This article is translated from: Top 5 Reasons Why Biotech Startups Fail; Original author: Clara Rodríguez Fernández
Entrepreneurship is a nine-dead life, and it may be even more difficult to put into biotechnological fields that require continuous innovation.Not every entrepreneur can make it to that point, though it will pay off in the end.
Engaging in biotech entrepreneurship is a high-risk option.Unlike typical tech startups that can launch products in a few months, biotech companies usually need several years of intensive burning to bring their first product to market.
The author of this article communicates with a number of entrepreneurs and knows some of the "pits" in the entrepreneurial process.Some of the experts in communication are serial entrepreneurs and have created a number of biotech companies.They point out the five big mistakes that entrepreneurs can make and give some advice to share with readers who are in it.
1.Defective financial strategies
For any young entrepreneur, cash flow is always the biggest challenge for biotech startups, and they often need to raise more funds to ensure that the company can live long enough.
Finding the right investor is the key to the initial stage of the venture.But it takes time to gain investor trust, which means that entrepreneurs should talk to investors before setting up a company.
Early communication with investors is an excellent opportunity to obtain expert feedback and early assessment of the viability of the enterprise.Holger Reithinger, a general partner at Forbion, the Dutch biotech investment company, points out that "it is only with experienced investors that we know what to do next."
It is equally important to determine the priority terms of different investors in advance.If investors and founders fail to agree on the next plan and exit, chaos will ensue.Entrepreneurs who accept private equity often make the mistake of weakening their say in the company by diluting their stakes, which may eventually lead them to fail to deliver on their promise to start a company.
Another reason for the failure of biotech companies may be frequent small-scale fundraising.Edoardo Negroni, co-founder and managing partner of AurorA-TT, an Italian technology transfer company, pointed out: "Fundraising is a crucial task. Entrepreneurs must be cautious when approaching investors. It is better not to raise funds too often."
" The first thing after financing is to make a plan and show it to trusted investors, which is decisive for future fundraising.Don't wait for the money to run out before you start to build up evidence and write the next round of financing plans.Negroni suggested.In his view, it will never be too early to prepare for the next round. Entrepreneurs should always stay in touch with potential partners to lay a solid foundation of trust for future cooperation.
2.Lack of management experience
The success or failure of biotech startups is largely related to team management capabilities."Get people with management experience on board as soon as possible to avoid expensive detours," Reithinger said.
"There are two kinds of talent to avoid, one is that there is only a wealth of experience in the management of large pharmaceutical companies, and their methodology is generally only suitable for the operation of large pharmaceutical companies; the other is never worked in small and medium-sized companies, and they obviously lack the skills needed for start-up operations."Reithinger added.
"For startups and their companies, the key to success is to build relationships and seek guidance from experienced mentors and regional experts.Drug development is still an art form, and KOL's insights are an important factor in driving the company's success.Davidson Ateh, chief executive of BioMoti, a cancer biotech company, said frankly.
Dinko is an entrepreneur who has participated in the founding of 12 European biotechnology companies.In his view, it is also important for management to maintain good relations with shareholders and to articulate expectations for investors."From an investor's point of view, when the CEO is not authorized by the board and/or investors but remains briefly restrained, it does not mean that investors do not trust the CEO; from the entrepreneur's point of view, if you do not focus on doing the best for the company, then the chance of success will decrease rapidly."
In Valerio's view, corporate managers and investors should respect each other's roles.Above all, each participant was preoccupied and motivated.Many great technological inventions are actually destroyed by unqualified ceos, managers, investors, and boards of directors during the transformation process.
Conclusive and credible data is a necessary condition for biotech companies to persuade investors, partners, and regulators.Otherwise, it is impossible for others to see that the product (technology) is worth investing, cooperating, and approving for listing.
Therefore, it is very important to ensure that the technology (product) is in market demand before investing in the project. This method is innovative and superior to competitors."There are only truly innovative companies, not the 'me-too' approach," Reithinger says."You need to consider that the data in hand can support the company for several years."
Entrepreneurship is not fashionable.Only by ensuring that their technology meets the high unmet needs and has a first-mover advantage, can we provide enough time for the company's potential projects to fight direct and indirect competitors.Many molecules that work in animal models may not be effective in human clinical trials.
Professional investors actually encourage entrepreneurs to stress test new technologies. The feedback they receive can prevent others from wasting time and money.Even more frightening than the failure of technology is the fact that companies misreport data or exaggerate the effect, although in the short term it will bring a lot of money to the field, but in the long term it is a drag on the entire industry.
4.The timing is not right
Although the development of biotech products takes quite a long time, grasping the right timing and making quick decisions are crucial to the success of the company.The most difficult decision for managers is to stop the damage in time, that is, to "let go" of products or technologies that have not achieved the desired results.
"Executives must accept the high risk of drug development and test the effectiveness and safety of candidate products as early as possible through well-designed trials.Adhering to the wrong path will only make it more painful and expensive."An entrepreneur has a deep understanding.
In Johnson's view, it is more effective for entrepreneurs to mark easy-to-understand "stop-loss conditions" in the Business Plan than to "paint a big cake", so that they can coordinate the expectations of financial supporters and regularly decide whether to continue or cancel assets.At the same time, it ensures that milestones are delivered quickly and continuously, and is essential to please investors and maintain their advantage over competitors.
5.Dare to take risks
Even if it is carefully planned, biotechnology is a very unpredictable business.Companies need to be prepared to take the risk of computing in order to survive difficult times.
"Most successful companies must undergo one or more major changes before a product or technology can be marketed.Usually only the brave and brave manager can take the helm to change the course."Valerio said.
Valerio believes that an entrepreneur who is born unable to make bold decisions is destined to fail.By definition, success is rare and failure is the norm.When entrepreneurs return to the mean and return to the mean instead of making bold choices, failure lurks for four weeks.
6.Recommendation: Learn from errors
While the goal of creating a biotech company and ensuring its long-term success is daunting, entrepreneurs should not be discouraged.The path to success is one after another, and optimism is the reason why entrepreneurs should not give up prematurely.It's important to stay focused, and most importantly, to always learn from mistakes.
"Failure is part of a startup's success," Negroni concludes."If you learn from failure, you can prepare for success."
" We run companies in high-risk, cutting-edge environments, and drug candidates entering clinical trials are also nine dead.Whether it is investors or entrepreneurs, it should be accepted that failure is the norm."Entrepreneurs should not be afraid to make mistakes and do their best to build a successful company," the interview said.If it doesn't work, try again with what you've learned through failure.