Biotech Incubator: A Helping Hand for Budding Entrepreneurs

"The highest reward for a person's toil is not what they get for it, but what they become by it."


If you are slaving away in an academic research lab wondering what it is all for, this thought will be most comforting, but it is an unlikely motto for a bioentrepreneur! Having said that, if you are thinking about starting a company, the road ahead is full of challenges, barriers, and pitfalls -- anyone who gets to the end, or even passes only a short way along, will learn from the experience, so maybe it is a good quote for the bioentrepreneur. Those of us involved in "bioincubation" want to help the bioentrepreneur along that road by shifting the academic culture toward a more entrepreneurial stance and providing hands-on support to the start-up business.

Commercial biotechnology is highly dependent upon the science base, more so, perhaps, than any other business sector, and so making life less hard for the bioentrepreneur is extremely important to ensure good ideas get from "the bench to the bedside." The United States is still ahead of the United Kingdom and Europe in this respect; moving in and out of academia and industry is an accepted way of life for many U.S. bioscientists, but that is not yet the case on this side of the Atlantic. There are many reasons for this, related to the different drivers in academia and industry and a more risk-averse nature in Europe. So what can be done to overcome these problems?

Bioincubators were initiated in the U.S. and they have better success rates for company start-ups than nonincubated ventures. At the forefront of U.K. campus-based activity is Manchester Biotech Ltd. (MBL) followed closely by projects in York, Oxford, and Cambridge, among others. Scotland also has several exciting initiatives. Other bioincubator projects are also underway across Europe, particularly in Germany. So what does an incubator do? Like all other sorts of incubators, bioincubators help things grow from very small beginnings -- in this case fledgling biobusinesses. In developing the MBL incubator, we identified three particular services we needed to provide, and we established that everything needed to be right next door to the academic/clinical community:

  • Management expertise

  • Quality laboratories in a commercially focused building

  • Seed funding and access to follow-on funding

  • Sound management and business planning is key to any new business venture. Indeed, if asked what the three criteria are for a successful business, many venture capitalists will reply "management, management, management." While some academics may have a natural flair for business, very few will have any real grounding in commercial matters. University technology transfer companies can provide a lot of assistance but, by necessity, they are often generalists and until relatively recently have focused on licensing rather than spinout companies. A company like MBL is able to focus specifically on the biotechnology sector and provide the specialized management support (market knowledge, networks of contacts, knowledge of the investment environment, business planning expertise, etc.) plus the physical infrastructure required. Also, because the incubator is intimately linked to the campus, for Manchester academics at least, there is time to decide whether to "cross over" to the excitement of commerce or stay in academia -- and if things don't work out, they can "fail quietly," return to the lab, and prepare to develop the next idea.

    This brings us to laboratories and facilities. Undoubtedly, initial work can be carried out in a university laboratory, but this cannot go on for any length of time a) because it starts to compromise the university's real purpose of teaching and research and b) because running a business in an academic environment becomes difficult and can severely curtail operations. Given that biotechnology companies rarely evolve from garden sheds, there is a requirement for quality premises in which you can "hit the ground running" -- time is of the essence in any biotechnology venture. Biotechnology research regulatory requirements are stringent and the costs required to refurbish the average science park space are considerable in both time and money if, indeed, the conversion is possible. Our incubator provides Category II laboratories and shared purpose-built facilities like cold rooms and microbiology suites.

    Last, but certainly not least, is money. Biotechnology is an expensive business and it can be a long time before you start seeing returns on investments, especially in the case of a drug or therapeutic product. Seed funding is a problem -- it is high risk and the due diligence necessary to appraise a potential investment is expensive. In the U.K. and Europe the venture capitalists still prefer "safer" management buy-outs (where they fund a tried-and-tested management team to buy-out other investors) to true seed funding. As most academics are not wealthy themselves or have rich relatives willing to hand over the family fortune, most are reliant on external investment to progress their ideas. MBL has a small seed fund that can fund start-ups up to a maximum of about £250,000. This allows the company to develop its intellectual property (IP), business plan, and commercial team and, thus, become more attractive to external investors. But MBL is not a charity and this money is given in return for an equity stake in the start-up company. The size of the stake will depend on a number of factors including: the level of funding (anything from laboratory rental to full-scale running and staff costs); the stage of development of the IP; who owns the IP (someone else or MBL via the University of Manchester); and the input of the inventors and their time commitment to the company.

    So if you have an idea, come and see us, and, even if you are not an inventor, remember that technically qualified individuals with commercial acumen are in very short supply. Small biotech companies offer tremendous opportunities to the commercially orientated lab scientist who wants to develop their skills and go up the (mini) corporate ladder much more quickly. So go on, take the plunge....

    For more on Manchester Biotech Ltd., see our Web site.

    For more on incubators, see: L. Magee, "U.K. Science Parks and Incubators for Biotechnology," U.K. Biotechnology Handbook 97/98, 37 (1997).

    For more on technology transfer, see: "Technology Transfer in the U.K. Life Sciences," Arthur Andersen Report (1998).

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