Starting a new biotech venture: embarking on a long-term adventure
“Our job? Working together with world class scientists, seasoned managers and blue
chip investors to bring value to society.”
A splendid idea with high social impact and an attractive business model, conceived by some of the world’s brightest minds? Check. A great team to back the invention with legal, financial and business expertise? Double check! Can we speak of the birth of another VIB spin-off then? Reality check: biotech requires money. A lot of money. This is how our New Ventures team clears the path for the key ingredients of a successful VIB spin-off.
Building a company from scratch requires many different skills, and thus, people. Griet Vanpoucke, Carla Snoeck and Katrien Swerts, VIB’s New Ventures team, are strategically embedded within the VIB Innovation & Business team, featuring critical intellectual property expertise, business development experience, and, last but not least, a vast network of entrepreneurs, business angels and investors alike.
From idea to spin-off
Carla, after a pivotal discovery, there’s a critical choice between starting a new venture or partnering up with an existing one. How do you make that decision?
Carla: “It’s a common question, but one without a black or white answer. The first thing we do after such a breakthrough is build a solid data package, obtain proof of concept (PoC) and define a solid IP strategy. This is vital: since there’s no product yet, the idea’s value is determined by proprietary knowhow, PoC data and intellectual property.
Together with the scientists and supported by our IP colleagues, we aim to de-risk and make the invention commercially relevant and applicable – and thus more marketable. Inventions offering many applications or product opportunities (e.g. platform technology) are usually piloted to the new venture option. Ablynx with its Nanobodies® and our recent spin-off Aelin Therapeutics with its Pept-in® technology are good examples.
For single assets, we often choose to explore licensing options with existing pharma or biotech companies but we may also build a company based on such single assets, and bring these to the next level. Or, when the idea needs more development, we set up partnerships with companies, both local and international. The key message is that we create several options to bring VIB’s inventions to market; there is no onesolution that fits all.”
Katrien, when the choice for a start-up has been made, what are the next stages?
Katrien: “Then it’s time to draft a tangible business plan. This is where targets, timings and cost estimates come in. Sometimes we do this inhouse, like with Aelin Therapeutics, but we prefer involving entrepreneurs early-on in this process. They can help make the plan and eventually become part of the start-up’s management team. These ‘entrepreneurs in residence’ are usually seasoned professionals in biotech or pharma, who we convince to take a leap into a new adventure. In some cases, this means moving to Flanders.”
Griet: “We’re looking for white ravens here; compiling the management team is a critical step in the process: the technology or the invention is the foundation for a new venture but it’s the team that needs to run with it and turn it into a success. We also strive for a good match with the scientists. A great management team is also the living proof that we’ve done our homework properly! It’s our job to strike a balance and keep everybody happy – including thepeople who come in the next stage: funders.”
All ‘bout the money
Elvis was right: only fools rush in. Big investors will rarely engage in projects that haven’t been backed properly by data or have been sufficiently derisked. Though they are called venture capitalists, they are often pretty risk averse.
We have sufficiently de-risked a project, built a comprehensive data-package. How do we look for bigger funders?
Carla: “Developing a new drug costs a lot of money, you will never raise this amount all at once – too risky for the funders, too much dilution for the founders. The crux is to build your business plan stepwise and define different value inflection points: each time you hit a major milestone, you further de-risked your project and increased the value of your business. As such, new money becomes cheaper as funders will pay more to get a share of your company. This is the point where bigger investors will step in.”
Griet: “For Aelin Therapeutics, we were able to raisea record amount of 27 million euros, sufficient to bring a first candidate drug to the clinic and test its safety in humans. This will be a major milestone for the new company: are Pept-ins safe to use in humans?”
“Over the past 20 years, VIB managed to build a solid reputation in the investment world because of its successful start-up track record. That network is invaluable: raising funds is all about networking and connecting to the right people at the right time. There is no textbook protocol for this, you start with your close network, the “friendly” investors, because they are great sounding boards we can use to fine-tune our pitch.”
Katrien: “Raising money takes time, form first pitch to closing the financing round takes on average 6-12 months. During this time you need to make sure your story stays a priority for the investor: you should know that an average VC receives ~300 investment proposals per year and will invest in only 3-5. It involves a lot of talking, pitching, reshaping and improving plans and hopefully add more convincing data as you move along.”
Johan, what is the role of V-Bio Ventures, the VIB affiliated venture fund?
Johan Cardoen: “V-Bio Ventures was launched as an early stage life sciences investment fund in 2015. VIB is an investor (LP) into the fund and VIB has a preferred Dealflow arrangement with V-Bio Ventures. The relationship with V-Bio Ventures proved to be very valuable as the fund acts as a sounding board and brings the VC-perspective when we discuss early-stage start-up opportunities. Furthermore, investment of V-Bio Ventures in our start-up projects is a further sign of endorsement and convinces others to also invest in the project.”
Are VIB start-ups also capable of attracting foreign capital?
Johan: “After the financial crisis in 2008, it was hard to find foreign investors unless the project was already seeded thanks to Flemish capital. But since 2014-15, we’re seeing a positive shift: even in early stages (series A), foreign investors tend to take the lead and these days, international wellrenowned funds approach us and scout for opportunities to work with VIB. Even more, we’ve observed a spillover effect: they discover other interesting investment opportunities in Belgium or Flanders thanks to our initial project.
While perhaps less known, this is another good example of the importance of biotech for the Flemish economy!”