Biotech start up companies will typically burn through millions of dollars over several years before generating any revenue. Managing this process requires executives who understand the developmental, regulatory, marketing and other challenges that biotechs typically face in their early years. The greatest of those challenges will be procuring and managing the venture capital that will keep the biotech afloat while its products go through an intense development and regulatory process.
Consider AdhereTech, a New York-based company founded in 2011 in order to bring a “smart” pill bottle to the market. AdhereTech developed its proprietary technology in conjunction with researchers from the University of Alabama. The company and its products received glowing reviews but it did not raise substantial funding until late 2014, when a group of investors injected $1.75 million into the company in a Series A funding round. AdhereTech and its products continue to receive good press, but more than four years after its founding the company hasn’t yet turned a profit.
Executives and managers whose solution to any problem is to throw more money at it will be out of their element at biotech startups like AdhereTech. Biotech and medical device startups require management that can juggle multiple challenges, including dealing with strict FDA procedures and protocols, controlling limited financial and personnel resources, outsourcing development and testing to contract research labs rather than keeping everything in-house, addressing competition from established biotech companies and new startups, all while maintaining an innovative atmosphere that can bring new medical technology into the marketplace.
The beginning of any good technology startup will be the innovation or idea that forms the company’s product or service. Venture capital firms and other funding sources will be interested in the idea, but the startups that succeed in raising funding will more likely be those with a management team that is trusted by the venture capitalists and angel funds to take the product or service from the drawing board to the marketplace. Given the choice between a company that has a stellar product or service that is in the hands of the wrong management team, and one with a fair product or service that is in the hands of a stellar management team, the money will always flow to the latter choice.
Executives and managers who want to step into the biotech startup world would do well to assess their own skills and personalities to determine if they are good fits for that world. The payoff can be incredible, but not everyone is ready for the challenges and frustrations of managing an often thinly funded biotech company in a heavily-regulated and competitive environment.
Biotech and medical device startups frequently fail not because their ideas or products are bad, but because they don’t have the right management teams. Forming the right team for the idea or product is the greatest challenge that a biotech startup will meet. For more information on what it takes to be part of a biotech startup, please contact us at your convenience.