From Series A to B: Navigating the transition from promise to proof

“Even if you do not need pharma during your series A funding, you have got to know what pharma has in store [for you] and you still need to get in touch with them to start the dialogue already because Series B investors are going to ask you, what does pharma think about this?”, Arthur Franken, general partner at healthcare investor, Gilde Healthcare said to the audience at LSX Investival Showcase in London, UK.

Franken described how a Series A financing round provides a biotech firm “with the opportunity to become the domain expert in the product you are focusing on.” Therefore, post-series A activity must be geared towards acquiring knowledge through “talking to pharma and experts.”

In doing so, he argued that “once you come to Series B, you can be viewed as the domain expert” and consequently, you will be more likely to secure investment and move the needle closer from promise to proof.

Gonzalo Garcia, investment partner at Syncona Investment Management, agreed with Franken’s sentiments and told delegates “By the time you get to Series B, you need to be a well-oiled machine that is ready for clinical execution.” He advised attendees of the panel that “the Series A runway is a good time to be thinking about” resources for this.

Additionally, he said companies must be thinking about derisking and emphasized how “it is not enough to say you have the Series A funding.” Instead, you need to shift your focus into removing “the risk of investment and making it attractive for new investors to come in” for the next round.

The conversation between the panelists developed into a discussion concerning the importance of team members when operating in a post-series A company.

The ‘nice to haves’ and the ‘must haves’

Though some might think you need to have every C-suite position filled, the panelists shared how this is not always the case (especially when trying to conserve some capital). The requirement for a CEO is clear, but Franken argued that a chief financial officer (CFO) “is not a must-have unless the CEO” lacks fundraising skills.

The same debate surrounded the role of a chief medical officer (CMO).  Daniela Begolo, managing director at EQT Life Sciences, said the right moment to bring in a CMO is something that is “always raised.”

She warned delegates her firm has seen companies try to bring this position on board “maybe a little early” and that while “the CMO is a key hire” and should be “lined up pre-series B,” it is not a role that needs to be in place too early, such as Phase I.

Franken agreed and described how “the problem is if you go out to look for a CMO too early, you might not be able to get the right person.” Essentially, “you have the ‘nice to haves’ and the ‘must haves.’”

The importance of hiring the right team at the right time remained clear throughout the panel. Garcia highlighted how there are windows of time where a firm can bring in the person they really want and said, “you do not have to have the whole team there on day one.”

He suggested how in some circumstances it is beneficial to “start with a part-time CMO as you embark on the Series A and then you can bring them on full-time as you approach the Series B funding.”