lead to value.”

Don’t bother understanding how many likely buyers there are for the deal.

Are there two likely buyers for your deal, or 50? If you don’t know, you can’t plan accordingly, but your strategy should look radically different.

In the first case, you might want to focus obsessively on just a few targets. In the second, you may want to try to drum up some competition before seeking your preferred deal.

The worst decision you can make is to search broadly for opportunistic behavior with unlikely targets. Time and time again, I see biotechs running their cash reserves into the ground seeking deals that will never transact. If you want to get a deal done, know who your buyers are and go get them.

Also see point one.

Denial

It’s never nice to hear that a deal may be harder to transact than you’d like.

Putting in the work to get the deal done is hard, and the process often takes longer than we want it to.

But here’s a certainty… avoiding the truth about what it takes to get a deal done is a lot like racking up credit card debt. It’s a lot of fun until you get the bill.

That bill may be the death of your company, or a very disappointing M&A transaction. Unlike credit, these are career outcomes you’re not likely to ever pay off.

Want to get smarter about your business development process?

Then you should meet OutMatch. OutMatch is a better way to research and manage the entire business development process.

An extraordinary approach to effective partnering.