“Society needs biotech innovation to meet the challenges of the 21st century, and entrepreneurs need to build biotech companies that develop innovative products in a capital and time-efficient manner.”
Biotechnology has the potential to solve the major societal challenges of the 21st century: environment, energy, food and healthcare. Entrepreneurs need to solve the challenges of building biotech companies and bringing disruptive products to market in the new economic reality of 2013: high technical risk, increased regulatory risk and limited access to—mostly expensive—capital. The Lean Biotech Startup is a framework for aspiring entrepreneurs to meet these challenges through a capital-efficient biotech model designed to mitigate risk and rapidly create value.
The Lean Startup Model
Lean, as it applies to startups, includes a set of processes for the efficient discovery and creation of a viable business model. Introduced by Steve Blank and popularized by Eric Ries, the Lean startup model was initially applied to industries with low technical and regulatory risk, such as web and mobile apps. The lean principles of are:
· Validated, customer centric learning
· Product experimentation
· Iterative product releases to rapidly test minimum viable products and integrate customer feedback to efficiently create a product to support a repeatable and scalable business model.
The Lean Biotech Startup Model
The Lean Biotech Startup retains the overarching goal of efficiently discovering and creating a viable business model. However, the Lean Biotech principles recognize the additional technical and regulatory risks, and opportunities associated with developing biotechnology products. The Lean Biotech Startup principles include:
Validated, customer-centric learning
Validating that a proposed product satisfies a market need with customers is often the greatest emotional challenge for scientist founders because of their attachment to the technology. “I’ve spent my Ph.D./Post-Doc/Life developing this great technology, therefore the market must care.” Unfortunately, this is not always true. Great science does not necessarily translate to great products. Given the inherent technical and regulatory risks of biotechnology, it is incumbent on entrepreneurs to have a fanatical understanding of their target market. For example, Biotech companies developing a therapeutic need to consult frequently with a wide range of “customers”, including patients, physicians, hospitals, government, payors, etc. to ensure that their proposed product substantially improves the standard of care and does so at an acceptable cost.
Rapidly reach pivots using aggressive de-risking strategies
The Lean Startup uses rapid release concepts (e.g. website A/B testing, agile software development, etc.) as a de-risking strategy. Most biotech companies cannot rapidly release products and iterate based on customer feedback. However, even the most regulated biotech sectors, such as drug development, can apply innovative strategies to “fail fast” in order to come to a decision gate. If the failure points cannot be overcome quickly (time=money), then a pivot to a different application / indication / market is needed. Here a timely shift can catapult a company with a valid technology base to success and preserve optionality to develop for the initial, potentially bigger, but also more protected and regulated markets. For example, by using genomic tools to stratify patient enrollment in clinical trials, applying biomarkers to obtain efficacy readouts from phase 1 clinical trials, or initially applying a technology to a lesser-regulated market.
Validating that a proposed product satisfies a market need with customers is often the greatest emotional challenge for scientist founders because of their attachment to the technology. “I’ve spent my Ph.D./Post-Doc/Life developing this great technology, therefore the market must care.” Unfortunately, this is not always true. Great science does not necessarily translate to great products. Given the inherent technical and regulatory risks of biotechnology, it is incumbent on entrepreneurs to have a fanatical understanding of their target market. For example, Biotech companies developing a therapeutic need to consult frequently with a wide range of “customers”, including patients, physicians, hospitals, government, payors, etc. to ensure that their proposed product substantially improves the standard of care and does so at an acceptable cost.
Rapidly reach pivots using aggressive de-risking strategies
The Lean Startup uses rapid release concepts (e.g. website A/B testing, agile software development, etc.) as a de-risking strategy. Most biotech companies cannot rapidly release products and iterate based on customer feedback. However, even the most regulated biotech sectors, such as drug development, can apply innovative strategies to “fail fast” in order to come to a decision gate. If the failure points cannot be overcome quickly (time=money), then a pivot to a different application / indication / market is needed. Here a timely shift can catapult a company with a valid technology base to success and preserve optionality to develop for the initial, potentially bigger, but also more protected and regulated markets. For example, by using genomic tools to stratify patient enrollment in clinical trials, applying biomarkers to obtain efficacy readouts from phase 1 clinical trials, or initially applying a technology to a lesser-regulated market.
Efficient use of capital
Venture capitalists burnt by high rates of failure, increasingly complex regulatory requirements, long development cycles, and shrinking opportunities for exits have left the capital-intensive biotechnology industry in favor of web/mobile startups. To mitigate this capital access and utilization challenge, startups must operate efficiently while also consider a wider variety of capital sources:
Venture capitalists burnt by high rates of failure, increasingly complex regulatory requirements, long development cycles, and shrinking opportunities for exits have left the capital-intensive biotechnology industry in favor of web/mobile startups. To mitigate this capital access and utilization challenge, startups must operate efficiently while also consider a wider variety of capital sources:
· Access existing infrastructure to increase runway: Use a pay-as-you-go model to access high CapEx and especially non-core equipment and infrastructure at universities and CROs
· Set up lean operating structures to reduce personnel costs: Use virtual and ad hoc temporary teams to access subject-specific expertise on a project basis
· Leverage the existing capital base: Raise non-dilutive financing when it is aligned with timelines and outcomes; utilize tax credits
· Generate supporting cash flows to support the capital base: Segment and monetization non-core assets early; use fee-for-service to generate revenue.
Society needs biotech innovation to meet the challenges of the 21st century, and entrepreneurs need to build biotech companies that develop innovative products in a capital and time-efficient manner. The Lean Biotech Startup framework is designed to mitigate risk and create value under capital and time constraints to enable exits that satisfy founders, employees, investors, partners and potential acquirers. Resetting the baseline in this manner is necessary to revitalize the biotechnology investment eco-system, which in turn is necessary to meet the societal challenges of the 21st century.
About BiotechStart.org
Mike Koeris, James Taylor and Euan Ramsay are co-founders of BiotechStart. Mike is also the co-founder of Sample6 Technologies, and James and Euan are co-founders of Precision NanoSystems. BiotechStart.org is a nonprofit organization founded from a deep conviction that the world needs more biotech startups, not less. In the face of changing funding realities, BiotechStart aims to educate the next generation of entrepreneurs and democratize entrepreneurship in biotech by supplying information, promoting connectivity, and providing mentorship.
February 01, 2013
http://www.burrillreport.com/article-the_lean_biotech_startup.html