What if we could increase productivity and stave the capital flight by helping life sciences startups build their companies more efficiently?
We’re going to test this hypothesis by teaching a Lean LaunchPad class for life sciences and Health Care (therapeutics, diagnostics, devices and digital health) this October at UCSF with a team of veteran venture capitalists.
When I wrote Four Steps to the Epiphany and the Startup Owners Manual, I believed that life sciences startups didn’t need customer discovery. Heck, how hard could it be? You invent a cure for cancer and then figure out where to put the bags of money. (In fact, for oncology, with a successful clinical trial, this is the case.)
Pivots in life sciences companies
But I’ve learned that’s not how it really works. For the last two and a half years, we’ve taught hundreds of teams how to commercialize their science with a version of the Lean LaunchPad class called the National Science Foundation Innovation Corps. Quite a few of the teams were building biotech, devices, or digital health products. What we found is that during the class almost all of them pivoted, making substantive changes to one or more of their business model canvas components.
In the real world, a big pivot in life sciences far down the road of development is a very bad sign due to huge sunk costs. But pivoting early, before you raise and spend millions or tens of millions, means potential disaster avoided.
Some of these pivots included changing the product or service once the team had a better of understanding of customer needs or changing their position in the value chain (became an OEM supplier to hospital suppliers rather than selling to doctors directly). Other pivots involved moving from a platform technology to become a product supplier, moving from a therapeutic drug to a diagnostic, or moving from a device that required a PMA to one that required a 510(k).
Some of these teams made even more radical changes. For example when one team found the right customer, it changed the core technology (the basis of their original idea!) used to serve those customers. Another team reordered their device’s feature set based on customer needs.
These findings convinced me that the class could transform how we thought about building life science startups. But there was one more piece of data that blew me away.
Control versus experiment: 18% versus 60%
For the last two and a half years, the teams that were part of the National Science Foundation Innovation Corps were those who wanted to learn how to commercialize their science, applied to join the program, fought to get in, and went through a grueling three-month program. Other scientists attempting to commercialize their science were free to pursue their startups without having to take the class.
Both of these groups, those who took the Innovation Corps class and those who didn’t, applied for government peer-reviewed funding through the SBIR program. The teams that skipped the class and pursued traditional methods of starting a company had an 18 percent success rate in receiving SBIR Phase I funding.
The teams that took the Lean Launchpad class had a 60 percent success rate. And yes, while funding does not equal a successful company, it does mean these teams knew something about building a business the other teams did not.
The three-person teams consisted of Principal Investigators (PI’s), mostly tenured professors (average age of 45) whose NSF research the project was based on. The PI’s in turn selected one of their graduate students (average age of 30) as the entrepreneurial lead. The PI and Entrepreneurial Lead were supported by a mentor (average age of 50) with industry and/or startup experience.
This was most definitely not the hoodie and flip-flop crowd.
Obviously there’s lots of bias built into the data. Those who volunteered might be the better teams, the peer reviewers might be selecting for what we taught, funding is no metric for successful science let alone successful companies, etc. But the difference in funding success is more than 300 percent.
The funding criteria for these new ventures wasn’t solely whether they had a innovative technology. It was whether the teams understood how to take that idea, invention, or patent and transform it into a company. It was whether after meeting with partners and regulators, they had a plan to deal with the intensifying regulatory environment. It was whether after talking to manufacturing partners and clinicians, they understood how they were going to reduce technology risk. And it was after they talked to patients, providers, and payers whether they understood the customer segments to reduce market risk by having found product/market fit.
Scientists and researchers have spent their careers testing hypotheses inside their labs. This class teaches them how to test the critical hypotheses that turn their idea into a business as they deal with the real world of regulation, customers and funding.
So after the team at UCSF said they’d like to prototype a class for Life Sciences, I agreed. Here’s what we’re going to offer: The Lean LaunchPad Life Sciences and Health Care class. The goal of the Lean LaunchPad Life Sciences class at UCSF is to teach researchers how to move their technology from an academic lab into the commercial world.
We’re going to help teams:
- assess regulatory risk before they design and build
- gather data essential to customer purchases before doing the science
- define clinical utility now, before spending millions of dollars
- identify financing vehicles before you need them
We’ve segmented the class into four cohorts: therapeutics, diagnostics, devices, and digital health. And we recruited a team of world class venture capitalists and entrepreneurs to teach and mentor the class. Mentors include Alan May, Karl Handelsman,Abhas Gupta, and Todd Morrill.
The course is free to UCSF, Berkeley, and Stanford students; $100 for pre-revenue startups; and $300 for industry. The syllabus is here. Class starts October 1, 2013 and runs through December 10. You can download the all three parts of the Life Science series here.