Wharton Entrepreneurship Conference
Building Businesses in Biotech

The challenge for building biotech businesses today is crossing the "desert" between startup and late-stage financing, said Barbara Dalton, who is responsible for identifying promising new biotechnology startups for GlaxoSmithKline's venture capital subsidiary, S.R. One, Limited, as well as the venture capital firm Euclid SR Partners (where GSK is a major limited partner).

Currently, investors in the pharmaceuticals/biosciences/life sciences areas are focusing either in very early-stage or later-stage companies, leaving a "desert" in the middle, Dalton said. For startup entrepreneurs this trend means that "you've got to cull enough money from your early-stage investment to get you through that desert," Dalton said during a panel discussion at the recent Wharton Entrepreneurship Conference in Philadelphia. And that's not an easy task.

Because many late-stage products have recently been turned down by the FDA, Dalton said, pharmaceuticals companies and the VC community have become much more risk averse. "Therefore, you as entrepreneurs cannot go directly to the end-stage customer as much as you could in the past," she said. "You need to build working relationships with the likes of IBM; you need to have your product badged with somebody else to gain credibility."

"We're taking a much longer view of what these young companies are going to be needing and how they are set up for long-term financing. You cannot assume that money will be there for the next round," Dalton said.

Dalton advised entrepreneurs to "create a strong portfolio" of products while being supported by venture capitalists. "Once you hit the street, they're only going to be looking at your top two things on your table, and they better be your best." The trend in the biosciences field has been to alternate between product- and platform-based technologies, Dalton said. That is shifting now to a hybrid strategy of seeking a platform-based technology to spin off multiple products. To do this, young startups need to begin at the earliest stages to be choosing, sorting, and reprioritizing their projects on a daily basis.

"I don't think there's ever a good time or a bad time to be an entrepreneur," said Dalton. "But there is always a right time for you and your technology. From a buyer's perspective, there is no better time to be in this industry, and that's why I feel there's no better time to be in the venture capital seat."

Wharton Professor Ian MacMillan will lead a 5-day program this spring on corporate venturing, Business Building: Conceiving, Planning, and Executing Corporate Ventures.

    

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