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Biotechnology utilizes everything from biological systems—living organisms, and their parts—to develop products for practical use. That being said, one can already tell that it’s going to be bank-breaking to come up with enough capital to start a company in the biotech industry. But, knowing how to build a biotech startup might be able to help curb your expenses without sacrificing the quality of your outputs.
This is where this ultimate guide on how to build a biotech startup comes in. Buckle up and we’ll dive right in!
How to Start a Biotech Company?
As always, the hardest thing to do in any project is to start. But once you learn the basics, you can trust that the rest of the steps along the way will no longer be as difficult to do.
So, how do you start a biotech company? We suggest that you first answer these eight questions to determine if you really have the aptitude to commit to this undertaking.
- Are you ready to commit to creating your own biotech company?
- Have you evaluated the commercial viability of your biotech product or service?
- Have you sized up your target market and potential competition?
- Does your product or service pitch a unique solution to an existing societal problem?
- Have you filed a US patent for your product or service? If yes, how long is its coverage?
- Do you have the resources, strategy, and revenue model to market and sell your product or service?
- Can you make sure that you’re allocating your resources in the best way possible?
- Where will you get the funding for your startup?
First Steps in Starting a Biotech Company
How do you eat an elephant? By breaking it down into small, bite-sized pieces. That’s exactly what we’re going to do to make the process of starting a biotech company a little less overwhelming.
The first step is actually a bunch of smaller steps, which we’ll discuss briefly below.
Tech Vs. Biotech Startups
People often mistake technology or tech as something that can be used broadly in different industries. But tech involving codes and tech involving biological systems have entirely different characteristics that you should be well aware of.
Here’s a summary of the differences between the two startup categories.
|Parameter||Tech Startup||Biotech Startup|
|Commercial viability||Should answer the question: “Will people want to use this tech?”||Should be able to provide the solution (cure) to a market problem (disease)|
|Importance||Tech appeals to what the market wants||Biotech appeals to public health and safety, which is a market need|
|Progress trends||An up-and-to-the-right trend in the graph is a tell-tale sign of a growing tech startup||Progress is more erratic and depends on the biotech startup’s milestones|
|Developmental behavior||Tech startups can improve and modify their products regularly based on user’s feedback||Biotech products are filed under the FDA, which means the approval process is relatively longer and modifications to the product will require a repeat application to the agency|
|Founders||Younger, more adaptive to the current technology||Seasoned professionals in the scientific field|
|Market||Can create their own market segments||General public|
|Team||Outsourcing other talents is not common practice||Multi-disciplinary collaborations are welcome|
|Originality||Easy to mimic, copycats are everywhere||Patent protection is a standard operating procedure|
|Funding||Pre-seed, series of seed fundings||Funding agencies mostly include research and development institutions|
|Capital||Personal funds up to series A funding||At least the amount of a series A funding|
|Revenue||Almost always exits the industry with revenue||Less likely to gain profits or revenue after leaving the industry|
|Scaling||Little to no restrictions||Highly-restricted and regulated|
Framework for Ideation
You might already have an inkling of what biotech product or service you’d want to introduce to the market. But a general idea almost always becomes a flop because it’s too broad and is, therefore, harder to visualize.
There are lots of references that you can use to single out an idea worth championing for your biotech startup. You may want to check out previously rejected or failed submissions to the FDA. Or, coordinate with technology transfer offices and professionals in different research universities. Basically, there’s so much more information waiting for you outside the confines of printed literature in books and libraries.
Aside from producing novel drug combinations, you could also work on a repurposed drug, a biological compound target, a concept for new drug discovery, or a specific platform of conducting biological research.
The ideation framework below might come in handy.
Things to Consider in Picking the Type of Drug
In selecting the type of drug to zero in on, you should consider the following scientific and economical factors.
- Effect of the drug on the overall function of the target: gain or loss
- Drug target location (e.g. tissue between the barriers of the blood-brain or blood-retina)
- Scope of the drug’s effect: isolated or widespread
- Manufacturing and maintenance costs of production
- Drug safety
- Mode of intake or administration
- Pharmacokinetic considerations
- Economic pricing
How to Choose Disease to Target
The concept of developing a new drug might come from studying a disease, a pathway, or a platform technology. The combination of asking yourself these next four questions and providing scientific evidence to support your answers is the best course of action in choosing which disease your drug should target.
- Considering the pathway of the disease’s development and the platform technologies of the existing cures, how relevant or predominant is the concept of your proposed new drug?
- Which diseases will your drug be able to treat? Research on the standard cures or treatments to these diseases.
- Compared to the standard of care, does your drug have more potential benefits?
- Have you checked the existing clinical pipeline, including all the available generics of the branded drugs? Is your drug unique or has another biotech startup already beaten you to it?
- Do you have a stable, potential market to introduce your drug to? Consider your product pricing, accessibility, and existing regulations, to name a few.
One of the key differences between tech and business startups is asset protection. While it can be optional for some tech products, it’s almost a mandatory action to take in the scientific field.
In our how to file a US patent article, we talked about how filing a provisional patent application can be your property’s first layer of protection. But aside from patents, you can also opt to draft a confidentiality agreement with all the people behind the drug development process.
Incorporating your biotech startup is also a good choice for asset protection, provided that you can afford to pay for all the legalities. But the most common way of ensuring that the intellectual property stays with the developers is by tapping the technological license offices of their universities. Sure, the institution might get a percentage of the patent rights, but at the very least, the proponents will have one less thing to worry about.
Conducting research not only drains the brain cells of scientists but also squeezes out the rest of their laboratory budgets. While they can always request research grants from public and private institutions, securing funds from venture capitalists and submitting investment memos are the next best options.
Venture Capital for Biotech
If you know how to pitch an idea to investors well, then obtaining venture capital for your biotech startup shouldn’t be that difficult.
Here are the major steps to do:
- Carefully choose the venture capital institution you want to work with. This can either be private or public.
- Run the development process plan with them and get their insights as external reviewers.
- Negotiate the terms of your venture capital agreement until you find a win-win situation.
Sometimes, this route of raising funds is more appropriate when you’ve narrowed down your potential partners to a short list.
An investment memorandum or IM is usually created for new biotech startups looking to raise funds. Usually, Fund Experts in the field release this document to help investment capitalists better understand the product trying to enter the market. Keep in mind that this memo will only be as effective as how well you’ve written its contents.
Below is a general outline you can follow when writing an IM.
- Executive summary
- The opportunity
- Relevant acronyms, pathways, and structures
- The biology of the drug
- The mechanism of the drug therapy
- Indications of interest (including market- and regulatory- feasibilities)
- Analysis of the freedom to operate
- The biotech startup
Challenges in Building a Biotech Startup
If we’re being completely honest, raising money for your biotech startup is already a challenge in itself. So is the ideation process and all its components. But there are still more pressing concerns that a biotech startup should know about.
Building strategic partnerships
Identifying the perfect time to enter a strategic partnership can make or break a biotech startup’s momentum. If you wait too long, it could result in your startup’s funds running dry. Agree too early and you might be underselling your product and company. The key here is to assess the situation. Hire a consultant or a mentor if you can.
Recruiting people into your team
Manpower is still a scarce resource in academic science, despite the many applicants per project. While the technical stuff can be learned, soft skills like work ethics and socialization are harder to cultivate. So, when you recruit people into your team, weigh in their hard and soft skills first. Then, determine which position in the company will be most suitable for them—an employee, a director, a scientific advisor, or a member of the sales and management team.
Motivating the scientific talents that you are currently working with
As hard as it is to recruit people, it’s equally as hard to make them stay. The scientific industry isn’t exactly one of the most lavish industries today. So, it’s hard to find other forms of motivation, especially when money can sometimes be an issue. It’s true that some professionals don’t mind the lack of resources. But it can be a deal-breaker when you’re an inch away from the fulfillment of your goals and lack the funds to continue.
The key here is to plan carefully and only expect to achieve results that your resources can provide. Being too ambitious in doing research, without the proper support, is a surefire way to kill a project somewhere along the way. If it’s gonna take three phases, with different funding agencies, it’ll be better than a single phase with potentially insufficient funds to finish.
Observing compliance to regulatory bodies
Drugs and other forms of biological products that can have an effect on the health and safety of humans and animals are regulated by the US FDA. There are four different submission types for drugs that you should carefully study to ensure compliance with the FDA. If you want to know more, we highly recommend that you read this FDA submission guide.
You Might Ask
Is there money in biotech?
There is usually no money in biotech. Unlike most tech startups that can exit the industry with respectable revenue, biotech startups usually don’t have money to show for their efforts after their stint in the market. This could be because the general public is involved so they can only implement economic pricing. Almost always, the earnings would be just enough to cover operational and incidental expenses. But umbrella companies of different product lines like Pfizer, Johnson & Johnson, or Roche, have raked in big profits yearly, especially with the COVID vaccines.
How do biotech startups make money?
To make money, a biotech startup may choose to license out their drug or partner with pharmaceutical companies. Doing so will help maximize the reach of their product, which can then improve their sales, and consequently increase their revenue.
What percentage of biotech startups fail?
About 90 percent of startups fail in their first year in the industry. Biotech startups are especially included in these statistics because of their slow and erratic progress.
Setting up a biotech startup is difficult but very possible. Most startups in this category fail because the developers lose sight of what their long-term goals are. This results in unfinished research and poor evaluation from investors.
Through this guide, we hope that you were able to reflect on the things that you need to consider to build the startup that you have in mind. In our next article, we’ll talk about how to start a biotech startup on a budget. Join us by subscribing and being in the loop!