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What makes the perfect pitch? What do investors look for in a business? These are questions that will cross the minds of any entrepreneur, and ones that, if approached properly can make the difference between securing investment and not.
So to address these questions, NextFin sat down with Sunil Shah, the 2019 Angel Investor of the Year to ask him about his experience of investing in early-stage start-ups, what he looks for in a company as well as what he makes of the impact of coronavirus on the UK’s business sector.
“I’m an entrepreneur by background.”
Sunil is the CEO of o2H Ventures and in 2019, he won the UKBAA Angel Investor of the Year Award in recognition for backing high growth potential start-ups. He has been investing in the biotech therapeutics sector for a number of years - a sector from which many angel investors have stayed away.
o2h Ventures Limited has launched the o2h Therapeutics and AI fund which is the first S/EIS fund in the UK solely focused on early-stage biotech therapeutics and related AI opportunities. The geographic scope shall be UK wide including Oxford and London but will target the growing Cambridge biotech cluster. The Fund is structured to be S/EIS compliant providing tax breaks for UK taxpayers.
Over the years, Sunil has championed EIS Angel investing and biotech therapeutics to generate investment into companies. He has also added immense value to his portfolio companies by providing active mentoring and more recently, Sunil has launched the o2h Therapeutics & AI EIS fund which builds upon his existing Angel portfolio.
Speaking about investment stages, Shah told us: “Our sweet spot for investments is in the therapeutic space and human healthcare space. But if you drill below that, we are really interested in medicine that can impact various diseases, with an emphasis on digital or technological solutions.”
Part of the recognition he received when awarded Business Angel of the Year was his emphasis on active mentoring of entrepreneurs. “We are not worried about exits, we look to help nurture and grow a business rather than exit as quickly as we can.”
“We believe that if you do it like that, you will get better exits in the long term. You’ll get people chasing you rather than you chasing them for an exit.”
When looking to invest in these businesses, Sunil says that he particularly looks at “quality of the science and how much has been done around it.”
“Even if you have the best CO in the world, if the science can fall over it makes the business very difficult.
“When you are a very early stage business you can bring new people into the team, but the science and the base has to be robust.
“The other key thing is: who’s coming in alongside us. We like to invest with other people and collaborate on ideas. If they are investors of high quality and high calibre that can add brains to the early-stage start-up. That’s a positive for us.
Shah added that his rationale is unusual because “most investors look at the team, whereas we look predominantly for the science, although the team is important.”
In an operational sense, Shah has a number of business units including a team of three hundred employees in India as well as a business incubator in Cambridge.
“With the o2h chemistry centre in India, we’ve been in lockdown in India. Because we are R&D we’ve been open but we’ve had to navigate a more difficult working environment.”
“On the venture side of the business we are seeing a lot of interesting valuations, a lot of good deal flow. I think there’s a lot more excitement around the health sector than there has ever been.
“We are seeing investors actively coming into our space. Seeing the importance of science both socially and economically moving forward, the venture business is definitely business as usual, whereas other funds are struggling.”
“We are definitely seeing more interest in what we are doing. In fact, we’ve just made four investments in the last month or two during Covid and we have a number of businesses within our portfolio which have significantly had a positive impact on the fight against Covid and we’ve been trying to help those businesses as much as we possibly can.
“Generally, we are in a sector that has not been impacted. We’ve not had to furlough any of our staff and manage the best we can through the Covid crisis. It's very much business as usual.
Commenting on the range of support measures introduced by the government, Sunil acknowledged that “they’ve done a lot.”
“However, in the space that I am in, there is a bit of a gap”
“I think that Innovate UK can be quite supportive to some companies in our portfolio.”
“We appreciate what they’ve done, but we don’t feel they’ve done a lot for us.”
Sunil also spoke about the Seed/Enterprise Investment Scheme, claiming: “As far as I can see the government has missed out on the UK’s best kept secret - all the EIS investments, but these won’t apply to many early-stage businesses.”
“It is the seed stage businesses which are the ones that are going to generate the growth for our economy. Most of these companies are biotech and tech, and with Brexit on the horizon these are what are going to fuel the high growth jobs. And with the best intention of the government, they’ve left a gap there.
He added: I am a part of the EISA and unfortunately, it's as if the whole area has been left out by the government so far.”
NextFin recently produced a guide on what makes a perfect pitch. To add to this, we asked Sunil to give us his top two tips for a pitch that will attract investors.
First, “ensure you get through to the right people. Everything that comes through a warmer lead tends to do better takes the trust bit out of the equation which is helpful. Talk to investors through connections you know well.
He also suggested having a “nice summary”. A “one or two pager so an investor can quickly see whether an investment is suitable for their fund or not.
“Every fund has areas which they like to focus on. Very few focus on everything and investors will like to have an area of expertise something they can do quick due diligence - pick your investors based on what you know that they like.
“Get a lead investor who knows your space first and then get the generalist investors on second. If it is something not really in my sphere but I know an investor who has really made due diligence and is good at their craft then I am more likely to top up and fill up the round.”
Author: Sacha Bright & Oliver Murphy
Disclaimer
To the best of our knowledge, the information we have provided is correct at the time of publishing. Sacha Bright is not a solicitor or accountant and we recommend that you seek professional advice on any topic discussed.
Tagged: News Angel Investor EIS Covid-19 Sunil Shah
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