The transition period after completing a Ph.D. or postdoc can be one of the most daunting times in a young scientist’s career. In our current post-professor era, there is no set course, no expectations of what you should do with your hard-won experience and knowledge and those letters you’ve earned after your name. While the path of least resistance is typically a(nother) postdoc, more and more recent graduates are venturing out on their own and starting companies with ideas they’ve developed in the lab.
It makes sense. Self-drive, resourcefulness, creativity, and a willingness to work long hours—the core traits required to earn a Ph.D.—are not so different from the qualities needed to succeed at an entrepreneurial venture. But what are the logistical issues? What does it actually take to start your own business from academia?
“I am hopeful the venture will eventually be successful, but I am doing this almost exclusively for the challenge and for the experience that I think would be hard to get, in as concentrated a dose, in another job.” —Lucas Edelman
Luke Edelman, a recent Ph.D. graduate from the University of Cambridge in the United Kingdom, is in the process of launching a startup in genomics, developing new scientific and medical tools using DNA sequencing. Utilizing his background in bioengineering and molecular biology, Edelman identified a challenge facing the field and developed a technology he hopes will advance the industry, benefiting both scientists and patients.
Looking to gain professional experience outside of the lab, he decided to start his own company to manufacture and market the product. “I am not doing this for any sort of financial reward. I am hopeful the venture will eventually be successful, but I am doing this almost exclusively for the challenge and for the experience that I think would be hard to get, in as concentrated a dose, in another job.” Crucially, Edelman says, he is also at a time in his life when he is able to take the risk, both personally and professionally.
As he approached the end of his postdoc in experimental psychology at the University of Cambridge, Josh Keeler was motivated to escape from academia. “The life of a postdoc sucks!” he says. “It’s a lot of time, dedication, and stress, applying for grants and funding.” Furthermore, he knew that academia (and a postdoc in particular) wasn’t likely to provide the lifestyle he was looking for.
Keeler's work in reinforcement learning and animal cognition led him to an idea for a business venture he hopes will revolutionize the pet market. However, he was apprehensive about starting the project while still at the university because he feared the university would claim legal rights to his creations. The University of Cambridge, like most research universities, has an office dedicated to helping academics get their entrepreneurial projects off the ground. But, Keeler says, these arrangements often favor the university in the long run, offering the researcher only a fraction of the profits after the first year.
So, Keeler waited until his contract was up before he started work on the technology. Eventually he joined Makespace, a community workspace in Cambridge where aspiring entrepreneurs can set up shop.
Such bioincubators, or hacker spaces, have become essential resources for those looking to create science startups, offering members lab and office space needed to build a business from the ground up —some for just £40 a month. Bioincubators also provide access to some of the expensive, high-tech equipment often needed to develop new technology, which can be cost-prohibitive if you’re working outside an established lab.
Protecting your idea
Even more important than the technical work, Edelman says, is protecting your idea. “This sort of thing—a life science biotech company—is essentially nothing without IP [intellectual property] protection. … Probably the single largest thing—even before getting the stuff to work in the laboratory—is getting at least an appropriate plan in place for IP protection.”
But securing a patent can cost upwards of $10,000, an amount most people don’t have lying around. So would-be entrepreneurs often turn to venture capitalists (VCs) to help with the legal fees and the other—often much larger—expenses of getting a new company off the ground.
Hermann Hauser has worked in technology startups for more than 35 years, running his own company and funding others’ companies. His VC firm, Amadeus Capital, is one of many potential investors looking to fund new startups. Hauser says there are three things he looks for when deciding whether to invest in a new venture: the size and growth rate of the chosen market, the star power of the team, and the quality of the technology.
In addition to financial capital, Hauser says, his company can offer help with developing a business plan, which, he says, many scientists struggle with. “We have to do that for all our companies,” Hauser explains, “But a new company only has to do that once.”
Most new companies struggle to obtain funding, though, and usually the odds aren’t in their favor. According to a Forbes article, less than 1% of all new businesses receive VC funding.
However, the good news is that these firms are only one possible route for funding. An alternative option is to find an angel investor—a wealthy individual who decides to funnel their private finances into your big idea. These men and women also allow flexibility, often giving a little bit of money to a lot of different companies rather than going all in on a handful of companies as many big firms do. According to the Harvard Business Review, angel investors funded 16 times more companies than VC firms in 2011.
Even if you do obtain funding, this isn’t a guarantee of success. Furthermore, there are a lot of strings attached to the deal, including one big one: In exchange for the investment, a substantial portion of a young company’s IP and future profits are turned over to a VC firm. So, while Edelman and Keeler both say they need this economic support, both are apprehensive about striking a fair deal.
The daily grind
In the meantime, Keeler says, his life more closely resembles that of a graduate student than of a Silicon Valley bigwig. “You hear stories about all the tech startups from the ‘80s where they basically lived off Ramen noodles for the first year, and it’s kind of like that. You sort of feel once you finish the Ph.D., that it’s time to start earning some proper money, but you have to put that on hold, at least at the beginning.”
In fact, Keeler is tutoring high school students to support himself, and he writes software in his spare time. Juggling such diverse tasks is difficult, he says, but he still thinks the challenge is more than offset by what he’s getting back. “It’s an amazing thing to have a project that is your own baby and to see it develop over time, … to stand back and look at the designs that you started out with and then see something physical in front of you. I find that amazingly rewarding.”
Weighing the odds
According to the U.K. Higher Education Statistics Agency’s “HE Business and Community Interaction Survey”, recent university graduates started more than 3500 new companies—science-based and otherwise—in the United Kingdom during the 2012-2013 fiscal year. But with a failure rate of 75% (in the United States), Edelman advises those thinking about creating a startup to consider their own motives very carefully. If you just do the statistics, he says, you’ll see that you're likely to gain a lot of professional and technical experience, but you’re not likely to make any money. “Statistically, on average, it’s going to fail.”
Still, Keeler says, “My advice to anyone thinking about pursuing their own startup is absolutely go for it.” Hauser agrees, “People think for a long time if they want to start a company or not, and they just need to go and do it. Only if you start a company will you find the right way to do it.”
Top Image: Lucas Edelman
Top Image CREDIT: Andrei Okorokov