Starting a biotechnology company is nothing like any other startup.
There’s typically a lot more investment at stake and the failure rate for these companies is very high. With the average cost of getting a new drug to market being $350 million, there’s a lot that can happen to cause these startups to fail.
If you’re determined to create a special company aimed at changing the world, a biotech company can do just that.
Read on to learn how to start a biotech company so you can defy the odds and create a company that lasts.
Verify There’s a Market for Your Product
Before you pitch investors, before you even get a logo for your company, you have to make sure you have a viable product.
If you’re asking for millions of dollars, you’re going to need a lot more than a gut feel to prove there’s a market for your idea.
How can you tell if there’s a market for your products? That’s going to take a lot of research.
Once you’ve found that you have a viable product, you’ll have to make sure that your product isn’t already protected by a patent or other intellectual property claims.
Identify the Leaders of the Company
When you know that you have a product, it’s free of patent or intellectual property concerns, it’s time to put your team together.
Your team has to be the most important step you’ll take in your new venture.
These are the people you and your investors are going to have to rely on to guide the company through challenging times.
Your team has to be in this venture for the long haul. It takes years for a biotechnology company to break through the research, development, and regulatory environment just to bring a product to market.
You’ll have to decide who the founders are and keep in mind that not all of the company’s leaders should be considered founders.
The next piece to sort out is compensation. Initially, there won’t be much of a salary for the company’s leadership, and they’ll expect to be compensated in stock.
You don’t want to be in a position where you give the founders and leadership team equal amounts of stock, only for them to move on from the company while retaining their stock options and control of the company while you’re left to do the hard work.
Get a Good Lawyer
The person you hire as your attorney will be the critical piece in making your business run. They need to have experience in business law.
They need to have years of experience working with biotechnology companies because there are a lot of unique issues and challenges that arise in biotech startups compared to most other industries.
Beyond that, they need to be someone you trust, and you can turn to for legal advice and business guidance.
This will be the person you rely on to help start and grow your company through various stages of growth.
Incorporate Your Company
You’re going to need to chase investors as a startup biotech company. There are a number of ways to raise money. You can obtain grants, run a kick starter (though the amount of money you’d need to raise would be staggering), or go through venture capitalists.
Initially, you may have registered your business as an LLC. You’ll need to incorporate your company as a C-Corporation because that is what investors tend to prefer.
When you start to get interest from investors, convert your company to a C-Corp, which will help you seal the deal.
Develop Business and Marketing Plans
Investors won’t touch your company without a business plan.
They want to see that you have thought out the entire business. Here’s what you’ll need to have in your business plan:
- The market need
- How your product serves the need
- How much revenue it will create
- Company expenses
- Who the leaders are within the company
- When and how much the return on investment will be
- The exit strategy for investors
As you’re working through the business and marketing plans, seek counsel from your attorney. They can guide you through the process.
Build the Company Slowly
It’s important to note that you have to get it right the first time. There really is no room for error because with biotech products, you can’t just create a product, market it, and debug it after release like you can with a software product.
If you were to do that with a drug company, that would be illegal and completely unethical.
You’re going to be responsible for a lot of money. You’re going to have to show that you are responsible with those funds and need to show slow and steady improvement.
As you build the company, you’ll want to invest in consulting services to help you grow your business. There are firms like this company that offers solutions like strategic relationships and supply chain management.
That can help you keep your overhead low while you’re building up the company.
Set and Reach Company Milestones
Little by little, your company will grow and gain momentum.
You’ll have investors, and you’ll have to show progress, especially if you need more capital.
Your milestones can be related to product development, or company growth, such as choosing a new location.
As you meet your milestones on time, you’ll gain more investor confidence. The more consistent you are at reaching these milestones, the more likely investors will continue to invest in your biotechnology company.
Starting a Biotechnology Company
Starting a biotechnology company is a long-term commitment. It can take anywhere from three to ten years just to see it become a viable company.
The risks are massive, and you’re playing with hundreds of millions of dollars. The rewards can also be massive if your products are developed, pass regulatory hurdles, and make it to market.
Then you have to sell your products!
To be a success, it takes the right team, the right products, and a lot of patience.
To get more tips on starting a business, check out our blog today.