Contact us

Insights & Resources

•

Managing Cash Burn and Building a Healthy Runway for Seed-stage Success: A Case Study

Managing Cash Burn and Building a Healthy Runway for Seed-stage Success: A Case Study

Filed under

    Overcoming Financial and Operational Challenges

    A VC-backed, seed-stage life sciences company, operating in the UK and US, was looking to build an operating & financial model that reflects the actual functioning and runway of the business. Having previously relied on a fractional CFO and other professional firms for tax and compliance advice, they needed a cohesive financial strategy to manage cash flow, compliance and capital calls effectively.

    FD’s Approach

    FD’s tailored approach provided a comprehensive solution to streamline compliance processes, integrate financial management and optimise cash flow.

    Establishing a Scalable International Structure

    With operations in both the US and UK, the company needed an efficient cross-border financial framework. FD helped structure its international operations to support long-term growth.

    • Transfer Pricing Optimization: Designed and implemented a tax-efficient inter-company structure, ensuring proper allocation of IP returns, funding and pricing between the US parent and UK subsidiary.
    Optimising Tax Strategy & Compliance

    FD restructured the company’s tax position to align with its business model and improve compliance across jurisdictions.

    • Tax Structuring: Positioned the company as a UK entrepreneurial entity, enabling access to R&D tax credits and optimizing its overall tax strategy.
    • Seamless Compliance: Integrated US and UK compliance processes, reducing reliance on external finance professionals and streamlining regulatory obligations.
    Strengthening Financial Management & Cash Flow

    A strong financial foundation was essential for operational stability and investor confidence. FD provided financial modelling and cash flow strategies to support decision-making.

    • Data-Driven Decision-Making: Integrated financial data into strategic planning, enabling management to make informed, forward-looking decisions.
    • Financial Assessment: Identified key gaps in tax compliance (US tax, VAT, R&D, UK tax) and forecasting.
    • Scenario Planning: Developed detailed 3-, 6-, 12- and 18-month projections, including daily cash flow modelling, to identify inefficiencies in order processing and payments.
    • Cash Flow Optimization: Enhanced financial credibility by mapping cash needs across multiple scenarios, ensuring sufficient runway for drug development.
    Enhancing Operational Efficiency & Investor Readiness

    To support its growth, the company required a cost-effective finance function and a strong reporting framework for investors.

    • Capital Raise Support: Developed financial projections and scenario analyses to support venture capital reporting, contributing to a successful £5.5m fundraising round in Q4 2024.
    • Outsourced Finance Team: Provided financial management and reporting for a fixed monthly fee, improving efficiency and strengthening spending controls.
    Maximising R&D Tax Credits
    • Restructured for Higher Claims: FD’s tax strategy resulted in an additional £280K in R&D claims in 2021 – a huge increase from the £60K secured by the company’s previous advisor in 2020.
    • Ongoing Tax Benefits: Filed tax claims in 2022 and 2023, each yielding over £1m in R&D tax credits.

    The Outcome: Comprehensive Solutions for Financial Stability

    By addressing key financial and operational challenges, we positioned the company for long-term success and stability. Our approach ensured the company could confidently move forward with its growth and future fundraising efforts.

    • Cost Efficiency:Delivered a sensible, logical approach that kept costs reasonable for a cash-burning enterprise.
    • Risk Mitigation:Identified and addressed key financial risks, enhancing the company’s credibility with investors.
    • Operational Alignment:Streamlined financial and operational processes, enabling the company to focus on its core business activities.
    • Furthering Financial Runway through R&D Credits: Helped the company secure a total of over £2.5 million in tax credits from 2020 to 2023, significantly extending their financial runway.

    Next Steps

    If your business is navigating complex financial and tax challenges, our team can help. Contact us today to explore tailored solutions that drive financial stability and growth.

    Contributors

    Sonny Bangar, Head of UK Advisory

    Jaydeep Menon, National Office Leader, FD India
    Partner, Frazier & Deeter Advisory, LLC

    Jonathan Clark, Partner, Frazier & Deeter Advisory, LLC

    Thomas Wells, Director of Commercial Growth

    Bo Harmon, Advisory Director

    Explore related insights

    Explore Insights & Resources