Facing capital constraints, biotech companies must make a strategic choice. They can either dilute ownership by raising more venture capital or dilute their pipeline by partnering a secondary asset to fund their lead program. This "equity vs. assets" framework forces a clear-eyed decision on capital strategy.
Raj Devraj emphasizes that while intelligence is table stakes, the crucial traits for a startup executive are resilience and "street smarts." This is because navigating the high expectations and intense scrutiny of an investor-heavy private board requires a different skillset than what's found on a resume.
Unlike ventures in established biological pathways, startups tackling novel biology must first prove a specific drug product can work. The primary question isn't about the platform's potential applications but whether a single, tangible therapeutic is viable. Focusing on a broad platform too early is a mistake.
Raj Devraj simplifies biotech venture evaluation into a four-part framework: scientific viability ("Will it work?"), market viability ("Will it sell?"), feasibility ("Can I do it in my lifetime?"), and execution capability ("Do I have the team?"). This provides a comprehensive yet concise due diligence checklist for early-stage opportunities.
Early-stage biotechs prioritize scientists to build the core platform. However, once a lead clinical program is identified, the critical hire becomes a Chief Medical Officer who can design the clinical strategy. This hire is timed to the program's maturation, not the company's age, reflecting a pivotal strategic shift.
To raise capital, biotechs need specific clinical data. Raj Devraj specifies the three essential components investors look for: 1) confirmation of good drug exposure in humans, 2) a favorable early safety profile, and 3) biomarker data that provides proof of the drug's biological mechanism. Lacking any of these makes fundraising significantly harder.