Everyone's got one. You know, that idea that's been banging around in the back of your head. One prospective entrepreneur explained his to me after a career talk I gave that he attended. "It seems like a great idea, but I just don't know where to take it from here," he said. "I don't have money or experience in running a business, but I can't help but feel that this concept would really make a cool biotech start-up."
Some people launch a new business because they need a job. My son graduated a year ago, and, out of desperation, he and a couple of college friends formed a start-up in the motion picture industry. In the scientific marketplace, though, a successful start-up requires more -- a lot more -- than hard work and a couple of good friends. To succeed, a biomedical start-up needs an original concept backed by solid science -- but even that's not enough. It must also offer the promise of a very quick return on investors' money.
Still, ideas are easy to come by when you are young and full of energy. That makes the entrepreneurial track very appealing to many graduate students and postdocs.
What's not easy to come by is the chutzpah to actually do it. Even harder to come by is backing from other risk-takers, especially investors, and that's something a successful start-up cannot live without. For this month's column, I interviewed two entrepreneurs -- Robert Levy and Richard Woodward -- who are busy starting up a new biotech business. Below, I'll tell their story and relay their advice for the benefit of early-career scientists who are considering starting their own company.
Levy had a great idea, backed by sound science. An endowed professor of pediatric cardiology at Children's Hospital of Philadelphia in Pennsylvania, Levy had been working with his team on biodegradable polymer nanoparticles infused with iron oxide. They found that they could direct these nanoparticles to particular sites using a low-power magnetic field. This led, eventually, to a technique for releasing the drug paclitaxel into selected blood-vessel tissue, slowing the arterial blockage that causes peripheral artery disease.
Levy's idea, which combines nanotech, biotech, and medical-device technology, was an interesting nucleus for a company. But he needed someone to help him with business advice, someone who could convert the concept into a business plan -- and a business -- worthy of consideration by the discerning, hardened investors who would put in angel money or venture capital. Financial backing is what separates the "maybes" from the "also-rans" in the biotech world. It's one of the things, anyway.
Levy's partner is Woodward, a consultant and former business executive in the biotech industry whom Levy met through the unique QED Proof-of-Concept Program sponsored by the University City Science Center in Philadelphia. The program is designed to pair academic scientists with experienced business executives.
Levy wrote and submitted a conceptual white paper. Some preliminary funding was available to those who made it through a protracted, competitive process. Vascular Magnetics, the company that emerged from Levy's idea, made it through. "We were lucky," Levy says. "We had focused on an unmet need, something that actually looked commercially supportable."
Since then, the company has refined and modified its original concept, developed a business plan, and begun presentations to investors. Nothing is certain at this stage -- the company may or may not win the backing it needs -- but the concept is solid technically and it is winning positive notice from advisers and supporters.
Here's the advice the two entrepreneurs shared, filtered through my own experiences:
Ask yourself: "Is this truly a new idea that meets an unmet market need?"
"This is the first thing that any investor will want to know," Woodward says. "Even a smaller angel investor would pass on a business that doesn't address a need in some unique way. A promising technology is only as good as the benefits others derive from it. Cool technology on its own is a business plan destined to fail."
In my seminars, I often describe this common mistake as "technology push versus market pull." Many ideas from young scientists fall into the former category. Their concepts are, as Woodward describes, "cool," but they don't address an immediate market need. Slick new technology doesn't solve a problem or cure a disease on its own. Levy's nanoparticles were just a curiosity until he tied them to a novel drug-delivery method.
For a new business idea, "market pull" is much better. If you can convince investors that your technology fills a quantifiable need, then there's a good chance you'll be able to convince them that your cool technology could yield a profitable company. "Quantifiable" is important: Revenue projections for Vascular Magnetics suggested sales of over $1 billion per year just 4 years after commercial launch.
Don't be wedded to the original idea
The two entrepreneurs felt great about their chances after being selected by the QED Proof-of-Concept Program in Philadelphia, but they soon learned their second major lesson: Don't get stuck thinking that your only options lie with the original idea. "After we started the program, a lot of evolution went on," Levy says. "Our original idea used our technology for a different space entirely, but we got feedback that said no one cares about that area. Our advisers suggested, 'Why not go into the peripheral artery disease space?' "
"We were also experiencing some regulatory pathway issues with the original idea," Woodward adds. "Had we been wedded to Bob's original concept, we'd be fighting a battle we don't have to deal with today. Bob came in one day and said that there's a better way. It's so important to be adaptable."
Get as much good advice as you can -- and listen to it
Levy and Woodward took the advice of their advisers seriously. Their change in direction was a direct result of adviser feedback. Woodward says, "Good, seasoned business advice is critical. There are enormous numbers of mistakes you can fall into, and any one of them could trash your company."
Good advice from world-class clinicians, such as those whom Vascular Magnetics identified, can be expensive. In the formative stage, many entrepreneurs wouldn't seek it out. But Levy knew that such advice was worth going after.
"You need to have significant people giving you advice. They are working with us under the promise that we will get them some stock options further down the line," Woodward says. "My guess is that they came on board because of their respect for Bob and the fact that they know his reputation for getting things done."
Woodward and Levy both recommend that young scientists find a way to "pair up" with someone more seasoned who complements the founder's strengths in his or her field of expertise.
Avoid fantasies about getting rich quick
The young founders of Google or Facebook may have found incredible riches shortly after starting their businesses, but that isn't the norm in the biomedical arena. It takes years to build a successful start-up company, say the founders of Vascular Magnetics; your company probably will transition through a number of stages before a product reaches the market and benefits a patient. As a recruiter who has worked with start-up companies for many years, I can corroborate that observation.
So what's the best indicator of at least the possibility for success, and perhaps even riches? I like this idea from Woodward: He suggests that anyone considering becoming an entrepreneur put his or her idea through this simple filter:
"Ask yourself: So what? And who cares?"