What Scientists Need to Know About Angel Funding

It is no exaggeration to say that,Entrepreneurial scientists inevitably have to deal with money.

Enterprises are organizations aimed at making a profit, and the most direct manifestation of profit is money. To achieve profitability, it is necessary to master the flow of money. This forces founders to seek financing in order to sustain their companies' research and development efforts.

Especially when a company has just been established, the team is newly formed, the viability of the entrepreneurial direction remains uncertain, and products are still in the R&D phase, costs such as rent, labor, and utilities all constitute significant expenditures. During this period, founders face a myriad of concerns and must attend to every aspect of the business.At this stage, financing is like a timely rain.。

So, how can founders successfully complete an angel financing round, and what details can increase the probability of success? To answer this question, we have summarized six key points from the dual perspectives of investors and founders:From the Investor’s Perspective: Investing in People, Trends, and Narratives; From the Founder’s Perspective: Seeking Capital, Talent, and Resources.

Drawing an analogy with scientific research: collaborating with leading experts, identifying hot research topics, and submitting papers to top-tier journals—this underlying logic applies equally to the venture capital industry. In summary, it comes down to three key factors: people, trends, and narrative.

First,Invest in a Strong Team。

Investing early and in small ventures is essentially investing in people; this seems to be a consensus within the venture capital community—As long as the team is strong, business models, markets, and profits can all be created.

Although each venture capital firm has its own definition of what constitutes an excellent team—some investors favor serial entrepreneurs, others prefer to invest in young teams, and some are drawn to founders with deep technical expertise... butA team with diverse backgrounds and complementary skills and experience is always more attractive to investors.

This is particularly true for founder teams comprising a “scientist + CEO,” which exhibit greater risk tolerance and can respond more swiftly to industry changes.

Maitong Biology is a typical example. “The strong biological background of its scientific founders enables Maitong Biology to pursue novel targets and develop first-in-class innovative drugs, while the CEO’s extensive industrial and commercial experience facilitates the translation of scientific findings into drug candidates. Overall, the complementary backgrounds of Maitong Biology’s founding team ensure effective integration across various R&D platforms and smooth progress in drug development,” stated Dr. Zhang Shiyun.

Second,Projects in the spotlight are more popular.

Investors rarely have the patience to endure the long, quiet periods of basic research alongside scientists.

Beyond identifying a strong team, investors also evaluate the market sector and the product. More often than not, angel investment becomes meaningful only when both criteria are met: the team serves as the foundation for success, while the product and market sector provide the assurance of it.

Taking the AI-driven drug discovery sector as an example, during its boom period in 2021–2022, approximately 80 innovative companies were established in China, with 23 of them completing angel-round financing in the same year.

Identifying a high-growth opportunity, along with the strong market demand and potential customer base behind it, can often enable startups to rapidly scale, capture market share, and potentially emerge as industry leaders or unicorns, thereby delivering substantial returns to investors.

Third,Investors prefer to hear compelling stories.

Angel-round financing requires a compelling narrative that articulates the company’s future vision to investors.

On the eve of fundraising, founders must have also struggled with how to craft a compelling pitch deck. Chengguo Bureau at“Six Slides Are All You Need for a Scientist’s Startup Fundraising Pitch Deck”Six key insights have been distilled to best align with investors’ mindset and most effectively demonstrate a company’s core competitiveness: clearly articulate the problem being solved, the methodology employed, the market size, the competitive landscape, the team composition, and the funding requirements along with the planned use of proceeds.

The better the story, the more it must be logically rigorous, clearly expressed, and imbued with narrative twists, emotional depth, and warmth. Therefore, when founders present their pitch decks to investors, they need to carefully plan how the main and supporting characters make their entrances, interact with one another, and drive the narrative forward in a logical and coherent manner.

Scientist-entrepreneurs often seek investors whose values align with theirs and who can empower their companies. However, amid the current economic downturn, investors appear to favor more stable projects. This shift has likewise transferred pressure onto founders.

“It’s becoming increasingly difficult to discuss fundraising,” the CEO of an innovative company spun out from academic research told VCBeat. Scientist entrepreneurs face particular challenges when seeking angel-round financing.Scientists with the deepest technical expertise do not necessarily understand business: Scientists focus year-round on original innovation, have rarely received training in fundraising, and lack practical fundraising experience. Coupled with their limited bandwidth, this often leads to delays in project financing.。

Therefore, the first step in fundraising for scientist entrepreneurs,First, Understand Angel Round Financing。

Generally, when a project seeks financing, it is necessary to determine the valuation, define the funding amount, and specify the equity stake to be divested. Meanwhile, founders are also required to provide investors with a general overview of the intended use of proceeds and disclose any prior fundraising experience.

During the angel round financing process,Scientist-Entrepreneurs Are More Prone to Falling into the Valuation Trap。

Valuation is an art, especially for companies in the angel round. Most of them usually do not have mature products. Their valuation needs to consider not only the team but also predictions about future growth, competition faced, and whether they can ultimately achieve profitability.

When scientist-entrepreneurs hold excessively high expectations for their projects and propose inflated valuations, if the next round of financing fails to raise the valuation or if the valuation declines, early-stage companies are essentially “sentenced to death.”

Therefore, a relatively effective approach to fundraising is to first establish a flexible valuation range and then seek funding at the lower end of that range. If there is strong investor interest in the company’s projects during the fundraising process, the valuation will naturally increase.

Step 2 of Fundraising,Engage with investors as early as possible.

A professor focused on the commercialization of scientific research told VCBeat that he has nearly 1,000 friends on his WeChat Moments, most of whom are partners from the industry and investment sectors. Interactions with these partners also lay the groundwork for future entrepreneurship and fundraising.

Communication and interaction are even more critical for scientists who have already launched startups."Since entering the industry, one must understand its rules of the game."Many scientist entrepreneurs only consider angel financing when their funds are exhausted. In such situations, they are prone to making desperate choices, either selling equity at undervalued prices or entrusting their promising ventures to unsuitable investors.

Before formally launching an angel funding round, founders are advised to begin preparing their investment proposals and seeking investors six months in advance, thereby allowing for a wider range of options. Jensen Huang, founder of NVIDIA, also candidly stated in an interview: “In the early stages of my startup, I was constantly fundraising—closing each round as quickly as possible so that I could raise even more capital in the next round.”

As a startup, the risk of failure is greater; maintaining sufficient cash flow is paramount.

Step 3 of Fundraising,Bringing in external support might be a good solution.。

If scientist-entrepreneurs find their progress unsatisfactory in the above two steps, enlisting external support can save both time and effort.

Most scientist entrepreneurs seek professional assistance from financial advisors (FAs) when raising capital. FAs possess extensive networks of investors and investment institutions, along with specialized expertise in fundraising and capital markets. By leveraging their own reputation as an endorsement, they can introduce scientist entrepreneurs to potential investors and even provide a range of value-added services, all of which help save these entrepreneurs considerable trouble.

andThe most direct way to seek external support is to contact the university’s technology transfer office.

Finally, when the founder discusses fundraisingStrive to achieve a win-win outcome for both talent and financial returns.

The vast majority of angel rounds are not just about the money.

Beyond capital shortages, startups often lack support in areas such as resources and market access, which investors can provide. Therefore, founders should also evaluate the resources behind potential investors. Sometimes, angel investors offer entrepreneurs not only funding but also expertise in capital operations, guiding them into the capital markets; experience in product pipeline development, helping companies advance their R&D processes; and management expertise, enabling businesses to avoid common pitfalls.

In summary,Financing is inherently a two-way street; only when investors and founders place absolute trust in each other from the outset can they jointly withstand startup risks and achieve mutual gains.。

Finally, we wish all scientist entrepreneurs a smooth and successful fundraising process, and we hope that investors will find their ideal startup projects.