October 17, 2023
If you are an ambitious life-science professional seeking to create the next big innovation, starting your own company can enable you to share your ideas with the rest of the world. Opportunities abound within the industry, as shown by the frequent innovative breakthroughs that drive our professional lives. However, although you may be an expert within your industry, it takes careful planning and specialized knowledge of the business world to channel your expertise into a successful new company. Here, you’ll learn key elements to launching a biotechnology start-up so that you can transition from industry professional to entrepreneur.
Ideation and Conceptualization
Strong ideation is the first step to building a new business. The best business ideas solve problems, even if those problems are unrecognized by the people who have them. “Ideas for innovative biomanufacturing technologies are inspired by observing and pinpointing problems that have yet to be solved. Although you can be successful by “building a better mousetrap” and improving upon an existing solution, the biggest opportunities lie in inventing innovative solutions. You can use your knowledge, skill, and experience as an industry professional to observe industry needs and then reevaluate them from a business-building perspective.
Market Research and Validation
Before you develop a solution, market research can help you validate the existence of a market for your envisioned solution. It is best to begin by researching the market from a high-level perspective, studying products/services that are similar to your own idea and assessing their market size and growth trends. You’ll need to confirm that there is a market gap that can be filled by your product/service.
You’ll also want to determine the size of your target market — how many companies have the problem that you’re preparing to solve? For your business to thrive, the market needs to be robust enough to support your idea.
Next, it is important to gauge the interest of your potential customers. You need to know how they feel about your concept and whether they are willing to pay money to address the problem you are preparing to solve. If you know people who have that problem, then speak with them directly about it. You also can assess market demand by using online surveys and establishing in-person or virtual focus groups.
Your next step should be to test the market by developing a minimum viable product (MVP), which is a basic version of your product that will function as a solution, but without any “bells and whistles.” You can use minimal resources to build an MVP and then test the market by introducing it to customers. That saves you from spending excessive time and money building a product that people don’t want.
Once you’ve developed your MVP, you’ll test it among a group of early adopters, customers who agree to be among the first people to sample new innovations. These customers will provide you with feedback about your product, detailing how and why they use it and describing additional features they would like to have implemented. That feedback will help you to improve the design and development for the next version of your product.
Business Plan Development
You’ll need to develop a business plan before you build the next version of your product. Doing so will guide you to think through each operational aspect of your business. As you develop a plan, you will need to research and develop strategies for all functions of your business.
Analyzing the budgetary aspects of your plan will help you to determine its financial viability. You’ll need to understand your startup costs to determine whether you can fund your own launch, or whether you’ll need to seek financial backing elsewhere. During this phase you also will calculate whether your business can turn a profit based on production costs and the amount that the market will pay. That information will help to inform business-growth projections as you gain new customers. Finally, a business plan is necessary for obtaining funding later. Even if you don’t need startup money, you may need funding as you seek to grow your business in the future. A business plan has several components, including the following:
• a company overview describing your history thus far (even if you’ve only done ideation and market research), as well as your company mission, vision, and business structure
• a description of the problem that you’re solving, your solution, and your proposed pricing model
• a market analysis that includes both the results of your market research and a competitive analysis
• a sales and marketing strategy for building awareness of your product and enticing people to buy it
• a technology strategy that details how your product will be developed and maintained from a technical
perspective
• an operations plan for managing your day-to-day business
• a management and personnel summary identifying necessary roles and how will you fill them
• a financial analysis that addresses startup costs, revenue, and cost projections for at least three years
• an executive summary that provides highlights of your business plan. You’ll write that section last, after you’ve developed your plan.
You may want to hire a professional to help you develop your plan. You often can find business-planning resources at local small-business development centers and business incubators.
Funding and Investment
Many founders start businesses using their personal funds and then survive by “bootstrapping” until the company becomes profitable. Doing so is advantageous because you won’t pay interest or give up equity to investors. However, growing a company significantly often requires a large amount of capital. Life-science industries have many people and companies that like investing and lending to support new innovations.
If you need to secure funding to start or support your business, banks offer several loan options. Many banks facilitate US Small Business Administration (SBA) loans, which are backed by government-supported SBAs and come with favorable interest rates. However, bank and SBA loans require repayment with interest that will reduce the cash flow to your business. Banks also offer little support for business management and strategic development.
Alternately, you can seek professional investors to provide capital in exchange for equity in your company, eliminating your need to make payments or pay interest. Investors often provide significant support in terms of resources and strategic advice, sometimes taking on managerial roles that can provide founders who lack business-management backgrounds with tremendous support. In such cases, founders may need to sacrifice significant equity in their companies and even some measure of control. But investors share your goal of growing your company quickly. They want it to reach a level at which they can exercise a successful exit, whether through the sale of the company, a merger or acquisition, or a public stock offering.
Usually investors seek a return of five to 10 times their original investment upon departing a company. For example, if they invest US$1 million for 30% equity in your business and seek 10× return on investment, they’d be looking for an exit price of $33.3 million with a personal share of $10 million. In such an example, you could walk away with $23.3 million. Not bad!
Your local business incubator is a good place to start identifying investors. Such services often provide access to seed funding programs, sometimes through government support. They can introduce you to “angel” or venture capital investors who specialize in life-science industries. Be prepared with a “pitch deck” of slides for presenting your business plan and capturing investor interest.
Product Development and Team Building
You are now ready to build the next version of your product. When designing, prototyping, and testing, it is important to incorporate learnings from your MVP to ensure that you are meeting the needs of your target market. You also may consider protecting your intellectual property with a patent if you think your work could be duplicated. Investors can help you assess the patentability of your product and sometimes can refer you to a local patent attorney.
Next, it’s time to implement the management and personnel aspects of your business plan. At this stage, you may need to fill only some positions. Determine what roles are necessary to get your product to market and to maintain your business in the short term.
Be selective in your hiring; you want qualified people who share your vision.
Going to Market
Now you’re ready to start making sales. You’ll need to implement your marketing and sales strategies, which should be tailored to your target market. Artificial intelligence (AI) provides powerful tools not only for scientific research, but also for marketing. In fact, AI is projected to have a stronger impact on marketing than on any other aspect of business. AI tools can help you to personalize messaging based on your target market’s needs. They also enable the creation and placement of targeted ads based on the online habits of potential customers (1).
Be sure to measure the effectiveness of your marketing over time so that you can focus on strategies that work. You’ll also need to stay apprised of market and industry trends. You may need to adapt your product and strategy and find opportunities to expand into new markets. Continuous innovation is necessary to remain competitive in the technology and science sectors.
By putting your skills and knowledge to work in the business world, you can build something of value that can last for generations. Take a thoughtful approach to starting and developing your business, just like you do in your field of expertise, and you can achieve amazing things.
Reference
1 Five Fifty: Real-World AI. McKinsey Quarterly. August 2023; https://www.mckinsey.com/featured-insights/artificial-intelligence/five-fifty-real-world-ai.
Corresponding author Martin Eckler is a legal advisor at Step By Step Business;
[email protected].
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