Entrepreneurs lead perilous lives, continually living in the shadow of failure. But biotech entrepreneurs find themselves in an even more precarious position. Not only do they have to contend with the usual difficulties of running regular businesses, but they also have to adapt to a brutal regulatory environment which does everything it can to suffocate innovation. Biotech firms that survive are a rarity. Those that thrive are virtually non-existent.
If you do decide to walk this difficult path, what do you need to know? What are the rules for growing a biotech startup into a self-sufficient business, not reliant on the generosity of venture capitalists?
Tip #1: Spread Your Message
Biotech companies have a habit of collecting people together in labs with filter plate equipment, looking at cell samples and playing around with pipettes. And while they’re very good at this, they often neglect the other important part of business: marketing.
To the average biotech startup, marketing seems like a waste of money. The first marketable product is usually five to ten years away (if on the cards at all), and so it makes sense for all of the company’s efforts to go into developing the tech or medicine that it will eventually produce on a massive scale. The problem with this thinking is that the startup limits its scope. Sure, in a world where public interest in your company doesn’t matter, it makes sense to plough all your resources into developing products. But that’s not how the world really works. Successful biotech firms are those who get wealthy investors excited about what they’re doing, securing access to long-term credit if necessary.
Tip #2: Make Quick Decisions
The aim of the biotech entrepreneur is, primarily, to help the firm manage the sheer timescales involved from developing a product to getting it approved for distribution in the market. As anyone who has been in the space before will tell you, it can easily take upwards of a decade to complete.
Making a quick decision is by no means straightforward. You need to have a sense of the direction in which your firm should go and which projects it needs to prioritise. Many firms hold off going public, just in case they don’t raise the capital they want. Rarely is the wait worth it.
Tip #3: Build Close Relationships With Regulators
Although regulators have hurt medical entrepreneurship enormously, many of them genuinely believe that they are doing the right thing. Public servants see it as their role to protect public health from medical mavericks like you delivering untested drugs to market.
The job of an effective biotech startup CEO is, therefore, to smooth relations. Rather than seeing the regulatory apparatus as a giant machine, its strategically advantageous to see it for what it is: a collection of people who believe that they are serving the public good. Don’t fight the system: work with it. By developing relationships with individual regulators, you build trust. Over time, they begin to see you as the kind of business they can trust and something with which they do not need to concern themselves.
Often it’s just a matter of education. The more you can explain to regulators why you’re doing what you’re doing, the more they understand. Remember regulators aren’t experts in the field that they regulate. Because of this, they’re usually hyper risk-averse, unwilling to allow you to try anything which appears to fall outside of their sphere of experience. Your role is to find ways to educate them, addressing their concerns as and when they arise.
Tip #4: Prepare For Volume Sales From The Start
A typical biotech company timeline goes something like this. First, the founders develop ideas for their product. Then, once they seem good enough, they canvas investors for the money to get the business going. After several years of research and product development, it’s ready to go into clinical trials. After perhaps five years, the firm gets FDA approval and can finally start manufacturing medicines for the mass market. Great.
The question is, in which part of this process should the startup start thinking about future sales? Some biotech entrepreneurs claim that preparations should be right from the start.
The great thing about the biotech product market is that it is clear where there are going to be gaps in the future. Companies need to get FDA approval before they can bring a product to market, so everyone knows roughly what kind of medicines will be available, three to five years out. This knowledge makes it surprisingly easy for companies to know which products to target. There’s little advantage in developing a product for launch when a similar medicine from a rival will arrive on the market in the same period. But there is a tremendous advantage of developing a product that fills a niche and doesn’t have competitors. CEOs, therefore, need to think about selling products from the start.
Tip #5: Tailor Your Startup To The Local Culture
The location of your startup can have an enormous impact on the overall funding it receives and its level of success.
In Europe, for instance, the level of regulation is much higher, and the concern of policymakers isn’t so much whether human health can be improved, but whether the government can create services that ensure that everyone has the opportunity to be equally sick. Startup CEOs in this culture need to be aware that not everyone will have a rosy view of medicine and markets as they do.
Biotech investors in Europe are much less optimistic about a firm’s chances of success than in the US. The average investment in the first round in Europe is about ten per cent of the level achieved in a place like Boston, which is brimming with startups.
Planning for the local culture is, therefore, a major consideration. If possible, you’ll want to avoid highly regulated companies and move to places with more liberal incentives for entrepreneurs trying to develop new medical technologies. You may need a lot of cash to get your company off the ground.