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.  

To register for this series click on the Research Commercialization Online Courses and Webinars

To purchase a copy of the reference book click on this link “The Business of Bioscience: What Goes Into Making a Biotechnology Product”

You may be a Professor 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 leading successful biotech companies, unfortunately, stereotyping of scientists 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, 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 position.  But even if you are interested in leaving your academic position, 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 or Vice President of R&D.  Participate by leading the technology development but have someone else shoulder the business and financing responsibilities of the organization.

2. Participate as a Scientific Advisory Board Member and assist in the overall direction and in solving problems during the technology development

3. Participate as Scientific 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 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? (more…)

The lifeblood of a young biotech company is cash.

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.

Stanford University’s Entrepreneurship Corner interviewed Brook Byers, an early partner in the firm discusses the best way an entrepreneur should find and reach venture capitalists.

In this second video clip he shares his thoughts on selecting and working with venture capital firms. (more…)

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.

In a post, William Crawford references Whitesides talk on “Challenges to Successful Innovation and Translation” of medical research where he outlined “Whitesides Rules for Biotech Entrepreneurs” or “Uncle George’s Homey Rules for Entrepreneurs”.  These 14 simple rules are, well… simple, but like viewing life in a rear-view mirror, some of these may be seem obvious as you read them but they were most likely borne through adversity.

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.

(more…)