Silicon Valley's top biotech VCs share the biggest mistakes startups make when they pitch

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Biotech is one of the hottest sectors for venture-capital funds right now, but pitching a science-heavy startup to investors isn't always easy.
We asked the top investors in the space to tell us what startup leaders do wrong when they try to attract venture funding — and what they can do to avoid these pitfalls.
Their answers contain some key lessons for biotech startups.

Biotech is one of the buzziest sectors for venture-capital funds right now.

Across the globe, VC investments in biotech startups topped more than $10 billion for the first time in history. Over the summer, dozens of American biotech companies went public. Nearly a third of the companies in the latest class of Y Combinator, Silicon Valley's biggest startup accelerator, were in the biotech sector — up from just 8% the year before.

Much of the recent excitement has centered on new ways of tackling cancer using patients' own immune systems, fresh therapies built on gene-editing tools like CRISPR, and potentially revolutionary techniques for making meat without factory farming.

But if you're a science- or health-minded entrepreneur in Silicon Valley, cutting through the noise can be a challenge.

We talked to investors who've backed some of the companies working in these areas to learn what startup leaders get wrong when they pitch their ideas.

Emphasizing a tool's impact on the market over its impact on patients

Helix DNA 6 Cure disease. Fix the food system. Prolong life.

These are just a few of the intrepid aims of today's leading biotech startups.

But accomplishing these goals requires laying practical groundwork. In healthcare, that could mean painting a concrete picture of where and when your startup's technology will be used. Whether it's a new disease-detecting diagnostic or a new drug to treat an illness, investors want to know how a tool will fit into the current standard of care, Dan Estes, a partner with venture capital firm Frazier Healthcare Partners, told Business Insider.

"The biggest mistake I see is when someone spends more time talking about how a product would affect the market than they do talking about how it would affect the disease it's designed to treat," said Estes, who serves on the boards of four pharmaceutical startups, including Cirius Therapeutics, which is focused on tweaking the human metabolism to NASH, and Sierra Oncology, a cancer therapeutics company.

Rather than focusing exclusively on how a new technique or drug would impact the market, Estes said he prefers when startup founders also demonstrate how people would actually use it.

"How will it help patients? What would that look like?" Estes said, adding, "The best investment is where you can very clearly see where a physician would use" a new piece of tech.

Graham Walmsley, a principal at San Francisco-based VC firm Versant Ventures, agreed.

"When I see too much about revenue and market front-loaded, it suggests some naivete," Walmsley, who recently led Versant's investment in a clinical-stage therapeutics company focused on treating non-alcoholic steatohepatitis (NASH), which is poised to be a significant burden on the US healthcare system due to the growing number of patients with the disease, said.

Instead, he'd like to see entrepreneurs "build out the entire clinical case" for their company or technology first.

Clinging to your pitch deck

If you're headed to a meeting with a venture capital firm, chances are you've planned ahead. Whether you've brought index cards or a PowerPoint presentation, you've likely got a list of basic points about your company that you want to get across. But sticking too strongly to a list of prepared items can also turn off investors who want to ask questions.

"There's a saying that I like which goes something like, 'You have to release your agenda,'" Frazier's Dan Estes said. "I think sometimes companies stick to their pitch deck too closely."

That means if you're pitching your company to a venture fund and someone on the fund's team wants to skip ahead to another part of your presentation or pause on a slide to further explore something you've mentioned, it's better to be flexible than to rigidly plow through your talking points.

"It's better to let the questions guide the discussion rather than walking through every component dogmatically," Estes said.

Similarly, Dylan Morris, a general partner at venture firm CRV who focuses on bioengineering and recently led the firm's investment in a drug development startup called System1, said startup leaders should focus less on the technical details or decades of science that went into their technology and more on keeping potential investors engaged.

"Don't come into the meeting to teach. Come to sell," said Morris.

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