"Cultures that depend on survival are absolutely critical for this industry to succeed," Greene said. "If you don’t want to [stay independent], you’re not a company. You’re a project."
There is an interesting trend story coming out of the MassBio conference this week. Increasingly, it seems, medical-sector entrepreneurs are being encouraged to think in terms of succeeding on their own and not to depend on being acquired.
By now, we've all gotten the message that IPOs are no longer the default endpoint of a standard business plan, but the Exit Plan business model is a pretty common part of the startup culture. The costs of commercialization can be daunting and it's the rare enterprise that has managed to go from the lab bench to the marketplace without taking on some very serious partnerships, at the very least.
It would seem, however, that the conventional wisdom among some investors is shifting. The mood seems to be that a small, struggling enterprise may not be best served by having a CEO with one eye on their golden parachute. I don't imagine that buyouts are ever going to go completely out of style, but it's interesting to contemplate that a business may not be well-served by planning for one.
I'm reminded of a story about Hernan Cortes, the Spanish Conquistador. Upon landing in Vera Cruz, he set fire to his own boats while his men were asleep. There's a certain insane quality to his action, to be sure. But the boat-burning story holds a valuable lesson about entrepreneurship, too. When you remove the option to take the easy way out, it can have a powerful focusing effect. Success becomes an imperative, rather than a preference.
It may well be the case that mergers and acquisitions will continue to be as significant a part of the biotech company lifecycle as they ever were. Even so, what kind of new focus could you find if you approached business as though that boat were already burned? Perhaps some startups would be more likely to deliver on Plan A if there were no Plan B to fall back on.
In the IVD world, this probably means being prepared to take the harder parts of product development seriously. If your business plan ends in an acquisition, you may be tempted to minimize work done on design control and quality systems. It may seem less urgent to determine a regulatory pathway or find the correct breadth of your intended use. Those may seem like details best left to larger companies who have their own systems, strategies, and people. It's quite possible that your prospective partners may be able to do these things more efficiently and tailor the results more to their liking.
That seems rational, but it may not be your best play. It's counter-intuitive, but your product may become a more valuable acquisition if you do not approach it as an acquisition. That's because the value of good development work is far greater than the resources it takes to create.
Product development isn't just about creating a particular set of documents for the least amount of cash. More importantly, development is a significant step in risk mitigation. Development work should be valued by your partners for the same reason it's valued by regulators: it reduces the amount of faith required to see value in the product. It's not hard to see why demonstrated value could be worth a lot more than potential value.
No single plan is going to work for all businesses, but focus is always a good thing. It may be the case that you have to set the bar too high before you find out how high you can actually jump.
Tags: Best Practices
