NYA FOUNDER SPOTLIGHT ‒ SCOTT PANCOAST, ZYLÖ THERAPEUTICS CEO & FOUNDER
Scott Pancoast is the CEO and Founder of Zylö Therapeutics. Scott has a wide range of experiences with early-stage technology startups including as founder, executive, investor, and board member. Before Zylö, he ran a biotech company in San Diego called Lpath, which forged worldwide partnerships with companies like Pfizer, Merck-Serono, Biogen Idec, and J&J. Lpath went public under his leadership. Scott’s experience as an early-stage investor includes investing in the first ear thermometer, which later sold to American Home Products, and subsequently acquired by Pfizer.
How did you first meet New York Angels?
I first connected with New York Angels in the fall of 2018. I think they may have discovered us through Gust.com. We went through their filtering committees and eventually were invited to New York as one of our key team members lives in New York. He and I made our first live presentation together and followed it up with a second presentation in the Spring, which clinched the deal. We also qualified for the New York Angels sidecar fund, making New York Angels an important part of our Series A round.
What were you looking for in investors when you were fundraising, and why did you choose to work with New York Angels?
Cash is cash, so of course, we were looking for investment. Beyond that, we wanted the investment to be efficient, especially since we weren’t focusing on VCs and institutional money. From previous experience, I knew how much time could be consumed working with an angel group that might spend 30-50 hours with you only to invest a small amount. New York Angels stood out because they are a very intelligent, accomplished group, and a larger group, which means if you succeed in getting them over the finish line, it's a much more efficient use of your team’s time. They’ve also provided valuable guidance, particularly from members like Elaine Gilde and Craig Frischling, who have been instrumental in offering insights and support.
What was the process like for you when you were fundraising?
Fundraising is always a grind – well, almost always. I've been involved with 14+ startups, and most of them focused on the VC world, which is a different kind of grind with a ~3% hit rate. It’s hard to even secure a meeting with a VC, so you feel accomplished when you do, but then you start to hear a lot of “no thank yous.” When a VC is interested, then you have to keep moving through every stage of the process: working toward a viable term sheet, rounding out the term sheet, and then finally filling up the round.
With Zylö, I had to learn about working with high-net-worth individuals and angel groups. High-net-worth individuals are extraordinarily hard to fund, but they are great because the process is more efficient – you might spend three hours and secure half a million dollars. We were extremely lucky to work with three of them.
Angel groups are different; they are an aggregation of people each investing at different levels, e.g. $10,000, $50,000, or $100,000, so the process is more of a grind. Platforms like Gust have made it more efficient. Ultimately, we learned how to work with angel groups which led to an oversubscribed Series A and Series B round. The three high-net-worth individuals and New York Angels and Venture South were instrumental in both of these rounds.
What have you enjoyed most about working with New York Angels?
New York Angels has provided a tremendous amount of support. While VCs often thrive in follow-on rounds, that’s where a lot of angel groups fall down. New York Angels actually invested more in our Series B round than they did in our Series A. This really showed their long-term commitment and confidence in Zylö. Elaine and Craig were instrumental in drumming up support amongst New York Angels members in our Series B. They also have been instrumental in the month-to-month guidance they have provided.
What advice would you give other founders who are looking to fundraise?
The #1 job of a CEO is do not run out of money. Many founders, for whatever reason, start raising when they only have 4 months of runway left. I know other founders who think they have a magic wand, and they’re going to allocate 10% of their time to fundraising. If the #1 rule is don’t run out of money, you should start fundraising 9-12 months in advance and allocate at least a third of your time to it. Fundraising is a grind - you’ll get told "no" a lot, so you have to keep upgrading your message and adapting based on feedback. Listen to your audience, don’t change at the drop of a hat, but if you start hearing the same things over and over again, you have to change it because perception is reality. Have multiple decks tailored for different audiences. I have a deck for the audience that knows my vertical, and I have a different one for the general audience that doesn’t happen to understand biomaterials. And most importantly, ask for feedback even if someone turns you down, as it will help you decide if you have to make a small or large pivot.
As someone who has been both on the founder and investor sides, what advice would you give other early-stage investors who are looking to invest in companies?
Diversify your investments, e.g. don’t only invest in life science companies, and if you do, do not only invest in oncology or all neuroscience. Diversification is important across several dimensions, not just verticals, but the executive team is just as important as the technology. I cannot think of a single startup that has followed its original business plan, so having an experienced executive team that knows when and how to pivot is crucial. You’re extraordinarily lucky if they are no major pivots in your storyline. If there is a company with great technology with a founder who isn’t CEO material, I’d have to have a discussion with him or her if they were willing to be the CSO or CTO. If the answer was a “no”, then I would have to pass. If the answer was “yes”, then I would work with them to find the right CEO candidate. Be wary of the “smooth operator” who is going to oversell the story. You want CEOs who will tell you like it is and give you a dose of reality, who will give you the bad news along with their plan to overcome challenges.
What has driven Zylö’s success so far?
I wouldn’t say we’re successful yet, but we’re on the right path. The success comes when I deliver a definitive, positive ROI for our investors. I’m confident we’ll get there, but it will be another 24-36 months. I owe our success to the team. I’ve spent a lot of time amassing a strong team. I have a great business partner Charles Hinkle, who has great business instincts as a CFO. Once I forged the deal with Albert Einstein College of Medicine, I knew we needed a CTO, so I plucked Dr. Frieman’s top postdoc, Andrew Draganski Ph.D., who was the co-inventor of the technology. He started out as a manager, and now he’s a VP. He has really grown and matured at Zylö, and he has strong business instincts and is a realist.
Other members of the team – Clay Tucker, Tracie Wood, Cody Reynolds, Scott Grimshaw – have been critical in making strategic decisions like helping determine when we needed to pivot. They convinced me we needed to spin out our pharma assets, so all of our investors are now investors in two companies. If you were a 1% owner in Zylö, now you are a 1% owner in Atticus Pharma and a 1% owner of Zylö. I think Atticus Pharma may have a higher ROI than Zylö because it’s in the pharma industry and they also have a phenomenal team with the CEO: Leigh Hsu Ph.D. MBA and Chief Medical Officer: Dario Paggiarino. I really think the combination of these two companies will be a big success with New York Angels and other investors.
