Lessons from successful scientific entrepreneurs for biotech start-ups
The biotechnology landscape is complex and defining a business strategy that will lead to success is challenging. Many companies struggle to define the roadmap towards success and to bridge the gap from being a start-up towards reaching an IPO, trade sale or launch onto the market of their product.
Specifically, the lack of profit during the first ten years of research and development (R&D) of the company seems to be a big challenge. When bringing a product to the market funding is essential to cover the high costs of R&D. However, the relation between the usage of different funding sources and success is unknown. This article reveals the main conclusions of a survey amongst scientific entrepreneurs in The Netherlands wherein nine successful entrepreneurs shared their inside business knowledge to empower the Dutch biotech sector.
Three components for success
The analysis of the stories of successful Dutch health and life science entrepreneurs, revealed that the specific sources of funding that are used to build a business is not decisive for success. It turned out that it is essential to invest in three critical components to guide a successful biotech business: A strong business management, building sublime science, and a solid financing strategy. While the balance between these components may vary depending on the business and the financing climate, they should all be at the center of the business focus, starting from the day of the launch of the company.
1. Investing in a strong business management
This was highlighted by all successful entrepreneurs as a key factor for success. In many cases, biotech’s are created as spin-off companies from universities and are based on scientific knowledge that was created before the business idea arose. However, to accomplish a successful biotech business, it is essential to establish a strong business focus and a clear vision on the societal impact of the innovation. This means that from the start of the company life, the management will re-direct the focus from fundamental research towards business minded experiments. Two possibilities are advised to create the required strong business management for a biotech company. First, a serial health and life science entrepreneur may be attracted to the company team to define the commercial business strategy. Second, a partnership may be established with an external biotech or big pharma that provides commercial expertise to define the optimal business strategy and direction of the scientific research. No matter what the strategy will be, getting the right combination of science and business people on board is a critical factor for success.
2. Investing in sublime science
This is the second critical component that was highlighted to become a successful biotech company. Each step in the company’s life should be focused on the evolvement in the technology readiness levels of the science and work towards reaching proof of concept for the product in a real life setting. A well-established roadmap for the scientific basis is essential to build the data package that is required for regulatory approvals and to critically shorten the time to market. The solid scientific data and a professional business vision together are the key factors to attract sufficient funding and further mature the scientific basis toward success. Progression through the scientific readiness for commercialisation is accompanied by readiness for increasing levels of funding. This allows growth from smaller amounts of subsidies and angel investors, to increasing amounts of venture capital investors, governmental loans and deals with contract research organisations. Clearly, the focus on the scientific strength of the data to reach the requirements for marketing is a critical component for success.
3. Investing in a solid financing strategy
This is the final critical component for success once the management and scientific focus are in place. Selecting and attracting the right sources of funding within the current economic climate is key to strengthen the scientific basis of the company. This includes a thorough understanding of the terms and conditions of the various types of funding and their impact on the development of the product of the company. Subsidies providers, angel investors, venture capitalists, governmental loans or deals all come with their own conditions and benefits for the company. The initial investments in the company are used for further developing the scientific data and attract new sources of funding, creating a series of financing rounds of increasing value in science and money. This vicious circle of funding continues until the science is sufficiently developed to attract big investors to provide the final push to market.
These critical components for success should be a key point of focus when running the business and maximize the chances for success in the challenging biotech business that ultimately will always be dependent on the results of your scientific projects.
This article was written Meike Sloet van Oldruitenborgh as part of her Research internship at Catalyze in July 2017. The article reveals the main conclusions of a survey among scientific entrepreneurs in the Netherlands wherein nine successful entrepreneurs shared their inside business knowledge to empower the Dutch biotech sector.