Originally published in Bio Business March/April 2011

What steps can you take to attract the best investors?

How can you demonstrate that your company is worth investing in?

Biotech companies must compete for funding against other biotech firms and start-ups in other sectors. When a company does get the attention of an investor, it needs to treat the investor's time the way it will treat the investment funds it'll receive: like a precious resource.

Rule #1 Have an intellectual property strategy

A solid presentation of the intellectual property strategy should consist of a concise and targeted explanation of (i) the company's plans to protect its products (scope of claims to be sought, countries to be targeted, research to support the claims, how patent application filings will be staggered); (ii) plans to monitor the patents and patent applications of competitors to ensure "freedom- to-operate" (also known as FTO or competitive watches); (iii) the company's intellectual property history and policies (to give investors comfort that the company seeking the financing has full rights to its intellectual property); (iv) the company's agreements with third parties to acquire, license or leverage intellectual property rights; and (v) the intellectual property budget. To make the presentation relevant to an investor, the presentation must also demonstrate how the intellectual property strategy dovetails with regulatory and business strategies.

Rule #2 Prepare for difficult questions

Sophisticated investors will pinpoint the vulnerabilities of your intellectual property strategy. Be prepared for their difficult questions. For example, what do you believe is the weakness of your intellectual property strategy and how do you plan to overcome it? How do you propose to deal with the blocking patent of a competitor? How do you propose to deal with the United States Patent and Trademark Office, which has issued five office actions rejecting the product claim for the key product? Acknowledge the issues and don't dismiss them as unimportant; rather show that you have a plan of action for tackling difficult issues.

Rule #3 Choose the presenter carefully

The presenter must understand the scientific, legal and business bases of the claims and be able to explain them to investors who may know nothing about the science or the patents supporting your product. The investors do not want to hear someone read claim 25 of a U.S. patent application and have to interpret its meaning. The inventor—who has lived with the science for many years—is often not the best choice.

Rule #4 Make it easy

Investors have many companies chasing their funds. How do you distinguish your company from the others? Make it easy for investors to invest. Have a binder available that explains the company's intellectual property strategy, answers the frequently asked questions, lists the company's issued and pending patents, provides an overview of the patents and patent applications of competitors (proving freedom to operate) and generally gives the investors confidence that they are dealing with a company that follows best practices in intellectual property.

Rule #5 Rehearse

Before you participate in a conference call or present the intellectual property strategy to investors, practise. Do several dry runs. Find out how much time you will have. For the dry runs, select a few business colleagues who are tough critics and ask them to grill you. If you complete the session relatively unscathed, practise again. If the session does not go smoothly, rework your material: don't stay married to an approach that doesn't work. Rehearse in front of people with different interests and scientific backgrounds so you get used to tailoring your presentation to a particular audience.

Rule #6 Follow up

If you sense the investors have questions, deal with them on the spot. If you need to follow up, don't be shy to say that you will get back to them—and then do so promptly. You may not be able to answer to their concerns, but your follow up and leadership may demonstrate that you will lead them to the answers if the financing comes through.

Torys has offices in Toronto, New York and Calgary

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.