What Clinical Trial Information Do VCs And Investors Actually Want?
By Artem Trotsyuk, partner; Sergey Jakimov, partner; Artemy Shumskiy, senior associate; and Vlad Cernoutan, senior associate, LongeVC
Despite reports that 2023 was challenging for biotech and medtech fundraising, deals still moved forward in the highly competitive arenas of cancer programs and biologics. JP Morgan reported a total of $86.1 billion in announced deal values through the fourth quarter of 2023. While the most notable rounds may be (for now) restrained to specific categories of biotech, health tech, and pharma, funding is still available for good, unique, and proven (or nearly proven) therapeutics, treatments, and/or devices.
If your company falls into the “nearly proven” category, that likely means you’re starting your first clinical trials. As you go into fundraising conversations, the question you need to be prepared for from VCs and investors is: “How confident are you in your clinical trial?”
Until you get further into due diligence, these investors aren’t asking you to detail your clinical trial timeline nor, in many cases, are they asking you to walk them through its design. This question is less about what the clinical trial is and more about how prepared you are to deliver value in every situation.
To prepare for these conversations, you and your team should know the “who,” the “why,” and the “when” of your clinical trial setup. Who on your team is guiding you through the process, and how are they qualified? Why did you choose your disease/treatment specification? What are your plans when something goes wrong or changes?
Three Key Questions To Answer
The first area to address is about your people. Make it clear who in your founding team or advisors has clinical trial experience, especially successful experience. Investors want to know that you’re not using their funding to figure it out as you go and that you have a realistic expectation of costs, timeline, and design. They want to see that you have accessible and relevant advice when facing challenges and the foresight to avoid costly mistakes.
The second question to answer is what informed your choice of disease specification and target user group — why these patients? Good companies understand who their patients are, which subgroups may respond best, and who is unlikely to respond. They adjust their inclusion/exclusion criteria and select the most relevant biomarkers and endpoints to measure. Importantly, they use trials to gather more data and make better decisions in the future. You should specifically highlight how this user group affects your go-to-market plans and total addressable market. Investors appreciate continuity, especially when focusing on platform technologies. The decisions should be made based on a combination of two things: your knowledge about your own technology/therapeutics and your understanding of your industry. Learning from competitors' mistakes is one of the best approaches to trials.
The next piece of information your investors want is the “when” — what are the next steps after your trial? This is especially important in the earlier stages. Showing safety is paramount, but investors want to know your plans for the subsequent larger clinical trials that also will be pivotal to showcasing the efficacy of your therapy. Are these larger trials adequately structured to show a robust effect? Are there plans to expand the indication? How challenging will it be to recruit a desired patient population? While investors understand that conditions may change and nothing is set in stone, having a rough plan for future trials is key to the success of the company.
Another piece of “when” that the investors will appreciate is when something changes or goes wrong, what is the pivot strategy? Investors need to see you've considered various outcomes based on the results of your trial. Having preliminary data to support your confidence in going to trial is non-negotiable — but so is having the ability to adapt. Demonstrate your plans for cost-saving measures if the trial requires mid-course adjustments. This could involve streamlining recruitment efforts, exploring alternative trial sites, or leveraging new data analysis techniques. Be ready to discuss potential pivots if the trial doesn't give the desired results. This doesn't mean admitting defeat; rather, it shows investors your willingness to learn from the data and adapt your approach. Can the therapy be repurposed for a different disease or patient population? Can you explore alternative delivery methods or refine the treatment regimen based on the trial findings?
By showcasing your ability to navigate challenges and strategically adjust your course of action, you demonstrate that you have a well-rounded strategy for maximizing the return on your investment, even in the face of unforeseen circumstances.
For example, if your initial pitch focused on a broad blood test encompassing numerous biomarkers, but your clinical trial targets a specific one, explain how (and if) you can expand to other tests. Here is where you should share more information, including your plan for adapting the market approach based on the trial results. This demonstrates your understanding of potential adjustments and your ability to navigate them strategically.
One More Question
In addition to the who/why/when pillars, we have one more: how. The investors want to know how the trials are designed. In the past few years, we’ve seen companies (especially the more advanced “hot” ones) going above and beyond to tailor their trial design as much as possible.
If your VC or investor has a background in biotech, they'll likely ask for more detailed information on your trial plans — which you should, of course, be prepared to share. Trial design and endpoints that the company is willing to meet must be in total sync with what the FDA will consider significant afterward. Ideally, these should reflect the level of conclusiveness from data that the future industrial partners/pharma want to see. We know a ton of examples where the company has done Phase II trials, and the results were good, yet some critical endpoints that would allow the company to be an M&A were still missing. As a biotech VC ourselves, however, we know it all comes to checking if the trial design is foolproof when it comes to mitigating the risk of repeated studies. We are focused on understanding how well, and to what extent, you have prepared for success (which gives us a view of your timeline and the timeline to exit for our LPs).
Final Words Of Wisdom
The last piece of advice we have is: Do not overestimate your investors’ experience in biotech. As a field gaining an impressive amount of interest and new investors, you may pitch to someone who hasn’t backed a biotech play before — so they may not realize the requirements. While every investor backing a product, treatment, therapeutic, or medical device should know to vet your trial on the most minute level, this isn’t the case. When they ask about your clinical trial, they are asking about your preparedness and readiness to adapt. You are fundraising on your ability (as a company and founder) to deliver value for your backers. Give them the data they need to evaluate this first before moving onward into trial (and patient) specifics.
About The Authors:
Artem A. Trotsyuk is the operating partner at LongeVC and a bioengineer and computer scientist by training. Artem’s experience focuses on early-stage investments (pre-seed, seed, up to Series A), supporting entrepreneurs in turning their ideas and visions into successful companies. He is a lecturer at Stanford University on bio-entrepreneurship programs. He completed his PhD in Bioengineering and Masters in Computer Science with an AI specialization at Stanford University under the supervision of Dr. Geoffrey Gurtner in the Department of Surgery. Artem's research interests lie in bioengineering, gene editing, wearables, CRISPR therapy, regenerative medicine, and ethical use of data in drug development.
Sergey Jakimov is a founding partner of LongeVC. He is a serial entrepreneur, having co-founded 3 deep-tech ventures and raised more than $50M in venture funding for his own ventures and as an entrepreneur in residence. He is a visiting lecturer to several universities on VC and intellectual property rights, and he co-authored a master's program in Technology Law for the Riga Graduate School of Law.
Sergey co-founded a medical tech startup, Longenesis, and the Longevity Science Foundation. He is also a member of the Longevity Biotechnology Association.
Artemy Shumskiy is a senior associate at LongeVC and an investment and scientific associate with deep experience in molecular and cellular biology and biotechnology. Before joining LongeVC, Artemy interned for top biotech research institutions, including the University of Illinois Urbana-Champaign, Skolkovo Institute of Science, and BostonGene. Artemy holds a Bachelor's degree in Cellular and Molecular Biology from the University of Illinois Urbana-Champaign and a Master's in Biotechnology from Skolkovo Institute of Science and Technology.
Vlad Cernoutan is a senior associate at LongeVC. He has a background in business and finance, including data analysis, microeconomics, managerial accounting, and international finance. Prior to joining LongeVC, Vlad served as a Fixed Income Trading Operations Specialist at SEB Global Services and the Chief Microeconomist for IFund. Vlad holds a Bachelor's degree in Business from the Stockholm School of Economics.