Taking An Idea From The Lab To Commercialization

By Tom Ricci

Today, more than ever, researchers are looking to take their fundamental discoveries, whether developed at a university, research facility, or corporation, and transition them into commercial ventures. However, the relevant issues around start-up ventures are significantly different from those encountered in the research laboratory. Many scientists have never thought extensively about intellectual property, freedom to operate, route to market, operating capital, and other issues which arise in the licensing and commercialization process.

If you are considering commercializing a technology and launching a business, then you won’t want to miss a workshop to be held at Pittcon 2011, in Atlanta, March 13 to 17. The workshop, entitled Startup Companies: Taking Your Idea from the Lab to Commercialization, is organized by Bruce Chase, the cofounder of PAIR Technologies, a start-up instrument company established by University of Delaware researchers and a former DuPont scientist. Joining Chase in leading the workshop are Scott Jones, professor of accounting and director of the Venture Development Center in University of Delaware’s Lerner College of Business and Economics; Patrick Foley Jr., a principal at Innovation Capital Advisors; and Rina Dukor, cofounder and president of BioTools, Inc., a start-up scientific instrumentation manufacturer serving the interests of biopharmaceutical research.

The panel of experts will provide a variety of real-world perspectives, insights, and anecdotes to help entrepreneurs understand what they can expect when starting a business and hopefully avoid some of the pitfalls.

Good Science: “It’s Not Enough”
The transition from a credible technical innovation in the lab to a product ready for sale and support is a path loaded with obstacles. According to Chase, “The biggest mistake made in small technology-based companies is assuming that the scientists are capable of running the business. We found out early on that there is a critical need for business and marketing guidance at a very early stage. When the scientists have free rein, the product is never ready for market. There are always further improvements to be made.”

Chase says that the marketing and business input forces you to “lock the design” and save additional changes for the next version. “You learn very quickly that something which worked quite well on the lab bench can have more than a few problems after shipping via truck! Never assume the markets you initially thought of in the lab are the actual markets you will participate in. Before you even think about forming the business, make absolutely sure you know your IP position and what it will take to get a clean license. The process is exciting, challenging, exasperating, and fun. Be ready for a roller coaster ride,” he added.

Licensing: “You Don’t Know What You Don’t Know”
Those are cautionary words from Jones, who points out that science and technology entrepreneurs typically lack the business and legal framework needed to understand the economic aspects of a start-up. Early in the process of going from lab to commercialization, intellectual property is frequently licensed from the parent company or university. This license may be the company’s only and most valuable asset. The terms of the agreement may bind the parties to conditions that may be very unfavorable as the business matures.

Jones, who is also a partner in PAIR Technologies and negotiated the technology license between PAIR and the University of Delaware, will discuss the important lessons that must be learned in licensing a technology for commercialization. In particular, he will review a new type of standard licensing agreement called the Carolina Express License Agreement, which was designed by the University of North Carolina at Chapel Hill to help entrepreneurs expedite commercialization of research. The agreement allows potential start-ups to select an appropriate standardized licensing agreement rather than undertake a customized negotiation with the university that can take considerable time and have unpredictable results. Says Jones, “The Carolina Express License Agreement offers a simplified cookie-cutter approach to licensing technology for commercialization. It may be advantageous for some, but others may still benefit from or require a fully negotiated licensing agreement.”

Either way, says Jones, it is critical that entrepreneurs seek expert legal representation when negotiating complex licensing agreements. “Entrepreneurs need to find a transaction attorney who has experience in their particular technology and market space. And the person shouldn’t just be an intellectual property attorney; the counsel must have experience in licensing negotiations,” he said.

Venture Capital: “We Invest In People, Not Technology”
The subhead quote above is from venture capitalist Patrick Foley, whose firm expects to complete two investment deals with instrument start-ups this year. In the Pittcon workshop, Foley will explain how the venture capital industry works, his personal experiences and views of the current overall state of early-stage venture capital investing, and the prospects for instrument companies for future venture capital funding.

While Foley says it is easier to start up a company now compared to 10 years ago because there are less capital requirements, it is still a very difficult economy in which to start a business. He says his VC firm will probably look at close to 300 start-up companies seeking funds before selecting the two in which they will make their investment.

“Entrepreneurs need to do their homework and understand how the investment process works and what the investors are looking for. They need to be able to make a compelling case as to why the world needs the product they are making, explain the need the product satisfies, and be capable of clearly communicating their business plan to market and sell the product,” Foley added.

While some entrepreneurs seek investments from VC firms like Foley’s, others seek angel investors or pool their own money along with family and friends to get their businesses started. “If you are seeking investment from a VC firm, then you need to be able to clearly explain how the investment will pay off and in what time frame,” explained Foley. “We look for people who have a product that can uniquely satisfy a market need and the business plan to make it successful.”

Entrepreneurs: “Are You Prepared To Be The President And The Janitor?”
BioTools President Rina Dukor says starting a company is fun and exciting, but at the same time challenging and stressful. She will share her ups and downs in starting BioTools and growing it to profitability and discuss some of the “dos” and “don’ts” in the process during her portion of the workshop.

In 2000, Dukor started BioTools with personal funds without VC or outside investors. Ten years later, the instrument company is about to achieve its first year of profitability. A life scientist by trade, Dukor admittedly knew very little about business or the financial process when she started the company. “We probably would have achieved success much faster had I been more knowledgeable about the financial process in the beginning,” she said. “It’s very important for entrepreneurs to learn, understand, and focus on business to be successful, not just the science and technology.”

Dukor cautions that while scientists are energized by their own discoveries and ideas, a successful commercial product needs much more. “First, the idea must be backed up by a strong marketing plan, and the first question to ask is ‘Does anyone except you need this?’ Second, the scientist must become accustomed to financial terms and terminology and understand why anyone else would be willing to give you money for the product — as most likely it is not because of ‘cool science.’ And lastly, an entrepreneur must understand that a new business is like a new child — it is a 24-hour job,” she said.

Before taking the first step, Dukor says it is very important to talk to your family and be sure they understand the level of commitment that will be required to start up the company, what’s going to happen, and how it will impact the family. Along the way, Dukor also learned about managing employees. “Sometimes I need to employ my motherly skills, other times I’m a salesperson, and still others I may be a priest,” she added. “I found that it was critical to be honest and realistic with my employees and communicate openly about the ups and downs of the business. In a small business, good employees are key, and it’s critical that you hire and retain only the best.”

Finally, Dukor says that entrepreneurs need to be patient in dealing with their customers. “It is difficult to listen to complaints. But I’ve learned that the customer is always right, even when they clearly are not,” she added jokingly.

About The Author
Tom Ricci is a science writer and sole proprietor of Ricci Communications, a marketing and public relations consulting firm dedicated to helping science and technology companies. He frequently publishes articles in scientific trade journals and generates content for corporate and association websites.