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"From Bench
to Bedside: Becoming a Scientific Founder" I am pleased to be with you this evening and participate in recognizing University of Missouri faculty for their accomplishments in academic entrepreneurship. As you know from the introduction, I am with RiverVest Venture Partners, a venture capital firm that invests nationally in life sciences opportunities, focusing on centers of excellence in the Midwest. In almost every case, our portfolio companies are based on technologies that were licensed from major research universities like the University of Missouri. First-rate academic research is crucial for any region seeking to capitalize on life science discoveries as an engine of future economic growth. However, moving a technology from "bench to bedside" in a startup company requires more than strong research. It demands an extraordinary commitment by the principal investigator to become a scientific founder, while simultaneously fulfilling his/her academic and, in many cases, clinical responsibilities as well. Regional initiatives can also play an important role in facilitating this process, and hence economic growth. These might include developing necessary infrastructure, like an incubator, or seeking to create a business climate conducive to entrepreneurship. Tonight's Technology Transfer Showcase and other initiatives here at Columbia, indeed throughout the System, are evidence that the University of Missouri is committed to fostering technology commercialization. In my remarks this evening, I would like to describe the general profile of a technology that would be of interest to a venture capitalist. Then, I will talk to you about what is involved in getting that technology to the point of interest. Finally, I will comment on the role of the scientific founder. Profile of "Interesting" Technology What is the profile of an "interesting" technology from a venture capitalist's perspective? Before answering that question, let me take a step back and provide some context. First, venture capitalists are generally focused on maximizing returns to their investors, not economic development per se. Clearly, the capital they can bring to an opportunity is an important ingredient in commercialization, thus economic development. But unless a venture capital firm can produce attractive investor returns over time, it will be unable to raise successive funds and continue investing. Also, venture capitalists are, by trade, a diverse lot-what is uninteresting to one venture capitalist might be of great interest to another. So, academic institutions should foster relationships with the broadest possible range of venture capital firms. Finally, venture capital funds typically have a 10-year duration, with the ability to extend that for a year or two. Accordingly, life science venture capitalists must invest in, build and exit a portfolio company in an average time frame of, say, five to seven years. As a consequence, they are usually looking for a technology broad enough to be the basis of a company that can expect a significant trade sale or initial public offering in a relatively short period of time. So, just because a venture capitalist is not interested in a particular technology does not mean it is without merit. A narrow technology that can broaden an established product line or improve a manufacturing process might be an excellent candidate for licensing to an established company. Or, a broader, yet very early technology that cannot be developed and exited in a reasonable time frame might benefit from continued incubation and development in a quasi-academic environment. Technologies that are "interesting" to a venture capitalist generally must adhere to a certain broad profile. Of particular interest to a venture capitalist are technologies that address unmet medical needs. The technologies offer significant commercialization appeal. Additionally, intellectual property, or patents on the technology, must be such that the technology is protected against potential competitors and its use will not infringe on other related patents. Prior basic research should have provided a background understanding of the molecular mechanism involved in the technology. Such understanding is crucial, for example, in drug development by allowing inference of efficacy and possible side effects of the drug, long before costly clinical trials have begun. Additionally, experiments in animal models of disease can provide necessary empirical evidence safety and efficacy, at least in those models. Finally, publication in peer-reviewed journals both validates the technology and provides the opportunity for other third parties, like venture capitalists and their advisors, to review and critique the scientific findings. At RiverVest, we concentrate on technologies that offer novel approaches to addressing unmet needs in large markets. For example, two years ago we formed a company named Auxeris Therapeutics (www.auxeris.com) with scientific founders from Washington University School of Medicine and intellectual property out of Barnes-Jewish Hospital. The technological basis of the company was comprised of two new approaches for treating metabolic bone disease, including osteoporosis. As you know, osteoporosis is widely prevalent, and its incidence is projected to grow rapidly over the next five years. Also, there is an unmet need for powerful anabolic agents that can form new bone. So, Auxeris was created around technology that clearly addresses an unmet need in a large market. In addition, the Company has subsequently in-licensed a second, more advanced anabolic agent from a third party that broadens its technology platform and gives it another "shot on goal" for a marketable drug. Getting to an "Interesting" Point How does a technology typically get to the point where it is interesting to a venture capitalist? In relatively rare instances, like Auxeris, a venture capital firm will provide the seed capital to form a new company, validate the technology, license it from the owning institution, develop a business plan, hire management and raise the first round of venture financing. More typically, however, the scientific founder, the institution that owns the intellectual property and other interested parties must work together to get the technology and related business opportunity to a stage where venture capitalists might be interested. That was the case with another of our early-stage portfolio companies, Kereos, also founded by scientists at Washington University School of Medicine with technology licensed from Barnes-Jewish Hospital. Kereos is developing molecular imaging agents and targeted therapeutics that promise to diagnose and treat cancer and cardiovascular disease much earlier than now possible. The co-founders, Sam Wickline, M.D., and Greg Lanza, M.D., Ph.D., secured a substantial portion of the more than $10 million in grant money that has gone into the Company, from the National Cancer Institute's Unconventional Innovations Program. This program is aimed specifically at fostering the translation of research findings, like those of Kereos' founders, into products. In addition, Barnes-Jewish Hospital has been very supportive in helping the founders build the intellectual property estate associated with their technology. So what resources are necessary for advancing a technology to a stage where a venture capitalist might be interested? While there could be variations, I believe the following list is representative of the required inputs. First, a gifted investigator who is able to attract significant grant support from the N.I.H. or other funding sources to conduct discovery research. Second, a licensing office that can recognize discoveries with potential commercial merit and has sufficient resources to obtain proper patent protection. Third, a source of pre-seed funding, possibly angel money, to finance key proof-of-principle experiments and evaluate the technology's commercial potential, as necessary. Fourth, the involvement of business professionals who can help evaluate and shape the commercial opportunity. Fifth, an incubator with wet lab space where a startup company can be established to accept transfer of the technology from the academic lab. Often, these incubators will have staff that can assist in the company-building process as well. And finally, a networking organization like SPARC that provides the opportunity for scientific founders to benefit from the experience of fellow academic entrepreneurs, as well as other parties interested in supporting the company-building process. Becoming a Scientific Founder Finally, let me comment on becoming a scientific founder, a path that is not necessarily self-evident. As Steve Teitelbaum, M.D., scientific founder of Auxeris said, "I was reluctant, at first, to start a company. I believed that as a scientist, I was better suited to research than business." So, why would an investigator take an entrepreneurial path, and what does it involve? While there is an opportunity for wealth creation, I believe that most scientific founders would like to see their discoveries translated into commercial products that benefit mankind. This is what motivates them. In a startup company, the investigator can stay involved with the development of his/her technology longer than would be the case if it were licensed to a third party, quite possibly enhancing the chances of its commercial success. In addition, there is an opportunity to participate in the company-building process, gaining new knowledge and insights. Again, in the words of Dr. Teitelbaum, "It's thrilling to see the therapeutic potential of the work we do every day in the lab becoming reality. It's exciting to remain closely attached to our research, to attract exceptional scientists to the Company's staff, and to create and witness our business plan materialize." What would the role of a typical scientific founder be? Most of the time, a scientific founder will prefer to continue his/her academic pursuits, which is generally where that individual's interests and expertise lie. In fact, the academic lab, depending on the nature of the licensing arrangements, could well become the discovery arm of the startup company. Often, a scientific founder will be directly involved with the company as chair of its scientific advisory board (SAB) and perhaps a member of its board of directors as well, at least for awhile. It would be unusual, however, for a scientific founder to become an officer of the company, and even more unusual for him/her to become the CEO. Just chairing the SAB and serving as a director requires a significant time commitment. Conclusion So, should you become an academic founder? Clearly, the hurdle is high with respect to the quality of science and its commercial significance. But, if the technology measures up, the satisfaction of helping move it from bench to bedside has to be immense. And the University of Missouri is putting in place the infrastructure necessary to support the company-building process. As one who has come to the startup "game" from a wholly different background, I can highly recommend entrepreneurship as an endeavor that is challenging, intellectually stimulating, and potentially very gratifying. To quote Dr. Teitelbaum one more time, he said, "No one mentioned that starting a company would be fun." Congratulations to all of you academic entrepreneurs on your accomplishments to date, and best wishes for continued success in moving your technologies from the bench to the bedside. Thank you. Click to view Tom Melzer's bio |
