Whether you’re a seasoned entrepreneur or a first-time business owner, due diligence is critical in ensuring your venture has the best chance of success. Developing an effective plan of action that outlines expectations can aid in securing successful outcomes. Venture capitalists understand that pioneering university research is essential, but readiness for operating in the real world requires discipline and due diligence. A systematic approach is needed to secure a smooth transition and capitalize on promising technologies so that the venture is prepared adequately for the path ahead.
Ultimately, successful investments can be made if both sides of a university and venture capital collaboration understand their roles and responsibilities. Through sharing knowledge, resources, and experience, each party can help ensure that the venture will reach its full potential. The reality is that every situation requires thoughtful consideration, as each carries its own set of risks and rewards. Venture capitalists ask key questions during due diligence. As an example, the list below, while not exhaustive, and is not intended to prioritize the elements of success because I believe that all are important, and they all work together, provides a robust guide for likely success:
Key elements towards success:
Clarity: Any organization needs to have a clear direction, clarity of vision, and goals to achieve success. It is essential that these statements are understood by everyone within the organization and communicated effectively. They should be reviewed regularly to ensure that all are on track with the mission. In addition, commitment and discipline from all team members are required to accomplish the goals. Success should be measured against these principles to stay on track and adjust as needed.
Risks: Risk management should also be considered, as multiple elements beyond scientific, technological, and clinical development need to be addressed. Every organization needs to understand its risk buckets and to have a plan to manage them. University researchers tend to have a very narrow and sometimes biased focus on their technology, but having an insightful and disciplined attitude is essential for them to be successful. This more comprehensive understanding of risk can help researchers stay on track with the goals set out and keep them focused on the mission at hand.
Agility: Organizational agility is paramount in the development of successful enterprises. As we know, enterprise development is rarely a linear process, and pivots often need to be made along the way. Therefore, organizations must be flexible enough to respond swiftly and effectively to these changes. It pays to consider whether functions should/can be integrated or managed internally or externally.
Awareness: Maximizing the success of a product or technology requires being well-informed about the culture, environment, and markets that the product or technology is entering. It is crucial to understand if there is an unmet need or demand for it and whether potential customers recognize its value proposition. Additionally, it’s important to be aware of any resistance points that may arise and whether the product or technology is well advanced beyond the current standard of care, product suitability, or usefulness seen in the marketplace. Market intelligence must be studied closely to ensure a complete understanding of one’s competitive position in the business environment. Ignoring this step can have dire consequences for success.
Management Teams: Management teams should be more than just the one or two smartest people in the room. They must be a collective of individuals passionate about achieving an organization’s mission and have bought into its vision, goals, and core values. It is essential to look for talent that demonstrates technical knowledge and qualities such as optimism, coachability, optimal collaboration skills, and the ability to be cross-trained. Leaders should not forget to value the importance of advisors, mentors, and other people who bring invaluable knowledge and experience to the enterprise’s success and longevity.
Cash: Having the right cash management strategy is essential for any early-stage startup. This means planning for funding raises, building buffers, and understanding the different stages of capital investment. Depending on the circumstances, pre-seed, seed, and Series A funding may be needed to raise sufficient capital. Cash management requires discipline and an understanding that the path to success is rarely straightforward; when dealing with clinical development, it’s important to remember that the timeline and cost can be highly variable. Careful cash management is essential for any early-stage startup and should not be overlooked.
Talent: Recruiting and retaining talent is a major challenge for startups, particularly in highly competitive areas such as the Bay Area and Boston/Cambridge. But don’t forget about Philadelphia! This city has become an increasingly attractive biotech market, offering businesses plenty of options for finding, recruiting, and keeping talented professionals. Philadelphia’s mix of highly educated workers, diverse business environments, and a myriad of quality universities produce high-caliber graduates with specialized skills that startups can leverage.
Manufacturing: In the world of production and manufacturing, timing is everything. It’s essential to get it right– if your product or therapy receives approval, you need to be able to rapidly upscale your manufacturing process to stay ahead of the competition and reap all the rewards. As we have seen in recent examples, a product or therapy that has received FDA or other approvals can quickly become under-prepared to meet high demands with corresponding losses in millions of dollars’ worth of revenue opportunities. On the other hand, launching a product too late can result in missing out on early market entry against competitors.
An effective startup enterprise program is a winning situation for all involved. It accelerates the funding and commercialization of new technologies, bringing mutual benefits to not only the entrepreneurs but also the universities, venture capitalists, their respective communities, and the broader economy. These mutual benefits are clear: universities gain access to resources from venture capitalists, while venture capitalists access the insights, talents, and potential of promising university researchers. This early look at transformational technologies offers the potential for impressive returns on investment. Implementing this paradigm for success can become a game changer for launching successful enterprises. So, let’s start building solid relationships to make a lasting impact!
About the Author
Chuck Kerrigan, is an accomplished global business executive with extensive experience in commercial and private banking, venture capital, and nonprofits. As an Area Head for the USA Mid-Atlantic Region, Chuck successfully launched and grew the corporate banking practice for a large European-based bank. With experience as a FINRA-licensed Financial Consultant, he has sourced and counseled ultra-high-net-worth clients for nationally recognized private banking and wealth management firms. Through his affiliation with internationally based venture capital firms, Chuck has guided and assisted in the development of many types of enterprises from startups through their growth phases. His work with established nonprofits includes responsibilities as a university trustee and Chair of numerous nonprofit committees such as a $1 billion investment program for pension and non-pension assets.