Preclinical Drug Development Stage Strategies for Startups

Article

November 25, 2025

The preclinical stage of a life sciences company brings exciting developments as your drug candidate undergoes rigorous preclinical testing and more formal funding opportunities are pursued — but this stage also requires collaboration with a variety of specialists to prepare for due diligence and navigate a complex regulatory environment.

Preparation and knowledge of all that is required during preclinical trials is essential for success during this phase, especially while you manage fundraising efforts, work with investors and align consultants to move closer to clinical trials.

Key Elements of the Preclinical Stage

May last anywhere from one to six years

Most companies will pursue Series A funding ($2M to $15M)

A main focus is on determining the safety profile of a drug

The end goal is to file an Investigational New Drug (IND) with the Food and Drug Administration (FDA)

To learn more about all the stages of a life sciences company, read our previous article, Mapping the Stages of a Life Sciences Company From Discovery to Destination.

Pursue Series A Funding

During the initial discovery stage, you may have received investment funds from friends and family or received proceeds from a grant agreement. Now that your drug is beginning preclinical trials, you will need larger investments to push the drug candidate through this phase of research. With a developmental roadmap in place, alongside market research, this is the ideal time to undergo a round of Series A funding, during which startups aim to raise sufficient proceeds to enable meaningful progress toward completion of preclinical milestones.

Understanding where your product fits in the market is one of the main foundational focuses for Series A, since shareholders will want proof that your drug has the potential to significantly improve the standard of care or address an unmet market need. Investors typically do not want to pour funds into a drug that will only marginally improve a condition or patient experience.

Once you understand the market fit, preparation for successful Series A funding falls into three categories: intellectual property (IP) diligence, financials and management.

1.) IP Diligence

The IP diligence process consists of protecting the science or IP at the heart of your company, including a comprehensive evaluation of your IP assets and rights. The main goal of this process is to validate the quality of your IP, including patents and license agreements. This will typically involve:

Working with an IP attorney or law firm that can help verify ownership
Assessing the enforceability of the IP
Identifying risks

Life sciences companies will benefit from working with an IP attorney to file their patents and protect their legal position before jumping into testing or continued research and development (R&D).

2.) Trustworthy Financials

Polished financial information may not be enough to make a deal happen, but the lack of a professional financial package has the potential to disrupt the diligence process. Inaccurate or messy financial reporting will spook an investor, making it essential to clean up your records and put the proper structures in place prior to pursuing funding. Questions to consider for adequate financial preparation include:

Does the company have adequate internal financial statements?
Are we in the right entity structure (e.g., will a C corporation status benefit the business more than filing as an LLC?)
Are our taxes and tax returns in order?
Can we clearly show where the company has spent its money?
Can we show how we plan to spend investments?

Collaborating with an outsourced accounting partner streamlines the financial preparation process and helps companies navigate fundraising with confidence. Outsourced accountants and fractional controllers manage a variety of tasks for life sciences startups, including:

Preparing monthly or quarterly board packages with financial statements, budget-to-actual analysis, summarized spend by vendor, and more
Verifying that records and expenses are being tracked appropriately
Filing tax returns
Forecasting and creating a budget plan for fund allocation

Additionally, investors will want to see the company’s capitalization chart — or the detailed breakdown of ownership among founders, investors and employees — to better understand the ownership structure of the entity prior to any investment.

3.) Proven Management

The full lifecycle of a life sciences company takes years, much longer than that of a typical startup, which means investors must place greater faith in a life sciences management team to eventually deliver a return on investment (ROI).

When an investor won’t know for years whether the product they backed will succeed or fail, they are more likely to seek assurance that management has prior success in taking a drug to market. Pre-fundraising questions to consider about your team include:

Am I able to prove that my management team, scientific advisory board or industry experts working with the company have an experienced background?
Have my employees, board members or consultants worked in the life sciences industry before?
Have I engaged with key opinion leaders, such as doctors, physicians, researchers or academics?
Have we performed sufficient market research? Do we understand the company’s path to commercialization, including reimbursement strategies, costs to produce and key competitors?
Do we have a realistic set of development milestones to reach based on the requested funding?

Trusted partners are vital when navigating extended cycles of fundraising. Founders should aim to surround themselves with experienced people; otherwise, it may be challenging to secure Series A funds.

Understand the FDA Approval Process

Preclinical research focuses on determining a drug's safety profile, with emphasis on efficacy, toxicity and dose. These tests are not done on humans and must be performed in compliance with the FDA’s Good Laboratory Practice (GLP) and Good Scientific Practices (GSP).

While most life sciences companies successfully make it through preclinical trials, startups may waste significant money if they progress without fully understanding how to navigate the complexities of the regulatory environment. Working with an FDA consultant can help you track changing regulations, comply with study protocols and manage the submission process.

After your drug has passed the necessary preclinical tests, you will file an IND with the FDA. Once approved, this application authorizes testing the drug in human clinical trials, moving your company to the clinical stage.

Your Guide Forward

Cherry Bekaert’s experienced professionals can help your life sciences company stay ahead of the curve and succeed in a rapidly changing marketplace. We serve life sciences companies through all phases of development, whether your business needs help evaluating tax structures, optimizing operations, fulfilling financial reporting and compliance requirements, or capturing tax credits.

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