When it comes to growing a startup, it’s easy to lose sight of the forest for the trees. As science (understandably) takes center stage, financial functions are left to develop organically. But when it’s time to reach for the brass ring of an IPO or acquisition, your financial infrastructure must be as robust as your science. Here are five best practices biotech startups should adopt early on to ensure they’re ready to shine when it’s due diligence time.
5 financial best practices for biotech startup acquisition and IPO readiness
Build a scalable financial infrastructure early
- Plan for growth. Finance at a startup is often a one-person show. But, as the company grows, you’ll need systems and processes that can handle increased complexity. Implement tools that can track expenses efficiently, provide real-time financial data, and support accurate forecasting. Choose accounting systems designed to grow with you and are easy to integrate with current and future tools and processes.
Learn more: ZAGENO’s lab, ERP, and P2P integrations
- Segregate financial processes. Early on, expenses may blur together, but separating costs is critical for creating clear financial statements. For example, distinguish between R&D expenses and operational costs like payroll and vendor management. This clarity demonstrates to investors and acquirers not just profitability, but also a strong understanding of resource allocation and management.
Implement financial controls that support growth
- Financial controls as a safety net. It’s tempting to bypass formal controls when you’re moving quickly, but cutting corners will come back to bite you later. Well-defined controls act as a safety net, showcasing to investors and potential acquirers that funds are managed responsibly and that sound fiscal practices are in place.
- Prepare now for due diligence later. Set up clear approval workflows and establish processes for managing vendor contracts and capital expenditures. These measures not only help manage cash flow and governance but also make it easier to demonstrate operational efficiency during audits or due diligence.
- Designate back-ups. As auditors like to ask, “What happens if you get hit by a bus?” While morbid, this question underscores the need for redundancy in small teams. Designate back-ups for essential roles to ensure continuity and safeguard operations.
Special session replay: Close Process, Auditing, and Spend Analysis Tracking Through Automation, a must-watch for finance leaders navigating the unique challenges of biotech startups and beyond. With Erik Smith of 92Bio and Lindsey Fitzgerald of ZAGENO.
Keep contracts and vendor relationships well-documented
- Establish a documentation system. Potential investors closely examine contracts and vendor relationships, so maintaining a thorough record of vendor contracts, leases, and employee agreements is essential. A centralized, well-organized “data room” ensures easy access to these documents, streamlining due diligence and boosting credibility. Familiarize yourself with typical due diligence checklists early on, so you can build a data repository that provides easy access to whatever investors may be looking for later.
Ensure accurate data and reliable reporting
- Maintain clean, reliable data. Investors need to see a demonstration of financial accuracy, which starts with maintaining clean, reliable data. Your financial reports need to reflect operational reality, ensuring they are up to the standards of investors, auditors, and regulators who will examine your numbers closely.
- Develop a data management strategy. Track all financial information, from daily transactions to long-term projections. Consistent, accurate reporting builds credibility and prepares your company for rigorous financial scrutiny during due diligence.
Take a long-term view on systems and processes
- Patience is key. Preparing for an IPO or acquisition can take months or even years, so it’s crucial to focus on scalable financial systems. Investing in the right tools and processes early enables efficient growth as your company expands.
- An ounce of preparation is worth a pound of last-minute scrambling. From ensuring financial transparency to streamlining procurement and vendor management, building systems that will support growth is an investment in your company’s future. The more organized your financial systems are, the easier it will be to simplify the IPO or acquisition process when the time comes.
How ZAGENO helps biotech startups achieve IPO and acquisition readiness
What is ZAGENO? With over 40 million product SKUs from over 5,300 global brands, ZAGENO offers the industry’s largest life sciences lab supply marketplace. Its AI-driven platform provides tools to streamline the procurement process and help increase scientific productivity by removing the manual, tedious steps labs are forced to deal with when researching, purchasing, and tracking lab supplies.
ZAGENO offers solutions that align with many of the practices and strategies discussed, enabling labs of all sizes to streamline procurement, improve financial transparency, and maintain strong controls as they scale. Here’s how ZAGENO helps biotech and biopharma organizations prepare financial systems for investor attention:
- Streamline procurement. ZAGENO’s lab supply marketplace centralizes your procurement, providing full visibility into spending and simplifying expense tracking. By integrating seamlessly with your financial systems, ZAGENO supports accurate budgeting and forecasting, which is key for demonstrating operational efficiency.
- Automate financial controls. With ZAGENO, approval workflows are fully automated, ensuring every purchase follows proper channels. This reduces errors, strengthens oversight, and helps keep you compliant with financial controls. Automating these processes ensures your business can scale without compromising governance, a key factor when demonstrating IPO or acquisition readiness.
See how it works: Procurement automation tools for biotech
- Centralize vendor management, Simplify vendor contract management with ZAGENO’s centralized platform. Easily store, access, and manage agreements in one place, streamlining the due diligence process and reinforcing your operational credibility.
- Achieve real-time spend and performance visibility. ZAGENO’s real-time analytics deliver clear insights into procurement spending and vendor performance. Track trends, optimize costs, and maintain accurate financial records with ease. These tools help you present a strong financial narrative, instilling confidence in your company’s integrity.
Spend visibility you need: Lab spend analytics
- Scale seamlessly as you grow, ZAGENO grows with you. Whether you're onboarding new suppliers, expanding teams, or managing increasingly complex financial data, the platform easily adapts to meet your needs.
Let’s prepare for success, together
Getting ready for an IPO or acquisition takes more than groundbreaking science; it takes smart, scalable financial systems. The steps you take today to build transparency, compliance, and efficiency into your everyday operations will set the stage for a seamless transition to your company’s next big milestone.
ZAGENO helps labs just like yours prepare for the big leagues by simplifying procurement, automating workflows, and gaining real-time financial insights, all while saving time and money that can be reinvested into science.
Contact ZAGENO today. Schedule a demo to see how we can help you prepare for the future in a way that doesn’t distract from the present.
