BUILDING A BUSINESS

So you want to be a student entrepreneur?

Charles H Jones & Andrew Hill
© 2017 Nature America, Inc., part of Springer Nature. All rights reserved.

Practical tips for graduate students with an aspiration to start a life science venture.

W hile finishing our PhD studies, we

decided to found a company, Abcombi
Biosciences, with the intent of commercializ-
ability to deliver results in a timely and pro-
fessional manner. During the early stages of a
company, the founders’ credibility is critical
This showed us how to initiate discussions with
set target and walkaway terms, and improved
our negotiating skills, and should be useful in
ing a vaccine we had developed for combatting for selling the company’s potential for suc- partnering discussions for your company.
pneumococcal disease. Because our technology cess. Furthermore, building your company’s In addition to building your IP, you will need
was developed in a university laboratory, three credibility must be your highest priority—it to identify potential competing technologies
of the four founding members of our startup improves your ability to raise capital, attract through patent searches and establish your
team were academics—only one of us pos- partners, and recruit competitively. During ‘freedom to operate’—a legal term meaning
sessed direct industrial experience. Although this process, it is important that you routinely that your IP does not infringe on any existing
this established our academic credentials, we perform honest assessments of your company’s patents. This is time-intensive and expensive,
quickly discovered that our lack of broad busi- strengths and limitations. These assessments but it’s critical for identifying how others might
ness acumen meant that our initial commer- will tell you where to first focus your efforts. circumvent your company’s IP. We recommend
cialization plans were ill-conceived and failed This will not only improve your company’s seeking funds from angel investors to support
to take into account many of the challenges in product(s), but also address concerns raised such activities and hiring a professional firm
commercializing a discovery-stage technol- by potential investors. to analyze your patent landscape for poten-
ogy. After realizing that our core team was not tial acquisition targets. Typically, potential
equipped for the challenge ahead, we started Scientific credibility. First, you’ll need to look investors will assess the protection of your
over. at your scientific underpinnings. As an old company’s IP during technical due diligence,
This article is our attempt to help other adage goes, “trust takes years to build, but sec- and expanding your IP portfolio beyond your
aspiring scientist–entrepreneurs from making onds to lose.” For students, your scientific cred- initial patents will strengthen the protection of
the same mistakes. It provides reflections and ibility is directly linked to success in research, your technology.
advice (Table 1) from our ongoing journey as curriculum, and practical experience, such as
graduate students turned entrepreneurs. As internships. When founding a company, you Business credibility. There’s an unfortunate
with many other aspiring small businesses, we will, in particular, face concerns from inves- assumption among researchers that a stellar
learned the hard way, through trial and error. tors and potential collaborators if you have not IP portfolio and a promising pipeline will sell
We provide below the framework and strate- completed your targeted terminal degrees. But your company by itself. It won’t. Your com-
gies most appropriate to students interested in this can be overcome by establishing a strong pany’s business credibility is primarily derived
navigating the intricate interplay of technologi- track record as a scientist through publishing from the collective experience and ability of
cal and commercial development in biotech, research and review articles, and securing pat- your team to navigate the diverse issues your
which often act at different scales—from intel- ents. This collectively demonstrates your ver- company will inevitably face. We realized this
lectual novelty to economic feasibility. As this satility in the respective field. after several of our initial attempts to raise
information would have been highly beneficial funding failed.
to us at Abcombi’s founding, we hope this arti- Intellectual property. Building a strong One means to build credibility in business
cle will prove useful to others seeking to start intellectual property (IP) portfolio for your is through networking at relevant conferences.
their life science ventures. company is another way to build credibility. Although as researchers, we attended confer-
For student entrepreneurs this again can be ences with long and established records, such
Building credibility a challenge, as students rarely possess owner- as those sponsored by the American Society of
A student entrepreneur’s biggest hurdle is ship of the IP generated from their research Microbiology and American Chemical Society,
credibility. It permeates every aspect of busi- laboratory and must negotiate licensing rights that offer limited exposure to industry. We
ness development and is an extension of your from their respective university. This is a sub- discovered that our business network could be
stantial challenge because, in our experience, built more efficiently by attending industrially
the university has little incentive to structure linked conferences, such as the Biotechnology
Charles Jones and Andrew Hill are at Abcombi a licensing deal with beneficial terms for the Innovation Organization (BIO) International
Biosciences Inc., Buffalo, New York, USA. student. In our own licensing negotiations, we Convention and the World Vaccine Congress
e-mail: charles.jones@abcombibio.com or greatly benefited from practicing negotiation (WVC). This enabled us to not only estab-
andrew.hill@abcombibio.com tactics learned through books and courses. lish critical industrial contacts but also learn

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 BIOENTREPRENEUR / BUILDING A BUSINESS

typically lead to the pursuit of highly novel solu-

Table 1 Checklist of actionable items for aspiring student entrepreneurs tions that pertain to issues of interest to either
Attribute Recommendations the student or advisor—do not necessarily
Establish your scien- • Build your reputation within your company’s field by soliciting opportunities to translate into solutions considered commer-
tific credibility with write review articles
industry
cially relevant by investors or major corpora-
• Attend specialized industry-oriented conferences and actively network
tions. Idealistic academic solutions often ignore
Build your IP port- • Learn and apply various negotiation techniques to secure licensing rights to the
folio IP your company requires to operate numerous business-related constraints and
• Evaluate the patent landscape surrounding your company’s product(s) to iden- therefore may not represent a viable commer-
tify potential targets for acquisition cial opportunity.
Gain recognition as a • Build connections within the business world to identify mentors who can guide Thus, aspiring entrepreneurs should focus
business leader you and provide validation of your company on developing ‘working solutions’ that are
• Build your network by engaging the connections of your mentor(s) and taking cost-effective, capable of overcoming regula-
advantage of the opportunity to learn from their collective experience
tory hurdles, can be delivered practically to the
© 2017 Nature America, Inc., part of Springer Nature. All rights reserved.

Understand what is • Identify the market for your product: is it sufficiently large to appeal to investors?
required to develop a • Determine the key advantages of your product: target demographic, and possess a competitive
competitive product advantage in a respectable market with a rea-
Lower cost
Superior coverage, efficacy
sonable promise of sufficient remuneration.
Market disruption
Bridging this gap means students need to over-
Build a product that • Determine what is important for a product within the market you are seeking to
come their academic biases to identify commer-
is realistic to develop enter: cially viable products.
and commercialize o Determine the key features to optimize cost and efficacy (80-20 rule) Even if your company has brought an asset
o Limit your product design to contain features that are currently accepted in to the brink of human testing, safety trials,
clinical applications proof of efficacy, and multi-center human
o If your product is highly novel, take steps to reduce its complexity and there- testing (phases 1 through 3) can cost an aver-
fore perceived risk
age of $22.2–71.3 million in the United States,
• Identify what you can use as a measure of efficacy and whether your regulatory
pathway is reasonable depending on the indication1. Thus, a critical
Achieve flight (get- • Become active in business plan competitions, starting initially in student com- issue is whether your lead product addresses
ting off the ground) petitions an area of pressing need and can do so with
• Identify various forms of small-scale funding that can enable you to de-risk your the shortest and most streamlined develop-
company ment pathway. Furthermore, even if you have
Angel investors identified a commercially attractive market, you
STTR and SBIR grants also need to demonstrate that your product has
• Enter discussions with organizations that provide dilutive funding with realistic
clear advantages over existing products (e.g.,
expectations; innovation is secondary to the likelihood of commercial viability
• Expect thorough due-diligence as you progress through negotiations
standard-of-care products) from competitors.
Balance graduate • Expect to work 80–100 hours per week and make efforts to organize your time
Those advantages might include a substantial
student and entre- efficiently reduction in manufacturing costs, a superior
preneur lifestyle • Maintain an open dialog with your advisor about your company and discuss product, or the ability to address a market
strategies to ensure that the interests both of you are protected issue not being currently addressed. Whatever
the case, you must do a thorough product
comparison to current commercial vaccines
and therapeutics, as well as to those currently
the business nuances of our field. Thus, any The hard part is that it’s difficult to obtain in development.
aspiring student entrepreneurs should identify, mentorships from world-class business lead- One of the first considerations is cost.
attend, and actively participate in key business ers, so do not become discouraged if you aren’t Although you may not be able to find out how
networking conferences. immediately successful. We found success only much your competitors spend to produce their
To overcome our inexperience with the com- after consistently attending business competi- products (called the cost of goods (COGs)),
plete vaccine developmental cycle, we recruited tions and industrial conferences, and engag- you can get a ballpark comparison using cur-
a team of experts with decades of corporate and ing with numerous individuals at each event. rent market prices while assuming a significant
clinical/regulatory experience. This allowed us In our experience, we had a 15% success rate markup. For example, if a competitor’s product
to draw upon their knowledge and dramati- in recruiting during our early growth phases. is offered using a tiered-pricing structure (i.e.,
cally improve our development strategy. A Impeding the process was our lack of credibility different markets/countries can purchase at
key relationship for us came from Margaret and inability to provide competitive compensa- discounted rates), you can approximate their
McGlynn, the former president of Merck’s tion. Our success came with individuals who COGS based upon third-world countries’
Global Vaccine and Infectious Disease Division shared our vision of the future and who were prices as these markets are often not capable of
and CEO of the International Aids Vaccine at a stage of their careers when they could take purchasing at a premium. However, if you plan
Initiative (New York). She agreed to serve as risks. to enter an established market as an entrepre-
an advisor to our company and we leveraged neur, you should always endeavor to develop
her network to establish contact with numer- Expanding the researcher perspective a product that solves a pressing need, rather
ous vaccine experts. Students often enter graduate school to partici- than one that is simply cheaper. Creating an
An experienced advisor can influence oth- pate in cutting-edge research and to fulfill their improved ‘me too’ product may be appealing in
ers to appreciate your potential, which can desire to solve world problems. This is noble, large markets, but startups lack the resources to
help with both investments and partnerships. but the goals of academic excellence—which compete with large multinationals that possess

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 BIOENTREPRENEUR / BUILDING A BUSINESS

an economy of scale advantage (i.e., the abil- your product’s respective regulations), all your key actionable items that build your company’s
ity to produce goods at a lower cost due to the previous R&D efforts will have been made in value, developing a clear (and realistic) vision
size of their production process). For example, vain (Box 1). for your company, and integrating any feed-
in the vaccine sector where Abcombi oper- You should create a clinical development back you receive.
ates, the five largest players control 75% of the plan and map out your regulatory pathway
global market, according to an analysis by the before finalizing your indications. We drafted Funding. How can a student raise sufficient
Program for Appropriate Technology in Health our plan and regulatory pathway internally, capital? The lack of credibility here com-
(Seattle), and are capable of competing at price but refined them through contracting consul- plicates things, especially with traditional
points well below levels required for sustain- tants that possessed substantial experience in routes such as venture capital. This means
ability for a startup. major pharmaceutical companies familiar that beyond raising funds from the three F’s
To determine whether or not your indication with vaccine development. When completing (friends, family, and fools), you will need to
has superior performance, develop a compre- these plans we modified our vaccine compo- consider a range of investors and investment
hensive understanding of the market you are sition and marketing strategy after gaining vehicles that are a realistic avenue for students,
© 2017 Nature America, Inc., part of Springer Nature. All rights reserved.

seeking to enter and the problems within it. For an appreciation for how difficult it is to earn as well as the pros and cons of each route2.
example, if you are developing an antibacte- regulatory approval. Specifically, student competitions, such as
rial asset, first determine what the rate of resis- The take-home message is that if you those around business plans, represent an ideal
tance development is for other antibacterial develop a realistic path to licensure early in starting point because their mechanisms are
drugs against your target pathogen, followed your endeavors, you will save a lot of time designed to teach and refine the skills needed
by quantifying your product’s superiority over and effort later. Furthermore, you also will be for securing funding from traditional routes.
competitors, and finally, determine the limita- better prepared for discussions with inves- These opportunities are often offered through
tions of competing interventions towards the tors and present a more attractive investment your university’s business school.
goal of designing solutions. Understanding opportunity. Our experience taught us that Once you’ve gained experience in student
the market you plan to enter better positions having plans for marketing and obtaining competitions, you should transition to larger
you to develop a product that clearly solves a licensure is critical to obtaining funding for business-related funding competitions, rang-
pressing need. even preclinical research. ing from local economic initiatives, such as
the 43North business competition in Buffalo,
Commercial feasibility Achieving flight New York, to national and international enti-
A common academic bias is that the best solu- After identifying your product and founding ties3. There are also government programs
tions are both novel and provide the strongest your company, you’ll need funding. There that can help4. Specifically, if you are a gradu-
impact, but as an entrepreneur, you should are two kinds of investments: dilutive and ate student based in the United States, you
focus on a ‘good enough’ product, one that non-dilutive of company equity. You’ll want can apply for non-dilutive Small Business
possesses 80% of the functionality at 20% of to understand the positives and negatives Innovation Research (SBIR) or Small Business
the cost. This is called the 80-20 rule, and associated with each type of funding, which Technology Transfer (STTR) grants offered by
is derived from factors that aren’t always will improve your likelihood of matching the the US National Institutes of Health (NIH) or
accounted for in academic research. interests of particular sources. In preparation the National Science Foundation.
Businesses are profit-driven, so your pri- of potential funding events, you will need to These government business grants are simi-
mary objective should be shepherding a prom- take steps to improve your company’s investor lar to traditional academic funding sources,
ising product to market rather than spending attractiveness. These steps include identifying such as NIH R01, R21, and R03 grants, but
an extended period on its perfection. This is
especially important if you are considering the
addition of novel features to obtain the stron- Box 1 A cautionary tale
gest possible clinical outcome. The healthcare
industry’s take on innovation has been shaped It is important to understand all the challenges along the discovery, preclinical and
by years of failures and delays, and it has thus clinical development pathway. We learned this lesson while developing our inexpensive,
shifted its emphasis to innovations that add potentially universal (as a standalone) common protein vaccine for pneumococcal
the most value to the patient, manufacturing disease. Ultimately, our entire solution turned out to be non-viable because we had
process (e.g., cost reductions), distribution failed to take into account a key clinical development consideration.
channels, or product use. Consequently, com- Because the composition of our vaccine candidate differed substantially from
pleting clinical trials using novel technologies the composition of current commercial vaccines, we did not possess an established
is often arduous and you may not possess a correlate of protection to evaluate our vaccine’s efficacy. This was further complicated
clear regulatory pathway. For example, use of by regulations that prevent the standard of care (in this case, Prevnar; pneumococcal
novel adjuvants in vaccines is not permitted in polysaccharide conjugate vaccine) from being denied to patients. Consequently, our
infants and generally requires demonstration phase 3 trial needed to demonstrate that co-vaccination of our indication with Prevnar
significantly reduced the incidence of pneumococcal disease caused by serotypes
that the adjuvant is both safe and necessary
Prevnar does not provide protection against. Because the incidence of invasive
for efficacy. By designing your product with
pneumococcal disease in regions that employ routine vaccination with Prevnar is below
your endgame in mind, you can substantially
100 per 100,000, a power analysis demonstrating our vaccine’s efficacy necessitated
reduce the complexity of its path forward.
a massive phase 3 trial with tens of thousands of patients. Consequently, the costs
As you design your product and plan your
associated with obtaining regulatory approval for our vaccine drastically outweighed its
regulatory pathway, be prepared to make
potential benefits. As a consequence, we were forced to redesign our vaccine from the
adjustments. Unless you have a clear and
ground up. Lesson learnt.
realistic pathway to licensure (i.e., navigating

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week, or greater than 14 hours a day, to prepare

Table 2 Summary of angel and venture capital funding stages funding applications, corporate presentations,
Typical funding publications, or other major documents.
Funding stage range ($ millions) Purpose of funding
This is demanding, and it will likely impact
Seed 0.5–3 • Business plan development
your graduate research. Make sure you discuss
• Establish IP portfolio for proposed indications
your company and its development plans with
Series A 5–20 • Discovery-stage experiments
your PhD advisor, so you can protect both
• Preclinical animal studies
• Process development, manufacturing, controls
your academic and entrepreneurial interests.
Series B 25–50 • Early clinical studies (generally pre-phase 2)
Open dialog helps avoid lapses in communi-
cation, whereas poor communication leads to
Series C, and following 50–100 • Pivotal studies (phase 2 and 3)
• Regulatory licensure
all sorts of negative interactions. In situations
• Commercialization
where you find company priorities conflicting
with your advisor’s demands, focus on empa-
© 2017 Nature America, Inc., part of Springer Nature. All rights reserved.

Source: National Venture Capital Association

thizing with their specific concerns and dis-
cussing actions you can take to alleviate them.
the objective here is to provide funding to the amounts you ask for and what milestones This is another instance in which negotiation
support proof-of-concept studies or to further you can achieve. skills are highly valuable.
the product maturation necessary for a com- Although innovative science can be one These demands can be intimidating. To
pany to reach development milestones that aspect for attracting investment, venture capi- mitigate this, we maintained a detailed sched-
can trigger further investment rounds. These talist or family offices are often more focused ule to ensure that we made progress on each
non-dilutive funds are limited and will not be on the capabilities of your team, your clinical item daily. By keeping on schedule, we avoided
enough to sustain commercial development, development plan and regulatory pathway, and rushing items as they got close to their due
but they are perfect vehicles for building cred- commercialization strategy. Typically, they date. Time management in this manner is
ibility, and they should help create opportuni- will accept your science at face value upon absolutely critical; your ability to execute tasks
ties for more traditional funding routes in the first meeting, and determine the shortcom- in a timely manner reflects on your credibility
venture capital community. ings of your product during the technical due and your company’s credibility.
diligence phase.
Venture capitalist expectations. Bear in mind Also, keep in mind that venture capitalists Conclusions
when seeking dilutive funding from investors generally (though there are exceptions) are Putting aside the myriad challenges associated
and organizations that they are focused on the not interested in helping you grow as an indi- with launching a life science venture, we con-
best chance at a positive return. It is important vidual or benefiting society at large. Their aim tend that students are in a unique position to
to align with investors whose exit strategies is to find projects that have the best chance excel. One of your greatest strengths is that you
marry with your plans for company develop- of maximizing the return on investment of are isolated from the burden of your indus-
ment. As you proceed through negotiations, the limited partners in the fund in a limited try’s conventional wisdom. You can harness
expect intense due diligence, in which your time horizon (typically less than 10 years). In a this advantage using your academic creativity
team, technology, and corporate strategy will recent assessment of the development of clini- to solve critical problems by developing solu-
be thoroughly evaluated to determine your cal success rates for 2006–2015 released by the tions that are neglected by the low-risk scope
company’s value and likelihood for success. If Biotechnology Innovation Organization (BIO; of large companies. At no time in your life will
these organizations decide to provide funding Washington, DC), the likelihood of licensure you be likely to have more freedom and less
for your company, they will typically obtain from phase 1 therapies across all indications personal commitments to be able to pursue
one or more seats on your board of directors. was ~10%. The greatest risk reduction occurs your startup dreams.
If a substantial amount of capital is to be pro- after phase 2, when the likelihood of licensure Creativity, however, needs to be tempered
vided through dilutive funding, it is likely your increases to 50%. All the more reason to have a by the necessities of the marketplace. Building
team will be replaced in one or more senior strategy for demonstrating efficacy and devel- a company requires a desire to learn from
leadership positions by an individual with oping your regulatory strategy before seeking others, passion for developing an impactful
more experience. Although this is a scenario investment. product, and willingness to make sacrifices.
you will not likely encounter with non-dilu- You will constantly learn as you go, and at each
tive funding, and while being removed from A balanced life step you should refine your company’s vision
a management role may not be your desired If you are starting a company as a graduate and products, raising your credibility and bet-
outcome, you should view receiving dilutive student, you will face constant demand and ter positioning yourself to attract investors.
funding as a milestone of company success. substantial strain on your time. It would be
COMPETING FINANCIAL INTERESTS
It will provide access to advice, information, difficult to make meaningful progress in your
The authors declare no competing financial interests.
market expertise, and it will expand your net- startup unless you commit at least 40 hours a
work. week toward building value. You’ll also likely 1. Sertkaya, A., Wong, H.H., Jessup, A. & Beleche, T. Clin.
Trials 13, 117–126 (2016).
Awarded venture capital is typically divided need to commit at least 40 hours weekly to 2. Ford, D. & Nelsen, B. Nat. Biotechnol. 32, 15–23
into several rounds, given to help achieve graduate research and studies. This is the min- (2014).
specific goals. The funding stages, typical imum workload, and we found it was regularly 3. Sekula, R., Bakhru, S. & Zappe, S. Nat. Biotechnol.
27, 793–796 (2009).
amounts, and purposes are shown in Table 2. surpassed during ‘crunch’ periods. Often, we 4. Beylin, D., Chrisman, C.J. & Weingarten, M. Nat.
As you grow your company, be realistic about needed to invest more than 100 hours per Biotechnol. 29, 567–570 (2011).

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