Launching Your Own Company: Entering a Business Plan Competition

March 18, 2013

Entering business plan competitions can help fledgling entrepreneurs grow their new companies. A new study of 354 startups who participated in the annual Rice Business Plan Competition (RBPC) shows these entrepreneurs have a much higher rate of success than typical new ventures. Thus, chemists starting their own companies could benefit from entering the RBPC or similar business plan competitions. The RBPC is the world’s largest and richest business plan competition. The longitudinal study covers the 11-year (2001 – 2011) life span of the RBPC. It provides insights into the experiential factors that can help entrepreneurs launch a successful business. Whether or not you enter your fledgling chemical business in one of these business plan competitions, the complete report on the RPBC could provide useful suggestions on how to increase the prospects of success for your startup chemical business.  That report can be found at:

(http://www.alliance.rice.edu/uploadedFiles/RBPC/2012_RBPC_ImpactReport.pdf)

Details of the RBPC

Teams that compete at the RBPC present their ventures to more than 250 venture capitalists, angel investors, corporate investors, mentors, successful entrepreneurs and other leaders from the business community, where they have a chance to get mentoring, feedback, start-up capital and connections.

Entry into the Rice competition has become more competitive each year. In 2012, less than 3% of the 1,600 applicants were accepted. The states with the largest number of competitors during the first 11 years were Texas, California, Illinois, Massachusetts and Georgia.

The universities with the largest number of teams accepted to compete at the RBPC include Rice University, Massachusetts Institute of Technology, University of Texas at Austin, University of Michigan, Johns Hopkins University, University of Arkansas, Carnegie Mellon University, University of Chicago, Southern Methodist University, University of Illinois at Chicago, Georgia Institute of Technology, Northwestern University, Duke University and Stanford University.

Results of the RBPC

Using data on the 354 RBPC graduate-student competition teams from 2001 to 2011, the study found:

  • 199 of the entrepreneurs (56%) went on to launch their companies after competing at the Rice competition.
  • 128 of those (64%) are successful and still in business today. In comparison, only 20% to 50% of startups survive to their fifth anniversary.
  • Past competitions have raised more than $460 million in early stage funding.
  • A conservative estimate of jobs created tops 1,000.

According to the Kauffman Foundation, in the past 30 years, all net job creation in the U.S. has taken place in firms less than five years old. (The Kauffman Foundation is a private, nonpartisan foundation that works to harness the power of entrepreneurship and innovation to grow economies and improve human welfare.)

“The study shows that university business plan competitions can go beyond simply being an academic exercise or educational experience,” said Brad Burke, managing director of the Rice Alliance. “They can serve as a vehicle for building a robust entrepreneurial ecosystem and as a launching pad for new businesses, especially high-tech, high-growth startups.”

“The Rice Business Plan Competition’s track record is unparalleled in creating new, successful high-tech startups,” said Kauffman Foundation Vice President Lesa Mitchell. “The competition provides access to venture capital and other early stage investors, strategic partners, mentors and service providers – not to mention more than $1 million in seed funding and other prizes – all critical resources for successfully launching a new company and creating jobs.”

One-quarter of the successful startups from the competition have raised venture capital funding. This compares to less than 1% percent of startups that typically get venture capital funding. Of the total $460 million in funding raised, 62% came from venture funding, 13% from angel investors and 13% from government grants. (Angel investors are usually found among an entrepreneur’s family and friends. The capital they provide can be a one-time injection of seed money or ongoing support to carry the company through difficult times.)

The RBPC results have shown to be a good predictor of a company’s success, based on the winners and teams that reached the finals. All of the winners in the RBPC from 2004 to 2011 have been successful, are still in business and have raised more than $107 million in funding. Of all the teams that reached the finals from 2001 to 2011, 56% have been successful and have raised more than $269 million in funding.

John Borchardt was a chemist, freelance writer and devoted ACS career consultant for over 15 years, until his sudden passing in January 2013. He was the author of the ACS/Oxford University Press Book “Career Management for Scientists and Engineers,” and had more than 1500 articles published in a variety of magazines, newspapers and encyclopedias. As an industrial chemist, he held 30 U.S. and more than 125 international patents, and was the author of more than 130 peer-reviewed papers. John’s advice, insights and articles helped hundreds of scientists improve their professional lives, and he will be truly missed.


Working Effectively with your Firm’s Patent Attorneys

June 25, 2012

Working effectively with patent attorneys can both increase the number of patents you are awarded and improve their quality. An effective working relationship begins with understanding the basics of the patenting process and knowing when to alert your patent attorney that you may have developed an invention. Just as a major factor in a university faculty member’s career advancement is publishing research papers, the key to an industrial researcher’s advancement is developing profitable new intellectual property. Being the inventor on patents is a way to demonstrate your productivity.

Understanding the patent attorney’s mindset

Patent attorneys usually approach situations with a different mindset than researchers do even if they have an advanced degree in chemistry. While research managers and inventors tend to think about an invention’s interesting technical aspects, your patent attorney often is thinking about how your competitors will try to legally get around your patent and develop something very similar.  A better strategy for your firm may be to keep the knowledge a trade secret rather than patenting it.

The patent attorney, often asking pertinent questions, can help protect the firm’s interest by extending the scope of the invention. This can make it more difficult for others to legally circumvent your patent (when it issues). The lab work necessary to accomplish this and write pertinent claims often can be done in a more timely and cost-effective way early in a project than very late. By performing a timely “prior art” search, the patent attorney and the project team may be able to define potential competitors. You and the attorney can then monitor that particular firm’s patent activity and publications to determine if the firm is indeed working to develop similar technology.

The process of obtaining a patent does not end with the submission of a patent application. A patent examiner specializing in the technology area of the application will review it and issue an “office action” evaluating the validity of the application. Most patent applications are rejected in their first office action. Usually this office action will state what is described in the patent claims as “obvious to one skilled in the prior art.” While the patent attorney will consult with the inventor, the attorney usually takes the lead in rewriting claims and rebutting the patent examiner’s assertion that the proposed invention is obvious to specialists in the technology field of the application. After receiving a negative office action on one of my patent applications, attorney Richard Lemuth commented to me, “This is when I really earn my salary.” Repeated office actions may be needed to convince the examiner that the invention, or part of it, is valid resulting in the issuance of a U.S. patent.

Your own role in patenting

Understanding the basics of the patenting process aids researchers in defining the key features of the technology to be patented and how the new technology differs from previously known technology (the prior art). It helps them work more effectively with patent attorneys in preparing patent applications. The patent attorney may ask questions leading to the inventor to perform additional experiments to broaden the scope of the invention and to support the patent claims that define the invention.

Not understanding the patent process – particularly what constitutes an invention – can lead to adverse consequences. For example, when I began working in my first industrial position, I knew nothing about patents and assumed others would tell me what I needed to know at an appropriate time. I hadn’t realized that I had conceived an invention and reduced it to practice when I left the firm to accept another position. Another chemist who inherited the project submitted an invention disclosure to the company patent department but did not include my name as an inventor. A patent was issued and the invention became the basis for a profitable business for my former employer. Years later, a competitor entered into the same business and because my former employer did not provide the U.S. Patent and Trademark Office (USPTO) with the correct inventors, their patent was rescinded.  This action permitted the other company to use the technology to develop a competitive product, and I learned a very important lesson as young industrial chemist.

John Borchardt is a chemist and freelance writer who has been an ACS career consultant for 15 years. He is the author of the ACS/Oxford University Press Book “Career Management for Scientists and Engineers.” He has had more than 1200 articles published in a variety of magazines, newspapers and encyclopedias. As an industrial chemist, he holds 30 U.S. and more than 125 international patents and is the author of more than 130 peer-reviewed papers.


Are You An Entrepreneur?

April 23, 2012

Recently, I encountered several graduate students who were considering starting their own business. While many people dream about being an entrepreneur, a significantly smaller number are willing to put in the time and effort it takes to make their dream a reality. A colleague who has been running his own company for over 20 years said that when people ask for his advice on starting a business, he tries to talk them out of it.  When he started, “the only thing that would have stopped me from doing it was if my wife had told me, No!”  If you have that kind of dedication, you just might be an entrepreneur.

Starting Point 

A great place to begin is by writing a business plan – a document in which you completely describe the business.  Forcing yourself to write it down will make you step back and really plan out the venture.  The living document then serves as a roadmap as you move forward and start to involve other people.

Summary

One of the first sections of the business plan will be the executive summary. You should be able to describe your business at several different levels of detail.  Are you going to sell a product or a service? What is your targeted industry? What will make your offerings compelling to potential customers?

Legal Structure

Will you start a sole proprietorship, partnership, limited liability company, C or S corporation….?  The form you select will have implications for taxes, liability, staffing, and complexity.  Make sure you understand all the options and implications, and choose what’s right for you.

Products/Services

While you may have an idea of what you’re going to sell, in a written business plan you’ll have to detail your offerings.  How many different products/versions will you have to offer in the beginning?  How is your offering going to be different/better from other things already on the market? Will you offer customization?  How will you protect your intellectual property?  Will you patent your ideas, or keep them trade secrets?

Market Analysis

Describe the industry in which you will be working, including historical, current, and projected future size.  What subsection constitutes your target market?  What is the critical problem your offering is going to solve? What alternatives are they currently using?   What are their geographic and demographic characteristics? Who is your ideal customer?  Are there any seasonal or cyclical purchasing patterns you’ll have to work around?  What market share do you expect, and why?  

Marketing Plan

Once you have your product and target market, you have to get the two together.  What is your marketing plan?  How are those ideal customers going to find out about your offering?  Will you exhibit at trade shows or conferences?  Offer free trials?

Competitive Intelligence

Who exactly is your competition; other companies, or possibly solutions internal to your potential customers?  What are the strengths, weaknesses, and market share of each?  How important is this market to your competitors?  What are barriers to entry to this market?  What other offerings will present to differentiate you from the pack?  What is on the horizon from other companies?

Organization and Management

Who is going to run the company? What is their expertise and experience?   If you are going to hire employees, you become responsible for bringing in enough business to cover their salary, and taxes, while reporting requirements get more complicated.  Depending on the number of employees you have and the state in which you are operating, various other regulations start to apply as headcount numbers increase.  How will you address the various regulatory requirements?

Pricing

How much is it really going to cost to make your product or service, and how will you price it? Are you going to compete on low cost and high volume?  Or high cost and high quality?  Is your offering a need or a want for your customers, and will that affect what they are willing to pay?

Revenue

Will you reply on repeat customers, subscriptions, or contracts?  Will you sell over the Internet or are face-to-face sales required? Will you hire your own sales force, or use distributers? Where will start-up money come from?  How will you ensure enough money to cover operating expenses until substantial profits arrive?  Will you seek investors?  If so, how will you attract them and what will you offer them?

There are many more questions your business plan will have to answer, but if you’ve already thought about all these issues, congratulations!  You are well on the way to becoming an entrepreneur.  If not, you now know how to get started.  For more resources, see the US Small Business Administration or SCORE for more ideas, and the new ACS Entrepreneurship Initiative (EI).

This article was written by Lisa M. Balbes, Ph.D. of Balbes Consultants LLC.  Lisa is a freelance technical writer/editor and author of: “Nontraditional Careers for Chemists:  New Formulas for Chemistry Careers,” published by Oxford University Press.


Entrepreneurship: Can less be more for Startups?

March 5, 2012

A new study from North Carolina State University is turning conventional wisdom about technology start-up companies on its head, showing that:

  • moderately undercapitalized companies can still be successful and’
  • a top-notch product is more important than a stellar management team

Undercapitalization

Startup technology companies with moderate levels of undercapitalization can still be successful according to a new study from North Carolina State University and the University of Oklahoma. The study examined 79 companies started over a 10-year period. “Our research shows that undercapitalization is not a death sentence for start-up ventures,” says Dr. David Townsend, Assistant Professor of Management, Innovation and Entrepreneurship at NC State who co-authored the study with Dr. Lowell Busenitz, Professor of Entrepreneurship and Management and Academic Director – Center for Entrepreneurship at the University of Oklahoma.

The two researchers found that moderate levels of undercapitalization, even capitalization ratios as low as 20% of the venture’s initial goals, are not statistically related to a venture’s probability of surviving. “There are things a venture can do to survive and succeed.” Basically, Townsend says, start-ups that fall short of their fund-raising goals can take steps to minimize their cash outflows in order to stay viable.

They can do this by engaging in “management strategies focused on reducing their costs. For example, outsourcing certain development tasks and accounting responsibilities or exchanging services with other companies,” Townsend says. Locating your firm in an incubator that offers services that can put you in touch with firms that can do this with your startup can be an important factor in choosing a business incubator for your new firm.

Creative use of resources is important. For a chemistry or life sciences startup, this can mean obtaining inexpensive access to expensive laboratory facilities, particularly instrumentation.

Management team

Townsend also concluded that a great management team is not more important than a top-notch technology product when it comes to securing sufficient amounts of capital.

A disciplined approach to cash management is essential according to Townsend. Writing in Bloomberg Businessweek, Vivek Wadha, a start-up veteran and visiting scholar at the University of California-Berkeley, a senior research associate at Harvard Law School, and the Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University, agrees with Townsend. Wadha observed that when a company is running on a tight budget; it will perform better than a company with ample funding from venture capitalists. Why?

According to Wadha, large amounts of equity money can quickly lead to bad habits. Venture capitalists will want the CEO to bring in a seasoned management team. However, these managers typically want large salaries and big chunks of equity. These managers often want what Wadha calls “rock star perks” such as: a personal assistant, first class travel, company car, etc. Wadha reports that bringing in one or more hires like this usually means the original members of the startup team stopped worrying about keeping costs down and increased their own spending. According to Wadha, this “can quickly cripple and kill any new venture.”

Bringing in large amounts of venture capital often creates expectations of very rapid growth on the part of investors. This often comes at the expense of long-term profitability according to Wadha. It can also mean that startup founders worry more about keeping their investors happy and less thinking about customers. A lean and hungry startup tends to better maintain its customer focus.

John Borchardt is a chemist and freelance writer who has been an ACS career consultant for 15 years. He is the author of the ACS/Oxford University Press Book “Career Management for Scientists and Engineers.” He has had more than 1200 articles published in a variety of magazines, newspapers and encyclopedias. As an industrial chemist, he holds 30 U.S. and more than 125 international patents and is the author of more than 130 peer-reviewed papers.


Federal Government Essential to Survival, Growth of Start-up Companies

February 27, 2012

Biotechnology start-up companies are employing increasing numbers of chemists. These firms are dependent upon recent passage of key federal government legislation for their growth and survival. Additional federal legislation can promote increased establishment and growth of biotechnology companies. Biotech firms represent a major growth opportunity for chemistry employment.

The Biotechnology Industry Organization (BIO) is an organization that represents more than 1,100 biotechnology companies, academic institutions, state biotechnology centers and related organizations across the US and in more than 30 other nations. It promotes the interests of the biotechnology industry in a number of ways including lobbying for federal legislation that will support startup companies in this industry.

While there are biotechnology porter clusters (http://MEMagazine.asme.org/Articles/2011/October/Birds_Feather.cfm) such as San Francisco, San Diego and Boston, BIO President and CEO Jim Greenwood commented “Our nation’s biotechnology industry is comprised of scientists, entrepreneurs, and large and small companies in all 50 states engaged in translating the latest scientific discoveries into innovative new medical therapies and environmental products, increased agricultural production and farm incomes, and greener bio-based products and biofuels.”

2011 U.S. patent reform

Recent federal government developments impacting biotechnology companies, particularly start-up firms, include the recent passage of the America Invents Act to reform the U.S. patent system  signed into law by President Obama (see C&EN, pp. 24-28 (Dec. 19, 2011). In a White House statement, President Obama said, “This much-needed reform will speed up the patent process so that innovators and entrepreneurs can turn a new invention into a business as quickly as possible.”

The U.S. patent system is essential to the development of the biotechnology industry including the survival and growth of biotech start-ups.  Greenwood highlighted that innovation in biotechnology is based upon the strong and predictable protection of intellectual property provided by our nation’s patent system.
“Without strong and predictable patent protection, investors would shy away from investing hundreds of millions of dollars, over a decade or more, in high-risk biotechnology companies, and will simply put their money into projects or products that are less risky or offer a more immediate return but are of less value to society,” said Greenwood.

“Small biotech companies rely on intellectual property to attract investors to fund the lengthy and expensive research and development process necessary to bring breakthrough new therapies and other biotech products to patients and consumers,” also noted by Greenwood.

R&D legislation

The December 2011 passage of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) reauthorization (as part of the National Defense Authorization Act, HR 1540) by both the House and the Senate is also important to start-up firms. Greenwood notes, “BIO and our members have long advocated for the reauthorization of, and changes to, SBIR/STTR, which are critical sources of funding for emerging biotechnology companies in the early development stages of medical research for serious and life threatening diseases; including cancer, diabetes, HIV/AIDS, and Parkinson’s.
Greenwood commented, “We especially are pleased that this Act will allow majority venture capital-backed companies to once again compete for SBIR/STTR funds, which will help level the playing field for small biotechnology companies so that they can continue to bring innovative medical treatments and cures to market. Allowing companies that are primarily funded through venture capital to compete once again for SBIR/STTR grants will increase the number of new medical discoveries and innovations available to patients.”
Future action

ACS members can support the passage of additional federal legislation that will promote the establishment, survival and growth of start-up firms by following discussions of legislation in C&EN and elsewhere and writing their congressmen and senators supporting such legislation.

John Borchardt is a chemist and freelance writer who has been an ACS career consultant for 15 years. He is the author of the ACS/Oxford University Press Book “Career Management for Scientists and Engineers.” He has had more than 1200 articles published in a variety of magazines, newspapers and encyclopedias. As an industrial chemist, he holds 30 U.S. and more than 125 international patents and is the author of more than 130 peer-reviewed papers.


Entrepreneurship. R&D Funding Available from the Federal Small Business Administration

January 16, 2012

The Small Business Administration (SBA), a unit of the U.S. Department of Commerce, offers two programs to assist entrepreneurs with research & development (R&D) costs.

Small Business Administration Innovation Research Program (SBIR)

SBIR funding is 2.5% of the total extramural research budgets of all federal agencies with extramural research budgets of more than of $100 million. These funds are reserved for research contracts or grants to small businesses. In 2010, that represented over $1 billion in research funds. Over half the awards were to firms with less than 25 people. One-third of the funds went to very small companies indeed, one with fewer than 10 employees. One-fifth of the funds went to minority- or women-owned businesses. One-quarter of the companies in fiscal year 20100 were first-time winners.

Information can be obtained from:
Small Business Innovation Research Program
United States Small Business Administration
Office of Technology
409 Third Street SW
Washington, DC 20416
202-205-6450
www.sba.gov/sbir or sba.gov/index.html
Small Business Technology Transfer Program (STTR)

STTR uses a similar approach to promote partnerships between small businesses and nonprofit U.S. research institutions. Funding currently totals 0.3% of the relevant agencies’ extramural research budgets. In the 2010 fiscal year, this amounted to over $100 Million.

The federal agencies involved are:

Each year, five federal departments and agencies are required by STTR to reserve a portion of their R&D funds for award to small business/nonprofit research institution partnerships.

• Department of Defense
• Department of Energy
• Department of Health and Human Services
• National Aeronautics and Space Administration
• National Science Foundation

Small businesses eligible for STTR must be American-owned and independently operated. The principal researcher need not be employed by small business. (Thus principal researchers can be academic researchers starting a company aimed at commercializing the results of their research). Company size limited to 500 employees

Upon reviewing the proposals, agencies make STTR awards based on small business/nonprofit research institution qualification, degree of innovation, and future market potential. Small businesses that receive awards then begin a three-phase program.

• Phase I is the startup phase. Awards of up to $100,000 for approximately one year fund the exploration of the scientific, technical, and commercial feasibility of an idea or technology.
• Phase II awards of up to $750,000, for as long as two years, expand Phase I results. During this period, the R&D work is performed and the developer begins to consider commercial potential. Only Phase I award winners are considered for Phase II.
• Phase III is the period during which Phase II innovation moves from the laboratory into the marketplace. No STTR funds support this phase. The small business must find funding in the private sector or other non-STTR federal agency funding.

To help small businesses deal with the complexities of working with the federal government, the SBA operates the Small Business Administration Answer Desk at 202-205-6600, extensions 296 and 287.

Other federal programs

Other units of the federal government also have programs to assist small businesses. For example, the Environmental Protection Agency (EPA) Small Business Ombudsman helps small businesses gain access to EPA funds. Ombudsmen may be reached through the EPA at www.epa.gov or by telephone (703-305-7777).

The Minority Business Development Agency is a unit of the U.S. Department of Commerce and collects and disseminates information about starting and operating minority-owned businesses. It may be reached online through www.doc.gov or by telephone at 202-482-4547.

The Office of Small and Disadvantaged Business is another Department of Commerce unit helping small businesses. It may be reached on-line at www.osec.doc.gov/osdbu or by telephone at 202- 482-1472.

The U.S. Department of Energy operates a similar program, the Minority Energy Information Clearinghouse focused on small energy-related businesses owned by members of minority groups. This program may be reached through www.hr.doe.gov/ed or by telephone at 202-586-5876.

The U.S. Department of Defense operates the Office of Small and Disadvantaged Business Utilization for DoD. Information is available online at www.acq.osd.mil/sadbu or by telephone at 703- 545-6700.

The Department of Energy also provides information to small businesses through the Office of Small and Disadvantaged Business Utilization for DoE. Its website address is www.doe.gov. The office can also be reached by telephone at 202- 586-7377.

NASA operates the Office of Small and Disadvantaged Business Utilization for NASA. Information may be obtained online at www.hq.nasa.gov/office/codek and by telephone at 202-358-2088.
The Small Business Administration Development Center Program provides technical assistance and information on management techniques to small businesses at www.sba.gov or by telephone at 202- 205-6600, extensions 275 and 277.

John Borchardt is a chemist and freelance writer who has been an ACS career consultant for 15 years. He is the author of the ACS/Oxford University Press Book “Career Management for Scientists and Engineers.” He has had more than 1200 articles published in a variety of magazines, newspapers and encyclopedias. As an industrial chemist, he holds 30 U.S. and more than 125 international patents and is the author of more than 130 peer-reviewed papers.


Entrepreneurship. Business Incubators and their Services

January 9, 2012

Business incubators are facilities that provide entrepreneurs with an inexpensive start-up environment and a range of administrative, consulting, and networking services.  According to a 2010 study by the National Business Incubation Association (NBIA), the survival rate of startups using business incubators is 87% compared t0 44% for startups that didn’t use incubators.   At that time there were approximately 41,000 startups using 1,200 incubators across the country.

Every state in the U.S. is home to incubators designed to serve as homes for start-up companies and promote innovation. The website www.angelscorner.com/articles/incubators.htm provides a list of links to major U.S. incubators. Incubators became widespread with the explosion of start-up companies in information technology and computer fields in the late 1990s. Not all incubators include wet laboratories in their facilities but many do particularly due to the growth in numbers of biotechnology start-ups.

Some incubators are affiliated with universities. Others are operated by venture capitalists. Others are quasi-government operations.  For example, the Iowa State University Research Park has more than 50 start-up firms as tenants (http://www.youtube.com/watch%3Fv%3DB2Wv7c-l0Ho). It enables entrepreneurs to link technology creation, business formation (including potential access to capital) and development assistance. Located on a major university campus, it is also near federal laboratories.

One of the three incubators in the SPARK Regional Incubator Network (SRIN), the Michigan Life Sciences Innovation Center in Plymouth, Michigan, offers entrepreneurs wet laboratory facilities. Besides laboratories, the 57,000 square incubator includes offices and conference rooms, a loading dock and ample parking. Lease rates are affordable for start-up companies.

Getting in

Gaining access to incubator facilities  is more than just renting space. The start-up company has to meet specific requirements. One has to apply for it. The start-up company’s business plan, management team, capitalization and time to commercialization are evaluated. Its operations must be compatible with the available incubator space including environmental permitting, major equipment and utilities requirements.

Once established as tenants, start-up companies cannot stay in incubators forever. Most incubators limit initial leases to no more than three years with the possibility of one- or two-year renewals.

Incubator services

Some incubators offer start-ups reduced rental rates with the rents gradually increased to the prevailing market level in the area. Incubators usually provide reception areas and meeting rooms, secretarial and postal services and office equipment such as photocopiers and projection equipment for meetings. Incubator tenants share these and other overhead costs.

Many offer services designed to facilitate the development and growth of start-up companies. Business incubators often provide courses in entrepreneurship and seminars on topics of interest to entrepreneurs such as intellectual property protection, access to capital. Business incubator managers also serve as facilitators connecting entrepreneurs to firms and individuals providing services they need such as local artisans such as glass blowers and electricians as well as consultants and advisory services.

A recent survey of National Business Incubator Association members indicated that 83% of incubators provide entrepreneurs with access to seed capital. Also, 76% provide assistance in obtaining federal grants. 74% assist entrepreneurs in preparing financial proposals.

Some incubators with wet labs offer tenants shared access to instruments that would be used by each only a fraction of the time and routine laboratory services. Some offer access to sophisticated laboratory services that are often outsourced in small established companies.

John Borchardt is a chemist and freelance writer who has been an ACS career consultant for 15 years. He is the author of the ACS/Oxford University Press Book “Career Management for Scientists and Engineers.” He has had more than 1200 articles published in a variety of magazines, newspapers and encyclopedias. As an industrial chemist, he holds 30 U.S. and more than 125 international patents and is the author of more than 130 peer-reviewed papers.


Entrepreneurship. Spinoffs from Former Employers

January 2, 2012

Entrepreneurs are increasingly licensing technology and receiving aid from their former employers and using it as the basis to build new companies.

Divergence, Inc.

Divergence, Inc. chief executive officer (CEO) Derek Rapp described the history of his St. Louis start-up firm in a paper presented at the Revitalizing the Heartland’s Chemical Economy Symposium (part of the 2011 ACS Combined Midwest/Great Lakes Regional Meeting). Divergence began operations in 1999 as a genomics-based company looking to identify pathways to control and prevent parasitic infections of plants. Its goal was to develop a biogenetics means of controlling certain pests (nematodes) that eat crop plant roots thereby reducing productivity. After giving up on this approach, Divergence licensed technology from the CEO’s former employer, Monsanto, and developed it to the point of commercialization. In October 2011, Monsanto bought the company giving investors and Divergence employees a handsome profit and jobs with Monsanto.

Michigan life sciences start-ups

Michigan life sciences start-up firms provide interesting examples of start-ups that received support from the large firm that gave rise to them. In 2003, Pfizer closed its Kalamazoo, Michigan laboratory, the former site of UpJohn’s research center. About 1,000 employees lost their jobs. To prevent the departure of all of these professionals, the state and city provided seed money for aspiring entrepreneurs to start businesses. The more than two dozen start-ups that arose were primarily pharmaceutical service companies rather than companies relying directly on Pfizer technology. Most were born at the Southwest Michigan Innovation Center, which opened in July 2003 at the Western Michigan University Business Technology Research Park in Kalamazoo.

As of 2011 most of these service companies have graduated from business incubators to become fully operational. At least some have become profitable. Together they offer a broad range of services from drug discovery through early stage clinical trials with associated manufacture of the drugs needed for these trials. They employ a number of former Pfizer and Upjohn scientists. In at least some cases, Pfizer has provided these firms with contract research business.

An example is Jasper Clinical Research & Development, which offers early-phase clinical studies. Jasper has received a facility and equipment from Pfizer plus three-year contracts for contract research business Pifzer estimates total as much as $20 million.

Another start-up, CeeTox, Inc., provides in vitro toxicity screening of drug candidates, received equipment and technology from Pfizer and a recent $25 million dollar contract from the U.S. Environmental Protection Agency.

The founders of contract research organization Kalexsyn, Inc., Robert Gadwood and David Zimmerman, based their 2003 start-up company on what they had learned about CROs while working for Pfizer and its predecessor companies in Kalamazoo. Former Kalamazoo employees initially formed the core of Kalexsyn’s workforce. As the firm grew to 23 employees, Kalexsyn outgrew its original 7,000 square foot site in the Southwest Michigan Innovation Center. Kalexsyn built its own $4.5 million, 20,000 square foot facility in the Business Technology and Research Park on the Western Michigan University Parkview campus. The building includes both laboratory and office space.

A mixed record of success

Most but not all the post-Pfizer start-up firms have succeeded. For example, contract research organization firm ADMETRx, Inc. also was founded in 2003 in the wake of Pfizer’s laboratory closure. In May 2010, ADMETRx shut down with CeeTox acquiring some of its assets.

John Borchardt is a chemist and freelance writer who has been an ACS career consultant for 15 years. He is the author of the ACS/Oxford University Press Book “Career Management for Scientists and Engineers.” He has had more than 1200 articles published in a variety of magazines, newspapers and encyclopedias. As an industrial chemist, he holds 30 U.S. and more than 125 international patents and is the author of more than 130 peer-reviewed papers.


Do You Need a Plan? A Business Plan, That Is

August 19, 2011

Entrepreneurship is one of the ways that we will get our economy back on the right track – lots of small companies being started based on  great technologies.  While each of these companies will only hire a few people, the sheer numbers of them will employ many.  Additionally, as a new idea takes off, the company grows, eventually hiring many people and/or becoming part of a larger company.  Every company that exists today is there because someone had an idea, believed in it, then worked hard to sell that idea to others.

ACS is starting to actively encourage innovation and entrepreneurship. Dr. Joseph Francisco’s Presidential Task Force on Innovation and Job Creation reported (www.acs.org/CreatingJobs) on the changing nature of innovation, and recommends increasing awareness of career pathways and educational opportunities that involve entrepreneurship among chemical professionals.  A recent Chemical and Engineering News cover story described what life is like for instrument entrepreneurs.

While chemical professionals are great at coming up with new ideas, it’s the business operations that we are typically not so good at.  Scientists are educated to think differently from business people; and marketing, finance and exit strategies are often not part of our vocabulary. In the same way that it takes research and planning to conduct an experiment, you need to research the technology, study the market, and create a plan – a business plan – before starting a business venture.

To help chemical entrepreneurs with their planning, the ACS Committee on Science has organized a business plan competition for US based start-ups or existing small businesses. In order to compete, the proposed start-up company must be scalable and have the potential to attract debt or equity financing.

The competition will take place in two rounds. The first round requires an abridged Business Plan (no more than five pages, due December 1, 2011) describing the opportunity and including:

  • Executive Summary
  • Business Description: Description of the product, service, business model, IP protection strategy
  • Market Analysis: Market size, market potential, customer profile, and market positioning
  • Marketing Plan: Pricing, promotion, and distribution channels, how will the business achieve sales and significant profits
  • Financial Analysis: Revenue model, cash flow, income statement, balance sheet
  • Management Team: Experience, qualifications of key people
  • Projected number of jobs that will be created

Upon evaluation of the abridged Business Plan, a small number of applicants will be invited to submit comprehensive business plans (no more than 25 pages) and orally present their plans to a panel of angel investors and venture capital firms at the spring 2012 ACS meeting in San Diego. The comprehensive business plan must include the following:

  • Executive Summary
  • Description of the product, service, or business model
  • Intellectual property protection strategy
  • Market Analysis
  • Operational Plan
  • Opportunities, risks and contingency plans
  • Implementation Plans
  • Financial Analysis: Income statement, balance sheet and cash flow
  • Supplemental attachments including support data and resumes of the members of the management and technical teams

Invited applicants will be mentored and guided to facilitate their success at this meeting.

To help entrepreneurs prepare, there will be an afternoon session at the ACS National Meeting in Denver CO devoted to educating entrepreneurs on IP protection, Business Plan development and funding options.  “Financing your Intellectual Property for Commercialization” will take place on Monday, August 29, 2011 from 1:00 – 4:00 p.m. in the Capital 4 room of the Hyatt Regency Denver Convention Center.

This session will educate potential entrepreneurs about the critical steps for technology commercialization, including understanding of intellectual property protection options, how to develop a business plan and of course financing options. The speakers will focus on IP protection, business plan development, financing sources, and provide examples of technology commercialization and/or business start-ups based on university research.

Dr Sadiq Shah, Associate VP, Research, California State University Channel Islands , will begin the session by talking about “Business Start-up Considerations: IP Protection and Business Plan Development”.  He will be followed by a talk on “Financing your Business: Financing Options and Strategies” by Judith Giordan, Managing Director of Venture Well.  To help entrepreneurs know what NOT to do, Kenneth Polk, CEO for Innovation and Legal Affairs, American Chemical Society will talk about “Avoiding Common Pitfalls in Financing a Startup”, and the final talk will discuss “Technology Transfer and Commercialization”, and will be presented by Rick Silva, Director of Technology Transfer at the University of Colorado, Denver.
An open discussion session at the end will ensure that all your questions get answered.

The session in Denver is open to any interested parties.  Even if you’re not ready to start a business right now, learning about how companies get started, and what things founders need to consider will make you not only better prepared, but also a better employee.

To indicate your interest in participating in the competition, contact Dr. Mukund Chorghade at chorghade@gmail.com or Dr. Sadiq Shah at sadiq.shah@csuci.edu.

This article was written by Lisa M. Balbes, Ph.D. of Balbes Consultants LLC. Lisa is a technical writer/editor and author of: “Nontraditional Careers for Chemists,” published by Oxford University Press.


Striking Out On Your Own

July 17, 2009

We have been seeing a lot of interest lately from scientists who want to start their own business, often as a consultant in their area of expertise. A number of different factors are coming into play to make this a more attractive option than it has been in the past.

As the baby boomer generation gets to “retirement age”, many of them want to continue working in some capacity, but at their own pace. In addition, many people who have been laid off (some more than once) want more control of their own professional lives, and less dependence on a large corporation for their financial security. Working for yourself meets both these needs.

Companies are contributing to this trend as well – as “permanent” employment opportunities are declining, the number and variety of freelance postings are increasing, and in the future work may be auctioned off to the highest bidder.

As freelancing becomes more acceptable, this is now a viable career choice, not just something to do between “real” jobs. Starting can be as easy as saying “Hey, I’m a consultant.” However, making a living at it is a little bit harder. In some ways you are your own boss, but in other ways you are always looking for your next boss (client). You get to call all the shots – then live with the consequences of the decisions you have made.

If you’re thinking about striking out on your own, there are a wealth of resources available to help you plan for success. One great place to start is Business.gov, the official business link to the US government. Just reading through their FAQ provides much food for thought, and will make you aware of issues you may not have considered.

Your local SCORE (Service Corp of Retired Executives) office is also a great resource, providing classes, advisors, and printed materials to help you get started in any kind of business.

You can also check out the competition at places like the Chemical Consultants Network and the Association of Consulting Chemists and Chemical Engineers. Remember also that the main competition is usually not another consultant, but the person at the company who will do the job “for free”.

If you really want to be a full-time consultant, it will take time and effort, just like any job. But with some careful planning, a good network, and a lot of hard work, you can create the job you always wished you had.

This article was written by Lisa M. Balbes, Ph.D. of Balbes Consultants. Lisa is a scientific communication consultant and author of: “Nontraditional Careers for Chemists,” published by Oxford University Press (2006).