Financing the Company – Part 2: Funding Stages, Valuation, and Funding Tools

Abstract

In the previous chapter, we discussed the consequences of overvaluing a company at the time of funding. However, company valuecan decrease from a previous round, even though the company was not overvalued at that time. This situation can occur whena company consumes massive amounts of money without reaching any new value-enhancing milestones. A biotech company’s valueis closely tied to its product development progress; therefore, it is important to understand investor expectations at differentfinancing stages. In this chapter, we review the typical funding stages for a biotech company, discuss valuations and howthey are calculated, and review typical exit strategies for a company. Practical guidelines are also presented for writinga business plan, and tips are provided on making effective presentations to potential investors.