Monthly Archives: April 2013

Crowdfunding and the Other Life Sciences Market

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By:  Andrew Johnson, Ph.D.

Hand holding small coin bucket

Life Sciences Research Tools and Services companies may be a better fit for the small investor than the diagnostic or therapeutic companies with compelling returns, lower risk and shorter times to profitability.

The JOBS Act (Jumpstart Our Business Startups) may transform the way that startups in the Life Sciences are funded (at least initially) as crowdfunding fills the gap that was held by more traditional Angel and Venture investors.  There is a lot of controversy surrounding this issue with a lot of discussion on whether or not this is going to work.  Luke Timmerman wrote a very interesting post for XConomy  (Crowdfunding Is Coming to Biotech, so Get Ready for a Wild Ride) where he very clearly describes the potential opportunities and challenges that both companies that receive funding and investors who provide it will face when the crowdfunding part of the act is signed into law.  A few of these concerns surround the riskiness that regulatory approvals introduce for diagnostic and therapeutic offerings.  The large amount of money and long times required before a given product is permitted to being sold may not be ideal for investors who do not have a good understanding of this industry.

The Other Life Sciences Market
The research tools and services market may prove to be a better fit for crowdfunding investors.  Unlike the diagnostic and therapeutic Biotechs, companies that are commercializing new instruments, reagent kits, software and services do not require FDA approvals to begin to market and sell their products.  Therefore, the amount of capital required is an order of magnitude less and the risk is lower as well.  Companies in this market would likely have a risk profile that is a much better fit for crowdfunding investors.  With a  global market size estimate for the Life Science Tools and Services sector alone estimated to be ~$ 37 Billion in 2011 with a CAGR or 9% projected until  2016 this sector of the Life Sciences deserves a second look.*

*Note:  Market size and growth rates calculated using the statistics found in the following market reports.

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Test

Startups: Strategy or Innovation? Three Views

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By:  Michael Kaiser

eyeglasses on an eyechart

Having a clear vision and mission for your startup is not enough. Entrepreneurs with an actionable strategy have the best chance of leading their company to success!

Rather than “reinventing the wheel” I chose the
following three options to the question.

VIEW # 1

In a recent article by Ken Favaro, a Senior Partner at Booz and Company, (How Leaders Mistake Execution for Strategy (and Why That Damages Both)) explains that:

“When discussing strategy, executives often invoke some version of a vision, a mission, a purpose, a plan, or a set of goals. I call these “the corporate five” (see exhibit, below). Each is important in driving execution, no doubt, but none should be mistaken for a strategy. The corporate five may help bring your strategy to life, but they do not give you a strategy to begin with.

Before they get to the corporate five, companies need to address five much more fundamental, and difficult, questions. Let’s call them the “the strategic five:

1. What business or businesses should you be in?
2. How do you add value to your businesses?
3. Who are the target customers for your businesses?
4. What are your value propositions to those target customers?
5. What capabilities are essential to adding value to your businesses and differentiating their value propositions?”

Corporate5

Favaro reaches the following conclusion to the above:

“They can’t answer those questions because often they haven’t asked them in a very long time, if at all. Instead, the corporate five have become a mask for strategy. When that happens, the real substance of strategy—making deliberate and decisive choices about where to play and the way to play—is lost. There is no foundation for decision making and resource allocation. Everything becomes important. Indiscriminate cost-cutting and growth become the order of the day and, sooner or later, with no strategy as a guide, a business drifts”

VIEW # 2

By contrast,here is a recent article by Tania Prive in the Forbes Magazine issue of March 29, 2013 with the title “Top 11 reasons startups succeed”. Here are her titles for those 11 reasons

“1) Vision- 2) Speed -3) Budget Masters – 4) Social Skills – 5) Discipline – 6) Determination -7) Ability to adapt to Change – 8) Fundraising Skills – 9) Unwavering belief – 10) Master of time management -11) Execution”

At the end of the article we read that “…successful startups are always looking for opportunities to do something better by thinking outside the box and constantly questioning the status quo”

Both authors make a good case: Favaro, with a more analytical emphasis on established companies and Prive from fundraising and personal abilities needed in order to lead to a successful outcome. This is not a contest between two authors, but rather a choice that is left to the reader to determine if a startup is purely based on innovation, and thus, why and when should it dovetail with strategic concepts that fit more established companies.

VIEW #3

The answer and/or solution to such a conundrum may be found in an article authored by Uzi Shmilovici in Techcrunch (‘Strategy For Startups: The Innovator’s Dilemma’). Here are some excerpts:

“Strategy. Unfortunately, it suffers from a bad reputation among startups. It is associated with consultants who are paid millions of dollars only to come back with a two-by-two matrix of animals. Not that there is anything wrong with it. Some of my best friends are consultants.

However, strategy is crucial for startup success. Startups usually operate in an environment of constrained resources while competing with strong incumbents. Hence, the right strategy can be a matter of life and death…

The first concept we’ll look at is the “Innovator’s dilemma”, a term coined by Clayton Christensen from the HarvardBusinessSchool. The innovator’s dilemma discusses a situation in which there are established incumbents in a specific market who are investing in sustainable innovations — these are incremental improvements to an existing product. Usually, they are doing that to support the incremental needs of their customers

They are then faced with a new entrant to the market that introduces a disruptive innovation. The new entrant attacks only a small part of the incumbents’ business, usually the one in which the margins are very low. At this point, the incumbent decides not to compete in this business anymore because they don’t want to invest in defending their least profitable business and/or are afraid of cannibalizing their main business. As a result, the new entrant is then able to capture a significant market share in that specific segment… it is important to understand the types of disruptive innovation that exist. There are four: a new product, a new technology to produce a product, a new way to distribute a product and a new way to provide services. The entrant can introduce a disruptive innovation along one or more of these dimensions.”

And last but not least:
What do you, the reader/analyst of the above views, believe to be the one that more closely reflects your opinion?

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The Power of Story: 3 Key Steps to Connecting Your Vision with Commercial Success

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By:  Andrew Johnson, Ph.D.

open book with watch on it

Take the time to craft the ‘story’ of how your offering will impact your customers to provide a focus and direction to your commercialization efforts

There are a million things to do to get your new ideas and discoveries into a finished product that will delight your customers.  This can be a very overwhelming experience as you are not only trying to determine what your product will be like when you launch but also how to talk about it to your investors, your prospects, partners and your team.  One unifying principal that can help here is to use the power of story to guide you through this process.  Think of the story you would like people to tell about your company and its product(s) years after its success.  When you take the time to do this, the path to success will seem a bit less treacherous.

Easier said than done
The key here is to focus on the interests of your target audience and realize that the narrative will be different for each of your stakeholders.  This is kind of like trying to come up with a story that will appeal to both children and adults (perhaps using a comic book version for kids and a novel for adults).  However, as challenging as this might seem to be, the process that you will follow to create the story of your company will ultimately provide you with the insights and focus you will need to move your company forward.

Step 1:  Start with Your Future Customers
Your new product will provide some new outcomes for your future customers.  This could be a new diagnostic test to guide medical treatment, a new tool or kit that will allow researches access to new information or perhaps even a significantly improved version of an existing product or service.  In each case, you need to find out how badly your customers would wish to overcome a particular issue and ultimately if they can envision your solution to it to be compelling.  From this effort you will know what your product or service needs to do for your customers (not just what it can do but what it must do).  This is the most critical story to get right.  You will be basically retelling this story of how your product or service impacts customers to your other stakeholders in the following steps.

Step 2:  Delight your Board and Investors
Use the insights that you gained from the previous step to build enthusiasm on your Board of Directors.  Being able to share testimonials from future customers, and statistics like, “90 percent of the people we targeted in our initial outreach said that they would pay $$$ today for our offering to fulfill this critical unmet need.”  Testimonials like this go a lot further than statistics from market reports that have been shoehorned to fit your business case with these stakeholders.  Remember your ‘audience’ prefers non-fiction over fiction here.

Step 3: Putting It All Together with Your Team
The feedback from your future customers in Step 1 will become the minimal set of performance and pricing characteristics for your first product(s).    Your development team can use this to produce the first prototype for alpha evaluations.  Your commercial team will have key insight into what will be a compelling value proposition to use to reach and win new customers.  If your board and investors liked your ‘story’ so far, they will have validated it with their approval and perhaps even some additional funding.

In Summary:

  • As early as possible, find out who will buy your products and for how much and why (what impact will your offering have on your customers).  – The Customer Needs and Solution Story.
  • Use real prospective customer feedback to further convince your stakeholders (Board of Directors and investors) to support your team.  – The Rags to Riches Story –non-fiction version
  • Provide your team with real outside feedback to guide your development efforts towards making the right product for the right customer at the right price at the right time.  – The Life Science Idea to Successful Biotechnology Company Story

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Three Tips to Insuring That Your First Sales Are Not Your Last

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3d line chart

Upward sales momentum is rarely smooth, especially in the early days. Use insights from your first customers to win the larger number of pragmatic customers that dominate your market.

By:  Andrew Johnson, Ph.D.

Growing sales from your initial product launch requires a special approach with disruptive technology in the Life Sciences.   In a typical Life Science or biotech startup, your very first sales will likely come from some (hopefully most) of your beta evaluators.  Often, you will have a slew of sales at the beginning followed by a very frustrating period of time where every new sale takes a huge amount of time and effort to win.  Some have called this the ‘Valley of Death’ since it looks like your sales momentum has fallen off while you are burning through your capital reserves.

What’s going on?
Geoffrey Moore discusses this situation perfectly in his book “Crossing the Chasm: Marketing and Selling Disruptive Products to Mainstream Customers” (This book has become a classic and is a valuable source of insight to any entrepreneur with new technologically advanced products).  The premise here is that most if not all of your first customers are ‘Early Adopters’ but the market that you really want to reach and where the success and failure of your company hang in the balance is with ‘Mainstream Customers”.  There are never enough Early Adopter customers to be an attractive market.  However, these customers are valuable since they will help you to figure out how to reach the bigger market later on of the pragmatic ‘Mainstream Customer’.

Know thy customer
Knowing the difference between the characteristics of an ‘Early Adopter ‘ from  a ‘Mainstream Customer’ holds the key for getting across Moore’s ‘Chasm’ or the ‘Valley of Death.’  Here is how he defines both customer types:

“Early Adopters … buy into new product concepts very early in their life cycle … they are people who find it easy to imagine, understand and appreciate the benefits of a new technology, and can relate these potential benefits to their concerns … [They] do not rely on well-established references in making … buying decisions, preferring instead to rely on their own intuition and vision…”1

“[Mainstream Customers] … are driven by a strong sense of practicality.  They know that many of these newfangled inventions end up as passing fads, so they are content to wait and see how other people are making out before they buy in themselves.  They want to see well-established references before investing substantially.”1

Tips for winning ‘Mainstream Customers’
The following tips have been field tested and shown to work.  They are based in part on the insights gained from knowing the difference on what it takes to appeal to your first customers and what is compelling to all the rest.

      • Build early credibility using Key Opinion Leaders (KOL’s). – Learn who these people are from your first customers (you might think that you know who they are already, just validate this with these customers first).  Engage with these Key Opinion Leaders through collaborations, sponsorships and other ways (see  blog post ‘The Key to Key Opinion Leaders’ ) and get their endorsements and testimonials.
    • Get published – There is no better way to validate the impact of your new product though publication.  Work with your beta-evaluators and early customers to help them to publish.  Academic journal publications are most desirable but look to get poster presentations, articles in trade publications (printed and electronic) as well.  As good as the papers that your own scientists are publishing, the ones by outside investigators will hold the most value for the ‘mainstream customer’.
    • Stay visible while building credibility – Start a blog where you r scientists can showcase their mastery of this field of study and how your products are impacting your customers. (Be sure to keep your blog posts free of anything that looks and feels like an advertisement, keep this about the science)Where possible, see if you can get early customers and Key Opinion Leaders to be guest bloggers for you by submitting a post or two.

Reference: 

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Entrepreneurs: Their Inspiration, Challenges and Opportunities

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By: Michael Kaiser

Entrepreneurs face an arduous climb as they build their business but the view from the top is worth it!

Entrepreneurs face an arduous climb as they build their business but the view from the top is worth it!

From the point of view of our economy’s present and future direction, we can predict that management and executive jobs that lasted or last for more than five years will experience a sea-change in the financial history of our country, to be replaced by interim executives and entrepreneurs. For the purpose of this blog I will cite The Random House Dictionary of the English Language Definition of who is an entrepreneur: “A person who organizes and manages any enterprise, esp. a business, usually with considerable initiative and risk.”

I will propose another definition of what an entrepreneur is: He/She are the creative parents of a startup company. In the case of high-technology products and services, those parents have become the innovation and R&D sources of the New Economy.

By the aforementioned dictionary definition, entrepreneurs are driven by deep personal convictions, the main one being the vision of a unique opportunity to be successful in their career choice, as well as financially so. They are also driven by the challenge of their essential need to work after the collapse of job opportunities stemming from an economic recession.

In the search for a better understanding of the entrepreneurial ethos, I came across many useful and diverse points of view, some of which are listed for further reading in the Other References section. Kelly Spors, a staff writer for the Wall Street, in a 2009 edition of the WSJ (notice the start of the Great Recession), asks prospective entrepreneurs ten interrogative and advisory key questions in “So, You Want to Be an Entrepreneur”:

1. Are you willing and able to bear great financial risk?

2. Are you willing to sacrifice your life style for potentially many years?

3. Is your significant other on board?

4. Do you like all aspects of running a business?

5. Are you comfortable making decisions on the fly with no playbook?

6. What’s your track record of executing your ideas?

7. How persuasive and well-spoken are you?

8. Do you have a concept you are passionate about?

9. Are you a self-starter?

10. Do you have a business partner?

For her full article and the content of those questions, click on:  So, You Want to Be an Entrepreneur

For those who took or are ready to take the entrepreneurial plunge, Mike Michalowicz in his American Express’ Open Forum article “The 7 Most Common Money Mistakes That Entrepreneurs Make”, warns them in this order:

1. Overhead investments

2. Underestimating miscellaneous expenses

3. Not testing before investing

4. Purchasing extravagance

5. Tax avoidance

6. Spending on do-it-yourself projects

7. Hiring before you can afford it 

To read the full article, click on: The 7 Most Common Money Mistakes That Entrepreneurs Make

Finally, the following is an abridged version of a recent article by Bill J. Bonnstetter, which addresses the skills and performance of entrepreneurs from a useful statistical point of view:

“After assessing the subjects on their personal skills and comparing their performance against a control group, we found a certain set of skills were the most predictive of an entrepreneurial mindset. In fact, by examining these five distinct personal skills alone, we were able to predict with over 90 percent accuracy people who would become serial entrepreneurs.  HBR ChartThe quality serial entrepreneurs displayed above others were persuasion, or the ability to convince others to change the way they think, believe or behave. Persuasion for this study was defined as the ability to persuade others to join the mission. In the study, this was uncovered by ranking on a scale of 1 to 6 prompts such as: “I have been recognized for my ability to get others to say yes,” or “I have a reputation for delivering powerful presentations.” Unquestionably entrepreneurs need to excel at persuasion, whether to recruit a team or get buy-in from investors and stakeholders.”

To read the full article, click on:  New Research: The Skills That Make an Entrepreneur

Further Reading:

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