Starting and Growing your Biomedical Business

Starting and Growing your Biomedical Business Jenny C. Servo, Ph.D. February 27, 2007 1 Outline     Different perspectives What is unique about biomedical businesses Challenges that all businesses face Selecting a strategy for growth that works for you © Dawnbreaker, 2007 2 Different Perspectives QuickTime™ and a TIFF (Uncompressed) decompressor are needed to see this pi cture. Opportunity QuickTime™ and a TIFF (Uncompressed) decompressor are needed to see this picture. © Dawnbreaker, 2007 3 Scientists perspective   View the SBIR project as a research project and does not focus on developing a company Issue - No infrastructure, no growth © Dawnbreaker, 2007 4 Unique challenges of biomedical start-ups      Complexity of subject matter Confuse public policy/service with market need Clinical trials FDA approval Voracious appetite for money © Dawnbreaker, 2007 5 Challenges shared with other advanced technology firms      Intellectual property protection Sizing emerging markets Sophistication required in understanding alternative forms of financing Ability to stay focused Ability of founder and organization to continually re-define itself. © Dawnbreaker, 2007 6 Selecting a Strategy for Growth 7 What is Commercialization? “The process of developing markets and producing and delivering products or services for sale (whether by the originating party or by others)….. commercialization includes both government and non-government markets.” – National Science Foundation SBIR Solicitation © Dawnbreaker, 2007 8 What is a commercialization strategy?  Not defined in solicitations…...but alluded to – “….your company’s strategy for converting your proposed SBIR research into a product or non-R&D service with widespread commercial use -- including private sector and/or military markets.” – DoD SBIR solicitation © Dawnbreaker, 2007 9 Commercialization Strategy  The series of financing options that a company entertains to move its technology from concept to the marketplace Milestone Concept development Business case analysis Prototype development Intellectual property protection Beta testing U/L approval Test market introduction Marketing Scale-up of Production How Funded? Phase I SBIR G&A Phase II SBIR Retained earnings Corporate partner Retained earnings Equity investment ??? ??? © Dawnbreaker, 2007 10 Roadmap to Financing Options Founders Sweat equity Science for Hire Debt Equity Profit On Spec Federal Corporations Family, friends Personal credit banks Fed,State loans Business angels Venture Capital Corporations Investment banker Licensing Partnerships IP sale Referral network Accountants Attorneys Successful entrepreneurs, etc © Dawnbreaker, 2007 11 All require a Return on Investment! MILESTONE SOURCE OF $ Retained earnings •Venture capital & Corporate partner •Corporate partner ROI? All must benefit financially, commensurate with risk and their expectations © Dawnbreaker, 2007 12 Strategy selection process • • • Iterative ….. build and test Articulate at the outset and Revisit • • • as you collect additional market data as you develop the business case during negotiations with partner/investor © Dawnbreaker, 2007 13 Factors which effect your commercialization strategy • • • • • • • Mission Vision Business philosophy Your current situation Customer requirements of supplier Window of opportunity Competitors © Dawnbreaker, 2007 14 Mission • • • • Business functions Products and technologies Markets served Sustainable competitive advantage © Dawnbreaker, 2007 15 Sample Mission Statement “Soarrell Medical Systems develops, produces, markets, and supports proprietary, patient-oriented software, biometric smart cards and readers which interface with computerized patient record (CPR) systems. We offer outstanding customer support and share the financial risk with medical practitioners. We are dedicated to making it easier for physicians in private practice to spend more time providing quality care.” © Dawnbreaker, 2007 16 Elements of Vision • 5-years out • • • • Financial goals - revenue goals, profit margin goals Market goals - customers served, market niche, geographic region, market share Products and services Image- How will you be perceived by customers, competitors, employees, community © Dawnbreaker, 2007 17 Typology of Visions Life-Style Foundation High Potential Revenue $2 million $10 – 30 million $20 – 30 million Employees 30-40 40-400 500+ Purpose Support owners Start new industry Growth & value Public Private Private Go public © Dawnbreaker, 2007 18 Business Philosophy • • • • I don’t want to give to control I want to try it all I want to enjoy myself I don’t care who gets rich © Dawnbreaker, 2007 19 Current situation • • • • • • Financial health Sustainable competitive advantage Stage of product/technology development Management Market readiness Risk: technology,market, management © Dawnbreaker, 2007 20 Competitors • Positioning to • • • Take advantage of a window of opportunity Broaden a customer base Expand services © Dawnbreaker, 2007 21 Customer requirements of suppliers       Financial stability Platform interface issues Quality - GMP, ISO, CE certified Continuous improvements Quantities and delivery schedules Customer support © Dawnbreaker, 2007 22 Sample strategy - Licensing • • • Vision: Life-style company Philosophy: Do what I enjoy Financing methods Milestone Start-up Concept development Intellectual property Application development Production Funding Method Sweat equity SBIR Retained earnings Licensee Licensee © Dawnbreaker, 2007 23 Strategy - Strategic alliance • • • Vision: Foundation company (R&D and manufacturing) Philosophy: Conservative Financing methods Start-up Concept development Intellectual property Prototype development Production scale up Marketing/sales Sweat equity SBIR Retained earnings SBIR Equity investor, converted to debt Strategic alliance © Dawnbreaker, 2007 24 Strategy - Equity Investment in Parent Company • • • Vision: High potential venture Philosophy: Rich is good Financing options Concept development Prototype development Production introduction Market penetration Sweat equity Science for hire Private placement Debt financing from equity investors © Dawnbreaker, 2007 25 Sample Strategy - IPO • • • Vision: High potential venture Philosophy: I want to try it all Financing options Concept development Prototype development Market test Market introduction Federal funding Seed financing from angels Retained earnings Equity - Fortune 500 company Scale-up New facility Expansion Market penetration Second round financing from VC Private placement Line of credit, profits IPO © Dawnbreaker, 2007 26 Combination of strategies Life-style firm Parent company Spin-off High potential venture © Dawnbreaker, 2007 27 Financing Options as a Function of Application & Resources Required •Spin-off •Joint venture •Equity investment •Joint R&D •Licensing •Strategic alliance •Equity investment •Partnerships •Licensing •Angel investment A little Few Many A lot $ REQUIRED •Bootstrap •Angel investment •Debt financing APPLICATIONS © Dawnbreaker, 2007 28 Share your Vision     Communicate Redefine your role and that of others Focus on infrastructure Embrace the new © Dawnbreaker, 2007 29 Organizational Challenges    Delegate Soul searching Re-definition © Dawnbreaker, 2007 30