The ask is not a budget. It's a value proposition.
A funding request framed as a budget requires the investor to do additional work. A funding request framed as a value proposition does that work for them.
There is a slide in almost every biotech pitch deck that investors find more revealing than any other. It is not the clinical data slide, or the market size slide, or the team slide. It is the use of funds.
Not because the numbers are particularly interesting. But because of what they reveal about how the founder thinks.
A founder who presents a use of funds as a list of expenses - salaries, consumables, equipment, overheads, CRO costs - is signalling that they think in terms of activities. A founder who presents it as a value proposition is signalling that they think in terms of assets. The signal matters as much as the number. Investors back people who understand what they are building and why the capital will create value. Not people who know how to spend it.
The use of funds slide is the most honest slide in the deck. It cannot be polished or narrativised. It either connects capital to value creation or it does not.
What investors actually need to evaluate a funding request
Most funding requests are presented as operational budgets. This is not what an investor needs to evaluate them.
An investor needs to know three things. What specific uncertainty will be retired with this capital? By how much will the cumulative probability of success increase as a result? And what is that increase worth in expected value terms?
A budget answers none of those questions. It tells the investor what the money will pay for. It does not tell them what the money will prove, or why that proof matters to the person who will eventually acquire the asset.
The distinction sounds technical. Its consequences are not. A funding request framed as a budget requires the investor to do additional work: to translate the activities into value creation events, to estimate the probability shift themselves, to construct the investment thesis that the founder should have provided. Most investors will not do that work. They will move on to the next deal.
A funding request framed as a value proposition does that work for them. It makes the investment thesis explicit, connects the capital to a specific probability shift, and gives the investor a number they can model.
The three components of a well-constructed ask
A well-constructed funding request has three components, presented in a specific order.
The current position
State the asset's current cumulative probability of success and the expected value that implies. This is the baseline from which the investment will be measured. It should be a specific number, derived from the rNPV framework, not a vague claim about "significant potential."
The milestone the capital will fund
State a specific evidence event with a named completion date. Not a phase of development. Not a list of activities. A single, named result that forces investors and pharma BD teams to revise their risk model upward. The milestone should be stated in terms of what it proves, not what it does.
The new position after the milestone
State the revised cumulative probability and the revised expected value. The difference between the two expected values is the return the investor is being asked to fund. Make that number explicit.
The investor is no longer being asked to fund a programme. They are being asked to buy a probability shift at a specific price.
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A worked example
Consider an early-stage oncology asset at the end of Phase I.
Current position
15%
Cumulative PoS
EV: €120M
The ask
€5M
Phase IIa PoC data
Primary indication
Post-milestone
30%
Cumulative PoS
EV: €240M
The investor is being asked to spend €5 million to create €120 million of expected value. That is an investment thesis. A budget is not.
Note what this framing requires. It requires the founder to have estimated the current rNPV, which means they have defined the exit scenario, mapped the uncertainties, and calculated the probability components. It requires them to have identified the specific milestone that moves the probability needle most. And it requires them to have quantified the value creation that milestone represents.
These are not presentation skills. They are analytical ones. The well-constructed ask is evidence that the equity story has been built correctly. It cannot be retrofitted onto a weak architecture.
As with all illustrative examples, the specific numbers here are for explanatory purposes. Every asset's probability estimates must be calibrated to its own indication, modality, and development stage.
How much to raise
The correct amount to raise is the amount required to reach the next value inflection point, plus a contingency reserve of fifteen to twenty percent.
Not more
Because excess capital dilutes the founders without generating proportionate value. A larger round at the same valuation means more equity surrendered for the same milestone. The milestone determines the value creation. The amount raised should be sized to the milestone, not to a comfortable runway or an ambitious growth plan.
Not less
Because running out of capital before the milestone is reached is one of the most destructive things that can happen to a biotech company. It forces a down round or a distressed financing at the moment of maximum vulnerability. The contingency reserve exists precisely to prevent this.
The right number is the one that funds the milestone and no more. Everything else is a negotiation about dilution.
The dilution question
Every euro raised has a cost: equity. The question is not whether to dilute, but whether the value created by the milestone justifies the dilution incurred to reach it.
Rational dilution
If raising €5M at a €25M pre-money valuation funds a milestone that doubles the expected asset value, the dilution is rational. The founders give up equity worth €5M today to create value worth substantially more tomorrow.
Irrational dilution
If the same raise funds eighteen months of activity with no defined value inflection point, the dilution is not rational. The founders have exchanged permanent equity for temporary runway. The only thing that has changed is the cap table.
This framing makes explicit something that many founders prefer to leave implicit: the purpose of every funding round is not to survive. It is to reach a specific value inflection point that makes the next round possible at a higher valuation. Capital that does not serve that purpose is capital that should not be raised.
What the use of funds slide should actually say
Most slides look like this
- 40% personnel
- 25% clinical costs
- 20% manufacturing
- 10% regulatory
- 5% overheads
A well-constructed slide looks like this
- 65% Phase IIa clinical study - generating proof-of-concept data that resolves the primary clinical uncertainty
- 20% Manufacturing process development - addressing the secondary gating uncertainty
- 10% IP prosecution in US and European markets
- 5% Contingency
The difference is not cosmetic. The first version describes where the money goes. The second version describes what the money proves, and why proving it matters to the person who will eventually acquire the asset.
Every line item in a well-constructed use of funds is traceable to a specific uncertainty being retired. Expenditure that cannot be traced to a risk reduction event is overhead. Overhead does not create asset value. It consumes it.
The ask as the final test of the equity story
The funding request is the last element of the equity story to be constructed, and the most revealing test of whether the architecture underneath it is sound.
If the ask can be stated as a specific probability shift at a specific price, the equity story is ready. The exit scenario is defined, the uncertainties are mapped, the milestones are value-based rather than activity-based, and the capital request is tied to a specific risk reduction event.
If the ask cannot be stated that way, the architecture needs more work. Not more polish. More work.
The deck is a summary of the plan. The ask is a summary of the deck. If the ask is vague, everything underneath it is vague too.
Investors don't fund activities; they fund value inflection points. Let's align your next round's ask with a strategic capital allocation plan.
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