The road to launching a life science start-up can be a long and difficult one, with founders often struggling to secure funding and manage the logistics of setting up a business. In a move to encourage innovation and help start-ups hit the ground running, there are an increasing choice of accelerator and support programs becoming available.
We spoke to Giovanni Rizzo, PhD MBA Chief of Innovation Division, Z-Cube S.r.l. to learn more about such programs and the difference they can make to innovation, as well as share some tips for academics beginning a start-up venture.
What are some of the main challenges facing life science start-ups?
One of the challenges European life science start-ups face is the financing during 2 steps of the start-up life cycle: the seeding-and the growth phase. This ends up in a catch-22 situation: businesses in this sector, more than in other sectors, typically tend to struggle to get funding at the early stage and when they reach a certain level of maturity they are unable to grow unless risk-taking investors feel comfortable to invest in a technology that doesn’t yet show any traction or any revenue.
Where can start-ups look for sources of funding?
There are many possibilities for life science start-ups to get funded and now the European Union and many European countries have taken a big step forward to boost innovation and to support start-ups. Institutional grants (EU/National Institutions) are the first step to look at for very early start-ups and spin-outs from academic institutions. This offers possibilities for start-ups to get funding without dilution of their shares. Incubators and accelerators offer to start-ups a good support to develop their business but also a healthy environment and ecosystem that encourage investors and make them more comfortable in investing.
Business angels and venture capitalists are often a part of innovative acceleration programs, which creates the right network to get a round of financing in addition to seed funds. The network of Family business offices (FBO) in many countries in Europe and worldwide can be a good source of funding and it has been shown recently that FBOs tend to directly interact with companies instead of investing in private equity firms. Furthermore, there are private equities and investment banks, for those start-ups that are in the growth phase. Corporations can be important actors in this field, too. The business model of corporations has changed and they are now looking for start-ups and SMEs to be integrated in their technologies’ pipeline.
It is important to point out that, in order to gain the needed support, as well as financial backing, start-ups need to look at start-up accelerator programs. It is important for them to choose an accelerator which specifically operates in their sector. Choosing the right accelerator will mean that it can connect the start-ups with advisors and peers that understand the business and can help them to avoid some of those common pitfalls which make others fail, and can provide counsel to help build a valuable business. Corporate accelerators can be a great beginning, too, if start-ups offer a technology or a product that can be in interest of the company- the fast-track progress is then guaranteed.
How important is additional support, such as mentoring and networking, and what are the benefits of specialised life science angels/investors/programs?
Additional support could not be more fundamental for life science start-ups. The fact that firms, which already have access to funding can continue to receive more and those who are denied funding can’t progress, is a huge obstruction for innovation. Not only does it stifle any entrepreneurial initiative but it ultimately suppresses innovation as well as important developments that could improve patients’ health.
Joining an accelerator programme that provides counselling and advice can also be critical for building up the business to a stage where it becomes even more valuable. It is important that start-ups are not just drawn to an accelerator programme due to the availability of funding, but in fact choose one that will provide structured growth opportunities and access to mentors and advisors who can help when it comes to the practicalities of setting up a business. Moreover, the presence of investors in the acceleration programs, such as industry specific business angels and venture capitalists helps entrepreneurs to understand what are they looking for thus, allowing them to see their business through the lens of an investor. This is an important step for those who aim to achieve their next round of financing.
Can you tell us more about the Open Accelerator program?
The Open Accelerator program has been launched by ZCube research venture and it is essentially a fast-track acceleration program for life science start-ups. It is a 12 step program which will provide training to international researchers, scientists and aspiring entrepreneurs, that following a selection process, could receive seed investment of up to €100.000 per project.
The call for ideas covers four main areas: Drug delivery systems, open source prototyping, wearables and digital health and Big Data. The acceleration program will take place in OpenZone scientific campus where 21 successful biotech and life science companies are already residing. This entrepreneurial ecosystem naturally offers the best environment for start-ups to network, to get inspired and to grow.
What difference can models such as this make to innovation?
This type of funding can be critical not just for specific start-ups, but for all industry innovators to propel their ideas. Unless pioneering entrepreneurs are able to get a chance to demonstrate their solutions, the healthcare business risks missing out on important developments. Open Accelerator is a life science vertical corporate accelerator providing support to entrepreneurs with the acceleration program, a wide international network of investors (business angels and venture capitalists) specific for life science, industry-focused mentors, corporate (Zambon Group) resources and potential future customers. This method is very efficient in boosting innovation and helping entrepreneurs. Moreover, on the corporate side, the accelerator allows the corporation to: 1. Get insight into emerging technologies and trends; 2. Have access to rapid, cost-efficient technologies development; 3. Have access to talent pipeline; 4. Have access to economic returns; 5. Have access to skilled entrepreneurs.
Do you have any advice for academics beginning a start-up venture?
Life science start-ups tend to be set up by visionary academics who, unfortunately, would describe themselves as inexperienced with all the practicalities of setting up a business. They don’t necessarily know the ins and outs of a business, how to source a reliable supply chain, how to find and manage partners as well as how to deal with other administration and staff issues etc. However, it is so important that life science start-ups do not demonstrate any weakness in this area, particularly if they want to meet with investors and secure funding. Typically, research will show that a distinct lack of key skills will send investors running in the hills despite the technology being great!
Academics should focus on: 1. creating a multi-disciplinary team that can collaborate and choose a lead of the project; 2. looking for acceleration programs that can help to get important business skills and the right network to develop the project; 3. being open to opportunities and embracing the start-up challenges with full commitment: at least one member of the team should work full-time at the beginning on pushing the project towards business; 4. getting out of the box and letting the technology spread: you are the inventor and you need a leader to run a business, in the meantime, don’t be afraid to share your invention.
Giovanni Rizzo was speaking to Anna MacDonald, Editor for Technology Networks.