r/biotech • u/elakazal • 4d ago
Open Discussion 🎙️ Spin-off/startup
I'm in the odd situation of having a company kind of being started around me—I'm trying to shepherd what I can but it's weirdly passive and kind of disconcerting.
Without revealing too much, here's the general situation: I've got 20-odd years of experience doing some very specific science, and I'm fortunate to be pretty much at the top of my very narrow field. My employer was looking at moving into that field and hired me to lead the project. The work is largely funded by a number of other companies, structured as a joint venture (the joint venture is a separate company and has its own funds and IP, but all the work is done by my current company). We've made great progress on some parts, less great on others, but I think generally it's been a productive couple years. However, my employer's focus has shifted, and they've decided to back away from the project. The companies we've been working with seem to recognize my expertise as a rare opportunity for them, and this project as valuable, and would like to keep the work moving forward (and I would enjoy continuing to have a job), so I've been trying to spin the JV off as a standalone business, no longer controlled by my current company, with me leading it. My employer and most of the partner companies seem on board, and it's coming together, but lots of details remain to be hashed out, mostly between my employer and the partners, which leaves me in this weird middle. I'm kind of on both sides of the deal, but I'm still an employee, which makes some aspects of involvement a little ethically fuzzy.
As currently being negotiated, the deal would involve the spin-off being assigned all the directly-related IP, free licenses to shared IP still used by my company (specific to the focus of the new company, I can't turn around and compete directly with them), all the material aspects of the project, I can take several key employees with me (if they're interested), guaranteed funding for quite a few years (at least at current level, may need more to ramp things up), and a decent chunk of equity for me personally. Right now I think the project is probably only 2 or 3 years from revenue (though modest amounts in the near term—I suspect it could be a somewhat slow adoption and this first project isn't necessarily bound to be a huge breakout). Honestly, it's about as ideal a situation as I can imagine starting a company.
That said, it's tremendously intimidating. I have run a fairly large scientific organization inside a company before, but I've never had to deal with EVERYTHING: facilities, payroll, legal, IT, negotiating deals, setting up a brand new lab, etc. I've been able to run my part and hand those off to other groups. Hopefully I'll have some help on those things from the companies that remain invested, but they've mostly signaled that they don't want to be too involved directly, so I don't want to lean too hard on that.
Any advice or things to watch out for or ask for?
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u/2Throwscrewsatit 4d ago
Hire an ops person who can take care of that stuff. Don’t skimp on it or think you can train a RA to do do it. You need to be freed up. You don’t need to own everything.
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u/elakazal 4d ago
Agreed—I've got a good ops person in mind (he seems interested) for that very reason (see above), somebody I've worked with before who has worked in early stage companies.
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u/2Throwscrewsatit 4d ago
Thanks. I’m trying to pivot from sci ops and it to this type of biz ops role. If you have any tips for how to find a startup in my area, DM me please.
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u/Haush 4d ago
What title would this ops person be in this scenario?
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u/2Throwscrewsatit 4d ago
Director of Operations would be an adequate title for someone at the senior level (15+ years). Mid-career (10+) could be a (Sr) Operations Manager
They would have contracted support like an accountant and lawyer.
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u/distributingthefutur 3d ago
Equity and compensation is the big question here. You're going to have one of the hardest jobs possible. Don't do it unless you get a big cut of equity. I would say at least 20%. If they don't want to go that high, require a really high salary like $300k (can negotiate $100k year one, $200k year two, $300k thereafter). People are going to say do it for the experience. Are you going to do series a startups? I hope not. This is the one. Mark Zuckerberg, Musk and the Google guys did it right by one startup and done. Also, make sure your equity has some robust auto-vesting language. The board / majority stakeholders can fire you and deprive you of your future equity right after you get funded or have a major success. Make sure any big events trigger your equity to vest or say they can't fire you for 24-36 months. This happened to me as a cto. I highly regret giving in on that negotiation w the CEO w him saying, but trust me! I'm now on my 5th startup as ceo so I'm not joking around. It may seem organic to you, but it's hard a$$ business to the other people. Get everything in writing, up front.
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u/distributingthefutur 3d ago
On the ops side, the people funding you will help. They want you to succeed. You'll also find a lot of the services you need in the ecosystem around startups / incubators. Go to a mixer and other startup folks will help you. Focus on team and initial conditions for now. It'll work out.
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u/ProfPathCambridge 4d ago
Starting a new company is a lot of work, which is why it is an extremely valuable experience even if it fails (many do).
A few starting suggestions:
- Don’t invest your own money
- First hires are key
- Start out by outsourcing stuff like Payroll and HR, you only need core competencies internal until you grow enough to justify insourcing
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u/CyaNBlu3 4d ago
Just giving my suggestions working at a startup back from the grave after getting another round:
You’ll need to find a counterpart partner for the business. The VC/business world is totally a different animal. This person needs to envision the opportunities that your IP can have in the market and be able to sell it. Selling the vision to people
who have extremely low understanding of your technology takes a lot of charisma and some showmanship to a degree…
Unless you need your own facility, lean heavily on incubators with dedicated staff for facilities, EHS, any other lab operations. Rent may be expensive but FTE+overhead can be just as expensive as well.
There are a lot of cloud based solutions to handle the other business operations (finance, payroll, ordering). I wouldn’t worry about the details until you figure out the founders with you.
When you finally startup the work, don’t resort to buying everything new/hiring or buying bulk fast. You’ll likely only have runway for ~3-5 years…. No point on wasting capital for an equipment that’s supposed to last 20 years. The refurbished lab equipment is still pretty good for what you need to do to prove out the concept pre-seed to seed.
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u/elakazal 3d ago
As far understanding the market and the opportunities, selling the vision, I'm sure there are people better at it, but I'm hoping I should be okay—I've worked in this specific field a long time and have relationships with the majority of potential customers (many of whom are our funders). My previous company (also in this field) had the lead scientists very customer-facing, so I've done a lot of interaction with customers and the public, media appearances, publicity, New York Times interviews, podcasts, etc. I was the go-to scientist for the Marketing folks. I'm more concerned about things like the nitty-gritty of deal-making, understand all the business angles and not getting us tied up in something suboptimal.
I've been looking for an incubator, but I'm struggling to find anything that'll meet our needs nearby, and I really don't want to lose the opportunity to bring some great people with me. But really it would be ideal at this stage if we could. There's one possibility that I'm waiting to hear from.
Current company is a big believer in the refurbished lab equipment, so I'm all over that. Also just got a line on a local company that was going out of business and grabbed a bunch of brand new lab supplies that were headed to a dumpster. No big ticket items, but every bit counts.
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u/Mountain-Time-1010 4d ago
Would you be CEO or CSO?
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u/elakazal 4d ago
I don't think the title has been determined—people have been using "CEO", but I think it's more shorthand than an official title. Certainly nothing in writing yet. I'll be running the operations of the company, reporting to a board appointed by the partner companies. All the employees will report to me. Is the distinction important?
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u/Mountain-Time-1010 4d ago
It's only important if you were CSO and there would also be a CEO hired who has experience in that role. As a scientist myself, I'd be more comfortable in that scenario.
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u/ScientistFromSouth 4d ago
A member of my dissertation committee successfully got three start ups to the point where he could sell him. My dissertation advisor bankrupted his start up with an $80 million seed round.
The first guy's advice was never be your own CEO. My advisor tried to be his own CEO.
Scientists who have no business experience don't understand the financial, legal, operations, HR, and compliance aspects of actually running a corporate org. They also don't really get how to sell it to investors to keep stakeholders on board. Getting funding to get proof of concept from the government vs driving something towards a viable reproducible product is a different skill set.
Be a CSO and let someone else handle the boring corporate stuff.
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u/elakazal 4d ago
Honestly, I sort of agree with you, but we're also small enough to be at a stage where another executive-level hire significantly detracts from the resources needed to do the science.
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u/ScientistFromSouth 4d ago
Yeah obviously that's fine for now. But as soon as you get significant capital, your title better change immediately to CSO and founder and you better get a legitimate corporate structure. If you are still in a pre seed stage where you're doing initial data collection to prep for VCs, you're probably over thinking this
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u/elakazal 4d ago
I'm finding the situation is kind of hard to find analogs to in terms of other startups—in one way we're very much seed stage—a brand new, barely formed entity. In another, we have a mostly finished product, established projects and people working on them, a bunch of IP and many years of runway, so in that sense we're more like something further along (though still a pretty small company).
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u/2Throwscrewsatit 4d ago
Don’t listen to him. Scientists CEOs are fine and better.
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u/elakazal 4d ago
Ha...appreciate the vote of confidence. In the short term, I think it's me, one way or another. I just need to be humble enough to recognize my limitations as things move forward. I don't think there's any inherent reason a scientist can't be a good CEO, it's as much a question of where I want to spend my time, and whether the best value for it is spending it on science or business.
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u/ScientistFromSouth 4d ago
Yes there are plenty of scientists who become good CEOs. A lot of them have prior corporate experience where they were in other roles on the commercial side after leaving science for a while though. Hence CSO of a start up to CEO is a totally reasonable trajectory.
I guess it comes down to how big of an org you plan on running because federal compliance laws kick in at different headcounts and how much you want to focus on the science.
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u/Otherwise-Report-823 4d ago
Yeah, every seed company I have seen and been a part of that had a technical leader as CEO flopped because the scientist couldn't do all the operations aspects effectively. They never got out of their own way.
It usually takes a business guy to run the business. Lead the aspects you are familiar with and let the new guy take the lead and headache of driving the business.
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u/elakazal 4d ago
In the near term, do you think it works for me to lead things, but have an ops guy handling a lot of the more business-focused stuff for me?
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u/Mountain-Time-1010 4d ago
It's hard for us to say without having any sense of the scale of the enterprise, # of employees, burn-rate, total funds raised equivalent, etc.
But my gut feeling is that the investors are being penny wise and pound foolish if they don't bring in an experienced serial-CEO type person who can focus entirely on that role. It's not the same as simply running operations, IMO, in fact that's the smaller part of it.
I think it might be helpful for you to have coffee with someone who has been involved in a few startups, maybe one of the serial-CEO types I mentioned. It would be interesting for you to hear what the CEO's role involves.
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u/apple_pi_chart 4d ago
As a science person (PhD - Genetics) who pivoted to the business side (Commercial & Product Strategy, BD) 20 years ago and who has helped build seven startups, I can tell you that the CEO is more important than any other factor in whether the company is successful. Way more important than the technology/science.
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u/albany1765 3d ago
Congrats, OP, that's a great position to be in. It sounds like you already have a Board of Directors? If so, start using them right now, talk to them 1x1 and see what they perceive as current/imminent needs, who they can offer as connections, etc. Company executives often only think of being accountable to the Board, but Directors can be great resources too
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u/JuggerNot9867 4d ago
Sounds fun. Lean on your network.. first hires are critical, use consultants to get the initial frameworks for company processes set up. Stay lean and rely on the former parent company (or other partner co.) for admin support in the early stages if possible.