by Ruth
Do you ever dream of becoming your own boss so that you can plan your schedule and earn a decent income?
An article by Dragomir Simovic published on July 28, 2022, shows the following statistics:
* Ninety percent of new American billionaires are self-made.
* In 2016, 25 million Americans were starting or already running their businesses.
* The number one reason businesses fail? Lack of a market need for the product.
* Forty-six percent of small business entrepreneurs are between the ages of 41 and 56.
* There are 582 million entrepreneurs in the world.
* Twenty percent of small businesses fail within the first year.
* Studies show middle-aged men start the most successful businesses.
Type “entrepreneurship” in the Amazon search box and over 60,000 books will pop up. Rather than replicate those books, I would like to share my experiences.
Stage 1: Planning
The idea of starting my own biotech enterprise came to me when my former employer canceled my project and moved me to a different department. I’d invested a few years of my life in developing new drugs for complications associated with chronic kidney disease and truly believed our effort would eventually help many patients. Then, my company got out of the kidney disease drug sector.
Since I’d taken part in extensive marketing research conducted by the giant pharmaceutical firm where I used to work, I understood the market and competition. I also kept myself well informed about the cost, risks, and challenges of developing a new drug.
I let my idea sit for two years. After many prayers, I put together a business plan and resigned from my job.
Stage 2: Launch
The first step, an easy one, was to incorporate my company.
The much more difficult next step was to secure funding. Back then, we had intangible assets such as ideas, know-how, and experience. But we didn’t have patents or anything tangible to attract investors. Through my professional connections, I found several angel investors (wealthy private investors who finance small business ventures in exchange for equity) who shared my ideology. With a $600,000 fund, we set up a lab to start preclinical research.
Stage 3: Move Forward and Maintain
Anyone who has ever worked in the biotech sector will appreciate the fact about how fast research burns cash. We pinched pennies. Still, the initial fund evaporated in less than a year. Fortunately, our first few compounds all tested positive. With the data, we applied for the NIH SBIR (National Institutes of Health Small Business Innovation Research) grants.
To make a long story short, we received six NIH grants and raised two more rounds of funds from investors. The money allowed us to bring our compounds into clinical studies.
Stage 4: Exit
Ten years later, some of our original investors grew restless. When would they see a return on their investment?
We had outstanding data from a clinical study on ten hemodialysis patients. The next step required about $20 million to evaluate the compound in 200 more patients. Would we manage to find the money?
After numerous discussions, our board reached a decision and sold the program to a venture capital firm. Instead of raking in over $200 million with data from a Phase II clinical study, we sold it for about ten times less with the existing data.
Our original investors were well pleased because they received more than a tenfold return.
The example from my own story is to warn you that, if you are interested in becoming an entrepreneur, please research the four stages described above carefully before you quit your job.
You must estimate the net difference in your income between the current job vs. your new endeavor. In my case, my biotech venture paid me options instead of cash until we received the NIH grants. I prepared for it during the planning process, and our family lived on my husband’s income and our investment earnings for a few years.
Another important part of the planning is to analyze the breakeven point of the operations in your new business. Don’t be overly optimistic about your potential gain and underestimate the costs and risks. Since it’s notoriously difficult to conduct this analysis in the biotech industry, I told all our investors that there was a >95% chance that their money would go down the drain.
Last but not least, never start a business with zero or little experience in the relevant industry. For an entrepreneur, both training and know-how are absolutely crucial. Without my technical background and years of experience in developing new drugs, my small company would not have attracted the interest of angel investors.
