Monday, September 25, 2017

Maintaining Control Versus Maximizing Wealth (600-1)

It's your idea and your company, right? You instinctively hold onto your creation. Like a little kid holding onto a toy, you won't let anyone play with it. Unfortunately, stubbornness and entitlement is not exactly a recipe for entrepreneurial success.

You have a lot of competition, and they have teams of smart, dedicated people working in tandem toward a common goal. By the time you let someone else play with your toy, the market may have moved on to something else. As you probably learned a long time ago, you are going to have to share. And sharing means sharing ownership of your idea.

"Fine" you might say, "but I'm in charge." Does that mean you are in charge of the development process, the employees, the marketing plan, the sales effort and the oversight of the finances? Leaving aside the issue of who would want to work with someone who is such a control freak, do you really think that your skills in all these domains are better than every other person out there?

You are going to have to give up some control as well. The individuals who work for you will need to feel like they have some control. More importantly, your company cannot grow if every single component requires your input, vision, and guidance.  The question then becomes how much power to give up.

Let's say you are a person with excellent leadership skills and the CEO task is what you are best suited for. Perhaps you have a technical background, but others have more technical expertise than you have. You hire a CTO.

You don't have to give complete control over the technology to the future CTO. Maybe the CTO is a "pie in the sky" early adopter of the latest technology. They might choose the most expensive, cutting-edge technology, with the most exciting and trendy features. Is that the best way to deliver a viable product that meets customer needs on time and on a budget?

Probably not. So you still need to have some control over technical development and set the overall goal and limiting parameters. But recognize that there is an end to your power. Eventually, you have to let your CTO make some specific decisions based on their expertise. And some decisions may be a mistake. That's the risk you take. But the danger of disempowering people is higher. You don't want to be the only one who cares about your toy and kid that no one plays with.


Wasserman Noam. The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup. Princeton University Press. March 25, 2012, p. 12.

Photo courtesy of Donnie Ray Jones on Flickr. Creative Commons 2.0 Generic (CC BY 2.0)

Sunday, September 24, 2017

Using Crowdfunding to Build Business and Entrepreneurship Skills (650-5)

Not every life scientist wants to start a device or pharmaceutical manufacturing company and sell to a major device or drug manufacturer. Perhaps you are interested in a computer application for a mobile phone application for health purposes. If so then there may be the opportunity to pursue your entrepreneurial interest in parallel with your research. That is, perhaps you don't have to give up your research career while you are investing the viability of your entrepreneurship interests.

In fact, even for a life scientist interested in marketing a device or pharmaceutical, it may be advantageous to conceive of a technical application to test the waters and develop business and entrepreneurship skills without the complexity of equity arrangements and complex financials. Imagine it as a simple Y-Combinator type training to hone your entrepreneurship credentials.

For any potential enterprise, you need to first
  1. Get your thoughts organized regarding product, customer, customer need, and value added.
  2. Gather feedback to refine the idea, 
  3. Assess the financial viability regarding costs and competition
  4. Develop a plan to market the idea
  5. Test the market to see if it is viable. 
A reward crowdfunding site matches up with these steps
  1. For a life scientist with entrepreneurship interest a crowdfunding campaign focused on providing a reward versus giving equity is an excellent way to take on Step 1: Organizing one's thoughts. 
  2. Once complete you can easily proceed to Step 2 and present the enterprise concept to others. Your thoughts can be easily inspected and commented on by others to make further improvements and gather support. 
  3. The process will force you to investigate how much money you need and what you would charge. That's not a complete financial analysis, but it is a useful part of Step 3. 
  4. Crowdfunding emphasizes Internet marketing, and for today's products, social media focused marketing is your most effective strategy to accomplish Step 4. 
  5. Finally, the site can perform Step 5 where you obtain qualitative and quantitative input as to the value of the potential enterprise.
In the next blog, I'll outline how to utilize one of the two most popular reward crowdfunding sites, Indiegogo. I'll use it as an example of how it can organize your future enterprise.


Photo Credit: Crowdfundingescense.jpg ‎(630 × 433 pixels, file size: 38 KB, MIME type: image/jpeg) is licensed under the Creative Commons Attribution-Share Alike 4.0 International license. Source. 4 November 2015

Saturday, September 23, 2017

Funding your Life Science Startup with SBIR Phase I funds from the NIH

My friend during psychiatry residency said, "You should consider pursuing SBIR funding?" I asked him, "What was SBIR?" With this essay, I hope to succinctly answer that question and more importantly to explain why Small Business Innovation Research (SBIR) is an excellent way for someone interested in the life sciences to fund an entrepreneurial interest. Once a life scientist establishes a small for-profit business, SBIR funds can support the creation of a technological solution to an unmet need in the life sciences.

What is SBIR?
SBIR is a component of all the primary funding initiatives of the US federal government. The SBIR funding solution is not the same as a loan from the Small Business Administration. You do not owe the government anything for its granting of money to you. There is no obligation to pay it back. Still, keep in mind that this is a government-run grant program. You must spend the funds wisely and carefully, follow government standards, and in some cases complete an audit following government standards.

NIH and other branches of government are obligated to dedicate a percentage of their R&D funds to SBIR efforts. SBIR funds are only available to a commercial enterprise, in other words, a for-profit company. This funding mechanism is not designed to complete basic science research or produce a product with no apparent applicability. Funds must yield a viable commercial product sold in the marketplace.

This essay focuses exclusively on the NIH's SBIR program and specifically Phase I of SBIR funding which is the most rudimentary and simplest way to achieve funding. There are similar mechanisms such as STTR as well as more complicated means of obtaining additional SBIR/STTR funds however those are less likely to be the optimal choice and are not the focus of this essay.

The NIH SBIR program is particularly well suited to the life scientist-entrepreneur. NIH provides investigator-driven research through its more academic grants as well as SBIR. That means that the NIH program is unique in that it will consider your idea versus telling investigators what ideas they will fund. SBIR programs in other branches of the government will often specify a need and goal of the research. Your project must fit within that specified need. To sum, the NIH SBIR program can be an excellent solution for an entrepreneur interested in creating a product that will add value in the life sciences. But you must assess if the limitations and conditions are acceptable to your goals.

SBIR Limitations and Focus
Phase I focuses only on demonstrating feasibility. You are not expected to complete the entire product, nor fully assess it in all logical ways. Your goal is to use Phase I to demonstrate that the idea is sound, the team is capable and with further funding, it is likely that you will produce something of value. Some ideas cannot be easily demonstrated in a short time frame and with a limited budget. To fit within SBIR Phase I, you must then roll back your plan and goal to a feasible project. Reviewers will reject a project that over promises as quickly as one that under delivers.

Budget and timeframe for an SBIR Phase I are constrained. SBIR recommends completion of Phase I in six months. With justification, you can request a one-year period for funding. A Phase I SBIR budget is typically limited to $150,000 including any overhead or indirect costs as well as a fee that the government allows, which is maximum of 7% of the other expenses. This budget request can be raised to $225,000 if the author can justify the higher amount due to the complexity of the project. If your needs fit within time and dollar SBIR limitations, it can be an excellent source of capital to start your company while retaining full ownership of the enterprise and limiting debt.

More funds are available to support your project. If you obtain Phase I funds and complete the project successfully, you can apply for Phase II, which is two years in length and up to $1 million in funding. Phase II has a greater chance of success if you have had a productive Phase I that demonstrated the feasibility of the project to create a valuable product.

Preparing a Phase I SBIR Application to the NIH
Obtaining SBIR funding is complicated and challenging. As with any funding request, you must have a novel idea with potential and definite value. Alongside that idea, you need a team and an organization with the skills to convert that idea into a product that provides health-related value to a potential customer. You must carefully outline the strategy to create the product and describe the underlying theoretical basis that will guide the development.

It's helpful to consider an SBIR application as a standard pitch to a business audience, except you are pitching using paper to an academic audience that demands that the process and assertions are backed up with quality references.

The decision-makers regarding funding are not business investors looking for a return on investment over time. In fact, those decision-makers are a collection of individuals ranging from university-based academics to practicing clinicians to small business personnel who likely have submitted SBIR applications and or received awards in the past. Due to the likely academic orientation of reviewers, the emphasis will be more on the scientific basis of concept and rigor of the theoretical underpinnings. It is not just a question, "Is this idea good?" but, "Is this idea based on sound theory?"

All SBIR efforts include research and development to determine the effectiveness of the product. Rigor also applies to the assessment strategy and process as well. The application must provide detail regarding how value will be measured by various metrics and using established methods. For an individual with experience in research, this is relatively straightforward. For an SBIR applicant with no science or research background, the academic component will require guidance from someone with assessment research expertise.

As mentioned earlier, a Phase I application only focuses on demonstrating the feasibility of the concept. In Phase I, you are expected to show that it is feasible to produce the product and that it potentially has value. The typical commercial emphasis on commercial viability is not an essential component of this phase of the application although the potential business value should be relatively clear. In other words, there's no need for complicated calculations of cash flow, or anticipated pricing, or ongoing production costs. The author of an SBIR application focuses more on the customer need, the basis for that need, as well as a discussion of why the intended product will successfully address that need.

NIH provides complete information online as well as through conferences and other means to assist the individual interested in preparing an SBIR application. Contacts in the government can answer questions about the NIH SBIR program in general or the SBIR program for a particular Institute of the NIH. A local Small Business Technology Center likely has the expertise to assist with a pre-review of the application as well as general guidance. The NIH will not help you write your application or tell you if it's good or not. That feedback will come from the review committee after you apply.

Applications are submitted approximately every four months on the following deadlines January 5, April 5, and September 5. Feedback from the review committee comes roughly three months after you submit and will include the overall committee's consensus about the application as well as individual observations from three reviewers. These comments are an excellent guide to the problems which may have interfered with obtaining a score worthy of funding by the government. You can respond to the comments and resubmit the application at the next available deadline.

Is SBIR For You?
If you are new to SBIR, consider the first few applications to be attempts to understand the process and opportunities to learn how to sculpt a quality application that fits the structure and limitations of the SBIR program and reviewers' expectations. That is, achieving success the first few submissions is unlikely. As with most other pursuits, success requires diligence as well as perseverance. If you intend to submit one application for SBIR funding and not to resubmit, then in all likelihood you are wasting your time.

I hope this can get you started in your investigation of the potential of the SBIR program to fund your life science company. Good luck!

Image Credit: US Dept of Homeland Security

Friday, September 22, 2017

Funding Advice from a Recent Conference in Raleigh (650-4)

I recently attended the CED Tech Venture Conference in Raleigh. There were an excellent set of presentations, many relevant to the future life science entrepreneur. The most notable comment came from Silicon Valley Venture Capitalist John Doerr of Kleiner Perkins. He was intimately involved in support of Amazon Google, and Apple. He is an icon in the VC field.

The co-presenter asked him what he felt was the most potentially lucrative area for investment going forward. His answer was to ask the presenter how much money is spent on Google and Facebook versus how much of the money is spent on healthcare. With healthcare spending at over 17% of GDP in 2015, the winner is far away healthcare, more than 50 times as much. So his enthusiasm regarding entrepreneurship was in the life sciences. So one of the most influential financiers believes that now is the time for an entrepreneur with life science background to pursue a business to address a health-related issue.

The conference had some unique Investor Reverse Pitches. It was clear that venture capitalists have particular interests they will fund. For example, the Stanley Tools folks are interested in material science and batteries (no surprise). But others started out saying they are interested in life sciences and then clarified that only a tiny portion of life science interested them. I would assume that someone seeking funding would only be able to identify perhaps 2 out of 20 VC firms that would fund a startup with overlapping interests. Also, VCs are primarily interested in later stage companies and large amounts of capital. So for the early stage entrepreneur, VC holds little potential. Apparently, the days when John Doerr gave money to Google's founders, even though they didn't seem to like business, and money to Jeff Bezos even though he didn't have a business plan, are very much over.

The presentations by many companies at the conference were excellent. They did a nice job of conveying a simple pitch, outlining their unique value proposition, and providing some financial data to back it up. All of the CEO presenters at this conference were well funded. The companies that presented were looking for funds to expand globally and already had substantial success. They echoed the above finding. VC is for companies in later stages and a proven business model.

Finally, I was inspired by the Entrepreneur Workshop + Lunch with Scot Wingo by Robbie Allen, Founder & Executive Chairman, Automated Insights. He spoke on “Building a Startup Culture that Scales.” Mr. Allen explained the secret of success for his small business; the low-key atmosphere of the company was the driving force. He knew his employees would work hard and they needed to have a comfortable environment which supported energy and enthusiasm. And to that end he included a ping pong table, which was apparently well-used.

He worried at first that this would make his company look childish. But he found the employees were quite enthusiastic, and in fact, it didn't harm productivity at all. More importantly, he found that when his investors visited the office, they viewed the ping pong table in a positive light. They felt the ping pong table showed that his company was a dynamic and fun place to work. They noted that his space would be attractive to current and future employees. In fact, his employee retention was phenomenal.

Even as the company proliferated and at times was overly crowded, given limited office space, the team morale remained high. His message: Be yourself. If you are someone who enjoys a playful atmosphere, then create a corporate culture that works for you. And you'll be surrounded by people who share you vision of a comfortable work environment.


Image Above By WikiBasti - Own work, Public Domain, Link

Sunday, September 17, 2017

Why should I leave medicine or science for business? (650-3)

As they say in philosophy classes. Why not?

Let's assume the business that you are moving toward is a life science business. The first important consideration is to ask yourself "What were my goals when I decided to enter medicine or a life science field?" Presumably, the goal was to have some impact, either regarding patient health or the underlying basis of knowledge related to health or wellness.

Many folks get hung up on the "money" focus of businesses. It's true that the first goal of any company is to be viable and have sufficient cash flow (and thus revenue and limited expense) that it can stay in existence and complete its mission.

But for the physician and others in the field of providing health care, that reality is just as valid for medical practices and hospitals too. Healthcare businesses just happen to be in a market where it is essentially impossible to lose money or go bankrupt. Your customers will get sick and need your services. Healthcare training is a HUGE barrier to entry. Recessions, hurricanes, aging, and a whole host of other challenges to business won't affect your sales. In the end, health is a (BIG) business - 17.14% of GDP in 2014 and 18.4% this year and still climbing (yes, the EU average was only 10.04 in 2014 but let's not go there.

Life science research is the opposite, as described there are 33.1 billion invested in health science research by the NIH (1) and $26.5 billion (2) spent by non-business organizations. But all that support from the perspective of the younger life science researcher is less inspiring; the competitiveness of this market is all too familiar.

WIth NIH and biomedical funding and total awards showing minimal growth (1) and the number of newly minted (e.g., <35 years old) life science PhDs growing (3), getting your academic "business" off the ground using R01 (or other) funding is a struggle. A future research career is uncertain, and indeed many life scientists pursue careers other scientific research (4), including entrepreneurship. In fact, life scientists establish most biomedical startups (5)

The point is you are already in business, some easy some hard.

A business, be it a medical practice or bench life science work must have a mission, an overriding principle, and a goal, a reason for generating revenue, achieving cash flow, and staying solvent. I'm assuming that if you pursue a life science company, the core goal is likely to be categorically the same; that is, to impact the health of a population. In essence, there is no change. If one were to rephrase the question posed in this blog post to be "Why should I stop wanting to affect the health of the population?" the answer would be "Who said you are stopping?" Yes, you would be abandoning practice or laboratory science, but you retain your original (broader) vision.

In fact, migrating to a business direction gives you a vast range of possible impact. Perhaps you could join the digital therapeutic revolution, advance mobile health, and produce information technology directed toward either providers or patients;. Or you could assist in the discovery new devices and pharmaceuticals. Or, potential you could foster new models of care via real-time or non-real-time patient communication with a broad set of potential providers. You could do anything.

A life switch from medicine or science practice to business is not for everyone. As with any significant change the decision should be pursued with both meaning/relevance or "gist" based decision-making processes as well as a factual or verbatim based decision-making processes (6). Trust your intuition (7) but get your facts in order. If you can define an interest in entrepreneurship, then the next step is to more thoroughly investigate entrepreneurial intend and that is the topic of the next blog.

  1. Office of Budget (OB) Assistant Secretary for Financial Resources (ASFR). FY 2017 Budget in Brief - NIH. February 16, 2016.
  2. Eisenstein Michael. Assessment: Academic return. Nature. May 5, 2016;533(7601):S20-S21. doi:10.1038/533S20a.
  3. Sciences National Research Council (US) Committee on Bridges to Independence: Identifying Opportunities for and Challenges to Fostering the Independence of Young Investigators in the Life. Where Are We Now?. National Academies Press (US). 2005.
  4. Sauermann Henry, Roach Michael. Science PhD Career Preferences: Levels, Changes, and Advisor Encouragement. PLOS ONE. May 2, 2012;7(5):e36307. doi:10.1371/journal.pone.0036307.
  5. Mehta Shreefal. Paths to Entrepreneurship in the Life Sciences. Nat Biotechnol. December 2004;22(12):1609-1612. doi:doi:10.1038/bioent831.
  6. Blalock Susan J, Reyna Valerie F. Using Fuzzy-Trace Theory to Understand and Improve Health Judgments, Decisions, and Behaviors: A Literature Review. Health Psychol Off J Div Health Psychol Am Psychol Assoc. August 2016;35(8):781-792. doi:10.1037/hea0000384.
  7. Reyna Valerie F. A new intuitionism: Meaning, memory, and development in Fuzzy-Trace Theory. Judgm Decis Mak. May 2012;7(3):332-359.
Image: Sally Rockey, NIH Extramural News: Rock Talk. Age Distribution of NIH Principal Investigators and Medical School Faculty. February 13, 2012.

Saturday, September 16, 2017

Climbing the Entrepreneurial Mountain (650-2)

In Jumping To (False) Economic Conclusions, Austin Parker reminds his readers that changing one's pursuit is all about perspective. So ask yourself, am I blaming my situation on other people? Am I looking at others and seeing them as examples of successful change or as evidence that the challenge is so great that I will never succeed?

He also brings up the important topic "Is business good or evil?" Who wants to go into a field of crooks unless one is already crooked? Sure, there was Enron, but do you shop on Amazon? Do you use a smartphone? Who provides your news? The second perception to challenge is that business is bad.

In this blog and others, let's attack the doubt that says the mountain between you and entrepreneurship is too high to climb.

First of all, who wants to climb Mr. Everest on their own? Who would make it to the top without the Sherpas much less the folks who take you to the top, those in the base camps and the ones tracking the weather? So, no you are never going to be able to climb the entrepreneurship mountain alone, and you would be a fool if tried (and in the case of Everest, dead).

Luckily the National Institutes of Health (NIH) wants you to climb that mountain. The government is on your side. The NIH 2016-2020 strategic plan specifies a goal to “fuel the U.S. biomedical industry and keep our Nation globally competitive” (1). To achieve this aim, NIH understands that it must overcome challenges to maximize the return on biomedical research investment (2,3), and foster the transformation of health science innovation into commercial products (4). That means they are there to help you.

NIH’s SBIR program is a proven means for investigators to obtain rapid and substantial funding in a
relatively short term. I emphasize Small Business Innovation Research (SBIR) funding due to the
  • plethora of support opportunities, 
  • ease of the process, 
  • your familiarity with academic grant writing (vs. business planning), 
  • NIH’s strong support for the SBIR program. 
Possible NIH resources include the
NIH Technical Assistance Programs including the:
In the next blog, we'll keep investigating why the mountain of life science entrepreneurship seems so high and what you can do to shink it.
References and Credits
  1. NIH-Wide Strategic Plan. Natl Inst Health NIH. October 6, 2015.
  2. Eisenstein Michael. Assessment: Academic return. Nature. May 5, 2016;533(7601):S20-S21. doi:10.1038/533S20a.
  3. Macilwain Colin. Science Economics: What Science Is Really Worth. Nature. June 10, 2010;465(7299):682-684. doi:10.1038/465682a.
  4. Wapner Jessica. Technology transfer: The leap to industry. Nature. May 5, 2016;533(7601):S13-S15. doi:10.1038/533S13a.
The image "Climbing through the Yellow Band, Mt. Everest, -May 2007" (22 May 2007, 800 × 600 [282 KB] jpg) was taken from Brian-Everest photos Photo 44 of 51 by Lloyd Smiths. This file is licensed under the Creative CommonsAttribution-Share Alike 3.0 Unported license.

Friday, September 15, 2017

A Doctor's or Scientist's Life for Me? (650-1)

Austin Parker's blog post Building An Entrepreneurial Perspectve inspired to inspire my readers. His blog is a guide to others who can't or don't see themselves as entrepreneurs. For those of you in the life sciences, this is a call to action. Before you accept a long and complicated path in medicine or health science research, ask yourself "Am I an Entrepreneur?" If so then perhaps at least take a look around and see what your other options are.

"I am going to be a doctor/scientist".

This is what you told yourself, your family and you significant other/spouse as you embarked on advanced training for a PhD or an MD. It's what everyone heard. It's what everyone expects. You are on the journey.

But is the vision still the same. Do you still see the white coat and sitting in the lab or the clinic. Is this still the path for you? For many folks it potentially is not.

For the scientist the choice is not necessarily his or her own. Sure, in 2017, the National Institutes of Health (NIH) will invest $33.1 billion (1) in approximately 50,000 competitive grants that directly support 27,500 investigators (2) and 300,000 researchers. And the NIH supports an additional 6,000 scientists in its laboratories (3). In 2015, research investments also included $26.5 billion from other Federal agencies ($6.3 billion), foundations ($4.7 billion), and other non-business organizations ($15.5 billion).

That's a ton of money. But a new-minted life scientist (or a struggling post-doc) there is a lot of competition. In fact, NIH and biomedical funding and total awards show minimal growth (1) yet the number of newly minted (e.g., <35 years old) life science PhDs continues to grow. And the message for women scientists too is concerning since women accounted for much of the 7000 increase in life science PhDs received between 1993 and 2002 (4).

The failure rate of entrepreneurial pursuits is high, but what is the failure rate of an NIH grant application. Failure is part of the process of success. So if entrepreneurship has some appeal then keep reading the next series of blogs as I delve into the field of Entrepreneurial Intent and discuss the process of switching from life scientist to business person including moving the numbers from p values to investor ROI.

References and Credits
  1. Office of Budget (OB) Assistant Secretary for Financial Resources (ASFR). FY 2017 Budget in Brief - NIH. February 16, 2016.
  2. Lauer Mike. How Many Researchers?. NIH Extramur Nexus. May 31, 2016.
  3. Budget. Natl Inst Health NIH. October 31, 2014.
  4. Sciences National Research Council (US) Committee on Bridges to Independence: Identifying Opportunities for and Challenges to Fostering the Independence of Young Investigators in the Life. Where Are We Now?. National Academies Press (US). 2005.
The image "Path split by the 'Batchelor' seat" (4 July 2009, 640 × 405 [271 KB], jpg) was taken from the Geograph project collection. See this photograph's page on the Geograph website for the photographer's contact details. The copyright on this image is owned by Bob Embleton and is licensed for reuse under the Creative Commons Attribution-ShareAlike 2.0 license.

Friday, August 4, 2017

Talk at Serious Play on VR in Medical Education

I presented a talk on "3D Virtual Reality Using Oculus To Teach Complicated 3D Structures" at the 2017 Serious Play Conference, Hylton Performing Arts Center, Manassas, VA on July 19, 2018. Here is my bio on the site.

My presentation at Serious Play was to approximately 25 clinical and science faculty members as well as to some in the audience who specifically focused on education in medical school. I learned that despite being technologically sophisticated and enthusiastic, listeners varied widely in their experience with virtual reality. They were all willing to expand their knowledge.

My talk focused on how to convey the value of VR to administration to aid adoption and purchase decisions. This issue was well received and perceived as a significant problem.

As we attempt to deploy virtual reality technology in medical education we need to look beyond interest on the part of the student but assess interest, enthusiasm, and actual VR experience by the faculty member. Administration and curriculum committee awareness of and experience with virtual reality is also essential to deployment but is likely to be low. A strategy to address these limitations is necessary to obtain support for the technology.

Please contact me if you would like to learn more about the talk or about the topic in general.

Sunday, July 23, 2017

The Rise of Social Media and Adoption by Medical Students

The rise of social media is changing marketing strategy. United Airlines is the most recent example of the dangers of ignoring the role of social media. They paid dearly regarding market value until they quelled a social media-based firestorm trashing its brand and (potentially) altering purchase decisions.1

In its early days of social media, evidence of the marketing value was unclear. Early proponents claimed vast potential to reach the customer, but many unknowns clouded its potential, especially concerns regarding impact, and the challenge of measuring impact. Such concerns are in the past. With an audience of 180 million (56% of the population) in the US in 2015, and expected growth to over 200 million (>60%) in 2020.2 The digital marketer cannot ignore the potential value of engaging the target market using social media.

The reach across a broad demographic is large, about 50% of social media users are older than 35 years old. Use of social media is highest for users 18-24 years old (>90%) and still high for users <17 years old (84%).2 Activity increasingly occurs using a smartphone. Of the 180 million users, 88% use a smartphone. Smartphone based use is expected to continue to grow to the detriment of desktop viewing2 thus favoring smaller screens and location specific content. To obtain the attention of the potential consumer, the digital marketer must investigate social media and assume users access social media using their smartphone.

Earlier concerns acknowledged the reach of social media however some doubted if social marketing would succeed commercially and justify the high valuations. It is possible that a herd effect may have driven initial spending on social media and spending was not necessarily reflective of actual value. But, metrics to measure marketing goal achievement and ROI of social media involvement have evolved, and revenue for social media has shown a steady increase of dollars spent. Facebook accounts for most revenue; it alone has seen revenue from $12B in 2014 to $27B in 2016. By comparison, in 2016 Linked received $3B and Twitter $2.5B.3

Usage is another metric to assess social media platforms and their impact. In the US in 2016 monthly users were as follows: Facebook (149M), Instagram [owned by Facebook] (75M), Snapchat and Pinterest (51M) and Twitter (47M). YouTube had 116M visitors; however, it should be considered more of a passive video delivery medium rather than a pure social network since although there is a discussion component most activity is not social in nature. All the others fall far behind.4

Impact regarding social media is also a function of the number of users times average time spent. From that perspective, Facebook excels and dwarfs its competition with 50 minutes per user per day in June of 2016.5

Facebook excels at both time spent per user and number of users; thus their dominance is even greater than one might predict based on the number of users6(p10). A social networking strategy that ignores social media other than Facebook is indeed justifiable; one that ignores Facebook is not.

Social Media and Medical Students

Medical student use of social media is quite high, measured at over 90% in 20117 and has almost certainly grown since then. Initial concerns of medical educators focused on the dangers associated with a medical student using social media to divulge patient information.8 The expressed fear was that usage of social media, such as Facebook, would evidence weakened professionalism9. A demonstration of lack of harm caused by social media involvement calmed such doubts; however, evidence at that point concluded that no educational benefits existed.10 Instead, educators highlighted the need to educate students about the proper use of social media regarding patient care11; In general, the attitude toward the value of social media moved slowly toward cautious optimism.12 Despite the negative association of social media by some faculty, enthusiasm and interest in social media by medical students remained high.13

More recently there is a desire to remove the negative association of social media with unprofessional behavior and embrace its ability to enhance communication.14 Social media improves communication capability and successfully enhanced research communication and interest.8 Additional articles outline the value of Facebook for anatomy education16 and stress management.17 Despite the earlier rejection of social media, the medical training establishment appears to be embracing its potential value.

Medical education does not intend to get in the way of medical students using social media and may, in fact, support it. Engaging medical students via social media is a viable strategy. The community building potential and peer support offered by social media counter the challenge and stress of medical school. The social media community also enhances communication between students and medical experts. Given high percentage penetration of social media use, educators and those higher up in the academic hierarchy likely use it as well.


  1. Police drag a man from a United Airlines plane. The Economist.

  2. eMarketer. US Social StatPack: Usage and Ad Spending. May 2016.

  3. Social media: revenue of selected companies 2016 | Statistic. Statista.

  4. The 2016 U.S. Mobile App Report. ComScore Inc.

  5. Stewart James B. Facebook Has 50 Minutes of Your Time Each Day. It Wants More.. The New York Times. Published May 5, 2016. Accessed April 13, 2017.

  6. Activate Tech and Media Outlook 2017.Technology at October 25, 2016.

  7. Bosslet Gabriel T, Torke Alexia M, Hickman Susan E, Terry Colin L, Helft Paul R. The Patient–Doctor Relationship and Online Social Networks: Results of a National Survey. J Gen Intern Med. October 1, 2011;26(10):1168-1174. doi:10.1007/s11606-011-1761-2.

  8. Foley Niamh M, Maher Bridget M, Corrigan Mark A. Social Media and Tomorrow’s Medical Students--How Do They Fit?. J Surg Educ. June 2014;71(3):385-390. doi:10.1016/j.jsurg.2013.10.008.

  9. Osman Ahmed, Wardle Andrew, Caesar Richard. Online Professionalism and Facebook--Falling through the Generation Gap. Med Teach. 2012;34(8):e549-556. doi:10.3109/0142159X.2012.668624.

  10. Cartledge Peter, Miller Michael, Phillips Bob. The Use of Social-Networking Sites in Medical Education. Med Teach. October 2013;35(10):847-857. doi:10.3109/0142159X.2013.804909.

  11. Pander Tanja, Pinilla Severin, Dimitriadis Konstantinos, Fischer Martin R. The Use of Facebook in Medical Education--a Literature Review. GMS Z Med Ausbild. 2014;31(3):Doc33. doi:10.3205/zma000925.

  12. Popoiu Marius Calin, Grosseck Gabriela, Holotescu Carmen. What do We Know about the Use of Social Media in Medical Education?. Procedia - Soc Behav Sci. January 1, 2012;46:2262-2266. doi:10.1016/j.sbspro.2012.05.466.

  13. El Bialy Safaa, Jalali Alireza. Go Where the Students Are: A Comparison of the Use of Social Networking Sites Between Medical Students and Medical Educators. JMIR Med Educ. September 8, 2015;1(2). doi:10.2196/mededu.4908.

  14. Hennessy CM. Lifting the Negative Cloud of Social Media Use Within Medical Education. PubMed J. February 2017.

  15. Al-Khateeb Abdulrahman A, Abdurabu Hanan Y. Using Social Media to Facilitate Medical Students’ Interest in Research. Med Educ Online. 2014;19:25860.

  16. Exploring the Use of a Facebook Page in Anatomy Education. PubMed J.

  17. Facebook Stress Management Group for Year 1 Medical Students. PubMed J.

Saturday, June 24, 2017

Choosing an E-commerce Platform

So you have decided that you want to sell a product online. What next?

Building an Online Presence: First of all, get an understanding of the challenges and risks ahead of you. Get a clear vision of what it means to engage in e-commerce before you jump into the task of setting up a new website. In the decision to establish a site, keep in mind that this is a business. You are not creating a blog or a personal expression. Your goal is to make money selling products online. So put aside the need to create a lovely website or to provide pithy information.; those components are only relevant in as far as they help you sell products.

Storing the Product for Delivery: How will you manage the product after assembly? Your product must be available in sufficient quantity that users can receive it quickly. And you must have a means by which it can be stored and is still ready to be shipped promptly. How are you going to do that?

Gathering Customer Attention: Next comes the challenge of customers finding you and your marketing of the product to gather attention and enthusiasm. How will you stand out among the thousands of e-commerce websites already out there? Is your product so unique that it will engender a high-profit margin? Is it a commodity which will succeed based mostly on price? Also, consider if you want to offer special pricing to entice users to purchase your product such as a sale in July or a discount for first customers. Thus, how much control do you want to have over the marketing aspect of your product?

After the Sale: Once a customer has decided to buy your product you need to be informed of their purchase and engage a rapid and consistent system of shipping that product out to the customer reliably and efficiently. In a global market, users could be anywhere and potentially speak any language. You need to decide how far and wide you're going to ship and what methods you were going to use to ship the products.

When the Sale Sours: Unfortunately, the story does not always end there. Many times the product is seen as defective on the part of the customer, or there are shipping errors. These mistakes can lead to negative impressions of your product which harm sales in the future. How will you handle a request for returns and refund? Do you have a window upon which you will accept returns and outside of which you will reject them? Payments too can become problematic. The buyer can refuse the credit card payment. Depending on the credit cards you accept, you may have little or no recourse but to refund customers.

Happy Customers: Once you have established a relationship with a client, you may want to engage them in a system of longer-term retention to enable repeat sales or sales of similar products. You need to decide how integrated that system will be and time intensive for you to maintain. Similarly, will you somehow reward purchases and enable users to receive a discount for additional products? How will you get them to write a review or expressing interest in your products?

Choosing an E-commerce Platform: There are essentially three choices for an e-commerce platform.
  1. First, you can go it alone. That means you control the servers, the domains, the security certificates, and the payment system such as PayPal. 
  2. The second option would be to engage one of the many shopping platforms such Shopify. Shopify competes in a complicated Market. There are other shopping platforms which you would want to consider such as Bigcommerce Magento yo Kart and Big Cartel.
  3. The last option is the gorilla in the room, and that is Amazon. For the novice to e-commerce, Amazon has an incredibly complete help system with video and audio which explain components of the process step by step. 
Going it Alone: The above issues make it clear that creating your e-commerce website from scratch is unlikely to be a good choice and likely to be a source of risk and headaches. Few sellers choose this route anymore, and you should probably discard it.

e-commerce Platforms besides Amazon: Shopify is an example of a very easy e-commerce platform to engage. It will address most of your needs. But it doesn't necessarily have all the features you are looking for

Although the e-commerce platforms are popular, anyone who has purchased on Amazon understands its market power and influence. Unless there is a compelling reason to choose an e-commerce platform, Amazon should be your first choice to introduce your product to the market and engender sales. If sales disappoint or you feel that better returns could be obtained, then you can certainly engage a marketing platform to supplement Amazon or potentially to replace it. But as you start to investigate the value of e-commerce for your product Amazon and it's support for your growing operation, Amazon is a powerful and easy place to start.

Amazon constrains your site to the Amazon interface and approach. If you feel that a unique selling strategy is important or essential to your product's sales, then the look and feel of the Amazon experience may not work for your product. On Amazon, you will find many unique and different products. Those companies have likely assumed that the marketing power and sales potential of Amazon outweigh possible benefits of a custom-designed website regarding sales or the expense of effort required.

Amazon comes in two flavors to the seller one in which you continue to manage warehousing and fulfillment and mainly use their structure for marketing, customer acquisition, and customer relationship management. Amazon brings s together many of the pieces involved in e-commerce and has established standards at a higher level than large shopping platforms.

Amazon FBA
Amazon is interested in your forming an even closer relationship by engaging in their fulfillment by Amazon (FBA) program. FBA removes almost all of the challenges of e-commerce in exchange for your paying Amazon for this service. FBA is provided in two sections, one for the individual and one for the business depending on the number of sales. If the number of sales is beyond 40 items per month, then the business strategy is the optimal choice.

Why Amazon FBA
Amazon FBA offers a solution to almost all e-commerce questions and concerns. It handles warehousing, fast shipping, returns, payment systems, and product reviews. It also has tools to get an overview of your product, assess sales, and identify areas where you can improve the performance of your sales operation. You essentially lose control and gain freedom.

Amazon's goal is to get you to utilize Amazon FBA to sell your product, and they have developed a system that will accomplish this aim. Further Amazon is always endeavoring to expand its market and better serve its customers. As seen by Amazon's next day delivery and same day delivery, they will continue to push the boundaries of e-commerce and to delight customers by addressing their desire for a clean, seamless, and quick purchasing experience. So keep in mind that this is a field of rapid change. For your product will you gain from such rapid change or be harmed by an inability to keep up with the field of e-commerce? FBA is a bet that Amazon will stay on top of e-commerce. That assumption hasn't been proven wrong yet.

Friday, June 23, 2017

That's All Folks. Selling a Life Science Venture

It's never too early to start to plan for selling the company. In fact, before you start you need to visualize how this venture will end. After all, this is the outcome your angels and Venture capitalists are waiting for. And they will have strong opinions about when you should sell.

When that time comes, you may be delighted that your company will be sold. However, you should consider the ramifications to your career. You may have invested most of your career in obtaining expertise in a single life science area. After you sell what rights will you have to participate in this field? Will you continue to be able to expand your knowledge? Will you be able to utilize your expertise? These are essential components of any sales agreement, and it is important that you are comfortable with the outcome.

Regarding the actual sale of the company typically there are multiple options for obtaining value from the company post funding cycles; however, for life science company there are typically very few options. Almost certainly you will seek a strategic sale to a pharmaceutical company. The capitalization requirements and complexity of marketing a novel pharmaceutical or device most rule out an IPO. And without that expertise obtaining revenue to entice a walking harvest (ongoing payment based on sales) or partial sale are unlikely. Nor is a financial sale to non-life science company likely.

Further, few purchasers can obtain the full value of your vision, and the potential buyers will be short. On the other hand, large life science corporations are counting on companies such as yours to identify new opportunities, so if the trials go well, you have a valuable product to sell. Of course, there is a chance that trials go poorly and the value of company plummets. Be prepared for the reality that the end result of your venture is Chapter 7, full dissolution of all assets. Not a pretty outcome but highlight likely in a life science venture.

To prepare for eventually selling your company, your goal is to find angels and more importantly venture capitalists with expertise in this domain since no doubt skills required to sell a company are far outside your skill set. Look to investors to obtain expertise and negotiate a favorable sale of the company. Regarding the value obtained keep in mind that timing, a sale is not an exact science. You are going to feel like you either waited too long to sell or have sold too early. You are not seeking the perfect solution but of solution which meets your financial and developmental needs and goals. Good luck with your planning and good luck with your future venture.

The Startup Process: Sourcing - Evaluating - Valuing - Structuring - Negotiating - Supporting - Harvesting

Reference: David Amis-Howard Stevenson (2001). Winning angels: the seven fundamentals of early-stage investing. Pearson Education.

Thursday, June 22, 2017

Getting Support for Your Life Science Startup

As a life scientist-entrepreneur, you are well aware of the value of mentors. In the process of education and early training, a life scientist engages with the number of mentors who provide support from the emotional to coaching to specific skills development.

In the life of the company, there are similarly multiple areas that require ongoing support. For example:
  • determining a valuation of the enterprise,
  • developing a marketing strategy,
  • determining when to seek out guidance and from experts such as accountants and lawyers.
At crucial points in career development, scientists receive key input. One framework when evaluating the need for entrepreneurial support is to consider the concept of a value event. In scientific training, one can imagine such an event would be an advisor who recommended classes to take as an undergraduate or a Ph.D. program or MD program which would meet professional and personal needs. In career development of the life scientist, a large number of individuals have guided the life scientist regarding scientific research at various key points. In fact, the decision to pursue an entrepreneurial path is such an event.

The concept of a value event applies equally well to the life scientist embarking on a business career. In business, there are similar milestones including:
  • determination of a need for additional funding and the amount of funding to request,
  • the timing of various funding rounds and the type of investor to seek, 
  • reassessment of team members and the need to alter or enhance the team to meet business goals. 
Life scientists additionally have value events related to the production of a pharmaceutical or device. These are clearly marked through various stages of clinical trials. The success or failure at these stages will dramatically affect the potential value of the startup venture. It is essential that the investor also understands the implications of such value events. A medical product with negative impact or no demonstrated value cannot ethically be sold. Investors must realize that one cannot market such products even if it is in high demand.

In the life sciences because of the need for vast capital and marketing expertise, a startup venture will rarely succeed as an independent body. Identify individuals who can assist with the most important event to investors, the sale of the company when the proper time comes. No doubt, the investors will be very interested in participating at this point; however, the entrepreneur must look out for both personal and business interest since the sale of the company may require ongoing effort as an employee or removal from the enterprise altogether. These are dramatic changes that will impact the scientific career of the life scientist-entrepreneur. Picking up a new biomedical path is not the same of as creating a new piece of software.

The Startup ProcessSourcing - Evaluating - Valuing - Structuring - Negotiating - Supporting - Harvesting

Reference: David Amis-Howard Stevenson (2001). Winning angels: the seven fundamentals of early-stage investing. Pearson Education.

Negotiation of Startup Funding

For the budding life science entrepreneur, you want to establish an agreement with the investor that works in the long term. Negotiation of an agreement cannot be avoided, but need not be onerous. As discussed earlier in Structuring An Early Round Investment, there are several different structure strategies which can be deployed. The actual structure depends on the results of the negotiation. Similarly, Valuing Your Life Science Startup is a component of the negotiation.

Negotiation is not uniquely different for the life scientist in a business framework versus in any other aspect of life. Components to consider include:

Power differential. Who has the power?
  • Are you desperate for money and can't proceed without the investor? 
  • Are you unable to run the company without input from the investor? 
  • Are you hoping that the investor will help you establish a qualified board? 
  • Or recommend key team members. 
Alternatively, is everything in place and your project is so compelling that you need little from the investor some cash?


  • Are you an introvert who does not enjoy playing games with other people and who repels from any aspect of manipulation. In this case, be upfront and tell the investor that the deal is the deal and you're not interested in wasting a lot of time going back and forth. Highlight to the investor that this deal is not capricious but has been well thought-out, and it is fair in your mind and is a win-win solution for both parties.
  • If you are more extroverted and enjoy the experience of working with a car salesman to purchase the car at the lowest price, then you have an entirely different strategy. In a sense, you find the negotiation to be the fun part and will feel cheated if you don't get the best deal. Understand that if your investor is also of a similar bent, this will be a long protracted experience which potentially both of you will enjoy. It could also turn really nasty. If the investor is more introverted, you may have just lost that investor as a partner.
We all want to win. With the exception of the above car salesman analogy, almost every negotiation is best done with the assumption that both parties win. Funding a startup is not a zero-sum game.
You need adequate monetary support, guidance, autonomy, and motivation in the form of company ownership to successfully launch your business. Your investor needs a certain return on investment, risk profile, and a sense that your startup will add value according to their belief system. In your negotiation, make it clear that you want the investor and you to both win.  A good investor will understand a win-win scenario. An investor who disagrees should be told to look elsewhere.

Be aware of triangles. Negotiation is almost impossible if it involves more than two people. With every additional person, you increase the number of pairs of negotiation several fold. With three people there are three times as many negotiation requirements. That includes the entrepreneur negotiating with two investors, and the two investors negotiating between themselves. This makes the process substantially more complicated and should be avoided at all costs. You can easily calculate the danger of having four members in the negotiation. Get the investors to agree to have a lead and accept their terms. And only negotiate with the lead. If a non-lead won't buy into that, dump them before you waste a lot of time.

Final advice. Negotiation is not something new to you. You have been negotiating for things your entire life and have strategies that work and strategies that do not work. As opposed to the earlier topics, this is familiar territory. Do not change how you negotiate at this critical moment of your life. Choose a strategy that works for you, has a high comfort level and typically achieves the outcomes you want. If you hate buying from car salespeople, now is not the time to decide you want to become a high-pressure negotiator.

The Startup ProcessSourcing - Evaluating - Valuing - Structuring - Negotiating - Supporting - Harvesting

Reference: David Amis-Howard Stevenson (2001). Winning angels: the seven fundamentals of early-stage investing. Pearson Education.

Sunday, June 18, 2017

Seeing is Not Believing

Gaming holds great promise. It produces autonomy, empowerment, social connectedness, intrinsic motivation, challenge, flow, feedback, achievement, and more. The best games take over reality and immerse the player in an exciting and challenging world. And the best tool to engage the gamer in an immersive experience is headset-based virtual reality (VR). In virtual reality, one can be anywhere, and one can alter all the elements. So why hasn't VR taken off?

One aspect of gaming is rarely discussed: watching vs. playing. Why is it important to be in the game vs. following along? Do you have to be in the game to see its value? This issue is especially interesting for me since I am not a gamer and have never really been all that fond of playing games.

A user can see the value of a VR to the player in an instant. But that doesn't seem to translate to enthusiasm for VR in general. How do we convince folks to purchase a VR game if they have never used VR? I've tried using stories and 2D images and lengthy verbal explanations and failed every time. I did my best to create the dream, but it still wasn't good enough. Perhaps some rare folks can imagine a VR experience, but most cannot. In most cases, only those who have used Oculus/Vive/Playstation VR can understand the immersive value of VR. But it doesn't take long.

So to help people see the value of VR game based education we need them to do more than watch. We need to get them to experience VR, vs. being on the outside. We need an experience that puts them inside to the exclusion of everything else. Once there, folks will demand that this is how they give and get training from here on out.

What does this mean for applying VR to medical education? Medical school could deploy a gaming framework. Until faculty of medicine and educators in the classroom experience VR, a VR solution is unlikely to gain wide acceptance. But once stakeholders "get inside the game," VR for training purposes will expand rapidly. Game developers like me who want to create games for medical education need to be ready for that fateful day. And hopefully this holiday season will be the holiday when everyone receives a VR setup.

Friday, June 16, 2017

Structuring An Early Round Investment

The actual structure created for a life science startup will not be substantially different from any other startup investment. Thus the following information is not specifically customized to the needs of the life scientist-entrepreneur.

Structuring an early stage investment can be seen from two perspectives. The first perspective focuses on the complexity of the structure. In general, this requires a simple yet understandable agreement and an agreement which is based on trust and mutual respect of both parties. The Simplicity of the agreement is important because in most cases funding from the angel will not be the last funding. For both the founder and the investor it is important that the structure created at the outset is acceptable to venture capitalist in later rounds without significant modification.

The secondary component is the actual agreement terms. Structure includes more than ownership stake however since that component is often the most important the most contentious is it make sense to address it first.

The primary decision is between offering the investor of common shares and various rights that would likely accompany the common shares versus some type of preferred shares as well as the many possible rights that would be conferred alongside preferred shares.

Arguments for either can be made but basically, common shares will not confer many of the special rights available to preferred shares yet will be simpler arrange. For a small stake in a company common shares made be the easiest and most logical path to follow. The potential upside can be added through additional rights to invest in additional rounds as well as to sell when anyone else sells shares.

Preferred shares may provide additional rights related to board selection, obtaining dividends, obtaining internal information, making decisions regarding liquidation, or conversion or redemption of shares.

The final type of investment would be a convertible note which is more attractive currently. This avoids actual negotiation on the price and sets the share offering tied to a future event. The note is likely to be convertible into preferred stock and discounted to the rate of the actual sale of preferred stock as compensation for the additional risk that the angel endured. The advantage is that neither party must agree on a valuation at this time. At a later time, the financials will be more clear and the VC will likely be more skilled at valuation. The convertible note provides an incentive to gather additional funds via venture capital had a later time, and because of changes in the discount rate, the incentive is to obtain those funds earlier rather than later. Thus if additional funding is not expected this is not a logical path to follow.

The note includes the possibility that the investor would be repaid if additional funding is not received. However, in such a case it's more likely that the company is not viable and all the funds would have been lost. If additional funds are not received then the angel has likely taken on a large risk and received a fairly meager rate of return on the note. Again in such a situation a not is the optimal structure.

Additional important parts of the structure beyond the capital structure discussed above would be the expected involvement of the investor regarding participation in the board, or acting an advisor. The structure should also include the expected time that the entrepreneur will be involved as well as the salary and expected time the entrepreneur will stay with the company. Finally reporting as with any contract is essential and should offer financial information for the company as on a monthly and quarterly basis as well as significant expenses.

The entrepreneur should consider that a request for preferred shares will require a more complicated legal agreement to clarify the details and the investor rights. This also increases the time for the negotiation as well as the legal costs involved. However to avoid confusion and disagreements later it's logical to invest wisely regarding time and energy and ensure that the agreement is both sound and clear to both parties.

The Startup ProcessSourcing - Evaluating - Valuing - Structuring - Negotiating - Supporting - Harvesting

Reference: David Amis-Howard Stevenson (2001). Winning angels: the seven fundamentals of early-stage investing. Pearson Education.

Sunday, June 11, 2017

Valuing Your Life Science Startup

Angels investing in your life science startup will want figures for the value of the startup at the beginning as well as at a future time to calculate their expected return. Angels obviously do not expect that all investments will succeed. Thus they will want to know that your future value represents a significant multiple of the present value or a high internal rate of return.

In comparison to other startups, a life science product will likely require approval by multiple regulatory bodies Complicated and expensive empirical clinical studies will be required to achieve a minimal value product worthy of acquisition. The value will be measured not on regarding clinical benefits or diagnostic utility, but also cost-savings.

A life science startup likely has some previous work upon with to demonstrate clinical or diagnostic utility. The high failure rate due to regulatory approval and the need for successful clinical trials will hinder enthusiasm for the startup.

Calculating the future value, of course, is partially a guess. The business plan will provide proforma estimates of future sales, reasonable expenses, and potential earnings based on the product, market size, market penetration and competitive price. Your business plan's financials; however, are not the sole guide to valuation. The figures should provide some guidance, but investors understand that these numbers are not something upon which they can rely. In the life sciences (and elsewhere) a discounted cash flow valuation is recommended (Jarju-Jeanty, 2014). A discussion of the process is outlined in that paper.

Potentially, such figures have little to do with the value placed on your life science startup. The initial valuation may be the starting point. Of course, the initial valuation is inexact; for an early start up because there likely is no product or even a minimal value product upon which to judge value.

For this reason, some investors apply a dollar value to assets and ideas. For example, they may see an energetic, thoughtful, and motivated entrepreneur as providing $1M worth of value. A sound idea for a value proposition, a high-quality management team, and a well-qualified board may also be worth a million dollars. Having a prototype or potential drug will add value. However, this again would be based on conjecture as at this time the prototype or compound does not have a specific or guaranteed revenue generation capability. Together all of these elements will be a means by which an angel investor will determine the value of a company. This strategy is referred to as the Berkus method. A more complicated but similar approach includes more variables alongside weights and percent contribution but the effect is the same, rubric based on existing data rather than figures (Kauffman, 2007, p16). There are even online tools for a quick and easy estimate.

There are other strategies to value a company at its outset. Some will have a ceiling which they will not go beyond such as $5M. Others will assume that founders and management have two-thirds of the value and the investor is contributing 1/3.

Others will value the firm at the beginning based on what they expect the future value will be and then adjust that value for their expected multiplier. An investor seeking a multiplier of ten times the money they put in the startup will be interested in investing in a million dollars if they believe that the value of their investment three years later would be worth ten million dollars.

Other investors seek an internal rate of return. For example, if they expect to gain a 30% return each year and the investment is over three years they will expect that the initial investment will grow 30% each year and will yield the value that they perceive the company will have at a future time, say three years. Thus if they assume the company will be worth $10M they calculate that the current value must be $4.5M to achieve an IRR of 30% over a three year period.

  1. Hogue Joseph. Investing in the Next Big Thing: How to Invest in Startups and Equity Crowdfunding like an Angel Investor. January 28, 2017.
  2. Harju-Jeanty Robert. Venture capital valuation of small life science companies. Spring 2014.
  3. Amis David, Stevenson Howard. Winning Angels: The 7 Fundamentals of Early Stage Investing. Vol 1 edition. London: FT Press. March 15, 2001.
  4. Rossiter Matthew S, Kramer Barry J, April 11 Michael J Patrick •, 2013. Life Science Financing Survey 2012
  5. Styhre Alexander. Valuing and Investing in Life Science Companies. In: Financing Life Science Innovation. Vol Palgrave Macmillan UK; 2015:107-136. doi:10.1057/9781137392480_5.
  6. Allen Kathleen R. Launching New Ventures: An Entrepreneurial Approach. Vol 7 edition. Boston, MA: South-Western College Pub. January 16, 2015.
  7. Ewing Marion Kauffman Foundation. Valuing Pre-revenue Companies. In: Kauffman eVenturing : The Entrepreneur’s Trusted Guide to High Growth. Vol Kauffman eVenturing. ; 2007.
  8. Stevenson David Amis-Howard (2001). Winning angels: the seven fundamentals of early-stage investing. Pearson Education.
The Startup ProcessSourcing - Evaluating - Valuing - Structuring - Negotiating - Supporting - Harvesting

Monday, May 29, 2017

Angels Evaluating Your Life Science Venture

From the last blog, you figured out how to get the attention of Angels (or a group of Angels) for your life science venture. The next goal is to receive a favorable evaluation.

An Angel group noted that 86% don't get the chance to make a pitch [Clark Paul, Banks Charlie, Dunbar Matt, Lackey Mac. Perfecting Your Pitch: VentureSouth’s 101 Tips for Pitching to Angel Investors. April 23, 2017]. VC funding is worse probably. Per How does deal flow apply to VC firms?, only 30 of 650 scanned executive summaries will make it to the stage where the VC samples the financials and management; that's 4.6%. You have your work cut out if you want your life science venture to get funded. Keep in mind that there are many funding sources, so the numbers aren't as bleak as that figure would imply.

So how do you increase your chances of funding from a specific Angel?

At the early stage, Angels are looking for evidence of 
  1. a value proposition for a life science problem,
  2. validity regarding potential clinical impact, and 
  3. use of appropriate technology in the implementation 
(see Soenksen Luis R, Yazdi Youseph. Stage-gate process for life sciences and medical innovation investmentTechnovationdoi:10.1016/j.technovation.2017.03.003.). Those criteria are probably not a surprise to you.

Is this a hot topic?: Since the focus is the life sciences, consider how hot your topic is. Medicine is not neutral in its attention to a disease. And what is "hot" is not based on scientific fact (e.g., years of life lost, incidence, lifelong prevalence, cost to treat, etc.). If "impact" determined funding then almost all funding would go to prevention and basic science breakthroughs. In comparison, NCI receives more than any other institute at the NIH, over $2B. Cancer wins the prize probably because it is scary. If you want to get funded the topic must be one that an Angel sees as critical. Thankfully Bill Gates has shown light on health issues of 3rd world countries; hopefully, such neglected topics will soon be seen as worthy of investment.

So what is hot right now? Orphan diseases? Biologics? Related to the opioid or obesity epidemic? Zika virus? May sure, your topic is hot. And that you highlight how your topic is hot. And of course, hot topics come and go. Yesterday's "bioterrorism" issue is cold until it becomes hot again when evidence of the use of a biological weapon is demonstrated.

Next consideration is the team, but since we are talking life science, the team has to be more than a competent bunch of folks who can launch a business. You need to have a team that also has mastery over the topic and the competition that is also addressing that problem. If FDA approval is required, in addition to lawyers you need folks skilled in that labyrinthine process. But don't go too crazy with details, it is possible that your venture will be purchased early in the process (per Evaluating Life Science Companies for Investment, 9/6/2016). It is unlikely that an Angel has no life science expertise; don't fudge.

It's about health - and honesty: Outline the upside in both the financial return on investment AND the impact on health; the Angel wants you to achieve positive health outcomes. Finally, the problems of Theranos are fresh on everyone's mind. Be scrupulous in your development and presentation of the product. Any hint of deception and your venture will be in the 86% that go nowhere.

Where will more money come from?: Finally, an Angel understands how complicated a life science venture can be and you will most likely need additional funding. The Angel needs to know that you intend to eventually access additional funding [Styhre Alexander. Valuing and Investing in Life Science Companies. In: Financing Life Science Innovation. Vol Palgrave Macmillan UK; 2015:107-136. doi:10.1057/9781137392480_5.]

Hopefully, with the above, your new venture is on its way to a successful evaluation.

The Startup Process: Sourcing - Evaluating - Valuing - Structuring - Negotiating - Supporting - Harvesting

Reference: Stevenson David Amis-Howard (2001). Winning angels: the seven fundamentals of early-stage investing. Pearson Education.

Saturday, May 27, 2017

Angel Funding - Going to the Source

For the next set of blogs, I am going to take on a very different topic.

What if your passion is not to practice medicine but start up a company that can impact health outcomes?
What if what you want to do is to do research and then turn that research into life science business that sells pharmaceuticals and medical devices?

What if you want to launch a health startup with health focus? The possible ways of improving health by altering other components of our health care system are endless. With the rise of precision medicine, there are a plethora of opportunities to provide value through new technology and implementations of technological solutions. [Precision medicine ideas for VCs and angel investorsVentureBeat. October 11, 2015.]
If so, this set of 7 blogs is for you. The blogs specifically focus on early stage angel funding for the life scientist or health-oriented entrepreneur and include the following topics:
  1. Sourcing: Put your investment opportunity in a place where angels can find it.
  2. Evaluating: Providing an opportunity that appeals to angel investors
  3. Valuing: Describing the value you will provide to the angel.
  4. Structuring: Organizing an offer that appeals to the investor
  5. Negotiating: Working together to finalize an agreement that meets everyone's needs
  6. Supporting: Gaining value from the angel beyond funding
  7. Harvesting: Providing ROI to the angel.
Sourcing Groups

The first priority is to make sure an angel can find you. Investors seek opportunity so you need to put your opportunity out there. Options include:

A Local Angel Group. The main reason is the comfort level of angels for a nearby venture. For a venture that is location-dependent or dependent on some unique aspect of the local community, this is a perfect match. For a life scientist, this is unlikely to be the case. So the main value is convenient access to the angel as an adviser post-funding and the likelihood that they are more comfortable (and thus more likely to fund) someone close to them geographically.

AngelList Syndicates and Internet Focused Angel Groups. Such angel groups take advantage of the Internet to establish and foster longer-distance relationships and are more logical for an Internet-based business. The point of contact will want to be involved but they probably won't be local. If your product startup is Internet-focused, they are likely to have more comfort with and expertise in products targeting Internet-based solutions and that use the Internet for digital marketing.

Typical means to find single source angel funding. Examples include a convenient family, friend, business associate, accountant, or lawyer. These are still an option so classic face to face networking and promoting you in smaller groups and via Internet presence (e.g., LinkedIn, Facebook) may yield results. But as with most other aspects of society, the value of the Internet and the search engine are quickly eroding this means to find funding for your health-oriented venture.

Health and Medical Focused Angels
The Internet can also direct you more quickly to an individual angel or angel group with a specific focus on the life sciences aware of your venture. Not only are they more interested in what you propose but they most certainly have the connections to grow your company and advice most relevant to your business opportunity. Examples include:
  • Individual Medical Devices Angel Investors via AngelList - Links to individual investors although AngelList has other investment opportunities for more passive investors. How to Pitch Your Venture
  • AngelMD - Building relationships that spur investment in the companies, innovations, and people charting the future of healthcare. There is no cost to be listed on the AngelMD network. [FAQ]
  • Angel Investment Network - Our investors look at all stages of business and across all sectors from genuine start-ups to more established businesses. We currently have 140,130 private investors, family funds, and venture capital funds. [Note: The search engine for investors can easily identify health or medical opportunities. Cost to Expose Venture]
  • Life Sciences Angel Network - To help our portfolio companies succeed we need to provide them with funding but also with operational support and an access to a broad network of healthcare investors, key opinion leaders, corporate players and other entrepreneurs
  • Life Science Angels - Life Science Angels is sponsored by several premier service organizations. Many offer our membership special services tailored to the life science industries and emerging and startup companies. [Application process requires in-person presentation]
  • Mass Medical Angels (MA2) - A seed stage investor group exclusively focused on life science and healthcare investments. [Though I must admit that the website does not inspire confidence that this is a very Internet savvy group.]
If you are excited about a health or medical venture, proceed with the next blogs (coming soon) and get ready to upload your plan and hit the (Internet) road with your ideas.

The Startup Process: Sourcing Evaluating - Valuing - Structuring - Negotiating - Supporting - Harvesting

Reference: Stevenson David Amis-Howard (2001). Winning angels: the seven fundamentals of early-stage investing. Pearson Education.