A better VC Model:
Given the low cost of biotech resources, lab space is cheap, the market is flooded with used - relatively new equipment, and their is a HUGE talent pool available at lower salaries due to economic turmoil.
What I would propose is VCs start a company with no specific technology in mind, putting the control in the hands of good experienced, trusted people in a well rounded complete team that compliments each other. Then let them go hunt the technology to exploit and develop. The technologists are brought in to be technologist and develop the technology - whether you are getting it from the universities or from other companies who have abandoned it partially developed, or were driven out of business by econonic reasons. But you do not let the technologists run the show, they are in love with the technology and can't conceive of it failing. But, you can't do this with only one technology, you need to bring in a bunch of it, over and over again, to get the economies of scale in the R&D. Don't forget to use a lot of outsourcing to universities and such to keep the inhouse overhead low. So, in the Biopharma version of this, you would acquire and simulaneously develop say 10-20 drugs at once. Really fill the pipeline. Like I said, this would take a huge amount of capital. But, the odds of getting some successful products out of this are very high. It is basically the classic VC model applied to drug development - you fund 10 companies figuring on 1 or 2 big winners funding the 8 or 9 losers and walking dead. Where it really works is that the technologists are not in control, so you can fail things early and cheap rather than beating the dead horses because - "it can't fail, we won't let it fail, we love this drug - I have dedicated my life to making this compound work - let's try this and that and never give up". Screw that, be brutal in what programs you keep versus kill - kill them early when they go south. You can't do that when the tech who loves it runs the show. They are entrepreneurs - by their very nature they are optimists, they cannot conceive of failure.
Now, you will say 10-20 drugs at once in a startup, wow that is really expensive. But, that is just what the VCs want. They just haven't realized how to do it yet. Their pools of cash are soooo big that they can't do little deals - they just simply don't have the time to be on that many board of directors at once, and they need to be on the board for fiduciary reasons. So they need things they can put a big slug of cash into. And, they don't want to add too many partners to the firms, that dilutes their earnings.
They also currently miss out on a lot of great technology that is being done by the technologists that are just too inept to become business people, put a plan and team together, and go out and raise capital by people who expect a professional business like showing - not some techie who can barely speak english or carry on a coherent conversation, but who can do wonders in the lab. Those technologies go languishing in the labs of the universities all over the world.
Now, some VC funds kind of touch on this by having Entrepreneurs in Residence to evaluate technologies and maybe put a company together, but they usually are still run by technologists - the EIR - who falls in love with the technology.
In reality, almost every successful biotech ever started had their first business model fail, and often the second and even the third. Usually slowly, painfully and inefficiently. They are everywhere. But, they kept slugging away, and ultimately found a model that worked.
What I propose is that you recognize that and do it from the start by starting the company without the technology with an A-Class team, and then figuring out what to do, rather than starting with the technology and trying to beat it into life even after it is clearly failing.
It is in essence what is constantly going on in the industry anyway, but nobody starts a company with the intent of that happening because the dogma is that the technology matters. It really doesn't it is the team that matters, and that team should not be run by the technologists who love the technology.
Next post will be on the new biotech incubator model.
Rocketman |
