MiniMBA Overview

Jeff Behrens

miniMBA for MEMPs and other HST Friends

• Why miniMBA?• Key Topics

– Company conception/business planning– Scientific roles in startups– Company formation– Licensing– Financing

• Grants• Angels• VC

– Operations/Outsourcing– Dealmaking/BD– Corporate partnering– Exits

Why MiniMBA?• Translating science is hard• Significant failures• Investors not doing well• Capital is less available• Yet potential opportunities are amazing

– To make significant differences in healthcare– To build great companies and products– To make money and provide positive feedback to this dynamic system

• Scientists (in academia and industry) play critical roles in these processes• The better we are at translation, the more successful, the more money

mademore resources to do more translation• We need you to be aware of the issues and challenges in translation

– So if you end up in academia you can play a positive role here– If you decide to become an entrepreneur you have a leg up– If you enter industry you do so with eyes wide open

• We need your HELP!

My Background

• Harvard BA: philosophy• IT consulting: Telluride• Sold in 2003• HST BEP: 2005-2007• Biogen• Alnylam• Edimer• Sialix

The Telluride Group

• IT services: productified• Grew to 35 ppl• Sold to a Fidelity-funded “rollup” (mindSHIFT,

sold to BestBuy)• Profitable almost every year• Raised small angel round• Modest exit, but great for us

Predictive Biology Analytics

• Algorithm to predict small molecule drug toxicity

• SBIR Phase I = $150k• Couldn’t reproduce results• Game over

Edimer

• Third Rock Startup - $22m• Orphan indication – XLHED• Protein therapeutic• Joined at company formation through IND• In clinical trials now

Sialix

• UCSD spinout, 6 years ago– Founder led for 4 years

• Angels came in 2 years ago• I joined May ’12• mAbs targeting glycan alterations in cancer• Anti-inflammatory nutrition approach• Raising money now (all the time!)• 4 staff, small lab in San Diego• Outsourcing model

Key Theme: Risk/Reward Ratio

• Return should be correlated to risk• Can biological risk be quantified?• Who will fund innovation?• LPs, VCs, and other sources of capital• Significant problem: If investors are not

making money with life sciences; $ will not be available

Types of Risk

• Technical• Market/adoption• Management (financing?)

Why Are Life Science Startups Hard?

• Product development is expensive, slow and risky

• Capital is hard to find, and afraid of “expensive, slow and risky”

• Regulatory environment adds to the costs and risks

• If entrepreneurs (AND/OR YOU!) can address any part of “expensive, slow and risky” things get better

Life Science Product Development

• A long series of “de-risking” steps• Each reduces risk and raises value• Certain experiments/data are key (to whom?)• Knowing the opportunity/market• What are the right milestones?• Who is the customer? (big companies

w/established markets?) MDs? Patients?

Expensive

• Problem– Science is expensive – people, equipment– Time = money– Unknown path to a successful outcome

• Possible Solutions– Better academic validation pre-spinout– Outsourcing– Taking advantage of growing industrialization of

some areas of biotech (mAb engineering)

Slow

• Problem– Hard to predict when things will succeed– Time is money = burn rate– Full path to product approval and commercialization

is very long• Possible Solutions– Reduce burn rate so at least slow is not too expensive– Find interim “value creating” steps – early exits– Identify key derisking/value creating steps

Risky

• Problem– Unknowns– Biology & god– Humans

• Possible Solutions– The best people around the table

• Labs, advisors, consultants, PIs

– The best partners – big companies, CROs– The best IP– What CAN you control?

Key Topics– Company conception/business planning– Scientific roles in startups– Company formation– Licensing– Financing

• Grants• Angels• VC

– Operations/Outsourcing– Dealmaking/BD– Corporate partnering– Exits

Company conception/business planning

• Founders?• Is it a BIG idea? (it better be because small ideas

are equally risky)• Writing the story of the company/product– 10-20 slide deck

• Does this story have internal consistency?• Test the story – again, again, again, again…..• Multiple external validation is critical• Refine, tell, repeat….

Key Questions to Answer

• Product development plan/milestones• Costs to milestones – capital required• Funding strategy• Licenses/IP – will the TLO license to YOU?• Team (FT, advisors, mentors, board)• Exit/investor return• Internal consistency matters with this story

Scientific roles in startups

• Academic founder – staying in academia– Building a scientific and publishing “asset base”– Smart development of IP with close cooperation of

university TLO (and maybe outside advice?)• Academic founder – joins company• Academic consultant/advisor• Lab/company relationships – critical but

challenging• PI/Lab/Institution/Company – many actors

Company formation

• Corporate forms: C-corp, S-corp, LLC– Taxes matter– Best get it right up front

• Need: lawyer, CPA, advisors, mentors, board– Upgrading boards…

MIT’s Ecosystem is Amazing

• VMS (venture mentoring service)• 100k competition– And Mass Challenge, techstars, etc…

• MIT Entrepreneurship Forum• Sloan classes• Informal and formal networks

Licensing & IP

• Academic IP is owned by university not the inventor (though inventors typical get some % of licensing income)

• Academic centers have an obligation to license technology (Bayh – Dole)

• Licenses require:– Credibility – can YOU get the license?– Lawyers– Upfront $– Royalties and milestones

• Options

Financing the Venture

• Capital requirements– Product development vs. service/IT

• Sources– Grants (SBIR-slow!, Mass Life Sciences, other)– FFF: friends, family, fools– Angels– VC– Corporate partners (internal VC or other)

• Unfortunately, critical• We all salespeople, always selling

Operations and Outsourcing

• Team size• What is industrialized today? What can be

outsourced?• What cannot and must be in academic lab or

your lab?• Cost/budget implications• Risk implications

Dealmaking/BDCritical skill in this business

• Deals to:– Setup the company– License IP– Collaborate with academics– Fund the company– Early corporate partnerships– Exits

• Ongoing conversations critical– Learn what buyers want– Feedback/refine pitch

• Large corporate biopharma/device buyers:– Desperate for innovation & new products– Individuals need to do deals– Risk averse– Companies are many individuals with individual careers and agendas– Role of luck– Therefore always be pitching, building relationships– It can be fun!

Exits

• Exit as last chapter of your bplan/story– Credibility– Data on past exits– Conversations with potential buyers essential,

helpful– Critical for investors

• You never know when a deal will be done– Setup for success early and always be looking

Advice

• You have to sell, better learn how…• Interacting with innovation is fun – get involved somehow• Network for the rest of your life (gently, and enjoy it, make

friends)• Advisors, mentors, role-models• Complement your PhD with outside experiences, internships,

consulting, projects, classes– Not easy, but enriching– Very feasible in the MIT ecosystem

• Business is an applied skill, like working a lab– Classroom only helps a little– Gotta do it to learn it

Speakers

• Marc Rubenstein, JD, Ropes and Gray• Joe Smith, MD/PhD (HST), • Erik Halvorsen, PhD, Boston Childrens’ Hospital OTD• Kevin Bitterman, PhD• Richard Lee, MD• Julie Yoo, MS/MBS (HST)• Chris Love, PhD, MIT & Founder Enumeral• Todd Zion, PhD, Founder/CEO Smartcells (sold to Merck)• David Gilman, MBA, The Frankel Group• Reid Leonard, PhD, Merck (?)