What Will Fundraising be Like in 2024 for Life Science Startups? Takeaways from JPM 2024.

The Year 2023 was challenging for life science startups looking to raise money. The drumbeat of layoffs and company closures was loud and clear.  On the other hand, many startups successfully raised money, and added more employees. What gives? 

The Annual JP Morgan Life Science Conference in San Francisco usually serves as an accurate indicator where the funding for Biotech is heading for the upcoming year. Last week, Massachusetts Biotechnology Council (MassBio) held the forum in a tightly packed auditorium to address the question on what the startups’ CEOs can expect when looking to raise money in 2024.  

The panel was chaired by Imran Nasrullah, MS, JD VP & Head, Collaborate to Cure, BD & Licensing at Bayer and included the perspectives from a startup, large pharma, and financial markets represented by Cheri Ackerman, Cofounder & CEO Concerto Biosciences; Yves McMullen, Executive Director Corporate Business Development/Lilly New Ventures Eli Lilly and Company; William Pickering, VP, Senior Research Analyst - US Emerging Biotech, AB Bernstein respectively. 

The overarching sentiment of the discussion boils down to a cautious optimism. On one hand, stock market’s performance in Q4, 2023 and so far in Q1, 2024 and increase in the M&A activity point to favorable economic conditions. However, the jury is still out on the Inflation Reduction Act (IRA)'s impact on innovation. Currently, very low percentage of the approved drugs were developed through NIH funds and therefore are susceptible to IRA (Bayh-Doyle act). However, with a proposed increased role of government agencies in developing drugs, the panel suggested that IRA could put a damper on developing innovative medicines. 

In addition, the panel emphasized that companies with later-stage assets, and innovative discovery platforms (vs. platform companies with a series of molecules) would be the most attractive.  AI by itself is no longer a differentiator. Instead, the data you use to build your AI model is what sells. The clean, large datasets are essential to come up with the new hypotheses along with sufficient computing power to analyze the data. 

Furthermore, because there is a lag time between the improved market conditions and VCs’ opening the wallets for early-stage startups, the panelists emphasized the importance of seeking other ways to raise money. Notably, Yves McMullen repeatedly emphasized the need of Big Pharma to step in more to help the startups. Regarding the Big Pharma, another important point that was brought up that the Big Phrama companies whose products are close to losing their exclusivity to the generic competition would be more likely to partner on the later stage assets. In contrast, the large companies with less pressure due to the loss of exclusivity could have more appetite for the companies with innovative platform technologies.  

Despite the challenges posed by the IRA provisions, according to the panelists, non-dilutive funding such as SBIR/STTR grants remain an attractive alternative funding option. That said, the companies still need to pursue venture money. To increase the chances of success, it is critical to communicate how far you can get using the least money possible and what milestones the money will enable the company to achieve because you might not get the valuation you are seeking. The panel recommended raising a larger amount of money to get to the clinical trial. 

Overall, the panel sounded optimistic about 2024 as several major funds are about to close and the money is ready to be deployed. However, no one on the panel expects the funding environment to be as favorable as in 2020-2021. The adage that good science and good company fundamentals are essential to success, along with pursuing multiple funding mechanisms, holds as true as ever.

To position themselves for success, the companies and the entrepreneurs need a supportive ecosystem consisting of equipped shared space, mentoring, pitching competition, and connection to the ancillary services such as legal, accounting, internships, etc. We at Mansfield Bio-Incubator offer supportive environment to ensure your success. More information can be found https://www.bioinc.org. 

I want to start a Life Sciences company as CEO. What should I know?

By Mark Norige, Advisory Board Member, Mansfield Bio-Incubator

Can a technically trained person become a CEO?

As a highly trained technically-minded scientist, researcher or engineer, with a bright idea, you may be inspired to create your own company. Perhaps it’s to commercialize your research or a novel way to meet an unmet need that is driving you, however, you never envisioned or prepared to become a CEO. If this sounds familiar, then a good place to start is by learning about what it means to be a CEO.

What actually is a CEO?

In modern organizations, the CEO (Chief Executive Officer) is the organization’s top person, the top banana, its’ big cheese. CEOs are responsible for everything but for what are they really responsible?

CEOs using past training, education and experience, shape and guide a business using words, actions and decisions. Decisions which can impact (positively and negatively) the organization, its’ markets, employees, industry and even possibly the world. (thinking of wunderkind CEO Elon Musk here) Are CEOs rare creatures born to lead businesses or can anyone become a CEO? I believe they are “ordinary” men and women with “extraordinary” skills, ambition combined with a bit of luck too! Yes, many CEOs attribute their success to luck or just being in the right place at the right time. Could luck really play a role? According to Sandler Sales Training founder David Sandler; “Luck is preparation meeting opportunity.”1 We may not be able to control our opportunities but we can work to be prepared for when opportunities arise. Many opportunities are lost if they go unrecognized or we are just not prepared to act on them.

So where is the handbook for CEOs or for those aspiring to become CEOs? How does one learn to think like a CEO? Read on for three worthwhile tips.

Tip 1: A CEO model

One place to look to learn to become a CEO (or an even better one) is in the recent book by John Decker, titled; CEO: Mastering the Corporate Pyramid available, at Amazon. Decker describes his findings from interviews with hundreds of CEOs. He illustrates a pyramid or hierarchy of CEO skills, experience and responsibilities that shape a CEOs results. He's not talking about a nefarious pyramid scheme here. In the book John presents a complete framework or hierarchy of responsibilities for the role of the modern CEO. Of prime importance, at the top of the pyramid, is delivering results by increasing investor value. Next, in support of results come a wide array of supporting abilities resulting from critical knowledge and experience. In the pyramid John includes a variety of skills from managing critical relationships to developing key personal skills to developing good business judgement. Even included in the book is a CEO readiness survey to see how close you are to being a CEO.

Tip 2: Successful CEO traits

If we were to tap into the minds of successful CEOs we might discover a few things. From the CEOs I’ve known, I’ve learned they possess a highly developed and functioning awareness of their situation and that of their many stakeholders. Often CEOs are well aware of their own thinking. They maintain a keen focus on what is at stake, a clear vison of where the organization is going and drive to move it there. They set goals, keep score and track their progress. They are excellent communicators and seek to understand others by asking probing questions and by listening to what is said. They are able to hold themselves and others accountable; they seek to build consensus and build relationships to foster cooperation and support. When faced with conflict or when things go wrong, they face their failures and negative events head-on. They take responsibility instead of shifting blame despite the possible consequences. Continually looking to understand, correct and improve, they adjust their thinking to achieve better results.

Unlike other tech businesses, scientists, engineers and researchers looking to create and lead new life science companies face added challenges beyond the business skills and knowledge required to get a new company off the ground. CEOs in life science companies must be prepared for significantly longer development cycles and the complex testing and validation that goes with a mountain of regulatory requirements. To succeed, these CEOs must be good at long range planning, building strong relationships with collaborators and the ability to excite investors.

I believe, with practice, we can remodel ourselves, to change weaknesses into strengths, to think like a CEO.

Tip 3: Join a peer advisory group

Another way to be more like a CEO, or become a better one, is to be a life-long learner. CEOs who seek to learn from other CEOs often participate in peer advisory groups as a means to enhance their ability to produce better results. Imagine the value received from the advice of a room full of CEOs all vested and committed to each other’s success.

To determine if a CEO peer advisory is right for you consider these three questions:

• Are you challenged to achieve your best and to create exceptional performance in your business and personal life?

• Are you missing skills or experience to accomplish your goals?

• Are you willing to consider input from others in order to make better decisions?

If you answered “YES” to all three questions, then you should consider joining a CEO peer advisory group. The results just might surprise you.

References:

(1) The phase “Luck is what happens when preparation meets opportunity.” is attributed to Roman philosopher Seneca (c. 4 BC – A.D. 65)

Written by Mark Norige – Principal, Consultant and Chief Catalyst of The Board Forum®. Mark is a present and former CEO, business leader, Mansfield Bio-Incubator advisory board member and adjunct lecturer in Innovation and Entrepreneurship at Brown University. He writes and consults on leadership and business improvement topics.

© January 2022 www.theboardforum.com

Guided by professional facilitators, The Board Forum-CEO Roundtable is a peer advisory that brings together CEOs, presidents, company owners and other C-level executives, to solve problems, enhance thinking and perspective and to discover new opportunities.

The Board Forum – Genesis is geared towards the needs of early-stage businesses and membership is free for qualified applicants.

Two-minute lessons for Entrepreneurs. Why didn’t I see that coming? Reducing unwelcome surprises.

By Mark Norige, Advisory Board Member, Mansfield Bio-Incubator

Entrepreneurs. Have you ever; been blindsided by something that you should have known but didn’t? Was unprepared because you misread the situation? Turned down help from a colleague because you didn’t want to appear inexperienced? If you answered no to these questions then consider yourself lucky and read no further. If you answered yes, then you are like most people and please continue reading. This brief describes two common reasons, overconfidence and blind spots, that cause many unwelcomed surprises. As an added bonus, included are tips on how to keep confidence in check and minimize your blind spots. 

Overconfidence. The “mother of all biases”. 

In 1999, two Cornell social psychologists, David Dunning and Justin Kruger, published a study titled "Unskilled and Unaware of It: How Difficulties in Recognizing One's Own Incompetence Lead to Inflated Self-Assessments"(1). Later nicknamed as the Dunning-Kruger effect, they described a cognitive bias in which people with low ability at a task overestimated their own ability (also known as illusory superiority), and that people with high ability at a task underestimated their own ability. They found across multiple groups studied, people who possessed little subject knowledge lacked the ability to properly assess their own competence and thus thought they were much better than they actually were. Are you aware of your subject knowledge limitations or are you overly confident with only basic information? Asking others to check your plans for hidden biases before you act can go a long way to avoiding unwelcome surprises. 

Blind spots. Everyone has them. 

Back in 1955, psychologists Joseph Luft and Harry Ingham, first proposed the technique to better understand human interaction known as the Johari window, nicknamed after its creators Joe and Harry. 

The Johari window is comprised of four quadrants based on what we know and don’t know about ourselves and what others know and don’t know about us. 

The Johari Window

Quadrants 

1. The area of free activity, refers to the behavior and motivation known to self and known to others. 

2. The blind area, where others can see things in ourselves of which we are unaware. 

3. The avoided or hidden area, represents things we know but do not reveal to others (e.g. a hidden agenda or matters about which we have sensitive feelings).

4. Area of unknown activity. Neither the individual nor others are aware or certain behaviors or motives. Yet we can assume their existence because eventually some of these things become known, and it is then realized that these unknown behaviors and motives were influencing relationships all along. The idea of the Johari window is that when we acknowledge our BLIND areas and ask for help, we can decrease BLIND areas and increase OPEN areas creating more commonality and truth with others. Being open to others feedback is valuable in reducing blind spots by making your knowable unknowns known.

   Tips

   Further ideas to mitigate surprises due to an overconfidence bias or to avoid your blind spots is to build a circle of trusted advisors, coaches and mentors around you. Leveraging others experience and perspectives will go a long way to reducing your unwelcomed surprises.

   References:

   (1) Kruger, Justin; Dunning, David (1999). "Unskilled and Unaware of It: How Difficulties in Recognizing One's Own Incompetence Lead to Inflated Self-Assessments". Journal of Personality and Social Psychology. 77 (6): 1121–1134.

   (2) Luft, J.; Ingham, H. (1955). "The Johari window, a graphic model of interpersonal awareness". Proceedings of the Western Training Laboratory in Group Development. Los Angeles: University of California, Los Angeles.

   Written by Mark Norige – Principal, Consultant and Chief Catalyst of The Board Forum®. Mark is a present and former CEO, business leader and lecturer. He writes and consults on leadership and business improvement topics. © November 2021 www.theboardforum.com Guided by professional facilitators, The Board Forum-CEO Roundtable is a peer advisory that brings together CEOs, presidents, company owners and other C-level executives, to solve problems, enhance thinking and perspective and to discover new opportunities. The Board Forum – Genesis is geared towards the needs of early-stage businesses and membership is free for qualified applicants.

How COVID-19 Will Change Life Science Industry

By: Alexander Margulis PhD, Chief Operating Officer, Mansfield Bio-incubator

We are living during the unprecedented times. An invisible yet deadly COVID-19 pathogen has shut down wide swaths of the society worldwide pushing people into Zoom conference calls and virtual meetups instead of what used to be in-person interaction at the labs, offices, cafes, and conference rooms. Furthermore, the epidemic laid bare the vulnerabilities in the supply chains for wide varieties of industries, including biotech, pharmaceutical and medical devices, as companies scramble to find alternative sources of raw materials, components, and pharmaceutical ingredients, or start manufacturing them onsite, as the shipments from world manufacturing hubs overseas have become unpredictable.  Despite these challenges, it is astonishing to see the speed with which the innovation was unleashed here in the United States to come up with new approaches to vaccines, therapeutics, and diagnostics to combat this scourge.

As crippling as the disruption appears at this moment, this pandemic is temporary and eventually the world will recover. Nevertheless, COVID-19 is giving us a unique opportunity to re-think how we work and come up with better ways to achieve maximum productivity. 

Specifically, proximity to the major academic institutions has been a prerequisite to develop a robust innovation ecosystem. The premise was that the breakthrough ideas would be created by the in-person serendipitous interactions between the academic researchers, industry partners, and investors. For the last 30 years, this model has led to the creation of a dozen major life science hubs around the world. For example, Boston/Cambridge, and especially the 1.5 square mile area around Kendall Square, has become the number one hotspot in the world for the biomedical innovation. As I wrote previously, the area has increasingly become the victim of its own success through high real estate prices and the congestion exacerbated by the antiquated roadway network and the decrepit public transportation system. Before COVID-19, commuters had to brave the crowded buses or trains, or sit in the worst traffic in the nation, to make it to work.  Consequently, an increasing number of life science companies have moved their operations throughout the state. More life science mini-clusters formed throughout the state including Watertown, Waltham, Natick, Woburn, Beverly, Worcester, and now Mansfield, or are pushing the non-laboratory personnel to work remotely. As the economy starts to open up, many will be reluctant to use the public transportation, thus making the traffic and parking woes around Kendall Square even worse. Observing the required social distancing would be hard within the overcrowded laboratories and next to impossible everywhere else. Therefore, a good portion of employers who otherwise would have considered Boston/Cambridge are already looking into moving their operation in the suburbs both for quality of life considerations and to save money on the office/lab space while a large swath of the white-collar jobs will become remote.

Because the innovation workforce will become more dispersed over time, does it mean that the life science innovation in our region and other major hubs will suffer? On the contrary, thanks to the burgeoning virtual conferencing tools unleashed by the internet, there has been an unprecedented collaboration between different research entities all over the world to tackle COVID-19, such as a series of virtual hackathons at MIT.  Furthermore, many networking events that were previously done face-to-face, such as those organized by Venture Café, have successfully moved online. In fact, the attendance to the virtual sessions has increased and the audience has become more international, logging in from all over the world. The mix of audience has also changed. Specifically, me and others have noticed a much higher percentage of the attendees being more introverted scientists/inventors themselves as compared to the in-person events that were increasingly attended by more extroverted Business Development professionals. While over time, with the social distancing rules gradually relaxed, the face-to-face networking will come back, the pandemic will inevitably give rise to hybrid events which can be attended either in-person or virtually.

With many meetings going online following the COVID-19, key stakeholders within the innovation ecosystem, including the VC investors, will have easy access to the inventors not only within the Greater Boston region but all over the world. As such, the barriers to conduct groundbreaking research outside the immediate innovation hubs will have been reduced even further. In practical terms, a team working in an emerging life science cluster, such as the one at Mansfield Bio-Incubator, can now be a part of the Kendall Square, or other major life science hub ecosystem, without having to physically be there. In this way, a good chunk of money currently spent to cover the lease expenses can be redeployed elsewhere while giving the researchers more productive time during the day and therefore more time spent with family, friends and other activities crucial for their well-being. This will go a long way in reducing time for life- and planet-saving inventions to get on the market faster while stimulating the regional economies and providing more job and internship opportunities for the local talent coming out of colleges, high school and more mature professionals.