How Do You Become a Scientific Entrepreneur?
The internet is littered with motivational stories about how one person "transformed” an idea into a commercialized company. In the field of science entrepreneurship, many start-up companies can have a positive impact on humanity, but the road from idea to product isn’t straightforward. Even when armed with a revolutionary idea, there is a lot to consider, from choosing a company or product name, to securing licensing and investment – where do you start?
To understand more about the journey a scientific entrepreneur must go through, and the help that is available, we spoke to Dr. Michael Salako, Investment Director at Start Codon, a life science and healthcare venture capital fund and venture builder that invests in therapeutics, diagnostics, med tech and digital health companies, to help maximize patient benefit.
Ash Board (AB): Can you explain the first steps an entrepreneur should go through to get their idea off the ground?
Michael Salako (MS): The key thing they must do is delve into whether their idea solves a critical problem. They need to pressure test their assumptions. The first thing one would do is go out to the market and start speaking to other lab members, peers, colleagues and, ideally, potential customers and potential partners to get a sense of that need. What you don't want, and sometimes you often get, is a solution, looking for a problem. No matter how great the underlying science, what you want to have is a solution to a problem.
AB: Once the idea has been validated, what should they do next?
MS: Once you've gathered all the information and pressure tested the idea, the next stage is to bring this together. There are different ways that people do this, for example you can collate it using The Business Model Canvas, a strategic management tool that enables you to understand your resources, needs, cost, direction etc. Once you've done that, next is the case of bringing that information together to start to build a narrative. This should be condensed into a pitch deck, a high-level enticing summary including what the problem is, your solution, who you and your team are and what qualifies you all to be able to successfully execute in this space, who the competitors are and what your unique selling point (USP) is compared to them and what your defensive strategy is (intellectual property such as patents, trade secrets etc.). You then use this pitch deck to engage the community, which may include both potential partners and investors. If investors are needed, the key will be to identify a lead investor, they are the ones that will drive matters, especially legal, and would take the ‘lead’ on bringing in other investors to join the investment round and help support the company. At the early stage of the company, it is critical that the foundations are strong. This includes having the right investor from the start that is aligned with the vision of the company and who will do all it takes to help realize the company’s full potential. It also includes having the necessary intellectual property in-licensed into the company to provide a springboard for the company’s growth and success, especially if the company is a spin-out from an organization that owns the rights to the intellectual property, as without those rights (say from a university/ institute) the company may not be able to function. You also need to bring in the right team members to compliment and support the ambitions of the company on its journey.
AB: Who can support the entrepreneur on this journey?
MS: That can be members of your board such as non-executive directors or a chair. It may be that as a founder, you don't want to be a CEO, but just a hands-off founder and thus a CEO can help. A scientific advisory board that helps you with the scientific direction of the company and is separate to the corporate company board can also be helpful. Never also discount the supportive power of your friends and family and if you have one, your Co-Founder. Initial hires, who will be core to the company’s success can also be highly supportive.
With this worked out, then it's a case of executing on that, and hopefully, down the line, further fundraising, if needed.
Ultimately you get to a point where you get the idea to market and then get to an exit, which could be either an acquisition from one of the existing partners or a new partner or listing on the stock exchange in an IPO.
AB: How does Start Codon support of entrepreneurs on the journey you have just described?
MS: The whole entrepreneurial landscape can be quite daunting for founders and therefore what we try and do is roll up our sleeves to help support these companies and their ideas in various ways, basically acting like co-founders. If you're a founder who has a sniff of an idea, but doesn't know which direction to go, we're there to try and help work with you to flesh out the most commercially promising route.
For example, if a founder has undertaken work at an academic institution, any intellectual property would generally be owned by that institution. Naturally, institutions want to enable their researchers and help them spin-out their company and are happy to in-license required intellectual property into the company, that without, the company can’t function. However, as the founders are also employees of the institution, it is difficult for them to negotiate with their employers to out-license the intellectual property into their fledgling company due to conflicts of interest. So, we can help negotiate on their behalf, alongside their company’s own independent legal counsel, to make sure they understand the information and the company can secure the right terms. This is quite important, because at this early stage, whatever you do, in terms of your foundations, one needs to agree the best licensing terms, being mindful of what the future may hold. If the terms don’t make commercial sense, this will erode the potential value in the company and weaken its ability to secure further investment. Conversely, if you agree good, commercially relevant terms, it will make fundraising for additional investment in the future easier. As we deal with these sorts of issues frequently, we know what terms make sense commercially and will enable the company to be set up to thrive. If a company has already agreed and signed up to terms that are very restrictive, then from the very start, it doesn't matter what you do, the company may already be on a path that is set to fail. Essentially, we are the eyes, using our experience and advising the companies on the best course of action.
We always strive to upskill founders so that their current venture could become their first of many companies. So, not only do we guide them through licensing and legal matters, but we also have a program that takes founders through how to grow and scale a successful company and we allocate a special period each week to strategically map out what scientific and commercial actions should be executed for the following week, such as refining their pitch decks, supporting on R&D, operational and staffing matters, and with our wide network of mentors, advisors and investors, we also engage our network so that companies can get privileged access to those who can add further value.
AB: Does everyone realize they have a commercially available idea or do you have to uncover some hidden opportunities?
MS: There is really great science out there from researchers, many of whom haven’t even thought about or didn’t know how to start a company. We seek out such people by evaluating journals on an active basis, give talks or sit on panels, attend conferences and discuss trends with our pharmaceutical partners and also our, postdoctoral, medical and PhD student interns. Our aim is to identify those early opportunities and guide them towards success. As we review hundreds of pitch decks a year, we are keen on novel approaches we haven’t seen before.
As part of our due diligence, we speak to key opinion leaders, customers, investors, potential partners and pressure test the idea ourselves because we need to make sure that we have reviewed all facets of the opportunity and are happy based on the available knowledge to invest with conviction. What we're looking for are the diamonds in the rough. It does take time to dig in and develop an early-stage opportunity, with later-stage investors tending to come in when the proposition has been fleshed out further with more proof-of-concept data and an established team and board.
What we do is go in early to understand the nuts and bolts of a technology and determine what makes the most sense for success and what can maximize patient benefit.
AB: Can you tell me a little about the investment Start Codon has enabled?
MS: Thus far, we've invested about £4.75 million in 19 companies. To date, those companies have gone on to raise over £35 million. In itself, that's quite amazing. In 18 of these companies, we have been the first investor, the ones that have identified the opportunity and crafted a narrative for them to receive more capital.
We invest a minimum of £250,000. Our aim is to enable these companies to be in a position to achieve a good amount of follow-on financing. Recently one of our portfolio companies called Enhan3d Genomics, announced a Series A raise of £10 million, which is great to see given we were the first cheque in to that company less than two and a half years ago.
Dr Michael Salako was speaking to Dr Ash Board, editorial director at Technology Networks.