What Does It Take To Succeed As A Bioentrepreneur?
By Karl Schmieder
Three entrepreneurs, three different stories of bio-entrepreneurship and success. The three entrepreneurs featured this month prove there are multiple paths to founding a company and blazing a trail to bio-entrepreneurship. Currently at different stages of their careers, each offers insights into what drove them to start one or multiple companies and what it takes to be successful now.
With 35+ years of experience, Stan Yakatan started at Sandoz Pharmaceuticals, was instrumental in the success of New England Nuclear, and has gone on to found or cofound 15 other bioventures. He’s consulted to the governments of Canada, Quebec, Israel, and the Australian state of Victoria on starting their own biotechnology industries. Today, he heads a global consulting company helping bioventures at all stages of their development.
Craig Shimasaki found his way to the entrepreneurial life after a stint at Genentech. He cofounded Symex, ZymeTx, and InterGenetics. He also authored the leading book on bio-business, The Business of Bioscience: What Goes Into Making a Biotechnology Product, and now helps early-stage companies through his BioSource Consulting Group.
Our first-time bio-entrepreneur, Jim Chinitz, spent 20 years in the industry before founding Population Diagnostics. Focused on discovering causative genetic biomarkers, Population Diagnostics just completed its first round of funding, and its technologies are being adopted by scientists worldwide.
What Compelled You To Become A Bio-Entrepreneur?
Stan Yakatan: My first job out of college was with Sandoz, but I didn’t fit into the corporate mold and wasn’t willing to play politics. I was even told I was too young to be promoted into a significant management job. When the opportunity to join New England Nuclear came up, it wasn’t about money or equity; it was about a sense of independence. I liked the founders, and they were willing to give me the freedom to do exactly what I did. That, and the opportunity to build something were the biggest motivators. Truth be told, in those days I knew nothing about raising money or valuations, and it didn’t matter; what mattered was that sense of independence.
Craig Shimasaki: In the beginning, I didn’t even know what an entrepreneur was, but I was creative, inventive, and wanted to learn business. After college, I joined Genentech, where I became friends with a researcher who eventually moved to Oklahoma to help a colleague of his build a company focused on humanized monoclonal antibodies. He tried to recruit me for a year. I finally visited the company, found that I liked the environment, and became hooked on being an entrepreneur.
After cofounding InterGenetics, I realized I’d been in the industry 17 years and always wanted to learn more about business, so I enrolled in an executive MBA program. Biotechnology is still a relatively young industry and many of the people starting biotech companies are professors and scientists with academic backgrounds; few have business backgrounds. The MBA program helped me round out my knowledge.
Jim Chinitz: I spent nearly 20 years working my way up the industry in sales, marketing, and business development at Applied Biosystems, Affymetrix, Third Wave, and Enzo. In various roles, I learned how scientists applied the research tools of the trade. Although the gene discovery tools worked beautifully as claimed, their general lack of success in translating discoveries into the clinic was highly contingent on how thought leaders devised the use of those tools. I decided to start Population Diagnostics because I felt that the promise of the Human Genome Project was not turning into treatments fast enough. I started a company to systematize the discovery of medically relevant genetic biomarkers and accelerate their clinical utility.
How Did You Choose The Particular Area You Started Your Company In?
Yakatan: I had, and still have, one rule: Meet unmet medical needs. There is a significant difference between innovation and commercialization, although most people put them together. Very few companies are started on innovation alone. A lot of people take existing ideas and try to make them better, but few people make new ideas. I look for the new ideas.
In the early 1980s, I helped start Biosearch, a company that developed peptide and DNA synthesizers. There was one competitor, Applied Biosystems. I knew we could beat them in certain areas. We developed a technology and machines and sold the company to Millipore within three years for more than $35 million. After that, I looked at the monoclonal world and started Unisyn Technologies based on a novel technology to produce monoclonals. It was very different from other technologies, and we also sold it.
The rest of my companies have been based on innovations. There’s more risk there from an investor’s point of view, but the reward is greater.
Shimasaki: The first company I was a cofounder of in 1987 was based around the idea that monoclonals could serve as specialized diagnostics and treatments for bacterial and viral diseases. The second company, ZymeTx, was focused on developing rapid diagnostics and therapeutics using viral enzymes to inhibit or exploit their presence. We took this company public and worked to spin out the therapeutics technology.
The third company, InterGenetics, was a case of serendipity. I met the chief scientific officer, and he told me they were preparing to shut down the young organization. I learned they were unable to raise capital, their business model needed improving, and they needed the business acumen to take the company forward. In looking at their technology, I saw it had strong potential as both a therapeutic and diagnostic platform. I met with their board and let them know if I could raise the capital, I would take over running the company. Over seven years, we raised $18 million to complete the clinical trials and got another $3 to $4 million in grants, and now the product, OncoVue, is on the market nationwide. OncoVue is the first genetic-based test for the prediction of breast cancer risk in women with or without the disease.
Chinitz: I started Population Diagnostics based on what I knew best — mutation detection, screening, and discovery. I chose the area of genomic discovery because I thought we could fix the most significant problem, finding genetic variants with causative associations, finding the true causes of disease, unlike the statistical risk and predisposition factors that everyone else has been finding. I believe finding true causes is what everyone set out to do with the information generated by the Human Genome Project. Unfortunately, a decade after its completion was announced, we still have very few medicines and diagnostics to show for the discoveries that were made.
What Are Some Of The Challenges You Had To Overcome In Your Company-Building Experience?
Yakatan: Everyone starts a company with a plan. The biggest challenge is being able to modify that plan. The easiest way to fail is to stick to a rigid plan.
No two business opportunities have the same driving forces. You have technology. You have a market. You need capital and management. If you have something that needs regulatory approval, you will need approval. There are several other challenges I could list, but between each of those are hundreds of details, and you need to pay attention to the details.
Shimasaki: In the early stages I learned that just because you start or run a company doesn’t mean you will continue to do so. Early on, I saw two CEO cofounders who raised money from venture investors and later had difficulty with them. Both were replaced.
Working with the FDA also teaches you lessons. You realize those at the FDA are just people. You have to learn how to work with them and help them understand your technology. You also need to find ways to reduce risk and help the FDA understand which risks around your product have been mitigated. The problems of a few companies generally make it difficult for all companies. If more companies would bear the burden of understanding that ultimately they are completely responsible for all safety risks of their products, then we would see a different FDA. More products would be cleared faster, and the approval process would be less difficult.
Chinitz: Like many others before me, I started off green. I developed one-minute, three-minute, and seven-minute pitches but learned that very few listeners have the attention span to absorb highly technical concepts. I believe some of the best ideas come from piecing together clues which include their importance and evolution, and without this background, the main idea will go unnoticed or unappreciated.
The challenge then is how will you communicate your story? Will you conform to telling a watered-down version to an audience that won’t listen or want your pitch packaged their way? Or, do you look for the audience that will listen intently and take the time to get it?
Another challenge is facing the people who tell you your concept is too early. If you’re hearing that from investors, you may want to learn more about their risk tolerance. Most investors looking at early-stage companies are looking for an experienced management team. I would bet there are just as many success stories with first-time entrepreneurs who found investors willing to take a shot. The challenge is finding those investors.
What Are Some Of The Mistakes You Made Or See Being Made By First-Time Entrepreneurs?
Yakatan: First, they believe technology is important. It’s cliché, but you can have the best technology and the worst management team, and the company will fail. You can have the worst technology and the best management team, and the company will succeed. Management is more important than technology.
Second, they should beware of the trends. Hot markets are risky. There are at least 25 companies in the RNAi space right now, and few of them will succeed. It was the same thing with monoclonals, with combinatorial chemistry, with every new platform. How many companies have failed in each of those spaces?
Third, don’t forget to take the time to make sure people understand you. It’s critical that you are able to tell your story clearly.
Fourth, rely too much on the advice of attorneys and investors. Very few VCs and even fewer attorneys have in-house, company-building experience. You need to create synergy between founders, advisors, and investors, and challenge any of them if they threaten your vision.
Shimasaki: I think there are two things. First is what I call “the unknown unknown.” This refers not to the things that you know you don’t know, but the things that you don’t know that you don’t know. This happens all the time. Development is going great until you scale up or manufacture. Something unexpected happens during your financing. The solution is to pay careful attention, become an adaptive learner, and realize that you can’t know everything. This takes humility, because an entrepreneur wants to know everything. It is much better to understand your weaknesses and seek to hire people who complement you.
Second is the realization that at some point in your life, your success no longer depends on what you do alone, but on what you do with and through the help of others. Entrepreneurs need to understand that a great team will help you accomplish more, will help you attract capital, and improve your odds of success.
Chinitz: First, you need to answer the soul-searching questions, such as, Do you eventually want to own a small part of a really big company? Or, do you want to own a big part of a small company? There is no right answer to either of those questions, but you need to answer it for yourself and build your business consistent with that decision.
Second, when you go out and speak to people, do you understand their agenda? A lot of entrepreneurs are afraid to ask up front. It is just as important for you to qualify prospective investors in the same or greater way that they qualify you. You will save each other a lot of time. Don’t expect to convert a growth investor into an early-stage investor, and don’t walk away from any conversation without a referral.
Third, I think you need to look at your business plan and decide if there truly is a long-term viable company that moves the world forward. I emphasize this because there are many successful entrepreneurs who exited and became wealthy, but not because they built a viable company or had technology that actually contributed to improving humanity.
What Does It Take For A Bio-Entrepreneur To Be Successful?
Yakatan: A four-letter word: Luck. Well, two words, luck and management. The ability to start a successful company and launch a drug requires luck and great management.
shimasaki: You must have passion, vision, and persistence. The passion is your love for what you’re doing even if you’re not getting paid. The vision must be crystal-clear because if you’re not achieving your goals, it’s probably because your vision isn’t clear. Investors and VCs are looking for these characteristics. They won’t believe you can achieve your goals if you don’t have passion, vision, and persistence.
Finally, I would add you need to create the opportunities to be successful. You need to go out and talk to people, ask questions, take risks, listen to new ideas, and be a part of the larger biotechnology community.
Chinitz: Every entrepreneur has heard it takes industry knowledge, perseverance, and tenacity, but I think the formula for success is to think outside the box, challenge the thought leaders, and don’t be afraid to disassociate yourself from the herd, but only for a little while. Successful commercialization requires you to eventually create your own herd. I would also add, assume that VC funding is unlikely, so go out and build your business. Just build it. There is more than one way.
For an extended version of this article, go to our website at LifeScienceLeader.com and select the September issue.
What Are Some Of The Pros And Cons Of Starting A Life Sciences Company In A Non-Biotechnology Hub?
Yakatan: It comes down to one thing: The ability to network. The biggest advantage to being in a hub is being close to everyone. In San Diego, you go to the Connect Biotech meetings; in Boston, the MASSBIO and the nine other biotech-focused meetings. We have 10 clients in Boston because it’s an easy place to start a company.
One of the early biotech investors, Bill Bowes of U.S. Venture Partners, used to open his presentation with a picture of a bicycle. He’d say, “If I can’t ride my bike to the investment, I won’t invest.” That was in the 1980s. Today, I’d say there are as many local angels and venture capitalists as investors who will cross state and international borders. Syndicated deals are rarely localized in a hub.
Disadvantages? Being in close proximity to your competition. Whenever you present and your competition is present, you’re giving them a peek inside your business. I don’t want to sound paranoid, but if the competition is in the audience, I take out the ‘secret-sauce’ slides.
Shimasaki: The biotech hubs possess five key characteristics: The availability of local venture capital; high-caliber, academic institutions; affordable lab space; seasoned entrepreneurial leaders; and an available scientific workforce. Non-hubs are missing one or more of these five elements. Venture funding can be more difficult to obtain, and you might only be able to build your company to a certain level.
That said, being outside of the major hubs gives you access to assistance you might not receive elsewhere. You may get more attention from the local media because you’re saving lives and doing something significant. You may have access to more angel investors and public and civic leaders that want to help. That can give you momentum.
Companies starting in biotech hubs have more opportunities for venture funding and have access to tremendous support, but it is more expensive and more competitive. You’re competing for the same investors, the same workforce, and the same limited attention spans. It may be more challenging to start a company because you’re competing against multiple ideas and companies, and you might not find the attention you need — especially as a first-time entrepreneur.
Chinitz: New York City has world-class academic institutions with some of the smartest people in the world. We’re on Wall Street’s doorstep. The largest pharmaceutical companies in the world are headquartered here. But there are few opportunities to get scientists and business founders together with investors. You’re always fighting to be heard. Being a startup here is very challenging. There is consistently a strong pull to move the start-up to a hub.
Many of the investors in and around New York City are former investment bankers and need to be convinced with spreadsheets and financial projections. In contrast, investors on the West Coast and in Boston seem more apt to evaluate concepts around which to form companies.