Successful entrepreneurs view the world differently than everyone else. When other individuals spot a problem—an entrepreneur sees an opportunity. The average person may just complain about an obstacle, whereas successful entrepreneurs see solutions. They are by nature, problem-solvers. Try this exercise. What do you see?
Everyone can see a woman in this picture. If asked about the relative age of the woman, some will reply, an old woman, others will say, a young woman. At the outset, we all see one woman (old or young) and not both. However, with a little help and effort, everyone can eventually see both the old and the young woman facing different directions.
From this interesting exercise, we can glean two things. 1) Each of us spontaneously interpret new information without our conscious awareness. 2) However, the most critical point to recognize is that we are all examining the same information, but arriving at different conclusions.
Each of us interpret new information based upon a set of criteria. These include our personal experiences, our unconscious biases, our beliefs about the world around us, and our views about life. Thorough these “lenses” we spontaneously interpret everything new we encounter. For instance, if we believe all people harbor an ulterior motive, we will interpret whatever others do with caution, and be suspicious of everyone’s intentions. If we believe that we are prone to failure, we will abandon things prematurely when we encounter trials and adversity.
Thomas Edison viewed the world differently. He held the belief that he could discover a way to create an efficient incandescent light bulb by passing electricity through the right filament and thus converting electrical energy to light. Later, when asked the question about his numerous attempts and failures to find the right filament he replied “I never failed once, it just happened to be a 2,000-step process”. Edison saw the world differently because of what he believed.
What are you believing?
Everything that is man-made, such as massive skyscrapers, majestic dams, fine works of art and successful commercial products, were all envisioned in the mind of a “problem-solver” or entrepreneur many years before their existence.
Do you see the world differently from everyone else?
Let me encourage you with a quote from Henry Ford “Whether you think you can, or you think you can’t…you’re right.” Set your sights on a vision, believe in yourself, and work towards a solution. You will then be walking the same path successful entrepreneurs have traveled.
How could a chicken breast sandwich become a product that catapulted a company into 47 years of consecutive annual increases in sales generating $5.5 billion in revenue?
It is a great product…but after all, it’s still just a chicken sandwich!
The secret is in the rest of the story and the philosophy of its founder, Truett Cathy. The Chick-fil-A founder, S. Truett Cathy died at the age of 93. In the September 14, 2014 Wall Street Journal article, Mr. Muhtar Kent, Chairman and CEO of Coca-Cola Co, shares a story titled “Truett Cathy’s Lessons on Life and Business”. This list is adapted from the article:
1. Despite having only a high-school education, Mr. Truett believed in himself. He was an irrepressible optimist and he was convinced that he could make something of himself. As entrepreneurs, so many times, our biggest obstacle is our own disbelief in what we can truly accomplish given the opportunity. The quote by Henry Ford “Whether you think you can, or you think you can’t – you’re right” is a fitting reminder that we must first overcome the biggest obstacle – our own belief system.
2.He was a hard worker. In an age where there are real, but unlikely, expectations of winning the lottery or finding get-rich-quick formulas, the tenet of perseverance and hard work may be foreign to some. Good old hard work, with a purpose and a strategy, will eventually pay off. Remember Aesop’s Fable of the Tortoise and the Hare?
3.He was the motivator of a culture that he wanted to build and insisted on the highest quality products and service. He was devoted to serving his customers, his employees and young people in the community. All companies have a corporate culture. It is the sum total of the core values of its employees and leaders. For example, a company culture can be one of excitement and creativity, or one of minimalism and only doing what is required. Your corporate culture is either built on purpose, or by default; nevertheless, all companies will have one.
4.He was and innovator in his field.All companies must have a culture of innovation if they hope to grow and be viable force long-term. Innovation should be incorporated into the company’s service to its customers, the products the company creates, and in the way the company conducts business.
5.He was generous. All individuals appreciate generosity because it lets them know they are valued and appreciated. This is true of employees, customers and managers in any business. Generosity can be given in time, attention, money and assistance. Being generous always has a habit of returning in some way to the giver.
6.He stayed humble and never took himself too seriously. Pride is the opposite of humility and has a way of creeping up on individuals that have some measure of success. However, pride is simply the erroneous belief that every success you have is the result of yourefforts and no one else’s. At its worst, pride makes an individual believe he or she needs no one, which cannot be further from the truth. I recall a quote that goes something like this, “At some point in your career, your success will no longer depend on what you do with you own hands, but rather, what you can do, with, and through the help of others”. Taking yourself too seriously means you do not allow yourself the latitude to make mistakes and you become too hard on yourself. It is like living life in the rear-view mirror, being preoccupied with what you didn’t do or should have done, rather than looking forward and giving yourself some space to learn and grow.
Although making a chicken breast sandwich is not the same as making a therapeutic or medical device, the underlying principles that help make entrepreneurs successful are common to both. Let’s learn a few lessons from the Chicken Sandwich Entrepreneur!
Developing a biotechnology product has been likened to building an airplane while it taxis down the runway. You feverishly work to complete product development while the runway (your existing cash, your ability to raise capital and your time) is ever shortening.
Biotechnology product development, at some point, is constrained by time and limited capital. In addition to time and resource constraints, there are “unknown-unknowns”. The unknown-unknowns are things that you did not know, that you did not know, that you did not know. Because biotechnology is the melding of science and business, it creates a business of uncertainty. Biotechnology research begins with promising yet unproven science, although this promise provides the phenomenal opportunity for life-changing medicines. However, because of this uncertainty, product development rarely proceeds in a straightforward manner. This brings us to the first tenet of biotechnology product development – Always make allowances for product development pathway detours.
Unplanned but Anticipated Detours
Product development pathway detours are scientific issues that must be overcome in order to return to the original product development pathway. These scientific detours may include, an unplanned development of a new cell line to express a product in cell culture without Fetal Calf Serum (FBS) because there is not enough FBS commercially available to meet scale-up requirements—such as what occurred with Tissue Plasminogen Activator in the mid-1980s. Other detours may include an unplanned need to resolve a false-positive problem in a biological assay that was used for selecting lead molecules, after learning these molecules did not work when moved into animal models. These detours arise from the unknown-unknowns. Things you did not know, that you did not know—until you got there. The remedy is to make allowances for them because it is certain that all companies will encounter this phenomenon.
Universally, proposed product development pathways presume everything will work smoothly as planned, rarely allotting any time for unanticipated work. Of course, who wants to show a potential investor that they are not aware of all the problems when developing a product! This type of poor planning is a grave mistake.
It is vital to make allowances for the unknown-unknowns, because at some point in development, cash and time become the two critical limitations of a biotechnology company. Companies that do not make allowances for detours along the development pathway, quickly run out of capital and become drained of the ability to reach the next significant product development milestone.
Company Valuation Spillover
This problem becomes compounded since company valuation (the monetary value ascribed to the company) is tied to product development milestones. For instance, a company with an IND (Initial New Drug) Application on Clinical Hold with the FDA has a different valuation than a similar company with an accepted IND that is beginning Phase I clinical trials. These two companies have different valuations and differing abilities to raise capital to further their development work.
That is not to say that INDs cannot be put on Clinical Hold and still be successful. It simply means that if you only allocate time and capital to reach the IND filing point without allowances for detours, you may be forced to raise capital at a time when the company’s valuation is not reasonable, and depending on the financial market, it may be difficult for the company to raise capital—period.
THE TAKEAWAY TIDBIT
So, be aware of, plan for, and make allowances for the unknown-unknowns during product development. In doing this, you will provide your organization with the best chance for success in reaching its product development goals.
Assessing a Medical Product Technology: How to Know if an Idea is Worth Building a Company Around?
The vast majority of all commercially successful medical device, therapeutic, diagnostic and biologic products arise from discoveries that can be traced back to the research of a scientist, professor, physician or engineer at an academic or research institution. The truth is, there is no shortage of medical product ideas because top-notch research is constantly being carried out at universities and research institutions all over the world.
For entrepreneurs, the more relevant question is: how does one determine if the medical technology or inventive concept is worth pursuing as a commercial product? The answer to this question is critical for entrepreneurs because of the enormous amount of time and resources that will be committed to developing this product.
Academic and research institutions carry out great discovery programs, but they do not possess commercial product development expertise, and they typically are not well-equipped or experienced in identifying which technologies will become blockbuster products. Often, during the discovery phase, the best product application for a technology is not crystal clear nor is the best product opportunity obvious to many individuals. The missing link is the skill and creative ability of an entrepreneur in translating basic research technology into a successful commercial product. If you ask any Technology Transfer Office at any major research institution or university, they will tell you that between 60-80% of all their patents sit on their shelves without any interest from others. This was the situation for Stanford University when the nascent technology that became the genesis of “Google” initially drew little interest from outsiders.
So how can you tell if a biological or medical technology is worth pursuing as a commercial product? Here are 4 fundamental principles to understand when evaluating a technology and product concept, along with guidelines for making a decision on whether or not to undertake the development of a commercial product.
Any technology, no matter how alluring, is a simply a “solution” looking for a “problem” to solve. Therefore, don’t become enamored by the technology, but objectively evaluate whether or not the problem that the technology solves is important enough to a large group of customers who are willing to pay for it.
All problems are potential product or service opportunities. However, the bigger the problem, the bigger the product opportunity, and the smaller the problem, the smaller the product opportunity. Find out whether or not there is a significant medical market need that is not being satisfied by other products, or find out if inferior substitutes still leave the customer wanting a better solution for their problem. If the problem is big, the opportunity is big.
Your product will only be as good as the underlying science and technology. Be sure to assess the quality of the science and technology, and its reproducibility. If the science and technology underlying the product idea is inconsistent and unproven, the resulting product will be also. Find out if the technology can be reduced to practice by looking for surrogate indicators. In other words, is there evidence that this technology is useful? Find out if there are hidden issues that must be resolved which would prohibit your ability to create this product. Know what the risks are, then determine whether or not you can overcome and manage them.
Make sure the features and benefits of your envisioned product are the ones that solve the customer’s problems. All technology has certain capabilities and limitations; be sure that the technology capabilities deliver the features and benefits that solve the greatest issues for the customer. A car with 3 wheels is not a solution to a transportation problem just because it is close to solving a traveler’s need for an automobile. Be sure that your product precisely solves the customer’s big problem, and the technology can deliver it.
There is more that you must assess prior to starting a company or choosing to develop a product. These include: investor interest, length of time to develop, customer and insurers willingness to pay, and the ability to protect the intellectual property, to name a few. However, if the underlying technology does not first pass the threshold for these 4 criteria, then these other downstream issues are irrelevant.
When evaluating science and technology opportunities, first be sure that the proposed product solves a critical problem that is important to a large group of customers. Then carefully assess the technology quality and capabilities before undertaking any product development endeavor. Don’t become enamored by the technology but determine if the features and benefits it delivers precisely solve a significant unmet medical market need.
or…“How to persuade individuals who have money—to share some with you”
Continuous Flow of Capital is Vital
Few issues are more important to start-up and development-stage biotechnology companies than maintaining a continuous flow of capital—if you hope to advance the development of your product and market in an uninterrupted manner. The amount of capital you raise, and your company’s development stage, will dictate the type of investors who are attracted to your enterprise.
A critical tool for all biotech entrepreneurs is an Investor Slide Deck or “Pitch” Deck. This is typically a collection of PowerPoint slides used for communicating your deal to different groups of investors. Since capital is the lifeblood of your company, having a well-thought-out Pitch Deck is a vital asset for all biotech entrepreneurs. To address this I have put together some basic information about what a biotech investor pitch deck should contain when presenting for the first time to a group of potential investors.
Creating a biotechnology product is vastly different from other industry products, therefore, the topics that biotech investors want to hear about also differ. Unlike IT products and other technology products, biotech products have longer development timeframes, more exorbitant development costs, much more stringent regulatory requirements, and a unique need for diversely-skilled individuals. Therefore, one cannot use a generalized entrepreneurial pitch deck when pitching to biotechnology investors, however, there are some key topics that remain universal. Gratefully, biotech products are also unique in their significance to society and in the type of returns possible for investors.
The Pitch Deck
The outline below and the accompanying PowerPoint Investor Pitch Deck example are provided to help those who need guidance on what topics and information are important for a biotech investor presentation. Realize that this is not a template per se in which to simply fill in the blanks, but an ordered list of topics that are significant to most all biotechnology investors.
In reality, you should always tailor your slide deck to the particular audience and their interests; whereas the number of slides and the depth of information surrounding any particular topic are dictated by the time allocated for that meeting. However, in an attempt to provide a basic and universal outline for preparing a biotech investor pitch deck, this will give you a starting point.
16 Topics to Cover: Basics of an Investor Pitch Deck for Biotech Entrepreneurs
This is my preferred slide order when “telling the story”. I find that this order makes sense to the listener and is easy to follow as it builds upon preceding information. There are different opinions on which topics to cover and their sequence order. For example, some suggest that the Leadership Team be presented at the beginning rather than toward the end of a presentation. My opinion is that unless you have a stellar and complete Dream Team, then first sell the audience on the opportunity and the novelty of the idea. Whatever your topic order, make sure you tell a story that unfolds logically and be sure that the information is relevant to the investor audience you are pitching.
Above all, do not present a haphazard mosaic of subjects in an illogical sequence that confuses your listening audience. For instance, don’t start talking about your technology and product benefits before you first explain the significance of the “problem” or “pain” as it relates to your target market. Although some listening individuals may already be familiar with the problem you are addressing, not everyone will. And certainly everyone will not be aware of the nuances of this problem, yet these issues could be key to appreciating your product’s value proposition.
It is always important to remember that the majority of biotech investors are driven by “data”. Therefore present reproducible data on the technology, share data supporting your market need, describe data supporting insurance reimbursement for your product, include data when available on all other topics discussed, and don’t forget to cite credible sources.
Slide Deck Topic Order
1. Company, Purpose, Mission and History (relevant information only)
* Describe the focus and purpose of the company
* Tell where the technology originated, if significant
* Describe the current stage of development (Start-up company or Phase 1 clinical trials)
* Tell why you are there, and share the “Ask”— how much money are you raising? (Example: Seeking $1.5MM in Convertible Notes)
2. Problem or “Pain” – Explained in a way that lets the investors feel or know the pain of the problem
* Describe the issues with the current status quo (problem with diagnosis, treatment, manufacture, etc)
* Help the investors understand the problems those suffering with this condition face, or the issues someone has to deal with in this situation (describe in terms of limitations, costs, inconveniences, ineffectiveness, etc)
* Discuss why is there a problem
3. Technology and Product Solution
* Describe how your product or technology solves this big problem
* Show data, results, prototype testing and evidence that the technology or product works or will work, or has a very high likelihood of success
* Demonstrate to the audience that your data supports the likelihood of product success, or show its significance in leading to product success
* Describe the mechanism-of-action (non-confidential version), how it works (if you know). You don’t need to reveal trade secrets or confidential information here
4. Competition and Substitutes Currently Used
* Summarize the competitors and list any products or substitutes
* Describe products that may be coming out in the future and from whom
* Discuss the willingness of users to change from the current status quo
* Elaborate on your product’s points-of-differentiation and discuss the significance of your advantages
* Address why no one fixed this problem yet
5. Market Opportunity and Strategy
* Estimate the market size and be prepared to describe how it is calculated or provide sources (use credible sources only)
* Tell who is your Target Market and who is your secondary market – describe how you will reach your customers
* The amount of detail here depends on the biotech sector and the condition/disease/industry you are targeting (some market sizes are well-understood)
* Explain why the timing is right for your product
6. Business or Revenue Model
* Show how you are going to make money
* Describe the partnerships that are needed in order to be successful
* Discuss any distribution channels needed and the status of these relationships
7. Reimbursement Strategy
* Show proof of reimbursement that is related to your product or provide supportive comparisons
* Describe your pricing model if applicable
* Show any pharmacoeconomic models or data to support the type and amount of reimbursement for your product
8. Product Development and Regulatory Pathway
* Describe your current product development status and the progress made to date
* List your next product development milestones and the estimated timeframe to reach these
* Describe your regulatory route, timing, and issues you face and how they will be mitigated
* Briefly discuss any potential follow-on products supported by this technology
9. Intellectual Property and Secret Sauce
* Share what patents are filed or issued and indicate whether or not you have trade secrets
* If available, discuss findings from your Freedom to Operate opinion
* Share your technology license terms, royalties and milestone fees (if any)
10. The Leadership Team
* Discuss your senior management team and their relevant experience and their past successes
* Describe the background of your Advisors/Consultants/Board Members if formed
* Candidly discuss whether or not your team is complete and who else is needed and with what backgrounds
* Describe any key partnerships formed or those in progress
11. Estimated Exit, Potential Acquirers and Timeframe
* Share your presumed exit – VCs will know this but it is helpful if they know you know, and most Angel investors want to hear this
* Briefly share data on exit valuation or exit revenue multiples for your sector
* It is not wise at this stage to share your opinion on a “pre-money valuation” for your company as this will be based in part upon investor interest, and is negotiable. Preconceived opinions at this point may limit investor interest.
* Ideally, provide a five-year Pro Forma projection of future revenue (if relevant – generally not needed for therapeutics), share your assumptions and be sure to build with “bottom-up” rather than “top-down” calculations
* Describe the total funds raised to date, and what these funds were used to accomplish, describe grant funding if awarded
* Share your estimates for future funding needs to reach commercialization, and estimate the number of additional financing rounds
* Show your generalized Use-of-Proceeds for this fund raise
13. Risks and How They Will be Mitigated
* This slide is not always necessary, but risk mitigation issues must be addressed during the presentation or during the Q&A
* Alternatively, risk mitigation information can be incorporated within each topic as it is addressed or they can be placed in the summary slide depending on the investor audience and time allotted
* Investors know that you cannot manage a risk that you have not identified
* Recap any key highlights relevant to this audience and include any points you want them to remember
15. Thank You/Question & Answer Time
* Thank the audience (this does not necessarily have to be a slide, but be sure to acknowledge your appreciation for this opportunity and for any particular efforts made for you to speak to this audience
* Q&A typically starts here. However, be aware that some investor groups do not wait for the last slide to ask all their questions
* A good sign of potential interest is when investors ask many questions and become very engaged after your presentation
* Investors who have made up their mind not to invest, typically do not have many questions
16. Support Slides
* These slides are kept in reserve and are selected and shown based upon questions asked by investors
* The number and content of these slides are your choosing. Be prepared with additional and more detailed information on any topics you anticipate this investor audience may ask
How Many Slides do I Need?
Although the topics I have described are numbered, they do not represent the total number of slides needed, sometimes it can be more or less. The exact number of slides you use will depend on the following:
* The time allotted for the investor presentation (leaving time for Q&A)
* The backgrounds of the investor audience
* Their key issues with the product, technology, market or the business model
* Which issues are relevant to your technology and product success
Just be sure to cover or touch on each listed topic to a lessor or greater degree, as all are significant to an investor. Some of these topics can be combined, depending on your sector and product technology. However, the depth of you discussion on any topic will depend on the issues surrounding that topic. For instance, if every predecessor product in your sector has previously failed somewhere in the regulatory process, you will need to spend more time explaining why yours is different and has a higher likelihood of success.
A good rule of thumb for determining the number of slides in your pitch deck, is to presume that you need 1-2 minutes per slide, minus the time set aside for Q&A. For instance, if you are allocated 30 minutes for an investor presentation, plan on about 15-20 minutes for your slide presentation which would be no more than 15 slides, then allocate 10-15 minutes for Q&A afterwards. You can always elaborate in more detail if fewer questions are asked. However, you do not want to be cut off before finishing your presentation because you ran out of time.
In this blog I principally address the “content” and the subject matter of a good biotech investor presentation. I have not dealt with the issues related to slide formatting and presentation etiquette, since there is abundant publicly available information about these subjects. Just be sure to incorporate visual aids when discussing complex technology and make use of graphs and figures when explaining concepts rather than simply using only text.
For those wanting more information about presentations and creating a business plan, read Chapter 22 titled “Your Business Plan and Presentation: Articulating Your Journey to Commercialization” in my latest book “Biotechnology Entrepreneurship: Starting, Managing and Leading Biotech Companies.”
What Investors are Looking For That is Not in Your Slides
It is important to understand that not everything an investor is looking for is contained within your slides. I have listed a few of the characteristics investors look for in a biotechnology entrepreneur during this face-to-face meeting. These “unspoken” characteristics are observed and identified throughout your presentation and more importantly, during the Q&A session after your presentation. These are not necessarily qualities you can “practice” for a presentation, although all individuals can improve on them if they desire. Rather, these are inherent characteristics within an individual. When presenting, you want to be yourselfand be comfortable, rather than “perform” in a manner that you think an investor wants to see and hear. I would advise that you assess these character qualities within yourself before you begin raising capital. A good way to do that is to ask individuals close to you if they can observe any of these characteristics within you.
Important Entrepreneurial Characteristics That Are Not Contained in Your Slides
* Passion for your work
* Intricate and working knowledge of your business, product and market
* Good strategic thinking
* Ability to inspire others and ability to execute
* Willingness to receive advice, listen and learn
* Leadership characteristics
* Culture fit
The Takeaway Tidbit
Maintaining a continuous and steady stream of capital is critical for all development-stage biotechnology companies wanting to become successful. Since capital comes from investors, the biotech entrepreneur must be able to skillfully convey relevant information supporting an investment decision in their company. In order to do this one must know the pertinent issues for any investor. It is an unfortunate situation when a biotech entrepreneur has a great product opportunity, yet they derail the investment process because they do not understand how or what to communicate to sophisticated investors.
Biotech entrepreneurs should start by developing a well-thought-out pitch deck addressing these basic topics. You can later modify the depth and detail of information according to any investor interest or the issues relevant to their concern about your organization and product technology or market. By possessing a solid pitch deck covering each of these relevant topics, a biotech entrepreneur will have a tool to communicate to investors the relevant information necessary for making investment decisions. By first creating a thorough and well-developed Investor pitch deck, you can later selectively modify or consolidate this information into any presentation length and adapt it for other investor audiences, and thereby have at your hand, a ready tool to raise capital for your company.
When venture capitalist Robert Swanson, and biochemist Dr. Herb Boyer each put in $500 to start Genentech in 1976, it could hardly be said that they knew what they were getting into, or how they were going to make their company successful. Few biotechnology companies existed before, and there were no successful “biotechnology business models” to follow. However, these founders had a clear vision and a burning passion to use this newly discovered recombinant DNA technology to create disease treatments that were previously deemed “impossible”. This tool became known as “Genetic Engineering Technology”, hence the name Gen-en-tech.
Since its founding, Genentech scientists have developed some of the world’s first recombinant human therapeutics such as Recombinant Human Insulin, Recombinant Human Growth Hormone, Recombinant Human Tissue Plasminogen Activator (tPA) and many others. Then in March 2009, Roche and Genentech agreed to a complete buyout of the company for $46.8 billion dollars, for 56% of Genentech’s remaining outstanding shares that Roche did not already own. Not a bad return for a $500 investment in 1976.
Since its founding, Genentech scientists have developed some of the world’s first recombinant human therapeutics such as Recombinant Human Insulin, Recombinant Human Growth Hormone, Recombinant Human Tissue Plasminogen Activator (tPA) and many others. Then in March 2009, Roche and Genentech agreed to a complete buyout of the company for $46.8 billion dollars, for 56% of Genentech’s remaining outstanding shares that Roche did not already own. Not a bad return for a $500 investment in 1976!
There was no doubt that between 1976 and 2009, Genentech experienced numerous, and sometimes disastrous, trials and errors in their product development, regulatory approvals, marketing and corporate development. Since no best practices were available to follow in this fledgling industry, and there were few experiences to draw from, and no serial biotechnology entrepreneurs to listen to, the company founders forged ahead by sheer instinct, and created their own best practices as their company grew.
Today, the biotechnology industry is over 35 years old with thousands of biotechnology companies worldwide, and many of these companies have been started by serial biotechnology entrepreneurs. Sound business models are now available and there is plenty of experience to draw from for those contemplating starting and growing a biotechnology company. However, the challenge is often finding these resources and getting serial entrepreneurs to share their candid insights and experiences. All biotech entrepreneurs can save time and avoid costly mistakes if they avail themselves to as much practical experience as possible. This old saying does have an element of truth, “learn from the mistakes of others because you will never live long enough to make them all yourself!”
Beginning May 15 through June 12, 2012, a 5-week, webinar series titled “The Business of Bioscience: What Goes Into Making a Biotechnology Product” will be presented by Dr. Craig Shimasaki, and sponsored by the National Council of Entrepreneurial Tech Transfer (NCET2). This 5-series web-based presentation will cover the author’s 28 years of experience as a serial entrepreneur of three biotechnology companies. He will share insights that will help those wanting to take their product idea through to commercial development, and the author will describe how to navigate the challenges of building a successful biotechnology company.
The series covers five, 90-minute class sessions walking participants through the steps biotechnology entrepreneurs take when developling a product and building a company. At the end of each session the participants can submit questions to the presenter. This webinar covers insights from the author’s book “The Business of Bioscience: What Goes Into Making a Biotechnology Product” which will serve as an in-depth reference and resource.
You may be a Professor or Practicing Physician at a University or Research Institution and ask the question “How can I start a biotech company if I don’t really want to run it?”
Don’t worry! You don’t have to be CEO in order to start your own biotech company. In fact, it may not be the best advice to become CEO if you have no previous business experience. An academic scientist CEO without prior business experience can sometimes be an impediment to raising money because investors bet on experienced people – not just in technologies alone. Although there are examples of scientists and physicians leading successful biotech companies, unfortunately, stereotyping of scientists and physicians does occur. As a general rule, the more practical business experience you possess, the more confidence investors will have in your ability to successfully lead a company.
As a professor or practicing physician, you can assist in starting and forming your new company, help develop the technology and participate in its value creation without having to leave your academic or clinical position. But even if you are interested in leaving your position now or in the future, you still don’t have to run the entire organization unless that is your desire. There are several ways to participate in the entrepreneurial process without shouldering the responsibility for the entire organization. However, just because you are not leading the organization, it does not mean you cannot participate in shaping its future. There are several alternative roles you can assume that still provide valuable experience for participating in the entrepreneurial process and better equipping you for a subsequent entrepreneurial opportunity.
Alternatives to Taking the Leadership Role
It is important to first decide your time commitment to the new entity. Are you interested in full-time participation or only part-time? Do you only want to participate in this new venture as a consultant on an “as needed basis”? Would you like to start on an “as needed basis” yet have the opportunity to later participate full-time? If you first identify your time commitment interest, it will help in selecting your entrepreneurial options. If you are contemplating starting a biotechnology but are not interested in leading the organization, here are some ways you can participate:
1. Take a position as Chief Scientific Officer, Medical Officer or Vice President of R&D. Participate by leading the technology or clinical development but have someone else shoulder the business and financing responsibilities of the organization.
2. Participate as a Scientific or Medical Advisory Board Member and assist in the overall direction and in solving problems during the technology development
3. Participate as Scientific or Clinical Consultant and assist on an “as needed basis”
In the beginning, you will be heavily involved in establishing the company, and you must be willing to commit a large portion of your time during this phase. Afterward, you can then return to academic research or medical practice, while contributing an alternate role as described above. As a founder of the company you will most likely be involved in securing seed funding for your new venture, which may come in the form of grants and/or seed capital funding from angel investors. During this time you must identify and recruit an experienced CEO or a former entrepreneur who can give you guidance on how to move the technology forward. Initially, you must be the sole driving force behind the company, understanding that your work will have benefit later when you reap the rewards of your efforts. By participating in these alternate roles it will better prepare you for subsequent start-up options where you may want to assume the leadership role.
The Takeaway Tidbit
Professors and physicians with minimal business experience may want to consider supportive roles in their new venture rather than taking responsibility for the entire organization. In this way, you can learn by participating as a member of the team, rather than being solely responsible for the outcome of the company. By doing this, you will gain valuable experience and can be applied to your next opportunity. You can then lead with more confidence because you will then understand the start-up process and the issues you may face. It is essential to work with other experienced people because a good team is vital to business success. For those who are interested, more information about these alternative roles can be found in the chapter titled “What Makes a Biotech Entrepreneur”, in the book “The Business of Bioscience: What Goes Into Making a Biotechnology Product”.
What is the first thing a biotech entrepreneur should do when thinking about formally starting their company???
One of the first things is to talk with an experienced attorney who has worked with start-up biotechnology companies. Too many entrepreneurs say they can’t afford an attorney, but in reality you cannot afford NOT have one for your business.
This article in the October 2010 issue of Nature Biotechnology “Why You Need a Lawyer?” discusses things an attorney will give you advice on, such as: issuing stock, constructing employee agreements, selection of a board of directors and advisors, and other things you will want to know.
Determining Valuation for Early and Latter Development-Stage Biotechnology Companies –
All biotech entrepreneurs at some point must address the question “how much is your company worth?” The answer determines the slice of equity for yourself, employees, and current and future shareholders. As a result, most BioEntrepreneurs tend to overvalue their company at the start-up and early development stages. However, overvaluing your company is counterproductive and detrimental to attracting institutional and venture capital during these critical stages. Although there are standard valuation methods for determining the value of growing companies with product revenue, how do start-up and preclinical stage biotechnology companies without product revenue value their organization?
Without capital, the greatest of ideas get nowhere. The biotech entrepreneur must successfully identify and access consistent sources of capital over the life of their organization in order to transform their ideas in to products. During early development stages the entrepreneur should make use of Angel capital and Small Business Innovative Research (SBIR) and other federal (NIH) and state grants. But at some point this budding company will need to secure venture capital or what is known as Institutional Funds. How does one go about doing this?
Kleiner, Perkins, Caufield & Byers (KPCB) is one of the stalwart biotech venture capital groups and one of the early backers of Genentech in 1977. Since then, the firm and its Partners have backed entrepreneurs in over 100 life science companies working in every area of medicine, including cardiology, cancer, neurology, immune system diseases, ophthalmology, and molecular diagnostics.
Sometimes people make simple things complex. However, most of the time we make complex things impossible. George Whitesides has a knack for making complex things seem easy. He is a professor of chemistry at Harvard and a serial entrepreneur. Whitesides co-founded 12 companies which at one point had a combined market capitalization of over $20 billion. These companies included Genzyme, GelTex, Theravance, Surface Logix, Nano-Terra, and WMR Biomedical.
For instance, rule #10 “Regulatory Agencies are Motivated to Avoid Risk. Nobody ever lost their job for not approving a product” For the biotech entrepreneur, the lesson is, when developing and testing your product, be sure to plan on examining every reasonable risk imaginable…and then find a few more”. The FDA is a risk-averse agency by nature. Help them do their job by appropriately removing the guesswork from as many product risks as reasonably possible.
A recent report from Ernst and Young acclaimed that the biotechnology industry finally reached profitability for the first time in history with a net income of $3.9 billion in 2009 (Beyond Borders: Global Biotechnology Report 2010). This is a significant milestone and welcome news! However, to put this in perspective, Wal-Mart, General Electric and AT&T individually had net incomes of about 3-4 times the total biotech industry ($13.4 billion, $17.4 billion and $12.9 billion respectively).
The biotech industry is only about 35 years young. However, in spite of reaching profitability, some still say the biotechnology business model is broken. (more…)
Most would-be entrepreneurs believe that they will one day start a company, however they usually don’t know how. Starting a company cannot be haphazard. Beginning a company requires significant planning and many events must simultaneously converge in order to be successful. Some people describe the successful convergence of timing and opportunity as “serendipity”, others call it “chance” or “luck”. Whatever you call it, heed the words of Louis Pasteur who said, “chance only favors the prepared mind”. Knowing what to do first can be most challenging since there are so many things that must be accomplished. Here is a checklist of 7 steps that are essential for starting a biotechnology company.
WHAT IS IT… that propels some entrepreneurs to succeed and other to fail?
Defining Success and Failure
In order to talk about the traits of successful entrepreneurs, we must first start with a better understanding of “success” and “failure”. Success is often erroneously defined as—everything you do produces a favorable outcome. If “success” is equated with never having an idea that did not work, never having a business shut-down, or never encountering insurmountable product development problems, then there are very few successful entrepreneurs in this world, and it is near certain that you too will not be “successful”.
Most technically-oriented individuals believe that once their beloved product, (which is of great technical value) reaches commercialization, multitudes will clamor to buy their product or service. This nearsighted condition is termed “entrepreneurial myopia”. It is an ocular disease notorious for destroying promising enterprises. Entrepreneurial myopia is highly contagious, and the individuals most susceptible to this debilitating condition are typically those employed within the same organization. Rest assured, all others are immune to this disease, most notably those that hold the investment capital you seek; also, potential customers with cash in their wallet. These groups are immune because their eyesight and peripheral vision is unimpeded by bias and they clearly see what those with this disease cannot.
What is a Value Proposition? It is NOT how the science or technology works. Moreover, it is NOT the neat things the science or technology can do. It is how your product fulfills the acute needs of the customer; it is the way your product solves a problem for its customers—the more acute the customer’s need, the greater the market will be for your product. Believe it or not, there are great innovative product ideas that have no customers!
When starting a company, it is absolutely essential to find a good attorney experienced in biotechnology start-ups! Yes, there are boilerplate forms you can use for most every type of document, which can be found on the internet — sometimes free. However, remember you are paying for expertise and sound advice, therefore, find someone you can work with that has plenty of experience in the biotechnology industry.
Discouraging news was announced about the unlawful practices of Pfizer in marketing its drugs to physician’s using free golf, massages, and resort junkets, along with promoting off-label uses for several of their drugs (read complete story). The Justice Department said that Pfizer’s sales people created sham requests from physicians asking about unapproved drug uses and then the company mailed the information to doctors. This $2.3 billion settlement is the largest ever paid by a drug company.
Starting a biotechnology company can be invigorating, exciting and frightening all at the same time. Where will I find the money? How can I compete for world-class employees? What about lab space? I have never written a business plan before! These are a few of the myriad of issues a biotech entrepreneur must wrestle with in order to see the success envisioned by developing a life-saving product or service. If you are a first-time entrepreneur in the biotech industry, do not be disheartened.