Some of the most important lessons in life are learned in the playground. And so it proved this week, when more than 100 wannabe biotech entrepreneurs gathered in London for the Playground event organized by Index Ventures and Nature Biotechnology.
The goal was to inspire the next generation of entrepreneurs to take the plunge in biotech. To do that, Kevin Johnson pulled together some of the most successful biotech pioneers, led by the entertaining, thought-provoking and charismatic Stelios Papadopoulos. But the most striking thing? That almost all these inspirational leaders were from the US.
While its undoubtedly true that the UK has hosted some truly entrepreneurial biotech talent (look no further than Kevin Johnson himself), the US domination on the stage at Playground was representative of the start-up world.
Why is that? Are Americans simply a more entrepreneurial bunch?
Could it be that the young entrepreneurs were simply afraid of failure? Yes. And with good reason
Spending some time in the Playground didn’t just pose the question – it also provided some clear answers. For a start, there was no shortage of entrepreneurial spirit (or for that matter ability, energy or commitment) among the young audience. But one thing came up over and over again: what a big deal it was to start a business.
It really shouldn’t be – starting a business is just like starting a scientific experiment. So it got DrugBaron wondering whether the key difference between the UK and the US environment was the activation energy around those first start-up steps, and what the UK establishment could do to remedy it.
First the facts: the Boston biotech cluster alone is bigger than the entire UK biotech industry. By every metric, from number of start-ups, to capital deployed through exits achieved and dollars returned to investors the US biotech industry outstrips the UK by almost an order of magnitude.
Difference in population is nowhere near sufficient to explain the difference. So other factors must be in play.
Perhaps the favorite explanation, though, seems to be a cultural difference. Napoleon supposedly called the Brits “a nation of shopkeepers”, suggesting a conservative, rigid approach to business – and to life. And, given the relative paucity of biotech start-ups this side of the Atlantic its tempting to assume this assessment is as true today as it was in at the start of the 19th Century.
If indeed it was ever true. One’s enemies are not renowned for accurate character assessments, and Napoleon was not exactly a friend of the British. Clearly, the remark stung, maybe even resonated, for it to have survived in the popular mentality to this day. Its quite possible the nation is secretly proud to be seen in such light, if the antithesis to which they were being contrasted was the Mediterranean “laissez faire” that comes suspiciously close to laziness masquerading as flair.
Young entrepreuers at UK University are often seen as cuckoos – feathering their own nest at the expense of the public purse that pays them, and provides the necessary infrastructure
Certainly the evidence from the Playground suggests the entrepreneurial spirit burns strongly in the UK today. Organized by Index Ventures, together with Nature Biotechnology, the Playground event in London on 18th October was a shameless attempt to put the ‘cool’ into biotech. Loosely modeled on the successful formula of Seed Camp, which brings young wannabe tech and IT entrepreneurs into close proximity with seasoned industry veterans, VCs and serial entrepreneurs, the objective of Playground was to make starting a biotech company seem as cool as starting the next Facebook. With all the glitz of an awards ceremony in the chic modern Brewery venue in the City of London, it was perfectly clear that the audience of a little over a hundred young people, mostly from an academic background, were anything but Napoleon’s shopkeepers.
Many came because they were seriously debating whether to start a healthcare business. Good ideas, abundant energy, passion and determination were all in evidence. Indeed, with such enthusiasm it was hard to see why more great biotech start-ups don’t emerge in the UK. For certain, it is not for the lack of entrepreneurial spirit among the next generation.
Nor, contrary to popular legend, is it due to lack of capital.
Since closing their new dedicated life-sciences fund in March this year, Index have been inundated with start-up opportunities – but only a relatively small fraction of those originated in the UK. Despite a strong geographical bias towards Europe, at least historically, they still evaluate a large number of opportunities from the US. Other European funds report similar experiences.
So the capital is there, but the UK start-ups to compete for it are conspicuously sparse.
Paradoxically then, we have a ready supply of keen young entrepreneurs, we have access to capital, we even have (at least in Cambridge, Oxford and London) the infrastructure to support very young drug development companies. Yet from those ingredients, too few start-up biotechs actually emerge.
Ingredients alone don’t make a cake. Someone has to actually break open the eggs
So what is the bottleneck?
Talking to the students, the most obvious common factor was the perception that starting a biotech business was a big deal. There was much soul-searching going on: did they have the right business idea? Were they really good enough to “make it”? Some had clearly been deliberating these points for years.
Yet there is no way to know the answers to either of those questions without giving it a go. Starting a new biotech business is like a scientific experiment – the jury is out until the data comes in.
Indeed, more than likely the first endeavor will fail – most new healthcare technologies do. More often than not, it’s not the fault of the entrepreneur: they didn’t pick the wrong technology (well, they did – but no-one could have known better) and they didn’t do anything wrong in developing it. But once the data was in, it turned out to be a loser.
Learning to lose was an important lesson – one DrugBaron learned on the tennis court. Andy Murray beat Novak Djokovic in the 2012 US Open final by winning 50.79% of the points, a very slim majority. You can win a tennis match despite losing more points than your opponent. And losing points is an essential component of the game: if you play to get every shot in the court you will play too conservatively and your opponent will find you easy pickings. Accepting just the right level of failure to produce an overall victory is the key challenge for professional tennis players – and biotech entrepreneurs (and, indeed, as DrugBaron noted recently, senior managers in large pharma companies).
The simple answer then is that the wannabe bio-entrepreneurs were afraid of failure. Does that explain the lack of start-ups in the UK? Are UK-based bio-entrepreneurs more afraid than their US counterparts?
Yes. And, as it turns out, with good reason.
The nub of the problem comes down to how to support yourself in the early days of your start-up, and how to support yourself (and your family) when the all-too-likely failure shows up. It’s not a cultural problem – it’s a deeply practical one.
And its much more significant for bio-entrepreneurs than in other spaces. Here’s why: most businesses get started while their founder is earning a living doing something else. That might be waiting tables, driving a taxi or pretty much anything else that earns a few dollars but leaves you with enough energy to start an enterprise. It also helps if the business can be started with very little capital (like writing a an iPhone app or starting an internet retail business). Moreover, you can get a quick and dirty read-out of the likely success of your venture pretty early – how was the first version of the app received by your friends? Did anyone show up at your internet store?
But biotech is different. Big time. Quite obviously its neither low capital intensity nor quick to give an early read out of future potential. However, there is another more insidious issue at play. If you are young and yet still know enough about biotech to have a reasonable chance at starting a successful business, there is almost a certainty that you are working in the field for your day job. And you are very probably working in an academic lab (or in a large company) on exactly the topic of your expertise – and exactly the topic where you could best start a business.
That’s a big hurdle. Your intellectual property in the area is almost certainly owned by your employer. That’s very different from waiting tables aspiring to be an actor, or driving a taxi while founding the next Facebook.
The most important lesson learned in the Playground was not for the people in the room. It was for the establishment – the government and senior academics: young academics should be encouraged to start a company while still employed full-time by the University
And this is the big difference between the US and the UK: over the pond, many though not all, leading academic institutions not only embrace start-ups emerging from their faculty, they view it as a badge of honour. In some places it is almost de rigeur.
In the UK, by contrast, it is still frowned upon. Senior academics in their fifties sometimes do it, usually as a side-line, but anyone under the age of 40 is discouraged or even actively prevented from doing so. Students and post-docs work for a lab head, who increasingly struggles to raise the grant funding to pay their salary – so the boss wants to see their charges work night and day to deliver the currency of academic progress: peer-reviewed publications. Hardly any sanction the diversion of a parallel career as an entrepreneur.
There is also a pervasive view in the UK that academics starting a business are unfairly exploiting the infrastructure of the university – funded from the public purse. Worse, by doing so they may earn more (and drive a better car) that the senior Professor who (in his own view) gallantly sacrificed his own earning power for the good of the academic ideal.
Facing such a headwind, is there any wonder that so few actually break cover and found a new biotech business in the UK? Starting a new business, in any field, demands so much energy, enthusiasm and commitment that it is already a viable career path for only a chosen few. Add in external forces holding them back, and the flow will fall to a trickle.
Interestingly, DrugBaron (who was 34 and a full-time academic when he founded his first biotech company) mostly avoided these pitfalls: becoming a lab head at the age of 28 gave him the necessary control over his own activities that is denied to most post-docs, but perhaps even more importantly, his first “business idea”, for multiplexed diagnostic tests, fell entirely outside the academic field of his laboratory – allowing a complete separation of commercial and academic activities and intellectual property.
But we cannot restrict start-up activity to the tiny minority who achieve lab head status at such a young age, nor those whose entrepreneurial agenda lies entirely outside the interest of their employer.
Talking to the students, the most obvious common factor was the perception that starting a biotech business was a big deal
The most important lesson learned in the Playground, then, is not for the people in the room. It is for the establishment – the government and senior academics. If the UK as a nation is to properly exploit the entrepreneurial talent that is so clearly out there in abundance, and close the yawning chasm across the Atlantic, then they have to encourage young academics to try a different kind of experiment: starting a company while still employed full-time by the University.
Simple agreements to license the intellectual property from the University to the new company ensure that the publically funded infrastructure is paid for in the event the venture is successful (through milestones and royalties). These young entrepreneurs are not self-serving parasites exploiting public largess to feather their own nests – they are the engines of our economy and the best hope for genuine innovation in healthcare over the next decades. They are champions, not cuckoos.
Most will fail of course, but by dramatically increasing the number who try, the number that grow and flower and bear fruit will also jump. And the supply of first-time entrepreneurs is the pool from which will come the serial entrepreneurs that populate the US start-up space. Next time, it will not just be the audience in the Playground who are predominantly UK based – it will be the panel of speakers too.