Description
Brief illustration about biotechnology entrepreneurship in the 21st century from bench to bag.
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Biotechnology
Entrepreneurship in
the 21st Century
From Bench to Bag
David W. Altman
CONCEPTS
Secure intellectual property rights through a license or an asset purchase. •
Establish standard protocols for data storage and retention, confict of interest, recordkeep- •
ing, notifcation of inventions, disclosure and fnancial reporting.
Develop a business plan, preferably with comprehensive strategic planning. •
Complete business formation documents and intellectual property flings. •
Identify and gain commitments for a management team with diverse felds of expertise. •
Raise adequate capital from an appropriate source after considering all options in addition •
to venture capital.
Maintain focus during start-up by solidifying intellectual property, demonstrating proof- •
of-concept with the science and operating within fscally prudent guidelines.
Now that you’ve come up with the greatest innovation the plant tissue culture and biotechnology
universe has ever seen, what can you do to make sure that it gets into the hands of real people? Like
many other imponderables, the answer depends on your perspective. Of course, the scientist thinks
that business components are relatively mundane and should be utilitarian and subordinate to the
technology. The business men and women often want to box up scientists and to keep them in the
laboratory and out of trouble. Finally, investors who come up with capital to drive development are
a mixed bag, but generally assume the science is great and are looking for a star team that works
well together with both business and science elements.
This chapter will provide an outline for use by any stakeholder in a how-to format. The intention
is to describe entrepreneurship conditions and processes for a typical U.S.-based plant tissue culture
program in a stepwise fashion, but many of the principles and components could be adapted for
other life sciences or broader international situations. The frst section will deal with protocols and
systems that must be put in place in any modern plant science laboratory even before the thought
occurs about a commercialization route. These requirements should be taught to all students so that
they in turn will not face major problems due to ignorance of standard protocols. Such standards
should be considered in the same light as laboratory safety procedures and other typical operational
items. The sections that follow will then be specifc to the formation and initiation of a business and
include the steps of (1) planning, (2) personnel, (3) legal flings, (4) capital, and (5) start-up. These
554 David W. Altman
fve sections will assume that rights have been secured for any inventions in the new venture from
an employer or other owners of discoveries to be used in the business.
Before proceeding, the predominance of intellectual property considerations that are unique to
plant biotechnology, and most life sciences research programs, must be emphasized. From a busi-
ness perspective, the focus in these types of research companies would be described as dependent
on intangible assets. Major entrepreneurship differences arise as a consequence of this distinction,
which contrast with companies dependent primarily on tangible assets such as a manufacturing
operation making widgets or a retail shop selling knickknacks. This central element often is ignored
and limits the potential of many good concepts. The other salient point is that the plant biotechnol-
ogy practitioner doesn’t really need a bread-and-butter type of business expertise for key aspects
of putting the enterprise together because plant biotechnology, or life sciences generally, require
certain unique business skills, such as intellectual property management and fnancial guidance
for extensive periods without revenues. Chances of success are improved with special attention
to enlisting business expertise that includes experience in a life science feld; sometimes no other
viable option exists.
STANDARD PROTOCOLS AND SYSTEMS FOR RESEARCH GROUPS
Except for the lone scientist working in his garage or in similar circumstances, nearly everyone
working in plant biotechnology belongs to either proft or nonproft organizations. Each type of
organization has sets of rules that govern aspects of research touching on commercial endeavors,
even if the researcher has no apparent interest at a particular point in time. At the beginning of
employment or a short-term engagement, each individual should determine procedures and policies
in place for commercialization activities in their organization. In particular, every scientist should
familiarize himself/herself with requirements for confict of interest, recordkeeping, data storage
and retention, notifcation of inventions, and fnancial reporting.
While most corporate organizations pay attention to these activities, public institutions often
either don’t take a proactive role in disseminating these policies or have outdated or inaccurate infor-
mation. For any institution with government funding, the United States has certain requirements as
a result of the Bayh-Dole Act of 1980 and guidelines from agencies such as the National Institutes
of Health (NIH), National Science Foundation (NSF), U.S. Department of Agriculture (USDA), and
others. Any competent group or research leader should have a reasonable understanding of these
federal guidelines and be able to provide satisfactory explanation of requirements as well as where
to go for more in-depth information when the need arises. These policies prevent individuals from
engaging in activities that could get them into trouble while venturing into entrepreneurship.
Most business organizations would insist on compliance with established guidelines in order
to put any agreement in place, such as a research agreement, a licensing agreement, or other types
of support (see Harrison, 1999, for review of industry requirements for compliance from public
institutions). Sometimes, public institutions allow fnancial support from businesses as a gift, which
can greatly simplify some of the minimal elements for commercialization, but this option usually
provides a stopgap that shouldn’t obviate the need for best practices.
The next important concern is to protect any discovery or invention that might occur. This prin-
ciple applies even if you want to give the technology away. For this information, companies have
legal departments that provide the necessary guidance, and public institutions usually have a tech-
nology transfer offce. If these sources aren’t helpful, then access internet information from the
U.S. Patent and Trademark Offce (see www.uspto.gov) or refer to references about patents and
other forms of intellectual property (IP). Although patents are the most commonly recognized com-
mercial IP assets, other forms of IP include trade secrets, copyrights, trademarks, plant variety
protection (PVP) certifcation and a special type of U.S. patent protection for plants called “plant
patents.” Plant biotechnology can derive particular IP protection from PVPs or plant patents that
generally depend on whether the plant species are vegetatively propagated or sexually propagated,
Biotechnology Entrepreneurship in the 21st Century 555
and this protection can be a very valuable asset that would increase the long-term viability of any
entrepreneurial venture.
With more utilization of digital information exchange and other Internet-based methods for mar-
keting, social and professional networking, and similar activities, copyright protection takes on more
signifcance. In the U.S., copyrights are registered with the Library of Congress (see www.copyright
.gov). A common misconception is that registration is really not necessary. However, if an individual
wants to avoid postings on the Internet, Web site materials, instruction manual text, and other items
from being used indiscriminately, then registration creates a relatively simple deterrent. In addi-
tion, unless the registration is completed within 3 months of publication, the owner of the copyright
cannot collect statutory damages or attorney’s fees in the event of litigation, which means prompt
flings, or before the 3-month deadline has elapsed, are highly recommended. Simply using the sym-
bol © with the year of publication provides basic protection, but does not confer full protection.
In order to properly protect any future IP asset, the laboratory needs to have standardized proce-
dures for collection of data. In most instances, you might not be able to use the actual date of dis-
covery from the research unless these procedures are appropriately followed. The recording of data
is particularly critical. Each laboratory notebook should be bound because loose-leaf notebooks or
unbound fles are more diffcult to verify and are not considered adequate by patent examiners and
other authorities. With the same rationale, pencils are not acceptable for recording purposes, so
pens or other indelible markers are necessary. Corrections in bound laboratory notebooks should
not obliterate the original entry and should be accompanied by a brief notation. Pages in the bound
notebooks should be initialed, dated, and countersigned by another individual. The notebooks are
best numbered sequentially and maintained at a separate location when completed and after being
copied; only the copies should remain in the laboratory for routine reference. Other considerations
exist for use of data books, including procedures for inserting computer printouts, photographs,
and other materials, so researchers need to have training in how to record appropriately all data for
purposes of protecting the IP.
Procedures also need to be established for data exchange, public dissemination, disclosure to
business groups and similar aspects of modern biotechnology research. Without providing a com-
prehensive description, several highlights will be emphasized. Assuming that you have taken steps
to protect discoveries, that you are following guidelines in place for your employer, and that you are
adequately collecting and recording results, the next criteria is to establish rules of engagement out-
side of the laboratory group. Most employers, either public or private, require assignment of rights
for discoveries to the employer, and all research managers need to establish documentation for the
employees they supervise to verify such assignment.
The next item is to decide who can be contacted externally and what procedures are necessary
for making contact with other commercial groups, sending off publications, or conducting other
similar activities. In the private sector, business development personnel take care of managing these
details, but public researchers usually must take the initiative to comply with procedures estab-
lished within their institutions. The frst consideration for third party contacts would be confict of
interest. In brief, you can’t fairly split the IP and commercialization rights so that you do the same
venture, or in some cases overlapping ventures, with the same discoveries without specialized and
carefully crafted agreements, and frequently such agreements are ambiguous at best. You also can’t
give unfair advantages that are outside of the legitimate assigned rights to special friends or to other
groups with whom you wish to curry favor.
After passing the confict-of-interest test, documentation procedures are needed to go forward
with contacts that require disclosure of discoveries. Many employers require a discovery disclosure
form or notifcation. In this manner, the appropriate manager can ascertain if any IP protection is
necessary in advance of disclosure, or if the researcher can proceed without IP protection. At this
point, in the case of a publication, an abstract submission, or other types of similar disclosures that
might impact future commercialization, the correct procedure is probably straightforward—namely
send it off. However, if you exchange certain materials (DNA, probes, proteins, new chemical
556 David W. Altman
entities, cell culture lines, etc.), then a material transfer agreement (MTA) could be required in
advance. If the researcher is going to enter into discussions, negotiations, or similar activities for
possible entrepreneurship, then a confdential disclosure agreement (CDA), which might also be
called a nondisclosure agreement (NDA), would be required. Format for the MTA, CDA, or NDA
document is usually standard for most employers and can be obtained from the offces previously
indicated.
PLANNING
Hopefully, all of the preceding hasn’t dulled the enthusiasm for sailing off to the world of entre-
preneurial ventures. The prerequisites are daunting, but by following a prudent set of procedures
ahead of time, the intrepid novice or the seasoned veteran already would have a good beginning.
Before getting too overconfdent, don’t forget the obvious need to do suffcient planning. Although
planning might seem simple, the business world has particular parameters for typical new venture
development, usually condensed down into the process of strategic planning and creation of a busi-
ness plan. While not always necessary, the discipline of strategic planning and writing a formal
business plan improves chances of success, and many investors will insist on such materials before
consideration of any proposed funding.
Planning for an entrepreneurial effort depends considerably on an assessment of your goal with
the technology. If the goal is to fnd a partner with business experience, then planning might be
simply to research who are the principle players in the area of technology. The Internet is a good
starting point to gather information, and for those demanding more detail, usually industry reports
and other assessments by specialized consulting groups can be found. Obviously, many veterans of
entrepreneurial ventures tend to wax favorably on the virtues of launching a start-up over the more
conservative track of fnding an experienced partner. Timmons and Spinelli (2008) point out that
the United States is unique in creating a remarkable environment that fosters entrepreneurship and
label this activity “the great equalizer and mobilizer of opportunity.” With that being understood,
the exact formula for success has been elusive, and the option to get a partner rather than take the
plunge should not be dismissed fippantly.
If you have resources and stamina to complete a comprehensive strategic plan, then several
authorities on the process and the anticipated components of resulting documentation could get you
started (see Thompson and Strickland, 2007). Usually, a strategic plan would provide an assessment
of the current status, an evaluation of internal and external factors, consideration of viable options
for the business opportunity, and recommended strategy, with benefts and costs, to execute the most
advantageous option. The frst item would be to develop the mission and vision for a new venture,
as well as objectives of the business. External factors include an analysis of the market, customers,
competition, and the unique unmet need that your innovation will address. The internal factors can
address management, marketing and sales, operations, product development, distribution and other
services. Finally, based on these other components, careful fnancial projections and an ownership
plan would be essential to delineate.
PERSONNEL
Most scientists consider the really essential element of a new venture to be the technology. However,
the investment community is going to assume the technology is viable, at least prior to initiating full
diligence, and will focus on the management team. The necessity for cohesiveness and experience
as an attribute of the management team cannot be over-emphasized.
This aspect of entrepreneurship means that commitments are necessary from individuals with
widely different backgrounds. Typically, science, business, regulatory affairs, law, and other
disciplines are not used to cross-fertilization, but this convergence is the desired outcome for a
new life science venture. The founder or founders for a new venture can come from any of these
Biotechnology Entrepreneurship in the 21st Century 557
backgrounds and the task for the entrepreneur is to gather other individuals to round out the man-
agement group. Usually, attempting any delay in putting the team together will compromise success
of a new venture.
New ventures also have growth stages, similar in many respects to those of other new things.
Just as a baby might have different needs compared to the toddler, the teenager, the young adult, the
middle-aged individual, etc., a new venture does not have the same management requirements as
a mature company. Individuals who desire stability and security would not typically be well suited
for new ventures. Preferably, experience is an important attribute, and because many new ventures
fail for a variety of reasons, the litmus test should not necessarily be experience with a successful
new venture.
Another option would be to seek help from specialists to assemble a management team. Certain
consulting frms can provide temporary management for start-up ventures in the formative period.
This method of fnding appropriate personnel has an added advantage of making a transition to new
management easier as the company grows and has a need for management appropriate to another
development stage. Venture capitalists who specialize in very early stage projects can often be
another source of personnel, although this option can have other risks by potentially creating a con-
fict of interest with the new recruits. Specifcally, the founder might be questioning if team mem-
bers provided by venture capitalists serve company interests over those of the investment group.
Another possibility would be to utilize an executive search frm or other “headhunters.” This option
can be very viable for those new ventures that have resources to hire such agencies. However, some
search frms might defer fees, accept some equity, or make other fexible arrangements that render
their services more feasible.
Several pitfalls confront inventors/founders and should be avoided in putting together a manage-
ment group. Even if some of these cautions seem obvious, they must be mentioned, hopefully to
provide guidance for readers without extensive human resources experience. Friends and relatives
should not be the frst option to complete a management team, and such selections will be viewed
skeptically by investors and other stakeholders. Particularly in making critical decisions about
personnel, the prudent entrepreneur should not cut corners in recruitment. Some pointers include
the following: (1) avoid over-reliance on the interview and be sure to standardize your interview
questions as typically recommended by human resource specialists; (2) check references carefully
before making a decision; (3) involve all of the stakeholders, founders, and other members of the
extended management group; (4) make sure that a penchant for entrepreneurship and risk-taking is
an important trait for selection; (5) choose individuals who mesh with other team members; and (6)
seek diversity of skills within the team.
LEGAL FILINGS
While getting caught up in aspects of a new venture, certain legal flings are necessary to protect
the innovations in a reasonable fashion. All new ventures must be registered to conduct business,
so certain flings are perfunctory for any type of new venture. With biotechnology and other life
sciences, the IP component has been mentioned and will be readdressed as well.
Business registration usually begins by conceiving a legally-acceptable name for the business.
Typically, each state has a department that registers corporations and determines if a selected name
is acceptable. Although every state can feasibly provide this service, several states are considered the
preferred jurisdiction for registration among investors and others. Since a new venture is not required
to have its principal place of business in the state of registration, Delaware is a frequent choice
despite its size; there are several others, such as Nevada, that serve well for life science ventures.
After securing a name, the next decision is to decide the best type of incorporation for the com-
pany to select. This function doesn’t always require a lawyer, and specialized Internet businesses
can help the entrepreneur complete registration for minimal expense. However, usually the entre-
preneur can beneft from sound legal counsel and tax advice or accounting expertise when making
558 David W. Altman
this decision. One important factor is to limit liabilities by incorporating a business venture. Many
new ventures become established either as a limited liability partnership, a C-corporation or an
S-corporation, rather than a single proprietorship or a partnership. Because most new ventures usu-
ally must seek outside funding, the entrepreneur should carefully consider a business incorporation
that will be conducive to receiving funding in exchange for equity in the venture. Upon completing
the appropriate incorporation, be sure to register in all states where you will have business activities.
This registration is sometimes referred to as DBA or “doing business as.”
An absolutely essential item for most life sciences ventures would be flings for IP rights. Most
individuals must seek outside legal advice for this component of the business. However, for the
entrepreneur on an insuffcient budget and assuming that an employer or institution hasn’t already
started the process, several stopgap measures can suffce. Contrary to popular belief, a lawyer is not
required to fle a patent. The U.S. Patent and Trademark Offce allows registered patent agents or
inventors to fle patents as well. Patent agents typically have lower fees than patent lawyers, but the
adage about getting what you pay for might provide a moment to pause. A full patent application
also is not necessary because some protection for at least 1 year in the United States can be obtained
by fling a provisional patent that has a lower submission fee. In any case, doing nothing is the worst
option and will be punished in the marketplace. Thus, minimal flings, although not the preferred
method, should be provisional patents submitted by the inventor or inventors.
CAPITAL
Capital is an essential item to launch an entrepreneurial venture. This requirement for any start-up
business can be one of the most baffing and diffcult for the plant biotechnology practitioner who
normally doesn’t think about funding requirements of commercialization. Funding procedures for
entrepreneurship are usually not similar at all to grant writing or other noncommercial fundraising
activities. Many references about new ventures give an introduction to methods to raise capital, so
various options will only be briefy outlined.
The frst option would be to look at internal sources for getting past the initial steps to launch a
new business. Most individuals have access to some funds by leveraging their own personal credit
capabilities. Such an option would include home equity lines of credit, credit card debt, personal
loans, and other similar sources. Many start-up businesses have only needed to tap these types of
reserves in order to get beyond the beginning expenses to launch operations. The advantage of using
these resources is that the entrepreneur doesn’t need to convince other parties of the viability of the
business model.
The other option could be a secured loan from a fnancial institution such as a bank. Unfortunately,
most banks are very conservative and unfamiliar with intangible assets, and the fnancial crisis in
this decade has exasperated this risk-avoidance mentality. Therefore, the usual mode of operation
is that these institutions typically offer loans only when the loans really aren’t necessary as the
primary source of capital. However, sometimes the entrepreneur might be able to offer reasonable
security to collateralize a commercial loan or line of credit, so this option shouldn’t be dismissed
as completely impossible.
A likely scenario to obtain capital would be to approach venture capital frms that specialize
in high-risk new ventures. However, these frms only deal with high risks because of anticipated
high returns. Therefore, such frms will demand a substantial return on their investment, and the
plant biotechnology practitioner must understand that this requirement is normal for this source of
capital. In this situation, an experienced business person has the best chance to obtain more advan-
tageous terms for funding.
In addition, specifcs of the deal are extremely important to evaluate the opportunity to obtain
required funds. The most important element is determination of the pre-money valuation of the
business opportunity, which is the value that both parties agree to place on the entire enterprise
prior to investment of venture capital. Following many of the suggestions in this “cookbook” set of
Biotechnology Entrepreneurship in the 21st Century 559
requirements should result in a higher pre-money value because the savvy entrepreneur would have
protected the IP, assembled a credible management team, and put together a professional business
plan after thoughtful strategic planning, besides having a great innovation from the beginning.
Well-structured deals have other important details, but everything depends on obtaining a sat-
isfactory pre-money valuation. These specifcs include the form of investment vehicle, favorable
board representation, antidilution protection, reasonable commitment for assistance with future
funding rounds, and other aspects. The completion of this task should be the responsibility of the
business people in the management team, but every entrepreneur should try to keep abreast of the
issues and to stay informed with the status of negotiations with the venture capital groups. Without
a term sheet or other written commitment, all covenants are negotiable and should be carefully
considered before reaching a fnal decision about acceptance.
Finally, even when you have agreed upon a term sheet, this acceptance does not necessarily mean
that the fundraising task has been accomplished. Nothing is fnal until closing papers are signed by
all parties to a funding transaction. In particular, most term sheet agreements are contingent upon
due diligence by investors. This process is when every aspect of the business is examined in some-
times excruciating detail. If the entrepreneur has completed extensive planning and accumulated
the necessary documentation, due diligence will proceed relatively smoothly.
An alternative approach could be to complete a private placement memorandum (PPM), with
the intention of raising funds in specifed units at a predetermined, fxed price per unit. The only
caveats would be to comply with all legal requirements for such a document. Many attorneys could
assure the required compliance, and set up a process to screen each potential investor as an “accred-
ited investor” according to the Securities Act of 1933 and subsequently amended. Key requirements
for individuals are either to have a net worth in excess of $1 million dollars or annual income in
excess of $200,000.
There are occasionally some other options to obtain capital. A large, established company in
this industry might be willing to buy your new venture or other aspects of the business that has
been developed. Usually, this option is better to pursue once the venture has been able to oper-
ate for a period of time, so that milestones have been achieved and the innovation has been vali-
dated. However, many companies have divisions that act like regular venture capital frms, and the
advantages might include an ability of larger companies to bring experienced business development
groups into the venture with a proven capability to take discoveries to the marketplace. The found-
ers might still maintain involvement through a consulting contract or other advisory roles.
START-UP
After all anticipation and work, the novice entrepreneur might think that actual start-up of oper-
ations represents achievement of the primary goal to launch the new venture. Actually, in real-
ity, this start-up phase represents only the beginning of the next stage for business development.
Start-up companies should never forget the sense of urgency that resulted in their successful launch.
Frequently, start-ups don’t have an effective implementation plan, and this defciency can lead to
pitfalls as well.
The most common error would be to forget the need to position the new venture for the next
round of fnancing. Usually, a single capital raise is insuffcient to bring the new company to the
point of becoming a viable enterprise. The risk is that the science might prevent the young company
from staying focused on the main aspects to ensure long-term success. For life sciences companies,
the start-up phase usually requires progress for enhancing intellectual property and for demonstrat-
ing proof-of-concept with basic innovations that provided the reason to commercialize something.
Furthermore, no prerequisite keeps your planning and basic strategy from undergoing a mid-
course correction. Often, ability to evaluate progress and to adapt to changing dynamics is the most
important attribute of a start-up venture. In addition, all entrepreneurs should carefully monitor
cash expenditures, usually represented by an assessment of burn rate.
560 David W. Altman
With all due respect to the science, entrepreneurship is governed by the dictum that “cash is
king.” With life science and biotechnology ventures, cash can be king, queen, the prime minister,
grand poobah, and anything else. A frequent pitfall is to slide into the trap of perennially burning
cash, avoiding marketing, and forgoing the milestone of your frst customers. The glory days when
venture money fed high burn rates of companies with vague revenue models are probably a thing
of the past, if such a time ever existed in the frst place! While scientifc progress is important, be
sure someone is monitoring cash, aggressively seeking customers and revenues, and holding down
excessive expenditures. Sometimes this requirement can come into confict with long-term goals,
but the company needs to survive in order to reach the future.
Another pitfall comes from the nature of funding that usually provides capital to fuel new bio-
technology ventures. Venture funding usually means that equity is diluted for founders and start-up
employees who have put their heart and soul into creating the business. Repeated fnancing rounds
can excessively dilute founder and employee equity holdings, so these infusions should be precious
and limited to avoid excessive dilution. One frequently neglected aspect is the importance of debt
fnancing as an alternative to equity fnancing. Although the business might not have been able to
raise debt fnancing for the initial funding, once the start-up phase has begun the venture should
have an aggressive, sustained effort to open lines of credit, to utilize chattel loans, to be granted
favorable payment terms with vendors, and to exploit every opportunity to establish a sound credit
rating. This requires good fnancial leadership from the company’s CFO or other management with
this responsibility for the enterprise.
In an era of stimulus funding on top of other government grants, another possibility might be
to seek grant funding for commercialization, such as a grant under the Small Business Innovation
Research Program (seehttp://www.sba.gov/aboutsba/sbaprograms/sbir/sbirstir/), which are usually
administered in collaboration with a federal department or other research institution including the
Department of Agriculture, National Science Foundation, or others. One precautionary tip for those
tempted by the public trough would be to consider utilization of an adequately trained accountant or
bookkeeper who specifcally is competent with government accounting standards. These standards
are in addition to the more well-known standards of Generally Accepted Accounting Principles or
GAAP (which eventually will be replaced by International Financial Reporting Standards or IFRS)
and would typically be found in the relevant Federal Acquisition Requirements (FAR) and Cost
Accounting Standards (CAS). Many accountants or bookkeepers might really think they are able to
apply these standards, but often mistakes occur which can come back to annoy ventures for many
years to come.
Operations in general require specialized attention because mistakes can be costly to correct at a
later stage, and in some cases, might even jeopardize the future of the venture. Biotechnology ven-
tures will probably rely on IP rights of some sort, and these rights are intangible assets that must be
appropriately entered on the company books. Many of the plain-vanilla accountants and bookkeep-
ers are oblivious to specialized requirements for a life science business, which can include atypi-
cal accounting standards for revenue recognition, amortization/expense for research costs, stock
options, start-up equity covenants, and other items. Similarly, the management of companies that
often have few initial sources of revenues is a skill infrequently acquired by the average MBA. Be
sure to insist on these features being addressed early and appropriately.
In the current era after fnancial scandals typifed by Enron, WorldCom, Parmalat, and many
others, start-up ventures have been tarred by the same brush. The practical result for operations has
been the imposition of new rules for internal controls. The Sarbanes-Oxley or SOX regulations are
principally directed to larger, public companies, but even small companies should do an assessment
to address applications to the enterprise. The key idea would be to show some good-faith effort in
documenting internal controls and basic governance policies. Even if your venture can technically be
exempt for the current point of development of the business, banks, investors, government funding
agencies, and others will look favorably on minimal compliance. In any case, following these policies
and procedures represents best business practices in addition to being a regulatory consideration.
Biotechnology Entrepreneurship in the 21st Century 561
CONCLUDING COMMENTS
Entrepreneurship can be a stimulating and rewarding culmination of scientifc achievements for
plant biotechnology. Although scientifc publications and other such end products have great value
and contribute to our advancement of knowledge, without fnding a commercial outlet the discover-
ies from the laboratory might not be easily accessible to the general public. Business is a democratic
method to disseminate inventions, at least in the United States and most of the other nations around
the world.
The plant biotechnology practitioner brings a vital element to the commercialization effort and
is indispensable to the development of a product. However, the preceding material might lead to
the obvious conclusion that some other team members and components are necessary to obtain a
successful commercialization effort. Each person should do soul searching at the start to decide if
they have the temperament and stamina to try the new venture approach, and nothing is wrong with
choosing the path to fnd an established business to buy the discovery and to do the heavy lifting to
complete the development part of research and development.
Finally, the ultimate key to success in a life science venture will always be the quality of the peo-
ple involved in the enterprise. A science-based endeavor can ill afford to forget about this overriding
consideration. People in an entrepreneurial business need to be motivated and to work together well
as a team. Cohesiveness of the team will be critical when the new business faces inevitable periodic
crises that characterize entrepreneurship. Find the best people you can, reward them, and provide
incentives as much as you can. Cover various business aspects as well as needed scientifc exper-
tise when you assemble the team. Also, because the entrepreneur cannot be an expert in all felds
required for any business, don’t be reticent in seeking outside expertise or in fnding other resources
within reasonable budget parameters. In the end, these guidelines can improve your chances of suc-
cess, and hopefully the element of serendipity will then be more likely to fnd its place in your new
commercial enterprise.
REFERENCES
Harrison, C.H. 1999. Industry-sponsored academic research in the health sciences: Regulatory, policy and
practical issues in contract negotiations. J. Biolaw Business 2:9–25.
Thompson, Jr., A.A. and A.J. Strickland. 2007. Crafting and Executing Strategy: The Quest for Competitive
Advantage. McGraw-Hill Irwin, New York, p. 992.
Timmons, J.A. and S. Spinelli. 2008. New Venture Creation: Entrepreneurship for the 21st Century. Irwin
McGraw-Hill, New York, p. 704.
doc_165295457.pdf
Brief illustration about biotechnology entrepreneurship in the 21st century from bench to bag.
553
44
Biotechnology
Entrepreneurship in
the 21st Century
From Bench to Bag
David W. Altman
CONCEPTS
Secure intellectual property rights through a license or an asset purchase. •
Establish standard protocols for data storage and retention, confict of interest, recordkeep- •
ing, notifcation of inventions, disclosure and fnancial reporting.
Develop a business plan, preferably with comprehensive strategic planning. •
Complete business formation documents and intellectual property flings. •
Identify and gain commitments for a management team with diverse felds of expertise. •
Raise adequate capital from an appropriate source after considering all options in addition •
to venture capital.
Maintain focus during start-up by solidifying intellectual property, demonstrating proof- •
of-concept with the science and operating within fscally prudent guidelines.
Now that you’ve come up with the greatest innovation the plant tissue culture and biotechnology
universe has ever seen, what can you do to make sure that it gets into the hands of real people? Like
many other imponderables, the answer depends on your perspective. Of course, the scientist thinks
that business components are relatively mundane and should be utilitarian and subordinate to the
technology. The business men and women often want to box up scientists and to keep them in the
laboratory and out of trouble. Finally, investors who come up with capital to drive development are
a mixed bag, but generally assume the science is great and are looking for a star team that works
well together with both business and science elements.
This chapter will provide an outline for use by any stakeholder in a how-to format. The intention
is to describe entrepreneurship conditions and processes for a typical U.S.-based plant tissue culture
program in a stepwise fashion, but many of the principles and components could be adapted for
other life sciences or broader international situations. The frst section will deal with protocols and
systems that must be put in place in any modern plant science laboratory even before the thought
occurs about a commercialization route. These requirements should be taught to all students so that
they in turn will not face major problems due to ignorance of standard protocols. Such standards
should be considered in the same light as laboratory safety procedures and other typical operational
items. The sections that follow will then be specifc to the formation and initiation of a business and
include the steps of (1) planning, (2) personnel, (3) legal flings, (4) capital, and (5) start-up. These
554 David W. Altman
fve sections will assume that rights have been secured for any inventions in the new venture from
an employer or other owners of discoveries to be used in the business.
Before proceeding, the predominance of intellectual property considerations that are unique to
plant biotechnology, and most life sciences research programs, must be emphasized. From a busi-
ness perspective, the focus in these types of research companies would be described as dependent
on intangible assets. Major entrepreneurship differences arise as a consequence of this distinction,
which contrast with companies dependent primarily on tangible assets such as a manufacturing
operation making widgets or a retail shop selling knickknacks. This central element often is ignored
and limits the potential of many good concepts. The other salient point is that the plant biotechnol-
ogy practitioner doesn’t really need a bread-and-butter type of business expertise for key aspects
of putting the enterprise together because plant biotechnology, or life sciences generally, require
certain unique business skills, such as intellectual property management and fnancial guidance
for extensive periods without revenues. Chances of success are improved with special attention
to enlisting business expertise that includes experience in a life science feld; sometimes no other
viable option exists.
STANDARD PROTOCOLS AND SYSTEMS FOR RESEARCH GROUPS
Except for the lone scientist working in his garage or in similar circumstances, nearly everyone
working in plant biotechnology belongs to either proft or nonproft organizations. Each type of
organization has sets of rules that govern aspects of research touching on commercial endeavors,
even if the researcher has no apparent interest at a particular point in time. At the beginning of
employment or a short-term engagement, each individual should determine procedures and policies
in place for commercialization activities in their organization. In particular, every scientist should
familiarize himself/herself with requirements for confict of interest, recordkeeping, data storage
and retention, notifcation of inventions, and fnancial reporting.
While most corporate organizations pay attention to these activities, public institutions often
either don’t take a proactive role in disseminating these policies or have outdated or inaccurate infor-
mation. For any institution with government funding, the United States has certain requirements as
a result of the Bayh-Dole Act of 1980 and guidelines from agencies such as the National Institutes
of Health (NIH), National Science Foundation (NSF), U.S. Department of Agriculture (USDA), and
others. Any competent group or research leader should have a reasonable understanding of these
federal guidelines and be able to provide satisfactory explanation of requirements as well as where
to go for more in-depth information when the need arises. These policies prevent individuals from
engaging in activities that could get them into trouble while venturing into entrepreneurship.
Most business organizations would insist on compliance with established guidelines in order
to put any agreement in place, such as a research agreement, a licensing agreement, or other types
of support (see Harrison, 1999, for review of industry requirements for compliance from public
institutions). Sometimes, public institutions allow fnancial support from businesses as a gift, which
can greatly simplify some of the minimal elements for commercialization, but this option usually
provides a stopgap that shouldn’t obviate the need for best practices.
The next important concern is to protect any discovery or invention that might occur. This prin-
ciple applies even if you want to give the technology away. For this information, companies have
legal departments that provide the necessary guidance, and public institutions usually have a tech-
nology transfer offce. If these sources aren’t helpful, then access internet information from the
U.S. Patent and Trademark Offce (see www.uspto.gov) or refer to references about patents and
other forms of intellectual property (IP). Although patents are the most commonly recognized com-
mercial IP assets, other forms of IP include trade secrets, copyrights, trademarks, plant variety
protection (PVP) certifcation and a special type of U.S. patent protection for plants called “plant
patents.” Plant biotechnology can derive particular IP protection from PVPs or plant patents that
generally depend on whether the plant species are vegetatively propagated or sexually propagated,
Biotechnology Entrepreneurship in the 21st Century 555
and this protection can be a very valuable asset that would increase the long-term viability of any
entrepreneurial venture.
With more utilization of digital information exchange and other Internet-based methods for mar-
keting, social and professional networking, and similar activities, copyright protection takes on more
signifcance. In the U.S., copyrights are registered with the Library of Congress (see www.copyright
.gov). A common misconception is that registration is really not necessary. However, if an individual
wants to avoid postings on the Internet, Web site materials, instruction manual text, and other items
from being used indiscriminately, then registration creates a relatively simple deterrent. In addi-
tion, unless the registration is completed within 3 months of publication, the owner of the copyright
cannot collect statutory damages or attorney’s fees in the event of litigation, which means prompt
flings, or before the 3-month deadline has elapsed, are highly recommended. Simply using the sym-
bol © with the year of publication provides basic protection, but does not confer full protection.
In order to properly protect any future IP asset, the laboratory needs to have standardized proce-
dures for collection of data. In most instances, you might not be able to use the actual date of dis-
covery from the research unless these procedures are appropriately followed. The recording of data
is particularly critical. Each laboratory notebook should be bound because loose-leaf notebooks or
unbound fles are more diffcult to verify and are not considered adequate by patent examiners and
other authorities. With the same rationale, pencils are not acceptable for recording purposes, so
pens or other indelible markers are necessary. Corrections in bound laboratory notebooks should
not obliterate the original entry and should be accompanied by a brief notation. Pages in the bound
notebooks should be initialed, dated, and countersigned by another individual. The notebooks are
best numbered sequentially and maintained at a separate location when completed and after being
copied; only the copies should remain in the laboratory for routine reference. Other considerations
exist for use of data books, including procedures for inserting computer printouts, photographs,
and other materials, so researchers need to have training in how to record appropriately all data for
purposes of protecting the IP.
Procedures also need to be established for data exchange, public dissemination, disclosure to
business groups and similar aspects of modern biotechnology research. Without providing a com-
prehensive description, several highlights will be emphasized. Assuming that you have taken steps
to protect discoveries, that you are following guidelines in place for your employer, and that you are
adequately collecting and recording results, the next criteria is to establish rules of engagement out-
side of the laboratory group. Most employers, either public or private, require assignment of rights
for discoveries to the employer, and all research managers need to establish documentation for the
employees they supervise to verify such assignment.
The next item is to decide who can be contacted externally and what procedures are necessary
for making contact with other commercial groups, sending off publications, or conducting other
similar activities. In the private sector, business development personnel take care of managing these
details, but public researchers usually must take the initiative to comply with procedures estab-
lished within their institutions. The frst consideration for third party contacts would be confict of
interest. In brief, you can’t fairly split the IP and commercialization rights so that you do the same
venture, or in some cases overlapping ventures, with the same discoveries without specialized and
carefully crafted agreements, and frequently such agreements are ambiguous at best. You also can’t
give unfair advantages that are outside of the legitimate assigned rights to special friends or to other
groups with whom you wish to curry favor.
After passing the confict-of-interest test, documentation procedures are needed to go forward
with contacts that require disclosure of discoveries. Many employers require a discovery disclosure
form or notifcation. In this manner, the appropriate manager can ascertain if any IP protection is
necessary in advance of disclosure, or if the researcher can proceed without IP protection. At this
point, in the case of a publication, an abstract submission, or other types of similar disclosures that
might impact future commercialization, the correct procedure is probably straightforward—namely
send it off. However, if you exchange certain materials (DNA, probes, proteins, new chemical
556 David W. Altman
entities, cell culture lines, etc.), then a material transfer agreement (MTA) could be required in
advance. If the researcher is going to enter into discussions, negotiations, or similar activities for
possible entrepreneurship, then a confdential disclosure agreement (CDA), which might also be
called a nondisclosure agreement (NDA), would be required. Format for the MTA, CDA, or NDA
document is usually standard for most employers and can be obtained from the offces previously
indicated.
PLANNING
Hopefully, all of the preceding hasn’t dulled the enthusiasm for sailing off to the world of entre-
preneurial ventures. The prerequisites are daunting, but by following a prudent set of procedures
ahead of time, the intrepid novice or the seasoned veteran already would have a good beginning.
Before getting too overconfdent, don’t forget the obvious need to do suffcient planning. Although
planning might seem simple, the business world has particular parameters for typical new venture
development, usually condensed down into the process of strategic planning and creation of a busi-
ness plan. While not always necessary, the discipline of strategic planning and writing a formal
business plan improves chances of success, and many investors will insist on such materials before
consideration of any proposed funding.
Planning for an entrepreneurial effort depends considerably on an assessment of your goal with
the technology. If the goal is to fnd a partner with business experience, then planning might be
simply to research who are the principle players in the area of technology. The Internet is a good
starting point to gather information, and for those demanding more detail, usually industry reports
and other assessments by specialized consulting groups can be found. Obviously, many veterans of
entrepreneurial ventures tend to wax favorably on the virtues of launching a start-up over the more
conservative track of fnding an experienced partner. Timmons and Spinelli (2008) point out that
the United States is unique in creating a remarkable environment that fosters entrepreneurship and
label this activity “the great equalizer and mobilizer of opportunity.” With that being understood,
the exact formula for success has been elusive, and the option to get a partner rather than take the
plunge should not be dismissed fippantly.
If you have resources and stamina to complete a comprehensive strategic plan, then several
authorities on the process and the anticipated components of resulting documentation could get you
started (see Thompson and Strickland, 2007). Usually, a strategic plan would provide an assessment
of the current status, an evaluation of internal and external factors, consideration of viable options
for the business opportunity, and recommended strategy, with benefts and costs, to execute the most
advantageous option. The frst item would be to develop the mission and vision for a new venture,
as well as objectives of the business. External factors include an analysis of the market, customers,
competition, and the unique unmet need that your innovation will address. The internal factors can
address management, marketing and sales, operations, product development, distribution and other
services. Finally, based on these other components, careful fnancial projections and an ownership
plan would be essential to delineate.
PERSONNEL
Most scientists consider the really essential element of a new venture to be the technology. However,
the investment community is going to assume the technology is viable, at least prior to initiating full
diligence, and will focus on the management team. The necessity for cohesiveness and experience
as an attribute of the management team cannot be over-emphasized.
This aspect of entrepreneurship means that commitments are necessary from individuals with
widely different backgrounds. Typically, science, business, regulatory affairs, law, and other
disciplines are not used to cross-fertilization, but this convergence is the desired outcome for a
new life science venture. The founder or founders for a new venture can come from any of these
Biotechnology Entrepreneurship in the 21st Century 557
backgrounds and the task for the entrepreneur is to gather other individuals to round out the man-
agement group. Usually, attempting any delay in putting the team together will compromise success
of a new venture.
New ventures also have growth stages, similar in many respects to those of other new things.
Just as a baby might have different needs compared to the toddler, the teenager, the young adult, the
middle-aged individual, etc., a new venture does not have the same management requirements as
a mature company. Individuals who desire stability and security would not typically be well suited
for new ventures. Preferably, experience is an important attribute, and because many new ventures
fail for a variety of reasons, the litmus test should not necessarily be experience with a successful
new venture.
Another option would be to seek help from specialists to assemble a management team. Certain
consulting frms can provide temporary management for start-up ventures in the formative period.
This method of fnding appropriate personnel has an added advantage of making a transition to new
management easier as the company grows and has a need for management appropriate to another
development stage. Venture capitalists who specialize in very early stage projects can often be
another source of personnel, although this option can have other risks by potentially creating a con-
fict of interest with the new recruits. Specifcally, the founder might be questioning if team mem-
bers provided by venture capitalists serve company interests over those of the investment group.
Another possibility would be to utilize an executive search frm or other “headhunters.” This option
can be very viable for those new ventures that have resources to hire such agencies. However, some
search frms might defer fees, accept some equity, or make other fexible arrangements that render
their services more feasible.
Several pitfalls confront inventors/founders and should be avoided in putting together a manage-
ment group. Even if some of these cautions seem obvious, they must be mentioned, hopefully to
provide guidance for readers without extensive human resources experience. Friends and relatives
should not be the frst option to complete a management team, and such selections will be viewed
skeptically by investors and other stakeholders. Particularly in making critical decisions about
personnel, the prudent entrepreneur should not cut corners in recruitment. Some pointers include
the following: (1) avoid over-reliance on the interview and be sure to standardize your interview
questions as typically recommended by human resource specialists; (2) check references carefully
before making a decision; (3) involve all of the stakeholders, founders, and other members of the
extended management group; (4) make sure that a penchant for entrepreneurship and risk-taking is
an important trait for selection; (5) choose individuals who mesh with other team members; and (6)
seek diversity of skills within the team.
LEGAL FILINGS
While getting caught up in aspects of a new venture, certain legal flings are necessary to protect
the innovations in a reasonable fashion. All new ventures must be registered to conduct business,
so certain flings are perfunctory for any type of new venture. With biotechnology and other life
sciences, the IP component has been mentioned and will be readdressed as well.
Business registration usually begins by conceiving a legally-acceptable name for the business.
Typically, each state has a department that registers corporations and determines if a selected name
is acceptable. Although every state can feasibly provide this service, several states are considered the
preferred jurisdiction for registration among investors and others. Since a new venture is not required
to have its principal place of business in the state of registration, Delaware is a frequent choice
despite its size; there are several others, such as Nevada, that serve well for life science ventures.
After securing a name, the next decision is to decide the best type of incorporation for the com-
pany to select. This function doesn’t always require a lawyer, and specialized Internet businesses
can help the entrepreneur complete registration for minimal expense. However, usually the entre-
preneur can beneft from sound legal counsel and tax advice or accounting expertise when making
558 David W. Altman
this decision. One important factor is to limit liabilities by incorporating a business venture. Many
new ventures become established either as a limited liability partnership, a C-corporation or an
S-corporation, rather than a single proprietorship or a partnership. Because most new ventures usu-
ally must seek outside funding, the entrepreneur should carefully consider a business incorporation
that will be conducive to receiving funding in exchange for equity in the venture. Upon completing
the appropriate incorporation, be sure to register in all states where you will have business activities.
This registration is sometimes referred to as DBA or “doing business as.”
An absolutely essential item for most life sciences ventures would be flings for IP rights. Most
individuals must seek outside legal advice for this component of the business. However, for the
entrepreneur on an insuffcient budget and assuming that an employer or institution hasn’t already
started the process, several stopgap measures can suffce. Contrary to popular belief, a lawyer is not
required to fle a patent. The U.S. Patent and Trademark Offce allows registered patent agents or
inventors to fle patents as well. Patent agents typically have lower fees than patent lawyers, but the
adage about getting what you pay for might provide a moment to pause. A full patent application
also is not necessary because some protection for at least 1 year in the United States can be obtained
by fling a provisional patent that has a lower submission fee. In any case, doing nothing is the worst
option and will be punished in the marketplace. Thus, minimal flings, although not the preferred
method, should be provisional patents submitted by the inventor or inventors.
CAPITAL
Capital is an essential item to launch an entrepreneurial venture. This requirement for any start-up
business can be one of the most baffing and diffcult for the plant biotechnology practitioner who
normally doesn’t think about funding requirements of commercialization. Funding procedures for
entrepreneurship are usually not similar at all to grant writing or other noncommercial fundraising
activities. Many references about new ventures give an introduction to methods to raise capital, so
various options will only be briefy outlined.
The frst option would be to look at internal sources for getting past the initial steps to launch a
new business. Most individuals have access to some funds by leveraging their own personal credit
capabilities. Such an option would include home equity lines of credit, credit card debt, personal
loans, and other similar sources. Many start-up businesses have only needed to tap these types of
reserves in order to get beyond the beginning expenses to launch operations. The advantage of using
these resources is that the entrepreneur doesn’t need to convince other parties of the viability of the
business model.
The other option could be a secured loan from a fnancial institution such as a bank. Unfortunately,
most banks are very conservative and unfamiliar with intangible assets, and the fnancial crisis in
this decade has exasperated this risk-avoidance mentality. Therefore, the usual mode of operation
is that these institutions typically offer loans only when the loans really aren’t necessary as the
primary source of capital. However, sometimes the entrepreneur might be able to offer reasonable
security to collateralize a commercial loan or line of credit, so this option shouldn’t be dismissed
as completely impossible.
A likely scenario to obtain capital would be to approach venture capital frms that specialize
in high-risk new ventures. However, these frms only deal with high risks because of anticipated
high returns. Therefore, such frms will demand a substantial return on their investment, and the
plant biotechnology practitioner must understand that this requirement is normal for this source of
capital. In this situation, an experienced business person has the best chance to obtain more advan-
tageous terms for funding.
In addition, specifcs of the deal are extremely important to evaluate the opportunity to obtain
required funds. The most important element is determination of the pre-money valuation of the
business opportunity, which is the value that both parties agree to place on the entire enterprise
prior to investment of venture capital. Following many of the suggestions in this “cookbook” set of
Biotechnology Entrepreneurship in the 21st Century 559
requirements should result in a higher pre-money value because the savvy entrepreneur would have
protected the IP, assembled a credible management team, and put together a professional business
plan after thoughtful strategic planning, besides having a great innovation from the beginning.
Well-structured deals have other important details, but everything depends on obtaining a sat-
isfactory pre-money valuation. These specifcs include the form of investment vehicle, favorable
board representation, antidilution protection, reasonable commitment for assistance with future
funding rounds, and other aspects. The completion of this task should be the responsibility of the
business people in the management team, but every entrepreneur should try to keep abreast of the
issues and to stay informed with the status of negotiations with the venture capital groups. Without
a term sheet or other written commitment, all covenants are negotiable and should be carefully
considered before reaching a fnal decision about acceptance.
Finally, even when you have agreed upon a term sheet, this acceptance does not necessarily mean
that the fundraising task has been accomplished. Nothing is fnal until closing papers are signed by
all parties to a funding transaction. In particular, most term sheet agreements are contingent upon
due diligence by investors. This process is when every aspect of the business is examined in some-
times excruciating detail. If the entrepreneur has completed extensive planning and accumulated
the necessary documentation, due diligence will proceed relatively smoothly.
An alternative approach could be to complete a private placement memorandum (PPM), with
the intention of raising funds in specifed units at a predetermined, fxed price per unit. The only
caveats would be to comply with all legal requirements for such a document. Many attorneys could
assure the required compliance, and set up a process to screen each potential investor as an “accred-
ited investor” according to the Securities Act of 1933 and subsequently amended. Key requirements
for individuals are either to have a net worth in excess of $1 million dollars or annual income in
excess of $200,000.
There are occasionally some other options to obtain capital. A large, established company in
this industry might be willing to buy your new venture or other aspects of the business that has
been developed. Usually, this option is better to pursue once the venture has been able to oper-
ate for a period of time, so that milestones have been achieved and the innovation has been vali-
dated. However, many companies have divisions that act like regular venture capital frms, and the
advantages might include an ability of larger companies to bring experienced business development
groups into the venture with a proven capability to take discoveries to the marketplace. The found-
ers might still maintain involvement through a consulting contract or other advisory roles.
START-UP
After all anticipation and work, the novice entrepreneur might think that actual start-up of oper-
ations represents achievement of the primary goal to launch the new venture. Actually, in real-
ity, this start-up phase represents only the beginning of the next stage for business development.
Start-up companies should never forget the sense of urgency that resulted in their successful launch.
Frequently, start-ups don’t have an effective implementation plan, and this defciency can lead to
pitfalls as well.
The most common error would be to forget the need to position the new venture for the next
round of fnancing. Usually, a single capital raise is insuffcient to bring the new company to the
point of becoming a viable enterprise. The risk is that the science might prevent the young company
from staying focused on the main aspects to ensure long-term success. For life sciences companies,
the start-up phase usually requires progress for enhancing intellectual property and for demonstrat-
ing proof-of-concept with basic innovations that provided the reason to commercialize something.
Furthermore, no prerequisite keeps your planning and basic strategy from undergoing a mid-
course correction. Often, ability to evaluate progress and to adapt to changing dynamics is the most
important attribute of a start-up venture. In addition, all entrepreneurs should carefully monitor
cash expenditures, usually represented by an assessment of burn rate.
560 David W. Altman
With all due respect to the science, entrepreneurship is governed by the dictum that “cash is
king.” With life science and biotechnology ventures, cash can be king, queen, the prime minister,
grand poobah, and anything else. A frequent pitfall is to slide into the trap of perennially burning
cash, avoiding marketing, and forgoing the milestone of your frst customers. The glory days when
venture money fed high burn rates of companies with vague revenue models are probably a thing
of the past, if such a time ever existed in the frst place! While scientifc progress is important, be
sure someone is monitoring cash, aggressively seeking customers and revenues, and holding down
excessive expenditures. Sometimes this requirement can come into confict with long-term goals,
but the company needs to survive in order to reach the future.
Another pitfall comes from the nature of funding that usually provides capital to fuel new bio-
technology ventures. Venture funding usually means that equity is diluted for founders and start-up
employees who have put their heart and soul into creating the business. Repeated fnancing rounds
can excessively dilute founder and employee equity holdings, so these infusions should be precious
and limited to avoid excessive dilution. One frequently neglected aspect is the importance of debt
fnancing as an alternative to equity fnancing. Although the business might not have been able to
raise debt fnancing for the initial funding, once the start-up phase has begun the venture should
have an aggressive, sustained effort to open lines of credit, to utilize chattel loans, to be granted
favorable payment terms with vendors, and to exploit every opportunity to establish a sound credit
rating. This requires good fnancial leadership from the company’s CFO or other management with
this responsibility for the enterprise.
In an era of stimulus funding on top of other government grants, another possibility might be
to seek grant funding for commercialization, such as a grant under the Small Business Innovation
Research Program (seehttp://www.sba.gov/aboutsba/sbaprograms/sbir/sbirstir/), which are usually
administered in collaboration with a federal department or other research institution including the
Department of Agriculture, National Science Foundation, or others. One precautionary tip for those
tempted by the public trough would be to consider utilization of an adequately trained accountant or
bookkeeper who specifcally is competent with government accounting standards. These standards
are in addition to the more well-known standards of Generally Accepted Accounting Principles or
GAAP (which eventually will be replaced by International Financial Reporting Standards or IFRS)
and would typically be found in the relevant Federal Acquisition Requirements (FAR) and Cost
Accounting Standards (CAS). Many accountants or bookkeepers might really think they are able to
apply these standards, but often mistakes occur which can come back to annoy ventures for many
years to come.
Operations in general require specialized attention because mistakes can be costly to correct at a
later stage, and in some cases, might even jeopardize the future of the venture. Biotechnology ven-
tures will probably rely on IP rights of some sort, and these rights are intangible assets that must be
appropriately entered on the company books. Many of the plain-vanilla accountants and bookkeep-
ers are oblivious to specialized requirements for a life science business, which can include atypi-
cal accounting standards for revenue recognition, amortization/expense for research costs, stock
options, start-up equity covenants, and other items. Similarly, the management of companies that
often have few initial sources of revenues is a skill infrequently acquired by the average MBA. Be
sure to insist on these features being addressed early and appropriately.
In the current era after fnancial scandals typifed by Enron, WorldCom, Parmalat, and many
others, start-up ventures have been tarred by the same brush. The practical result for operations has
been the imposition of new rules for internal controls. The Sarbanes-Oxley or SOX regulations are
principally directed to larger, public companies, but even small companies should do an assessment
to address applications to the enterprise. The key idea would be to show some good-faith effort in
documenting internal controls and basic governance policies. Even if your venture can technically be
exempt for the current point of development of the business, banks, investors, government funding
agencies, and others will look favorably on minimal compliance. In any case, following these policies
and procedures represents best business practices in addition to being a regulatory consideration.
Biotechnology Entrepreneurship in the 21st Century 561
CONCLUDING COMMENTS
Entrepreneurship can be a stimulating and rewarding culmination of scientifc achievements for
plant biotechnology. Although scientifc publications and other such end products have great value
and contribute to our advancement of knowledge, without fnding a commercial outlet the discover-
ies from the laboratory might not be easily accessible to the general public. Business is a democratic
method to disseminate inventions, at least in the United States and most of the other nations around
the world.
The plant biotechnology practitioner brings a vital element to the commercialization effort and
is indispensable to the development of a product. However, the preceding material might lead to
the obvious conclusion that some other team members and components are necessary to obtain a
successful commercialization effort. Each person should do soul searching at the start to decide if
they have the temperament and stamina to try the new venture approach, and nothing is wrong with
choosing the path to fnd an established business to buy the discovery and to do the heavy lifting to
complete the development part of research and development.
Finally, the ultimate key to success in a life science venture will always be the quality of the peo-
ple involved in the enterprise. A science-based endeavor can ill afford to forget about this overriding
consideration. People in an entrepreneurial business need to be motivated and to work together well
as a team. Cohesiveness of the team will be critical when the new business faces inevitable periodic
crises that characterize entrepreneurship. Find the best people you can, reward them, and provide
incentives as much as you can. Cover various business aspects as well as needed scientifc exper-
tise when you assemble the team. Also, because the entrepreneur cannot be an expert in all felds
required for any business, don’t be reticent in seeking outside expertise or in fnding other resources
within reasonable budget parameters. In the end, these guidelines can improve your chances of suc-
cess, and hopefully the element of serendipity will then be more likely to fnd its place in your new
commercial enterprise.
REFERENCES
Harrison, C.H. 1999. Industry-sponsored academic research in the health sciences: Regulatory, policy and
practical issues in contract negotiations. J. Biolaw Business 2:9–25.
Thompson, Jr., A.A. and A.J. Strickland. 2007. Crafting and Executing Strategy: The Quest for Competitive
Advantage. McGraw-Hill Irwin, New York, p. 992.
Timmons, J.A. and S. Spinelli. 2008. New Venture Creation: Entrepreneurship for the 21st Century. Irwin
McGraw-Hill, New York, p. 704.
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