New models of biotech entrepreneurship

Thursday night, the Oxbridge Biotech Roundtable concluded its 2014 Onestart Americas $150k business plan competition. Several dozen contestants, mentors, and one LA-area biotech entrepreneurship professor travelled to the City Club in downtown San Francisco to hear the 10 finalists offer elevator pitches, and then see the money awarded to one of the teams.

Following the initial (2013) competition in London, the American competition began with December's submission of pre-proposals by 150 teams. 35 of these teams (including one led by current KGI MBS students) travelled to a February bootcamp at Stanford for additional training and mentoring, before the 10 finalists were announced in April. One of the 10 finalists, Excell Biosciences, was cofounded by a KGI alumnus.

As in the two previous Onestart Europe competitions, the contestants were required to be aged 35 or younger. As in Europe, the US competition was co-sponsored by SR One, the corporate investing arm of GlaxoSmithKline.

The 10 US finalists reflected an interesting mix of geographies and industry segments. From the leading U.S. biotech clusters, only three teams were from the Bay Area, one from Boston and none from San Diego. The competition also included two teams from Toronto, one from Vancouver and one each from Los Angeles, Denver and New York.

The mix of products was broadly representative of life science startup companies

• 3 therapeutics
• 3 devices
• 1 diagnostic
• 1 healthcare IT (consumer app)
• 2 process innovations, for manufacturing and for drug delivery

Most of the startups were in some phase of bootstrap funding, and the judges commiserated with the particular difficulty that therapeutic companies face in raising the tens (or hundreds) of millions necessary to come to market.

Have judged, organized and mentored business plan competitions for years, I was struck by several aspects of the OBR finalists compare to typical (college-based) business plan competitions.

• Of course, a lll of the plans were about technology. That’s true for our KGI competition but not for the typical b-school competition.
• Second was the depth of the entrepreneurs’ understanding of their technology. Again, at many (not all) b-school competitions, the entrepreneurs are smart individuals who BS their way through a partly thought out concept. On Thursday, the winning entry — Resilience Pharmaceuticals— reflected six years of work, including the 2013 MIT PhD dissertation by cofounder Retsina Meyer.
• The judges remarked on the depth of the teams (and that, like VCs, ultimately they had to bet on the teams as much as the ideas). The audience only saw one team member make a presentation, but some teams had five or more official members listed in the program. At least four teams were headed by polished PhDs. Apparently the winning team has attracted Boston veterans to join their team, beyond the founders.
• Finally, some firms had won equity investment prior to the finals. The winner has attracted a commitment from Third Rock Ventures, a leading biotech VC.

Representing SR One, partner Matthew Foy said that the $150K prize “is not the point of Onestart — it was just the carrot to get people’s attention”. They seem to have succeeded in doing so. Overall, in its second year (and third competition), the Onestart sponsors seem to have moved closer to their goal of creating actual entrepreneurs and startups.

It will take a few months to see how many of these 10 companies will actually launch and — more importantly — how many can succeed in bringing a product to market. Still, in terms of the structure of the program (and the nature of the competitors), the sponsors seem to have already done better than all but a handful of school-based competitions.

Some tech startups are more high-tech than others

In the business press, academic teaching and research, there’s often a discussion of the unique characteristics of “tech startups”, “technology entrepreneurship” and “technology-based firms.” Such startups are the focus of this blog.

Often the distinction between high- and low-tech startups is measured by the proportion of technical employees — such as fraction of R&D employees or fraction of R&D spending (i.e. R&D intensity).

Still, tech startups are not homogeneous. Some of the distinctions that have been draw are science- vs. engineering-based startups, or industry-specific startups like IT, cleantech, or biotech.

This week I attended two business plan competitions here in Claremont: Wednesday’s business plan competition at the Keck Graduate Institute (which I organized) and today’s Kravis Competition across all the Claremont Colleges.

Judges at KGI 2013 Business Plan Competition: George Golumbeski, Stephen Eck, Bob Curry. Not shown: Liam Ratcliffe, Paul Grand

Our KGI business plans (from my ALS 458 class) were all about commercializing patented (or patent-pending) biomedical technologies (therapies, diagnostics, devices) developed by top research institutions such as Caltech, City of Hope, and USC. The Kravis competition included several IT concepts, some low tech businesses, and AccuMab, a cancer diagnostic company from my KGI class.

In comparing the KGI plans to the other Claremont projects — or those in our textbook — it seems to me that — at least from a financial standpoint — there are three types of companies: high tech, medium tech and no tech.

What is dramatically different about our students projects was that (with one exception) is that they’re highly capital intensive, requiring $5 to $50 million in outside funding. For example, the winning team — using technology from Children’s Hospital Los Angeles to repair Shortened Bowel Syndrome — estimated it needs $20 million in equity and $5 million in government grants to get to market. This project — like many others — is building on millions of dollars of NIH/NSF/foundation grants already received to develop the basic science. There is a certain minimum scale required to get FDA approval and thus generate first revenues.

2013 winning KGI team — Hadi Mirmalek-Sani, Porus Shah, Shrina Shah, Rajesh Pareta —
with Bob Curry, chair, KGI Board of Trustees

Think about the story of Mark Zuckerberg, who launched The Facebook in early 2004 and took its first outside investment (of $500k) later that year. (Yes, they didn’t monetize initially, but still they created a compelling product and reached a million subscribers using the founders’ money). The iPhone app startups were launched for tens of thousands of dollars: Rovio had 40 million Angry Birds users before they took their 2011 Series A investment.

Over the years, entrepreneurship researchers (and practitioners) have demonstrated that any new company or product has highest uncertainty and risk up until first customer sale. So from a practical standpoint, I suggest a new metric: how much R&D spending do you need before launching a product? How big a bet — with what scale of outside investment — does it take until the entrepreneur finds out whether (s)he has a viable business?

By this measure, the difference is not the % of the money that goes to R&D but the size of the R&D bet that’s needed to test the marketing hypothesis.

A company that takes 5+ years and $50+ million is fundamentally different from one that can ship a 1.0 (or revenue-generating beta) for less than $1 million. By that standard, after biotech the biggest bets required are for renewable energy. You can start dozens (or hundreds) of software companies for one fully mature biotech, biofuels or solar company.

Tech startups: cross-functional people or cross-functional teams?

Today was the culmination of the business plan class (ALS 458) here at KGI, with the final presentations by 6 teams — some of whom will be going on to formal business plan competitions elsewhere. So it was the day of the year that the students, and invited guests most celebrate (and ponder) the nature of tech startups.

Our students are unusual in having both science and business training: they come with a science (or engineering) degree, they take science classes, and they take business classes. So in effect, they are cross-functional individuals, with a little bit of knowledge about a lot of things in their heads. Similarly, a company like HP used to pick their marketing staff from among engineers who later got an MBA.

This is also how schools like Stanford and Berkeley set up a mini-business school (or “engineering management” program) within their engineering school. And it’s also why MIT recently set up its Engineering Leadership Program for undergraduates.

On the other hand, a number of schools run business plan classes and programs by assuming individual specialization and deliberately mixing the various specialists. The NSF-funded Georgia Tech Tiger program is perhaps the best known such program among those of us who teach tech entrepreneurship. To some degree, this reflects the supply limitations — you can’t get enough cross-functional people so you merge silo’d programs (with silo’d students) onto a temporary cross-functional team.

Obviously any good tech idea needs to be brought to market through a combination of technology, marketing, finance and manufacturing (or other operations) skills. How do you build such a team in a real startup? And who should be in charge?

I’m an engineer who went into B2B sales and marketing, so it’s easy to guess where my sympathies lie. And at a recent MIT club event on the “Gordon-MIT Engineering Leadership Program,” I heard veteran tech CEOs talk about how it takes a technical person to lead a tech startup.

Still, there are many counter-examples. For every Larry Page, there’s at least one (maybe more) Jerry Yangs.

Steve Jobs offers another model. Sure he was a great marketer — one of the best of the 20th century — and a great CEO. However, if you look at the recent Jobs biography, it was clear that his mechanic father and his childhood electronics experiments gave him an intuition about engineering design that many practicing engineers lack. (Alas, as the original Mac 128 death march demonstrated, he also had completely unrealistic expectations about how long things should take.)

So how do you form a cross-functional team to make the next great tech startup? And how do you allocate decision rights and authority among them? How does this change over the life of the firm, the industry and the technology? And what do you do with your hybrid business-engineers (or business-scientists)? They’re not going to be CTOs or CSOs (are they?), but do you put them as VP of R&D, or division managers, or CEO?

These are all interesting questions. Perhaps someone will research these answers.

Biz plan contests: more are better?

The LA Times this morning ran a story on the business plan competition at the USC Greif Center for Entrepreneurship. On the front page of the business section (which today is not its own section) and with an obligatory picture of the latest winner, on one level the story was a fairly conventional reporter’s response to a college press release.

However, what caught my eye is that USC is not content to have one business plan competition, but seems to have four: the (original?) Greif competition, a New Media competition (“Crunch”?) at the Annenberg School of Communication, a newer New Media competition planned for the business school, and then a competition at the Viterbi engineering school

I know at SJSU, we’ve tried to make our business plan competition be an all-campus event, and that seems to be the philosophy at Stanford and MIT too.

There are occasional exceptions. When I was researching tech entrepreneurship programs at the top 25 business and engineering schools in the US, I noticed that Purdue has a separate Life Sciences Business Plan Competition.

There are pros and cons of each approach: The bigger all-campus competitions should be able to offer bigger prizes: MIT now offers $100k to its top winner, as well as more visibility. The smaller contests are probably going to be capped at around $10k top prize money (the three winners at Greif were awarded $12,500 each.)

On the other hand, the more focused competitions will be easier to judge, because the competitors are more homogeneous and it’s easier to get judges who can span this narrower domain. The size of the competition is kept more manageable. And perhaps more importantly, I think the organizers and judges can provide better feedback to the contestants.

The LA Times article notes — as any contestant or organizer would tell you — that the value of competing goes beyond the money to include the practice, the feedback and the connections made. My hunch is that where a campus can support multiple, college-specific competitions, the students will learn more and get a better career boost than the all-campus Inventapalooza that would otherwise ensue.

Cleantech Venture Challenge

Cross posted to Cleantech Business

The University of Colorado at Boulder is preparing to host its 4th annual Cleantech Venture Challenge, an international business plan competition for new ventures that somehow address a “sustainability” need. The business plan competition is sponsored by the Deming Center for Entrepreneurship at the Colorado’s Leeds School of Business.

The competition uses a three-stage process. An intent to compete must be filed by Nov. 21, followed by a complete business plan on January 30, 2009. The eight semifinalists will come to Denver March 17-19 for the final rounds and the ultimate selection. The National Renewable Energy Lab (in nearby Golden, CO) will also invite the top renewable energy project to present at NREL.

The top prize is $25,000. The finals will also coincide with a sustainable business summit to be held at the Denver convention center, part of the state’s efforts to position itself in the cleantech business.

SJSU's prize-winning tech startups

Today we had the finals of the 6th annual Silicon Valley Business Plan Competition here at San José State. I was one of the judges that winnowed down the 69 entries to 17 semifinalists and then 8 finalists.

The first prize ($10k) was won by a low-tech business plan by a student from our undergraduate honors business program, but the second ($5k) and third ($1k) prizes went to high-tech plans from SJSU alumni:

• nMotion plans to make a market in high-tech ads (since they don’t have a website, for now I won’t say more)
• BayCom has developed a new text message-based reader response system it calls Dial-Send-Read.

Our four industry judges were excited by the plans, as each year we have worked to bring technology-based startup plans from other colleges across campus.

We historically have had a dilemma that I think many campuses face with their business plans. Business students can come up with well-executed plans for run-of-the-mill businesses (like restaurants), while engineering (or here, industrial design) students have great technology but a hard time making a business out of it.

As I saw at the Georgia Tech conference, the key to good technology entrepreneurship education (like real startups) is cross-disciplinary cooperation. Technology management faculty are re-inventing this wheel across the country every year.

While such cooperation is a common issue for all tech entrepreneurship, like other CSU schools we have a slightly different problem than Harvard or Georgia Tech. We’re primarily an undergraduate program: 75% of our 32,000 students are undergraduates. My sense is the matching process is a little tougher with undergraduates than graduates — perhaps because the graduates will have already experience some cooperation in the workplace.

TI:GER and the other programs are going for formal, structured cooperation as part of a curriculum. So far, we’ve gone for informal cooperation — matchmaking business students with students who have a good technology. I’d be curious to hear how others have done such informal (or at least extracurricular) cross-functional cooperation.

BPC: beyond the university

I’m attending a workshop on technology commercialization programs at the Georgia Tech Ti:GER program, funded by the Kauffman foundation.

One of the speakers, from the Arizona’s McGuire Center for Entrepreneurship, mentioned one of their successful startup teams, LenSense. The company has a technology for camera phone zoom lenses that they hope to someday have embedded in 25% of the world’s phones.

What caught my eye was not that they were a mobile phone technology (an area of great personal interest) nor that they met with local angels (apparently as part of the annual business plan competition).


What was interesting was that the team entered a real (i.e. non-university) business competition — and ended up finishing in the top 12 (the only school team to do so). The competition, Mobile Rules! funded by Nokia, awarded a series of prizes in March.

Unfortunately, they didn’t finish high enough to get publicity out of Nokia, and it’s not clear what they won other than the experience. But it seems this is something that all technology entrepreneurship programs should consider — seeking out real world competitions, if nothing else to enable the students to enter such competitions again after they graduate.