Mistaken Notions of First-Time Life-Science Entrepreneurs
by Stephanie Oestreich and Peter Dolch
Life science is endlessly complex and fascinating – especially in startups.
With a combined four decades of experiences in pharma, biotech, medical device and other life sciences companies ranging from early-stage startups to established companies, we wanted to share our thoughts with aspiring entrepreneurs (so you can hopefully avoid some of the pitfalls and collect fewer battle scars):
Myth #1: Raise as much money as possible. You need to think carefully about how much you need to get to your next inflection point – with a reasonable amount of buffer – and not raise too much more than that. Money can de-risk a lot of things, but there are real dangers to overcapitalization, for which detailed articles can be found on Google. Seasoned investors will look at company budgets, at how investment dollars are intended to be allocated, and take a hard pass if they don’t see a smart amount being raised (“No, they’ll negotiate!” you say? See Myth #4) . Also note: Many times venture capital (VC) investments will also come in tranches, meaning that only a portion of the investment will be made until one or more agreed-upon milestones are met.
Myth #2: Regulatory Approval is Straightforward. The venture capital highway is littered with the corpses of life sciences startups that thought their regulatory pathway was either trivial or predictable. It does not take many years in this space to see the fallout from startups that get a “bad” FDA reviewer (months and money are wasted), or see their expected 510(k) rejected in favor of De Novo Submission (at 10 times the cost and potentially years of additional clinical trials), or receive an approval so narrowed by restrictions so as to make the product commercially unviable. Get good advice from outside experts on your likely submission-approval pathway and budget accordingly.
Myth #3: Science is all that matters. Great science is the basis for a great company, but anybody who has been with a startup (especially when the biology doesn’t work out as planned, which happens the opposite of never) will emphasize the importance of both high-quality, well-networked investors and an experienced management team. A great team aligned with great investors can bring the resources to bear to solve the solvable science problems, pivot around the unsolvable ones, and achieve success.
Myth #4: I’m the Smartest Person in the Room. You are likely either an accomplished, well-respected physician or medical researcher with accolades from your peers and are always the smartest person in the room. This could doom you. You need great advisors to help you on your journey; advisors who know all the things that you don’t (there’s lots you don’t know about fundraising, product development, hiring, regulatory approval, IP protection, and all the myriad things that go into a successful startup.) For instance you thought in Myth #2 that an investor who otherwise liked your team and your product would negotiate on deal terms they didn’t like, because that’s logical. But it turns out not to always be the case. Some investors see a red flag and won’t bother to negotiate because of prior experience with entrepreneurs who wouldn’t listen, figuring it’s a better use of their time looking for a deal that’s right from the start. You didn’t know that, but your fundraising advisor – if you had one – did.
Myth #5: Work on many early-stage projects at the same time. It is important to carefully consider for which indication(s) the respective technology would be a competitive advantage, de-risking the science by targeting the optimal intersection of indications and market size. Investors want to see the pipeline progress in the direction of a solution to a problem, not a multitude of projects stuck in a pre-clinical stage.
Myth #6: Build everything in-house. Life sciences is expensive. It is both faster, more risk-free, and a better use of funding to initially outsource as much as is practical. Early on, you don’t need to do all your own research, build all your own labs, or create all your own IP. You can license existing IP, access a multitude of high-quality CROs (contract research organizations) and incubators that offer a diverse set of expertise and instrumentation. You don’t need to develop or build everything on day one.
Myth #7: IP is only for Legal. Even before publishing a paper, think about filing a patent application and be very involved with your IP lawyer early-on to develop the most robust IP package possible. Don’t allow proprietary information into the public domain without counsel’s approval.
Best of luck in your entrepreneurial endeavors, and please contact grIP Senior Advisors Peter Dolch and Stephanie Oestreich if you would like to discuss.