Updated: Jan 30, 2021
The scale of venture innovation today is having a profound effect on many aspects of our lives, from our health, our productivity in our environment. Start-ups can have a positive impact on the economy and society but there is a risk that there will be a loss in costs due to ineffective product development, an ineffective team, negative externalities and the continuously changing technology landscape. The term creative destruction comes to mind.
Everything above sounds exciting but a little overwhelming, perhaps? It did to me too when I first joined the world of Venture. I come from an academic research background with little prior exposure to this world. But I knew from my work with innovation groups at university that I loved to see young companies grow. I saw there was a gap between the research and the commercialisation stage and that generally when it came to the commercialisation process, scientists took a step back, why?
A scientist should not feel alienated by the idea of bringing their research to market but rather, they should feel empowered and confident to do so. A few months ago, I joined Wilbe a venture firm and most importantly a home for entrepreneurial scientists. Wilbe taught me that scientists can and should be in the driver’s seat. That you can do the research and build your venture. Here, I share a few points as a scientist to a scientist on what to consider when commercializing your research.
The transition from the research phase to a venture requires tackling certain milestones or “critical junctures” as discussed by Vohora et al. (2004). Critical junctures can be divided into opportunity recognition, entrepreneurial commitment, venture credibility and venture sustainability. These are good benchmarks for measuring the early phase of transition of your research to a commercial venture. Here are things to keep in mind when doing so:
First, frame the opportunity.
A big part of getting here is being able to answer four core questions as clearly as possible: what you do, who you do it for, what is your secret sauce and why is now the right time for your venture. This makes up the core of your 'minimum viable deck' and also what we emphasise as a first step in our Become a Science Founder course. Taking one of the questions: What do you do? This involves defining your functional proposition (what you actually do) and your value proposition (what customers buy into), Saalim and Dezzy BSF instructors talk through this clearly here. The value proposition is the foremost reason the customer would choose your product. The functional proposition is the steps required to achieve this value proposition. Here's an exercise to test this out now.
Speaking to potential customers: Framing the opportunity is not meant to be a theoretical exercise, because the biggest proof you can get for moving forward is validation from your target customer(s), the earlier you recognise who this is and test if they would use your product the stronger the commercial potential. Just as you would plan your experiments, state your research hypothesis and test your product and then gain feedback to evaluate and improve your product for customers. If you recognise an opportunity for commercialisation for your research and it is validated by your target customer, then there's proof to move forward.
Become a Science Founder, 2020:
Second, your team is everything.
Form the right team. Your team shares the same vision and entrepreneurial commitment as you. They grow with you and will take out the time that is required to grow the venture. The team changes as the company grows. In the early stages, look for someone who can help develop the product to fit the customer’s needs and can understand the application of the research i.e. the core translational phase of your research to product. For example, during the research and development process, Watergenics brought in an experienced CTO and ML lead into their founding team to help build a customer-ready product.
Add to the team. In the later stages, for example, you may need someone who can manage the production to check if the product is safe and can be used by the customer. This involves running quality and stability checks on the product. I learnt that at the early stages when you are building your founding team you can afford to hire slow, analyse who you need in your start-up and be honest about it.
Third, getting relevant funding for your venture.
This allows you to build your science venture. Funding is only one aspect of a venture's credibility and sustainability. But credibility and sustainability come from a lot more! The most important is actually being able to solve the problem and have an impact. In terms of funding, early-stage funding will differ from funding in the later stages of your venture as it grows.
In early-stage funding, funds are required to demonstrate the scientific robustness of the product in the lowest budget possible and the majority of your costs go in research and development. For this reason, applying for grants would be the way forward as this a type of non-dilutive funding. Using grants, the team can build prototypes and do clinical studies before bringing a product to market. There are different types of grants, therefore choose one that aligns with your research. The grant must provide flexibility so that any alterations in research does not deviate from the theme of the grant. For example, Arete, a MedTech venture for respiratory health is the recipient of Innovate UK and Horizon 2020 grants which align with their goals. Overall, grant funding can be used to start off your venture but it does not necessarily validate the commercial potential of your research.
Once you have identified, validated and perhaps developed an asset from your research, private capital can be a valuable option. The first step in raising this kind of capital is to define your fundraising strategy: why, when and from whom do you need the capital. The next stage is to identify investors you would like to partner with on your journey, these could be angels, venture capital funds amongst others.
Angel investors use their own finances to grow an early-stage business. These tend to be family, friends or experienced operators that are not looking for short-term profit. The businesses they invest in can be in various stages of growth but are usually at very early stages of commercialisation.
Venture capital funds, a VC tends to invest in later-stage companies and receives equity from the start-ups that are predicted to grow and generate high returns at high risk. This requires an optimal amount of evidence to show product viability, hence why the initial grant-funded research can be valuable. To receive the appropriate type of VC funding one should look for certain characteristics in an investor - they should share the same vision as you, can guide you but not take-over in terms of management and add value.
Ultimately, your relationship with your investor is important. The journey is a long and arduous one and a good understanding of each other's goals plus a positive work relationship will lead to positive outcomes. Funding from such investors can provide credibility to your product, especially when you may be too early to have customers. I talk about this in more detail in my next post (watch this space!).
If you are in the very early stages of commercialising your research, the first two points are most valuable - your proposition and your team. Developing research into a viable product is a rigorous (and exciting) process. A cliché but a true saying - every entrepreneur has their own journey. The scenarios above may not apply to everyone but I hope this was somewhat useful to anyone looking to start their venture. Most of all, don't be afraid as a scientist to make that first step into starting your venture, similarly, I hope to start mine someday.
P.S. To anyone who made it to the end of this - thank you! This was my first time writing down my thoughts on this topic, needless to say, once I started writing I really enjoyed this process and had a lot to talk about. I will be writing more posts about what I learn on the process of building a science venture, so follow this space 🙂