Scientist-entrepreneurs often feel as if nobody knows their product better than they do. They have often developed it based upon a deep understanding of clinical practice and/or basic research, possibly refined it with the feedback of patients, and are many times internationally recognized experts in their fields. Naturally, they feel that they should lead a new enterprise that is based on their products. This feeling is accentuated when scientist-entrepreneurs see that the alternative leaders are business and finance professionals, who may not have the same academic or clinical background.
Most scientist-entrepreneurs we have met are, in fact, usually the most knowledgeable about their product and the underlying technology around which a new company is based. However the commercialization, operational, managerial and financial skills that are vital to creating a successful enterprise are many times not part of a scientist-entrepreneur’s tool box. In this article we highlight some of the key skills required to run a successful enterprise and the differences between these skills and—generally speaking—the training of scientist-entrepreneurs. We highlight some of the practices of successful scientist-entrepreneurs whom we have worked with. Of course there are many exceptions, including new physician-scientists who have successfully brought forward new ventures; we will simply be making general comments that we hope are helpful for new scientist-entrepreneurs to consider.
A study by Egon Zehnder International and McKinsey & Co. showed that the single biggest predictor of success for a CEO is customer impact.
For an emerging life-sciences company, the immediate customer is often the financial community that provides capital when there are no revenues to support the company. Scientist-entrepreneurs are accustomed to dealing with other scientists for access to funding; physicians can often override budgetary guidelines for the benefit of their patients. These experiences are quite different from raising capital for a new company, which requires constant selling of the company’s vision to business executives who have financial and investment acumen, but sometimes different scientific or clinical experience.
When a scientist-entrepreneur is successful in getting funding, he then has to focus on cash management, and how that impacts sequencing of development activities and proper decision-making to get to the value inflection. In the start-up world, running out of cash has dire consequences. Either the enterprise must be shut down, or investors must put in additional capital to rescue the company. This often occurs before there’s proof that the enterprise is viable, and at the cost of major dilution to the founder. Experienced entrepreneurs do not want to put their investors in this position, as it usually means a loss of faith in them as leaders, and they are understandably intensely focused on effective cash management. This highlights the importance of efficient deployment of capital and ensuring every investment is being made in activities that advance the program to value inflection and a successful exit. A general rule is to fail early, i.e., conduct experiments that clarify the odds of eventual success. Many times this is difficult for founders. Investors appreciate leaders who do not put more capital towards businesses that have a low probability of eventual success.
In a clinical environment, physicians are expected to make tough decisions rapidly and independently. Similarly, scientists are rewarded for independent thinking and developing scientific insights not apparent to their peers. Effective business leaders, on the other hand, are rewarded for bringing on talented individuals and managing and leading teams of such individuals toward common goals. Decisions and company strategy must be co-developed by all members of the executive team to ensure buy-in. The most effective entrepreneurial managers score higher on collaborative and team-building skills than their less-effective peers.1 Unilateral decision-making, rewarded in a clinical or research environment, can be counterproductive in the start-up company. When independence, not collaboration, has been rewarded throughout their training, it is not surprising that scientist-entrepreneurs may be surprised at the value of a collaborative management style in the business environment.
Bringing a new drug or device from the bench to the clinic is a completely different process from identifying the target and molecule in the first place. Whereas identifying a molecule that intervenes in a novel pathway requires scientific curiosity and imagination, a completely different skill set is needed for defining the target product profile up front, up-scaling manufacturing, testing the molecule for toxicity and navigating through the regulatory challenges to conduct a clinical study. Suddenly, the free-minded researcher is confronted with quality systems, documentation requirements and other regulations. Many researchers initially feel limited in their ability to be creative in such an environment. In addition, almost all academic institutions educate and train their students to become researchers; however, there are only very few training programs available that teach drug development, including regulations and processes. Therefore, almost all successful development professionals acquired their skills through hands-on experiences in start-ups or large pharmaceutical companies.
In addition to successfully acquiring new skills, the scientist-entrepreneur faces long odds that he remains CEO through multiple rounds of fundraising. Numerous studies have shown that the probability of a CEO being replaced increases with venture capital financing,
We have had the good fortune of working with Professor Robert Langer, ScD, of MIT, perhaps the most successful and prolific scientific founder in biotechnology. He is the author of more than 1,100 patents and has started well over two dozen companies, with over 100 products on sale or in clinical trials. Dr. Langer has enjoyed great financial, scientific and clinical success without ever having to be primarily responsible for the challenges highlighted here. Interestingly, he is well known for his collaborative nature and ability to motivate individuals, two of the key characteristics of successful entrepreneurs.
Serial entrepreneurs are good role models for new scientists with ideas they hope to move forward. Allowing other experienced professionals to take on the tasks that the scientist-entrepreneur does not have experience with or ability to focus on, and learning the keys to repeating that success, enables the founding of multiple companies. While some new scientist-entrepreneurs (and who do not have industry experience) have succeeded in their first CEO role, we believe—generally speaking—it is wiser to take on advisory or scientific/medical roles in the new company and gain the experience required to successfully run future endeavors.
Dr. Biswas is a managing director at VIMAC Ventures, and Mr. Chapin is the senior vice president of corporate development at Ora Inc. Ora provides a comprehensive range of product development, clinical-regulatory and product consulting for developers, investors and buyers; clinical trial services and regulatory submissions; and asset and business partnering support in ophthalmology. We welcome comments or questions related to this or other development topics. Please send correspondence to firstname.lastname@example.org.