The ‘Leverage’ Start-Up Model

Mar 08, 2019
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Entrepreneurial professors, recent graduates, or students in the life sciences who would like to translate their research into a biotech start-up have the potential to de-risk nascent technology and provide the foundation for a company by using a capital-efficient, non-dilutive operating model we term the “leverage” start-up. This model was developed in response to an economic climate in which early-stage investment capital for biotech is scarce and prohibitively expensive. By leverage of existing infrastructure and resources in universities and other organizations, and by judicious use of non-dilutive financing, an entrepreneur with a laptop and access to some lab space can incubate early-stage academic discoveries, develop proof of concept, generate value and establish a biotech start-up.

Biotech represents an expensive, high risk, long-term investment. Translating a discovery in a research lab to a new medicine approved for human use requires extensive research and development infrastructure, expertise and resources at an estimated average cost of $1.5 billion, and a product development cycle in the decades. Compare this with information technology, where the ability to create, test and develop a start-up has never been easier. A company can literally be funded on a credit card and new business concepts can be rapidly tested and iterated. A significant driver of this advancement has been a reduction of costs for technical infrastructure and an increased ability to rapidly test ideas in the marketplace. The convergence of these advantages has created tremendous innovation and investment in information technology companies over the past few years. In contrast, it remains exceedingly difficult to bring nascent academic biotech research to a stage attractive to investors. The Burrill & Company 2011 Annual Report on the Life Sciences Industry noted that “the funding woes biotechs face…represent[s] a structural change to the finance landscape for the life sciences.” The Leverage Start-up model represents a response to this change in the finance landscape for early-stage technologies.

The Leverage Start-up – a new model for building biotechs

The Leverage Start-up model (image at top of post) is a vehicle for developing technology through its earliest and riskiest stage. We believe that this model is repeatable and scalable because the Leverage Start-up:

  • Leverages R&D infrastructure, such as specialized facilities and equipment that exists in academic organizations, thereby minimizing the cost of establishing and equipping research facilities. This accelerates the R&D and product development program of the start-up
  • Leverages technical expertise from world-class academic institutions, building collaborations and obtaining insight into your proposed solution from recognized opinion leaders. These contacts serve as an (in)formal Scientific Advisory Board (SAB) ;
  • Leverages resources that support the commercialization of academic innovation, such as technology transfer offices, incubator organizations and industry support organizations. This access to business intelligence supports activities such as patent filing and business strategy ; and
  • Leverages non-dilutive funding from public, charitable and private sources to finance R&D programs to de-risk technology and generate value. This financing fills the gap left by shrinking investment dollars available to early-stage biotech start-ups and provides funding to help de-risk early venture concepts.

The “leverage” start-up is a mechanism to generate proof-of-concept data for promising early-stage academic discoveries in the life sciences. It is designed to advance technologies in a biotech start-up to the stage where investors would contemplate an investment, and the cost of that investment to the founders was not prohibitive. In future posts we will discuss each of the four components of the “leverage” start-up model in more detail.

Have you used a similar approach to launch a biotech start-up? Or do you believe that this model would work in your academic environment? We would love to hear your input. Please leave comments below.

James Taylor and Euan Ramsey

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