FountainBlue is pleased to share notes from previous Life Science Entrepreneurs' Forum. Special thanks to our facilitators for the forums as well as our former sponsors for our life science entrepreneurs' Forum, KeyPoint Credit Union http://www.keypointcu.com and our current sponsor, Perkins Coie LLP.
You are welcome to comment on any of the notes below by e-mailing us at info@FountainBlue.biz or joining us for our upcoming forums - on the third Mondays of the month from 11:30 a.m. - 1:30 p.m. at Perkins Coie LLP, 101 Jefferson in Menlo Park. You are also welcome to join FountainBlue's Entrepreneurs' mailing list at http://finance.groups.yahoo.com/group/SVEntrepreneurs for invitations to future events.
Our May 22 Life Science Entrepreneurs' Forum was on the topic ofAn Investor's Perspective on Trends and Opportunities for Life Science Companies, featuring:
Facilitator Roy Fiebiger, Sanford Rose and Associates
Panelist John Maroney, General Partner, Delphi Ventures
Panelist Kevin Wasserstein, Versant Ventures
Below is a compilation of advice for your reference.
About the Team
Ask yourself if your team fits the organization's opportunity - does everyone have the experience to lead, and to lead for what stage/size of the company? does everyone have the skills and connections to help the organization to succeed? Is the chemistry good between the entrepreneurs and the investors? etc.,
Show Positive Progress for Your Organization
Focus on the strategic objectives for your organization and make measurable progress on agreed milestones. This is important whether you're getting funding, between rounds, or never planning to receive funding.
Understand why progress is not being made - is it related to the team? the resources? the market?
With that understanding, take action to address the problem.
Avoid the 'lingering failures' or 'walking dead' - companies that are limping along without making progress, showing promise but not delivering. It's important to keep moving forward in specific areas, and to understand up front when to 'pull the plug'.
Conduct hypothesis-driven experiments which can help drive decisions. Conducting them early and cost-effectively will also help organization to make strategic decisions.
Build Credibility Behind Your Organization (Prove 'the juice is worth the squeeze'.)
Articulate the market size, your specific niche, your strategy for addressing that niche, the competitive landscape, etc.,
Know how you are differentiating yourself and communicate that clearly.
Consider the immediate likely objections of potential investors and be prepared to address those objections prior to meeting with investors.
Consider market adoption trends and health care provider practices when you write your executive summary.
Be flexible about your organization, its goals, its revenue models, etc., It's rare that an early-stage company's business plan endures for the long term.
Don't have 'founder-itis' - know your skills and your contributions and be willing to hire the right partners and team to address the needs of the organization. Put the organization in front of your own personal needs if necessary.
Physicians may be good partners in that they may be able to validate a market need.
Some companies come out of 'near-death' experiences stronger and better for it, and can build credibility based on learnings from those experiences.
Build Relationships with the Investment Community
Research which investors are funding in your space. Call the portfolio companies and ask them about their experiences with the funders.
Identify and make connections with investors who are funding in your market niche and find someone who can make an introduction to them, rather than submitting a business plan without an introduction.
When you have a conversation with a VC, be likeable and personable and listen thoughtfully rather than spending the whole time selling.
Don't get discouraged with 'nos'. If you get a rejection from a VC, take the opportunity to ask for feedback and even recommendations and introductions to other VCs who might be more appropriate funders for your opportunity.
Remember that relationships with investors are two-way relationships. Make sure that the investor fits your expectations on how the monies will be invested (how much for R&D, single product investment? team investment? etc.,)
Don't be afraid to ask the touch questions.
Our April 16, 2007 Panel was on the topic of R&D Funding Opportunities for Life Science Companies. Our esteemed panel included:
Facilitator Brian Boyer, Attorney, Perkins Coie LLP
Panelist Jeff Fairman, founder and senior research director, Juvaris
Panelist Tom Gutshall, Founder and Former CEO, Current Chairman of Cepheid
Start with a life science business idea which is interesting to a specific target audience, something you, as a founder are passionate about.
Create a team to build the organization and strategically identify the best R&D funders, those who would think that you're idea is a good one, in a huge market. Sell the funders on the business idea and on the team.
Once you are funded, make sure you execute on your business plan, while also staying flexible, based on changing market needs/technology requirements. This will not only help ensure the success of your company, but also to ensure R&D funding for your next venture.
When you are planning your funding, make sure that others on your team are aware of the level of work and commitment needed to ensure success. Investors will respect your personal financial and personal commitment to your cause.
The Value of Networking
Networking with the right people can help get the right doors open for your R&D efforts.
Continue speaking passionately to all your contacts about your current funding needs and a door may unexpectedly opened for you.
Be prepared - plan for such an occurrence to happen, so know what you're looking for, what you will do with it, who will do the work, over what time frame with support of which partners.
Be proactive and speak to program officers of foundations and other funding sources. Ask them for suggestions and feedback. Develop a relationship with them, and they may help you give you the advantage tailoring a grant request specifically to your organization.
Consider building relationships with VCs for support in filling out your team.
Having R&D funding changes the way other investors perceive you.
They may be more likely to partner with you, assuming that another party will fund the more risky R&D efforts.
They might think that the funding will make it more difficult to influence the direction of your company.
In some cases, they might be threatened by the grant agreement, if IP and ownership issues are raised for instance.
Plan your funding strategy, integrating a variety of sources - from corporate investors to foundations and venture firms.
FountainBlue's March 19 event was on the topic of Positioning Your Life Science Company for Outside Funding.
Last month, we had a conversation about corporate investments in life science companies, and stimulated thinking and discussion about how corporate entities are partnering with investors and entrepreneurs to support their corporate R&D strategies. This month, we will continue that conversation and talk about how to position your life science company for outside funding. Our conversation will feature entrepreneurs who have successfully received outside funding from investors, from corporations, etc., Our panelists will share their challenges, their successes and their advice on how to best position your company for outside funding.
Facilitator Geetha Rao
Panelist Brian Boyer, Perkins Coie LLP
Panelist John Cornwell, Sand Hill Angels, and Life Science Angels
Panelist Ken Martin, Onset Ventures
Panelist David Miller Founder, InnoSpine
Panelist Don Ross, Life Science Angels
During this session, we helped life science entrepreneurs to better understand how to partner with investors and corporate partners and to better manage and grow their life science concepts and organizations.
Below is advice for preparing your life science company for funding:
Ensure that there is a big market opportunity, more than 500 million, and have a clear understanding of the market, the competition, your unique value.
Focus on developing a fully integrated business plan, explaining the business and describing the team, as well as the product/technology. (Many entrepreneurs are so enamored of the technology, they don't explain the business opportunity when many funders look for the business and team information as much as the technology/IP.)
Build relationships with angels, VCs and other funders as they will be your advocate for funding, and also can coach you, make introductions for you.
Build relationships with others who could introduce you to funders - like start-up lawyers.
Network with people who can make the connections for you.
The angel funding process is similar to the VC funding process, only the due diligence is not as vigorous. The due diligence helps to address the risks investors may face with an investment. Minimizing those risks prior to seeking funding will increase the likelihood of a funding event.
Adopt the perspective of the funder - does it make sense to fund your company, and if so, why? What is the strength, potential, market opportunity for the company?
Select a funder you are willing to work closely with as it will be a very close relationship, and not always easy.
The founder must be prepared to give up leadership of the company as it approaches a later, more advance stage, which may require a different skill set.
Consider the exit early, as it forces strategic thinking and execution.
After a funding event:
An organization is forced to be more focused. The funded company will be held accountable to more people, who may not be as receptive to their ideas.
There may be more operational formality, particularly if there are regulatory requirements.
Funders may now have board members who are more likely to 'hold your feet to the fire'.
Management team may change.
Patent strategies may be more proactive.
Our Monday, February 20 Life Science Entrepreneurs' Forum was on the theme of Corporate Investments in Life Science Companies
Because of the government and other regulatory standards for life science products and services, whether they are pharmaceutical, bio-devices, bio-nano, etc., because of the experience, education and other personal characteristics of the entrepreneurs and executives within the industry, and other factors, the pace, culture, mind-set and expectations for decision-makers in the life science industry are much different than those in the high-tech sector.
However, with the convergence of bio, nano and information technologies, many high-tech corporations are branching into more life science solutions and investing in R&D efforts in the life science space. In addition, many larger life science and high tech are adopting an 'R&D-outsourced model', which helps them partner with VCs and early stage companies in support of their corporate R&D efforts. This month's meeting will feature speakers from both the high-tech and life science industries to investigate corporate R&D strategies and their implications for today's life science entrepreneurs.
Our facilitator was Geetha Rao, and our panelists were Simon Greenwood, Ph.D., Investment Manager, GenenFUND; Senior Manager, Business Development, Genentech, Inc.; Linda Greub, Business Development, Applied Biosystems and Eran Raber, Director, New Business and Venture Investments, Agilent Technologies. Additional information about the investment strategies for Agilent, Applied Biosystems and Genentech are provided below.
Below are comments and advice from our panelon how entrepreneurs can partner with corporate investors:
Corporate Investors are a vital part of the funding structure for life science companies.
They help cover the 'funding gap' between pre-clinical and later stage companies.
They partner with both entrepreneurs and VCs.
They invite innovative, entrepreneurial ideas which fit the strategic vision for their organization.
They offer many opportunities for partnership.
Advice for securing partnership with corporate investor:
From a corporation's perspective, research and development can be created organically (in house), through acquisitions, or through partnerships/collaborations. Decide whether to position your company for an acquisition or partnership/collaboration and plan accordingly.
If you're working on a partnership, consider all types of partnership opportunities (from in-licensing to joint ventures to M&A and equity investments) and be clear what you want from the partnership and clearly communicate that.
Understand how your company fits the overall corporate strategy and communicate that.
Larger companies generally realize that it's easier to be innovative in smaller companies with fewer enforced processes and systems. Even if a M&A event occurs, larger companies try to preserve that entrepreneurial culture where possible as it is in their best interest.
Corporations focus more on the best strategic investment rather than on price. (Strategy first, economics after.)
It takes time to finalize partnership agreements so plan accordingly. (It may take an average of 9 months to close a licensing agreement for example, as there is much diligence involved.)
Focus on the latest/hottest emerging technology trends
With the aging of the baby boomers, what opportunities will arise and how can entrepreneurs and corporations partner to address the needs of this huge market?
The Monday, November 20 Life Science Entrepreneurs' Forum was on the theme of "Building an A+ Life Science Team".
As life science entrepreneurs, we know the value of an experienced, results-oriented management team, but what can entrepreneurs do to attract the best and the brightest in early stage companies, when cash is tight? How can we retain, inspire and motivate your executive team and staff to work start-up hours and continually go the extra mile? How do you know what type of executive is best for which stage of your company, and how do you retain the right people at the right company stage, while maintaining relationships?
The facilitator is Roy Fiebiger, Managing Partner of Sanford Rose Associates-Silicon Valley, a Life Science Executive search firm. Prior to starting his executive search practice, Roy had served as a CEO and senior executive in several venture-backed medical device companies. Roy brings a unique combination of corporate experience, entrepreneurial wherewithal, vision, and dedication to address soft people issues and other business challenges. He has worked with many early and middle stage companies with their executive hiring process, and is eager to share his knowledge and advice on leadership, management and people issues with life science entrepreneurs. Roy has also assembled a panel to address the questions about and others from the VC, CEO, recruiter and legal perspectives.
- Tom Afzal, CEO of SpinalKinetics, who will share the life science CEO perspective
- Andrew Farquharson, currently with InCube and formerly with The Halo Fund, who will share the life science VC perspective
- Mike Hall, Partner Life Sciences Practice, Latham & Watkins, who will share the legal perspective
Below is a Summary of Notes and Advice for your reference, drawn on the wisdom of our facilitators and each of you as participants.
An effective management team is an essential ingredient for success
It is necessary both to have the visionary with the innovative ideas and the executive with the experience, connections and resourcefulness to execute and consitently deliver results.
There are different management needs for different stages of development
For early stage, resource-constrained start-ups, the founders must passionate communicate the start-up concept and get the right early founders to become engaged and grow the company. (A corollary to that is that if the right people aren't signing up for the company, perhaps the concept is not as exciting as the founder thinks!)
'Convenient Hires' - hiring friends, neighbors, family, may be detrimental to the long-term (and short-term) needs for the company, and may in the end strain these relationships, particularly when one party is laid off.
Planning on attracting and retaining an A+ management team will help ensure that it happens
Know what type of leadership area you need in what area by when, and create a strategic, milestone-related plan to get the right executives in place at the optimal time
Setting the goals, communicating the vision, attracting and retaining the right talent are all crucial requirements for putting the right management team in place
Creating and maintaining a positive, motivating and supportive culture will encourage your top talent to stay with the organization. It's not necessarily expensive to do that, and it's very worthwhile.
In order to hire the right people, you must be thorough and invest the time in the interview and screening process, including conducting behavioral interviews and doing full background checks.
Be careful with the current trend of hiring consultants rather than a full time staff.
There are a handful of requirements necessary to be considered an independent consultant rather than a staff member.
If most people in the organization is a consultant:
You must still have a 'buck-stops-here' decision maker to make pivotal decisions for the organization.
The business may not be as scalable.
It may not be as fundable by investors.
When you must lay off people on the team:
Be direct regarding your concerns and try to come up with a mutually agreeable arrangement to part company gracefully.
Document your communication - the measures taken to resolve any performance issues in case there is a legal dispute around wrongful termination.
It is more awkward for investors to part company with the senior executives for portfolio companies, but it can be done with respectful and direct communications, based on measurable, milestone-related performance/progress.
Our facilitators for the October 16, 2006 Life Science Entrepreneurs' Roundtable: Preparing Your Company for Outside Investors were Sergio Garcia with Fenwick & West LLP http://www.fenwick.com, Ken Macrae, and Geetha Rao with AuxoGlobal http://www.AuxoGlobal.com. Below is a Summary of Notes and Advice on Preparing Your Company for Outside Investors provided by the facilitators and the audience in general.
Know and Articulate Your Message and Strategy
Think through your business plan
What do you do for whom, value proposition over competition? Etc.,
What is your exit strategy and how will it affect the different threads of development?
Create documents which concisely and compellingly communicate what you do
Envision, describe the value of your organization; Present a picture of real success for your business in concrete terms
The importance of team
It's inadvisable to hire senior people who are friends too early in the company development. It can lead to unnecessary growth pains as you grow, cause barriers to growth, and damage a relationship
Hire experienced executives for your team, board, scientific advisory board, etc., Proven people will not only draw on their experience as they plan and execute, but will also have the connections to the right people to get the stakeholder support you need, be it in funding, in customer sales, in partnerships, in getting new board/team members, etc.,
Validate your business, your plan and your market
Validate your business with your plan - market size, product/IP, team, etc.,
Customer validations are important. Even if they are only non-paying beta users, from customers, you can get testimonials, feedback, data, suggestions for improvement, QA support, etc.,
Create an operational plan
Bridge the overall business plan and the operational plan -
What is the process and timeframe for getting from where you are to where you would like to be for: Team building, market penetration, patent/IP protection, board/leadership development, etc.,?
How will the individual strands be intertwined?
What are the implications for your funding, product delivery, team-building needs?
This will show investors how, when, why, where their money will be leveraged with what anticipated results
Why are investors charging a premium for investment in life science companies?
It generally takes a longer development time to reap benefits of an investment, due to longer development cycles, heavily and more rigidly enforced regulation, etc., (Average time to get a patent is about 14 years.)
There are fewer life science entrepreneurs as many of them have post-graduate degrees and deep experience in research (for example).
Other Topics Covered
Employment in Life Science Companies
This is a good time for experienced, credentialed entrepreneurs to seek positions in early-stage companies where they can make a big impact. Be passionate, stay the course.
Our facilitators for our first Life Science Entrepreneurs' Forum on September 18, 2006 were Michael Shuster from Fenwick & West and Melinda Richter from SJ Biocenter. Below are some comments and advice from Michael and Melinda and others in attendance at the event.
Advice on Bringing a Product to Market
Get Market Clarity: Know Your Target Market
Make sure you understand which slice of the market you'd like to target, who your competitors are targeting, what your edge is over those competitors, how you will attack that market, etc.,
Make sure you understand your target customer - it may not be the person you initially thought it would be
Be flexible
If your target market, customer, team, product, etc., changes, respond accordingly
When working with angels, VCs, etc., be flexible about your control of the company and the product and trust in their experience and wisdom, but use good judgement in selecting a funder who is compatible with your business and professional style. (Rarely do companies succeed with the entrepreneur's original product idea.)
Run a quality organization
IP, product, team, market, etc., are all important for the success of an organization.
Get quality legal and business advice (for example from Fenwick & West) to protect your IP and business interests. They can also offer introductions to the right investors.
Have your own vision and line up your partners who are in support of that vision. (This can help align supporters and investors.)
When seeking funding:
Consider all the funding options: High net-worth individuals, angels, angel funds, dedicated funds, foundations, banks, institutions. VCs are also an option, but they can be 'expensive and painful' money. (Contact Geetha or Michael whose organizations can help with this.)
When seeking funding, do not stop focusing on building the business. The funding itself is not the exit path.
When bringing a life science product to market:
Don't change the doctor's actions
Don't require changes in how reimbursements are processed.
