Biotech Entrepreneurship — an Investor’s Perspective
In a post-webinar discussion, Dr William Janeway shed light on what sets biotech enterprises apart from those in other sectors and highlighted current market trends.
As a private equity giant who played a fundamental role in the birth of a “boringly successful” biotech company, Life Technologies, Dr William Janeway can certainly teach aspiring biotech entrepreneurs and investors a thing or two. Uncertain times such as the novel coronavirus pandemic may be daunting but also create unprecedented opportunities for the commercial success of new business ventures. Notably, in the life sciences sector, the COVID-19 pandemic is acting as a catalyst for innovation in antiviral vaccine development and many companies promise to break historical precedent developing the sought-after vaccine in months rather than years.
Why are investors now drawn to the biotech industry in the first place?
Unlike a fancy technological solution that we can survive without, the existence of medicines and medical devices is a matter of life and death in a literal sense of the expression. This makes the demand for those novel solutions inelastic — where the demand does not falter regardless of how expensive the product is for the lack of alternatives. As an entrepreneur, if you succeed in producing an effective solution for an unmet need, then the market risk is virtually zero. A ground-breaking idea and scientific expertise may not be enough for an entrepreneur to get investment — any biotech founder should demonstrate an understanding of the target market and the ecosystem where their product will be deployed.
What would success look like to an entrepreneur or an investor?
Dr Janeway’s advice is to follow the money. A founder must have a vision and drive to make it a reality, but this mentality of a dreamer may come at a cost. An entrepreneurial leader is bound to overstate the likelihood of their success but “all entrepreneurs lie”, and it is the ones who don’t know they are lying that gets you [as an investor] in most trouble”. The cash flow sheet wouldn’t lie, and if it does not match the predictions, this is a red flag to both the entrepreneurs and investors.
Where do you find the capital for your biotech start-up?
The life sciences ecosystem has now spread beyond the US and Europe, and biotech entrepreneurship in emerging markets is supported by national and capitalist funding. Alongside the rise of life science enterprises, venture capital has gone global as the internet facilitates communication and networking on an international scale. These days a start-up from Cambridge, UK may find local angel investors, complete a seed round in Berlin, Germany and series A funding by a leading biotech investor in the US. The VC culture is slowly fading into the past, taken over by corporate investing but accepting funds from a corporate investor may limit start-up options going forward due to hidden incentives.
In a nutshell, if you are thinking to start a biotech venture, remember this — make sure that the science works, know how to get your product to and over the finish line, choose the investors that will help you succeed and not pull you down.
