From lab to limousine
pharmafile | October 16, 2003 | Feature | Research and Development |Â Â biotech, start-upÂ
Attend any networking conference bringing together fledgling biotechnology companies and investors, whether financial or industry, and you will repeatedly hear variations of the same equation:
T + IP + M = $£¥E
Technology plus IP plus strong management equals money. Or, put another way, for a business enterprise to succeed, it requires:
- novel patented technology with utility
- a sound business plan
- a strong scientific and commercial management team.
Provided that all these elements are in place and can be demonstrated to potential partners then the ensuing monies/licensing agreements/collaborations, although by no means guaranteed, are more likely to be forthcoming. Indeed, in these pessimistic times attention to these details in business plans and professional presentations are paramount if a compelling case is to be made to the investor community.
So, how does an entrepreneurial-minded academic expect to negotiate the minefield that exists between his/her aspirations and the practical realisation of those dreams?
British academics, and to a lesser extent their European counterparts, have become increasingly receptive over the past decade to the concept of commercialised research. This paradigm shift in thinking was anticipated many years previously in the US where the principle of profiting financially from ones research has been long established. This cultural change in the UK has been facilitated by a number of events and initiatives arising from government, academia, industry and individuals, including:
- Government cut-backs on funding university research, requiring such institutions to seek funding elsewhere
- Government encouragement via tax breaks for R&D spending
- SMART – small business service (SBS) initiative that provides grants to help individuals and small and medium-sized businesses to make better use of technology and to develop technologically innovative products and processes
- universities' willingness to supplement funding of research through commercialisation of research emanating from their departments with follow-on equity in resulting companies
- technology transfer departments set up by universities to assist in-house scientists access licensing deals and industry collaboration
- successful demonstration by previous academic spin-outs of commercial success without ethical scientific compromise.
Similar initiatives, to a greater or lesser degree, exist throughout continental Europe. However, the attributes required for a good scientist are not necessarily those required to be a good businessman. Indeed, commonly accepted stereotypes of the corduroy clad boffin on the one hand and Saville Row suited wide boy on the other can be said to have some foundation in truth. A successful biotech start-up needs a combination of characteristics from both camps. Founding scientists with such qualities are extremely rare animals so, inevitably, a team has to be created with complementary skills.
Assuming that the technology is indeed novel with genuine potential for commercial application, what additional features need to be brought in to a business in order for that technology to achieve its true potential?
Of paramount importance is the requirement for timely world-wide patent protection. Subsequently, the originating scientist needs to put together a business plan and commercially orientated core management team in order to secure funding for his/her venture. At this stage, the process of company creation becomes complicated by the inter-relationship of these factors. A business plan requires commercial understanding and input, funding is dependent on the quality of business plan and core team, recruitment of business expertise requires funding, etc. Breaking out of this circle can be difficult and frustrating.
To some extent the business community has recognised these problems and put in place a number of coping strategies to facilitate the process. In the UK these include the following:
Technology transfer
Teams set up by universities to provide advice and seed funding to those academics interested in taking their research out of the laboratory.
Business angels
Entrepreneurs who have a track record of successfully negotiating all the hurdles between lab bench and stand-alone company, made some money and are looking to help others achieve their ambition, with advice and seed funding.
Entrepreneur developers
A comparatively recent concept using advisors versed in business practice to train and mentor academics in the art of putting together and presenting a business plan and communicating with the business community.
Business (bio)incubators
Sites providing a halfway house between the research laboratory and ultimate commercialisation. The bricks and mortar of these sites are underpinned by core services, such as finance, legal, HR, etc, acting as impartial advisors to emerging businesses. Some of these enterprising sites are also investing and taking small equity stakes in the tenant companies.
Each of the above can also introduce founding scientists to the required management expertise, either directly or through various people networks. Introduction to and recruitment of a commercially adept CEO can also take place through a venture capitalist who, having worked with previous successful entrepreneurs, may have retained contacts useful to ventures in which they intend investing. However, such input can be perceived to be overly intrusive and lead to potential conflict between investors in a consortium whereby the CEO may be seen as lacking impartiality. Such differences may be put aside for the common aim of guaranteed returns on the investment that may rest on securing the services of a CEO of proven pedigree.
The influence of CEO and venture capitalist may subsequently lead to several changes in the business plan as the company evolves. Public markets are littered with companies far removed from their scientific origins. The founder scientist/entrepreneur needs to be aware of and comfortable with the idea that the technology for which the company was created might not be the technology that ultimately drives that company to success.
A resource unfamiliar to and thus rarely used by company founders in the recruitment of commercial expertise is that of executive search consultancies. Such agencies' raison d'etre is the identification, evaluation and recruitment of talent into companies. Previously better associated with providing such services to large corporate clients, they are increasingly being recognised as having a constructive part to play in bringing business expertise to start-up ventures. They do suffer with the reputation for being expensive and thus unaffordable at a time in a companys life when money is tight. The academic clientele are inclined to spend what little funds are available on research rather than recruitment of a core management team. However, search companies are commercial undertakings in their own right and have thus adapted to meet the needs of this emerging sector by introducing innovative and flexible packages to address these concerns. In addition, they provide value added features including knowledge of the sector and its people, experienced evaluation ensuring cultural fit, impartiality and neutrality, and facilitation of negotiations. They are also adept at identifying raw, as yet unproven talent that can benefit the biotech sector as a whole.
In summary:
- funding of any venture is reliant upon patented, novel, commercially applicable technologies allied to a realistic business plan and high quality management team
- the environment for the commercialisation of academic research continues to evolve and remains vibrant, despite the current pessimism in the commercial life sciences sector
- a number of resources have been created and are operating to assist researchers achieve their aspirations of bringing their research to a wider audience – putative company presidents need be aware of and use these services
- a good management team, and in particular a good CEO, will repay its investment many times over.
Finally, success in starting a business, as in all walks of life, demands patience, perseverance and the phenotype of a pachyderm.
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