Member SpotlightsBIOENTREPRENEUR SERIES Bioentrepreneurs Up Close and Personal: A Start-Up Story A Memoir by PJR A Member Since September 2003 My husband Ed and I were living comfortably in the Midwest when we decided it was time to end our post-docs and look for proper employment. As fate would have it, Hilary Clinton embarked on her health reform program. Suddenly, all hiring was frozen in the U.S. Ed, who sent job applications worldwide, was offered a position at one of the pioneer biotech companies in Germany and a post-doc position in Sweden. We had enough of post-docs and we were willing to move to Germany. Besides, we were not U.S. citizens and could not stay in the U.S. if one of us at least was not gainfully employed. I was fortunate to get a position at the Max Planck Institute for Biochemistry where they did not require me to speak German. It was another post-doc, but, I just needed to work. When after a year I felt it was time to move on, where would I go? I was still interested in biological mass spectrometry but no one in the Munich area (in academia or industry) seemed to be doing stuff I was interested in. I could create a job for myself if I started a company. After throwing ideas back and forth with Ed, it became very clear that, together with some other co-founders, we would start a biotech company with a novel technology platform for drug target validation at the protein level. We would be a first-mover in the field of functional proteomics when proteomics was still a fairly new biotech buzzword (this was 1998). Ed the visionary came up with a business plan and I was editor and critic (always am and will be). Then, we met with a few local VCs. This was eminently a hurdle (we were all non-Germans and had little management experience)—although not a major one because we were so convinced of our idea. We went with a VC firm whose investment manager had a good “gut feeling” about our technology. Closing the deal, though, was not all that easy. We did not pick the right law firm to represent us and the negotiation with the VC was a disaster. But the VC called for a meeting with no lawyers present. We deliberated the clauses that we were not happy with and came out of the meeting feeling much better. Since it was the start of summer and vacation time here in Germany, we had to wait until August to close our seed financing round. At this point, I felt we had no cause to celebrate because we were on borrowed time; we should have started proof of principle experiments yesterday! As Chief Operating Officer, I had to move things forward on all fronts. Resolved to run the company like a US company, we would foster creativity and transparency and, above all, communicate in English since we were thinking global. Then the difficulties set in… It is true what they say that you can test a man’s character if you give him power. The people in management that we were dealing with on a day-to-day basis were not as we knew them before. Ed and I traced this back from the day we closed the deal with the VC. There were arguments on both important and petty matters. We alerted the investor who later drew his conclusion that we were a kindergarten. It was a case of my word against his. By the time the VC finally realized what Ed and I were saying had some truth to it, six months had passed (equivalent to years in biotech time), and with that, a lot of our cash went down the drain. The proof of principle experiments were moving along. The difficulty, however, was selling the tech platform. To an outsider, the platform was complicated and, usually, the question in the end was “what is this technology good for?” It was clear we needed someone in business development who could really sell the technology. This was back in 1999. We hired a business development manager, promoted an R&D director, and then hired a chief business officer. Each one at some point left the company for one reason or another. They all did not grasp how to pitch the technology and failed to identify the right customers, i.e. early adopters. It is now 2004. Ed retains his CTO position (T for technical) but is in charge of business development. Better late than never. So far so good, there are deals to be made. Let me fill in some gaps: 1. Some of our original partners are no longer shareholders. In the process, I lost my COO position. Even after the dust settled, I never got any feedback even when I asked. Only Ed would give it; that does not do me a whole lot of good if I find myself in the employment pool. 2. After the COO position, I was relegated to an R&D directorship. Ironically, although I was meeting my goals and objectives, I found this position more difficult than the COO. I realized that I had the business sense and was on the nose regarding some decisions relevant to the company. I can understand though that I would never be credited for these and in fact probably intimidated some. I really hit the proverbial glass ceiling. 3. During the second financing round, the company almost died! There was a failed round; the business plan went through a re-write; and Pop (my father), Ed, and I put together our personal savings to be able to pay salaries for 3 months. By the 3rd month, Ed as managing director was able to close the round. The new investors then brought in a new CEO. 4. I left the company in 2001 and was able to keep all my shares. I suppose some people high up in the company did not like me and it would have been psychological suicide for me to stay on. In hindsight, it was also a case of mobbing (happens over here). I am currently doing some free-lance consulting. In all of this, what was the biggest challenge? That’s a hard one to answer. Obviously, the challenges just kept coming. When it’s your baby and you are determined to give it your best shot, you just keep going. In the words of one of our co-founders, “it’s not a sprint; it’s a marathon.” And I am banking on Ed, who’s still in the race, to secure those deals! The top 3 lessons learned: 1. Choose the people you will work with judiciously (from co-founders and VCs to management and legal counsel). Obviously, competence and chemistry count a lot. But get it right from the start and you’ll be less hassled later on. People skills are essential when people have to work as a team. Interview diligently. When someone is hired at senior management level that is incompetent or has an agenda, you may have to kiss your hard work goodbye. They are not easily removed. It takes fortitude and the political will of the key shareholders. If any of the above is missing, it may not happen and something will have to give in terms of the company’s fate. 2. Choose wisely where you plan to found a company. Being a first-mover in a risk-averse environment really poses problems from scientific discussions to decision-making at the top. Acceptance of cultural differences is also a key issue from effective communication to salary negotiations and awarding of bonuses. It is a matter of perception and affects the comfort level of those key shareholders, the investors. 3. Money is key and you should always have enough of it. Why start a business when you are not in it to make money? If you don’t, your investors will get you for it. Plan on a revenue stream. Hence, common sense tells us that any company needs a strategy: in particular, a financing strategy and a business development strategy. Know when to raise money and how much. Know how best the company can capitalize on what it has and what can it develop in the near term and in the long term. (It should be in the business plan anyway.) When there is a market for a technology but it doesn’t sell, you package and re-package but don’t throw it out the window on a whim. This current trend for products as a business model is fine. But if you have a technology that’s making money, especially when you can retain product rights and develop your own products down the road (when the time is right and revenues are there), no one can criticize you for not being a product company just yet. ### << Previous Next >> [ View All Member Spotlights ] |
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