At least you have reached the first critical step in the process. You decided to take action and create a company. Now what? The process varies with the individual, but these are some of the critical steps and a little about how to accomplish them. This is not comprehensive but a class 101 on what to do. The graduate classes will come later, if you are interested.
Pick Technology Area
The technology area may be something you are currently working on or an area you follow. If you do not have a favorite yet, a good place to start is an area you have passion for, or at least can develop the passion. It may be healthcare, green, energy or some other area. At least be excited about what you will be doing because you will be living with it for quite a while. You may have some very difficult times ahead of you and working on a technology you hate does not help at all. After all, growing a business is not for the “faint of heart”. You can be certain that your excitement will carry through in your attempts to raise capital and develop a successful business. Also, it will fuel your drive to learn all you can about the topic of your business. You must become the expert in the space.
Intellectual Property & Licenses
You now need to find intellectual property (IP) in the forms of patents or pending applications. You may have your own ideas and patents, but you can also go on the hunt to find technology. Searching for technology is not difficult, but it does take a lot of work. Universities are often the best place to start. Most universities have a Technology Transfer Office that will manage IP and handle licensing of patents generated at that Institution.
The Association of Technology Managers (AUTM: http://www.autm.net/home.htm ) has some resources and connections if you are not a member, but you can get greater access if you are. Some university offices are listed and sometimes here are links to the office. Most often it is best to go direct to a university web site and look for the group that handles the licensing. Often, the office will have a listing of available technologies and these offices are often looking for entrepreneurs to develop a business around the technology. Better yet is to develop a relationship with someone at the technology transfer office and let them know what you are looking for. It may not have been invented yet and you can request an alert if a patent application comes across their desk.
If you have a favorite scientist, you can request info about technology available by that scientist. You can also discuss with the scientist how to gain access to the IP through their University. Be careful, in nearly all cases, the scientist (professor) does not own the rights to their inventions, the university does. Make sure you are dealing with the correct entity.
Getting a license and or a patent, whether it is yours or it belongs to someone else, will cost money. Just the patent process alone can be expensive and the license adds to that expense. So, this is another reason you want to be excited about the area, you will need to spend money or promise to pay in the future for the rights to the technology. I usually recommend that the entrepreneur not borrow against their house or other assets for payments. If the business fails, you may experience greater difficulty at home later.
The IP is essential!!! It protects the company from others selling your products. Yes you really do get to have a “real monopoly” on a product if the IP is sufficient to protect the space. A complete set of IP also addresses a question of “what makes you so special.” I get this a lot.
You might be surprised how many times I have looked over IP for other startups or companies only to find they did not cover enough of the field, or that their patents are in a field so cluttered that there is no real room to operate. The “Freedom to Operate” issue is a true concern. Most inventors do not realize that having a patent gives the ability to prevent someone from selling a product, not give you permission to sell a product. You really need to look at the IP landscape to make sure you are clear to sell. However, this is the topic for a later blog on IP.
You can save a bit of money by searching on http://www.uspto.gov/ for IP. Issued patents and some applications are listed and searchable. You may even decide to seek patents to license via searches. It is a useful site and worth time learning how to use it. There is an similar site for foreign IP but a bit more complicated to cover all locals.
Suffice it to say, you MUST have knowledge and ownership which can allow you to have an ability to commercialize something with minimal or no competition. Otherwise, it will be much more difficult to the funding you need in the biotech space. By the way, telling someone you will compete on price or cost of goods is not that exciting. You are much better off telling them you will have a monopoly in the area.
Business Plan & Slide Deck
OK now you know what the product line or inventions may be. You have passion about the area. Now you need to organize your thoughts for yourself and for others. You need to develop a Business Plan.
This is not a simple few page document, but an in depth description of the Field of the Company, whether it is a C-class corporation of an LLP etc, the potential Products (future & past), how these fit in the commercial landscape, the management team with their ability to execute, summary of the IP, the competition and your competitive advantages, and YES cash flow projections and timelines of the key milestones of the company, and a lot more. There are a few different models for a plan, but it can be a significant preparation which can take a while and will require significant supplemental research to make sure it can withstand scrutiny.
You can check around, as there are software programs that can help compile the document. Remember, “Trash in, Trash out” you must do your homework. This is the first real document that will be seen by funding sponsors you approach. You may start off with the executive summary, but the full business plan will be something investors will want to see.
You now have to generate a slide deck which is to be your investor pitch. I usually tell young entrepreneurs that they should have an “Elevator Pitch” to go with the deck. An Elevator Pitch is a 20- 30 sec description of the business and why someone should be interested. Not so easy! But I cannot tell you how many times I have been in close quarters like an elevator and used a pitch. My last was with a Merck executive at the JP Morgan Healthcare conference. Yes, I was actually in an elevator! The person I spoke to gave me a business card which I used to follow up with a Slide Deck and Executive Summary of the Business.
The Slide Deck is a description of the company, management, technology, product, and value proposition for an investor or company. It is a real presentation / sales pitch on what the company is, who is running it, what the products are, and how the person listening will make money by investing or working with you. I usually have two versions; one which is around 20 min and one around 40 min in length. The 20 min version is most often used. With questions the presentations can run 1.5 hr, but I try to keep it to under an hour. I also try to find a way to give it in 5 min. I have had to do that on more than one occasion. The talks usually take much longer because of the questions, but you MUST be aware of the person’s time listening and keep things short enough to keep the listener’s interest and allow them to keep their schedule.
You think things were difficult. Wait till you start a search for funding.
Funding can come from Friends & Family, Angel Investors, Venture Capital, Partners, and other sources. Essentially you need to be prepared for the long haul on this one. Before the year 2000, it was much easier to find funding for young companies. After 2000, it became more difficult. Recently, it has gotten much worse and partnering has become more difficult as well. The landscape for partnering and funding are easing a bit, but I do not expect significant improvement in the next few years.
It is this aspect of building a company most entrepreneurs like the least. You have to listen to a lot of things which seem a bit rough. Sometimes get great advice, sometimes people just listen and say they will get back to you but don’t. I have actually had a few be downright ugly to me, but this is where persistence is crucial, once you start you cannot give up easily. You can’t take things personal. There is an old saying that “there is a wife for everybody.” Well, that is sort of true for funding. You are looking for that select group that like you and your technology and will give you money and back your business.
You may have to continue the hunt for extended times and your company will have little or no money to help with the process. Just keep on going and don’t give up.
By the way, you can apply for Grants. There are a wide variety of grants which are possible to obtain, but it takes time and they are not guaranteed. Nevertheless, you will need to apply. You can work out an arrangement with a senator or congressman to get earmark investment, you can seek funding via state programs for loans or grants, and there are likely sources you would not even guess are available. Special interest groups for example have granting facilities for certain health areas. Remember to seek all avenues and do not give up.
The key take homes from this blog are:
1. Work in area you find exciting
2. Develop a “Moat around the Field” with “IP and Know How”. Yes you are to generate a true legal monopoly.
3. Generate a stellar business plan and a presentation to match. You have to convince people to invest in you and the technology. You really need to know the space and be an expert.
4. Get MONEY. You can’t run a company with no funds. This will take time and you have to “Kiss a Lot of Frogs to Find a Prince or Princess.”
5. It is important you do not get discouraged. I have been at deaths door at least 4 times and managed to get things turned around before closing a business. KEEP TRYING, persistence is essential.This is my first blog. If there is interest in this blog and I get feedback indicating so, I will continue and elaborate on these and more areas in detail; there are so many. I hope this first blog is not too simplistic but it seemed a good starting point for those that are just considering starting a company. I often describe these steps and more with young faculty members that have just come up with a invention and want to be more entrepreneurial.
You be the judge. I hope you will let me know if it is useful. Likewise, if you have areas you would like to see covered next and in more detail let me know.
Taffy Williams is the author of: Think Agile: How Smart Entrepreneurs Adapt in Order to Succeed to via Amazon