Strategic Partnerships For Small Life Science Companies

Two businessmen shaking hands, creating a strategic partnership
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Two businessmen shaking hands, creating a strategic partnershipJordan WarshafskyBy Jordan Warshafsky, Partner, Ashton Tweed

See this article on LinkedIn.

 

It’s very common for life sciences companies to enter into strategic partnerships, whether they’re small start-ups or large established businesses, because it’s an effective way to share expertise, resources, and funds. As a small company or start-up, especially if you are in the research and development phase, you require funding to survive. This can come in the form of investors and partnerships.

 

Having worked with many small companies in the process of completing strategic partnership deals with larger companies, I know how challenging it can be to negotiate the needs of both companies and their investors. Each perspective needs to be considered in order to gain the full benefits of a partnership.

 

To avoid common partnership pitfalls, put yourself in the shoes of each party involved to make sure everyone’s needs would be met. Remember that a deal can only work if both sides have a chance to accomplish their corporate objectives. The goals for your company in a partnership should include:

 

  • Ensure that you are gaining funds and resources you don’t currently have. Big companies typically depend on small companies for their innovative technologies. In return, your potential partner should have the funds and resources you lack to get your technologies developed and approved.

 

  • Mitigate risk for your current and future investors. Having put money into your company, the end goal of your investors is to get money out. Any partnership worth considering should provide a strong potential for investors to make a return on their investment and reduce any risks that would put their money in jeopardy.

 

  • Establish a possible exit strategy with the partner. Your investors want to feel secure in their investment by seeing a promising exit strategy; this is key to getting them on board with a strategic partnership.

 

  • Minimize dilution of current investors. Depending on what the deal looks like, a strategic partnership has the potential to dilute the shares of your current investors. Although it’s idealistic not to affect the percentage of their ownership at all, it’s wise to keep this dilution to a minimum as a result of the partnership deal in order to keep your original investors as whole as possible.

 

  • Speed up your timeline. The partnering company should be able to get your products developed, approved, and on the market faster than you could have alone. The potential partner should get the technology to market as soon as possible and improve timelines.

 

  • Improve the credibility of the company. A strategic partnership with the right company can help significantly improve your credibility. If a well-known company backs your technology, your company and your product become more credible. So make sure to show how you and your products provide long-term value to potential partners and how they fit into their strategic direction.

 

Remember that good deals take time, dollars and effort to complete. Six months to a year is not uncommon. Entering a strategic partnership can be an immensely positive and profitable experience if executed correctly and with great care. All parties should benefit from the deal, including investors. And although your motivations behind the deal might differ, make sure to define a joint vision of the venture in order to align your purpose as a team.

 

Looking for partnership opportunities in the life sciences industry? Check out Ashton Tweed’s networking page for upcoming partnership events.

Share your insights! Contact khoffman@ashtontweed.com to contribute your life sciences article as a guest writer.

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