I am fortunate to have an office that faces a lagoon in Redwood City. It's endlessly entertaining to watch ducks, geese, pelicans, egrets and other birds feed on whatever lives underneath the water. I'm always amazed at the how the various groups of birds flock together and all of them head towards the same feeding areas. I assume there must be a school of fish causing these birds to clump together, but it's difficult to see from my vantage point.
There have been moments this year when watching the diagnostic industry is a bit like watching these birds. For no obvious reason, several companies will begin working on the same marker or indication at the exact same time. Each seems to think that they alone have discovered a school of fish. None seem to realize that the pond may already be over-fished by the time they get there.
Here's a sobering example: Earlier this year, I was contacted by three separate companies who were all working on the exact same intended use. They all contacted me on the same day. Each one was just getting started, each seemed to think that they had found a secret trove of riches that none of the other birds knew about.
I'd like to think that our marketing is so fantastic that 100% of the new IVD projects call me within 24 hours of getting started. Modesty and practicality suggest that this number is quite a bit smaller, however. Is our market penetration 10%? 5%? Less than 5%? If three companies calling us about an indication is just a small sample of the companies currently beginning work, it's pretty obvious that this pond is destined for rapid over-fishing.
Competition is a good and healthy thing, but there are practical limits to how many competitors even an enormous indication will support. Failure to recognize these practical bottlenecks will prevent you from making it to the pond in time, even if you have excellent technology.
For example, one of the biggest challenges in oncology is finding existing samples with outcome data. This is particularly challenging with difficult-to-obtain samples such as bone marrow. Having access to good samples is critical and if the samples you need aren't already available the budget and time line had better include prospective sample collection. Understanding availability of samples (and who else may be trying to obtain them) will be critical in determining whether success is possible.
As another example, partnerships are frequently a key to success. One of our clients has an assay that was developed for a specific platform. Very early in our work, I urged them to sit down with the instrument manufacturer and forge some kind of agreement... or even make a brief introduction. They didn't do it, however, and when the instrument manufacturer announced an exclusive deal with another company working on the same intended use, our client was left with the bitter choice between restarting development on a different platform or just pulling the plug.
I suspect (but can not see) that schools of fish are attracting flocks of birds. Similarly, I suspect (but can not directly observe) that investors are causing much of the industry flocking behavior. I've heard stories that investors will identify what they believe is a good idea and then send a dozen or more companies out in pursuit of it. Or that as soon as one of them funds a company to chase an idea, all of them want to make a play. To me, this seems wasteful, but I'm aware that the economics of venture capital make it unlike most other kinds of business.
Obviously, I can't tell prospective clients about the other companies working on their product. I maintain a strict non-disclosure policy around all proprietary information I hear... even redundantly proprietary information. But when I get that second (or third) call about the same idea, I often wish I could say something.
Then again, maybe I don't have to say anything at all. Perhaps you can glean as much if I seem unexcited by your intended use. Or if I gently thank you for calling and wish you the very best of luck.
The best consultants are, after all, another one of the things that usually goes to the early bird.
Tags: Industry, VCs and Investors
