Editor: This article is the second of a two-part series. Check out Part One here.
This primer provides practical insights into starting up a biotech company - from brainstorming an idea to building a product, and from learning to ask questions the right way to become aware of key legal aspects. It will also familiarise you with all the jargon that is most frequently thrown around in conversation as well as in writing.
Getting started
A good starting point to establishing a start-up is to brainstorm problems rather than solutions.
90% or more start-ups fail (for more on this, see Part One of this series here), with about 34% of them failing because they lack a product-market fit. In other words, they built a product that no one needed. Therefore, it is incredibly important to identify a problem and thereafter a solution to that problem.
Choices from a good brainstorming session can be organised onto a graph (Figure 1), where you can immediately identify ideas with the greatest potential (‘disruptiveness’) and feasibility.
‘Disruptive’ start-ups do exactly that: they shake things up. In essence, a disruptive startup will be able to change the way things have always been done in very visible and obvious terms. For example, the CRISPR technology has completely changed the field of science. Yet, whether start-ups that build on it (such as CRISPR Therapeutics) are considered to be disruptive greatly depends on the competition. In this case, competition is defined as any infrastructure that can effectively replace your start-up. Examples of these would be other start-ups, incumbent corporations, or even ‘quick and dirty’ solutions from the consumers’ end.
On the other hand, ‘feasibility’ is a much more waffly, self-coined concept best described as a reality check. These include asking questions like - can you really build a magic pill that cures every single disease? Do you have the expertise to design such a drug?
The main rule-of-thumb is that start-up teams should only further investigate the ideas which are on the top right-hand corner of the graph. And out of all those ideas, they ought to choose what the team is deeply passionate about. This is because every founder will probably have to spend anywhere between 20 and 100 or more hours a week working on this, so they would really have to care about the problem and finding a way to solve it.
Figure 1: A matrix to help you organise your start-up ideas. Basically, more disruptive ideas result in larger paradigm changes within the industry, whereas more feasible ideas might be more logically plausible. With those in mind, only ideas towards the top-right hand corner (indicated as a red cross) are worth pursuing as a start-up.
Failing fast
The next step is to get out into the world and validate your idea. More specifically, it is the problem that needs validation first. In fact, you could even equate this exercise to a scientific experiment because they have a lot in common:
Identify who you think has the problem you are working on and ask them unbiased questions to get unbiased responses. Here, the ‘Mom Test’ methodology is key as the methodology essentially leads to asking questions that begin with “what”, “why”, or “how”. Not to mention, another common mistake is when the entrepreneur does most of the talking instead of being the listener, so it is crucial for you to keep that in mind when speaking to potential customers.
Talking to more people results in more data, which makes the experiment more reliable. As a rule of thumb, it will be okay for you to stop when you no longer hear anything new.
Try to find an answer to a single and clear hypothesis. At this stage, it would be “is X really a problem for person A?”. It should not be, “does person A want to buy product Z?”
Failing early saves a lot of time that would have otherwise been spent building a product that no one wanted. Therefore, just like in good science, always seek to disprove.
All in all, conducting thorough interviews uncover incredible insights that you would not have known otherwise. It is then back to brainstorming so that you can tweak your original start-up idea to reflect this feedback. After that, the tweak will result in a new hypothesis that should be tested in a similar manner.
Ultimately, you would become confident of having identified a real problem. And once that happens, you can move on to asking around about whether your solution is a good idea.
But first, a primer on the business lingo and concepts
This process is known as finding a product-market fit and the iterative methodology is called being a lean start-up. It is the fastest and easiest way to go from being a concept to having a prototype that not only works but also sells.
Fundamentally, an important part of adopting the Lean Start-up methodology is accepting that starting-up is not a linear process (Figure 2).
Figure 2: The start-up process is highly iterative and can involve going through a lot of circles and even seemingly ending up where you began - but it involves a lot of learning.
In entrepreneurship, another common jargon is “market pull”, which means that the start-up is developing a solution in response to a customer's problem. The opposite of that would be “product push” whereby the start-up comes up with an innovative product and then tries to find customers who would buy it. In the case of biotech entrepreneurship, it is a bit of both - a laboratory innovation may be a close fit for a market need, or a market need may also inspire a biotech product. However it pans out, the key is to know what your consumer needs and to listen to that feedback.
A mini bonus for reading this far: explore "the Lean Business Model Canvas".
Back to building your start-up: prototyping
A solution will undergo several phases of development. This process is called prototyping.
The initial prototypes may just be sketches on paper, regardless of whether it is a drug delivery molecule or a plasmid vector doing something cool. When the prototype is built to do what it is supposed to - albeit horribly - then you would have achieved proof of concept.
As each prototype is rigorously tested, it can grow in complexity until it has all the elements that solve the consumer’s need. Such a prototype is called a minimum viable product (MVP). It may be ugly, but it does the job.
Part of proving that the prototype works could involve going back out into the world to test that this is what your users need, as discussed above. But usually, the right MVP will be able to attract initial early users.
Some further reading: how do you know you’re building an MVP?
Something for you to note - a prototype that looks pretty is a looks-like prototype. In contrast, a prototype that not only works but also looks pretty, can sell much more widely than just its early adopters. For a non-biotech firm, that may be a polished website shipping beautifully packaged products and handling transactions. For a biotech company, however, it may need to be far more advanced because of the legal hurdles that biotech companies often face before ever reaching the consumer.
The legal minefields
In theory, intellectual property (IP) is any original intellectual idea or concept. This may take the form of a novel DNA sequence, manufacturing technique, or a unique company name. Patents, trademarks, and copyrights are a few examples of legal provisions that entrepreneurs can use to protect themselves against copycats. Additionally, IP also plays a role in fundraising as investors will want to know that the technology underpinning their investment is (a) well protected and (b) original.
Originality is itself an intricate topic and can hinder as much as it helps. If you have a truly original idea and can use legal mechanisms to prevent others from copying it, then you will have a significant advantage. On the flip side, if someone else had a vaguely similar idea that is well protected (or they may just be a significantly larger corporation with a bigger legal budget), then it can be hard for you to launch your idea without having to pivot away from your original concept. The legal jargon for this is “freedom to operate”.
Figure 3: IP protection and infringement together with stringent approvals requirements create legal minefields far more complex than the maze used here to represent the biotech entrepreneur’s struggle to go from concept to market. Do have a go at trying to solve this maze, you may find that the shortest route is not always the most obvious.
To prevent fraud and to encourage new business, every country has its own provisions to safeguard IPs based on their own legal definition of IP. This affects what can be legally protected in each country, creating another legal minefield (Figure 3).
The most basic and effective technique when you are just starting out is to simply keep the information need-to-know. Entrepreneurs often choose to only invest in formal legal protection once they are sufficiently confident about product-market fit and know which country/countries they need legal protection in.
Another related but distinct minefield is safety approvals (Figure 3). Some biotech products, such as therapeutics and food, may need approval from the Food and Drug Administration (FDA) or its equivalent in each country that the start-up intends to operate in. Others, such as those with genetically modified organisms (GMOs), may also require additional approvals or might even be completely banned. What’s more, there are also others that are so innovative that the law has not caught up sufficiently (so no one really knows how to handle it properly!). An example was the highly anticipated ruling by the US courts that isolated DNA sequences are patentable during the earlier days of biotech.
These uncertainties can lengthen production times and worsen the start-up struggle. However, these problems could be overcome with good advisors and strong teammates. If you are only just starting out, it can also be helpful to not think too far ahead and only worry about ironing out the legal wrinkles when you are closer to those times. The most important thing to consider right from the start is the nature of your IP and a working plan to protect it.
A bit of further reading for you would include: Getting an IP assignment agreement and clarifying who owns the IP in a start-up. You might also want to read about some high profile lawsuits against pharma biotechs over safety approvals.
It is a quest for survival
In summary,
Most startups fail because they did not find a product-market fit. This is where the Lean Methodology comes into the picture to help you spot such problems as early as possible.
Getting and using unbiased feedback requires simple techniques and can result in the start-up considerably evolving over time. Not to mention, the best entrepreneurs are good at listening and observing problems (meaning that they don’t force their first idea onto the consumer).
The evolution of the start-up can involve a shift in the exact problem being solved as well as how it is being solved. The latter constitutes a process known as prototyping.
IP and safety approvals constitute legal minefields that can both hinder and aid the start-up. Although they can both be overwhelming, it is useful to have a working strategy in place, and that evolves as the start-up develops.
Here are some last thoughts towards giving you the best survival chances:
Don’t be afraid to ask for help. Networking with experienced mentors and advisors is really important to ensure that you build a strong support system to sustain your venture when the going gets tough.
A bigger team means more hands and heads, potentially enabling camaraderie, productivity, and reduced development time. On the other hand, a large team without clearly defined roles and weak leadership can also breed an unproductive and even a toxic culture. Therefore, it is important that you manage the team as a resource. Further reading: are start-ups families or teams?
Ultimately, the journey is as important as the destination. So, jumping into the world of biotech start-ups is bound to be a win-win situation either way, for nothing is more entrepreneurial than losing it all and learning to rebound from a failure.
Author
Hansa Shree
DPhil, Chemical Biology at University of Oxford