Christine Fu's blog

Ken Kengatharan. Photo: Christine Fu

What does biotech development have in common with farming, poker, or automobile racing?

You are probably scratching your head now, if you missed Dr. M. (Ken) Kengatharan’s QED seminar on April 5 at UCSF Mission Bay. According to Kengatharan, president and CSO of Altheos, there are only a handful of factors that determine the failure of a biotech startup. He makes a reference to Freakonomics® in his seminar title, zooming in to the most unconventional factors among these.

The farming analogy is a recurring theme through this talk. Kengatharan compares biotech companies to farmers, obtaining seeds (IP), producing crops (R&D) and selling them to wholesalers (big pharma). If the farmer doesn’t get paid until the wholesaler sells a product, this whole industry is in danger of collapsing. He sees the current biotech industry as heading toward a hard landing, and in need of some audacious reform.

What is the number one reason contributing to the demise of biotech companies? Kengatharan believes it’s a faulty reward structure that fails to recognize and look after talents.

“The asset in the company is not patents and drugs; it’s people,” he says emphatically.

In an organization, leaders at the highest level get most of the reward, while neglecting people at the lower level who actually develop technologies to carry the company through successful exit. The resulting exodus of talents not only drains a company of innovation, but also gives competitors a leg up by capturing them.

To address this conundrum, Kengatharan proposes an alternative model, in which a percentage of every investment in a biotech trickled down to employees, previous investors, and founders. Such a strategy may boost morale and encourage people to reinvest for a tax break.

“Motivating employees is the key,” he argues. “Management of people is the reason for success but also the reason for failure.”

So where does the poker analogy come in? Kengatharan draws on the game’s low odds of winning to explain the technological risk associated with a biotech’s failure. A poker player can push opponents out of the pot before the game ends—not unlike a startup convincing big pharma it has the best drug by Phase II/III and selling itself. Which drugs have the best chance of winning? Nobody can predict that, as the cards are dealt at random. Some of the biggest blockbuster pharmaceuticals in history in fact met with much initial skepticism, including Lipitor, Viagra and Rituxan.

Another reason of failure is trying to revise the business model during the life of a biotech startup. Kengatharan points out that just like a car built for NASCAR can’t run on an Indy 500 circuit, you cannot expect to suddenly evolve your company into something that it is not. Although there are situations in which similar cars may ride on different tracks, you should decide on your business model from the outset, and focus on that until your exit.

Don’t miss out on the eyebrow-raising statistics, personal anecdotes, and cautionary tales in this talk. The podcast and slides will be posted shortly.

Dennis Henner. Photo: Christine Fu

“It was like a kid in a candy store, and beyond that, the kids were running the candy store,” said Dr. Dennis Henner.

No, he was not telling a new adaptation of Charlie and the Chocolate Factory. Instead, Henner was describing the early days of Genentech, when he first joined the company in 1981.

Prior to his current position as Managing Director of Clarus Ventures, Dr. Henner was at Genentech from 1981 to 2001, holding various positions including Senior Vice President of Research. In a recent QED seminar at UCSF Mission Bay, he shared his experiences at Genentech, and provided some perspective on the current climate for investment in life sciences.

Henner had a strong background in Bacillus subtilis genetics from his Ph.D. and postdoc training in Microbiology. His scientific career at Genentech evolved from Bacillus subtilis to E. coli expression systems, and then to therapeutic antibodies. As the opening quote suggests, there was little supervision over research in the early 80’s. Innovation flourished, but commercial reality ultimately clashed with that free-willing culture. Henner outlined three crucial transitions Genentech went through in the mid 80’s to maintain creativity while expanding commercial success.

1. From technology company to pharmaceutical company. As David Packard, who sat on the board of Genentech, was quoted saying, “More companies die of indigestion than of starvation.” A decision was made to focus efforts on drug development and curtail other research programs.

2. From technology-driven to biology-driven company. As recombinant DNA technology became easier over time, Genentech was losing its competitive edge. The low-hanging fruits in pharmaceutical development were harvested relatively early. Genentech had to turn into a molecular biology company with more emphasis placed on “biology” than “molecular,” by reorganizing itself around different biological disciplines.

3. From bottoms-up and free-willing culture to more integrated and disciplined organization. Genentech went to academic institutions to find the “adults to supervise the candy store.” To encourage scientific innovation within an integrated framework, the company strived to maintain key interactions between its research and clinical arms, as well as organization-wide transparency.

New entrepreneurs may derive valuable lessons from Genentech’s success story. Just as Genentech had to do some soul-searching and focus, you need to carefully consider what your business model would be. What is your competitive edge and how long can you maintain it?

As an experienced venture capitalist, Henner also offered three observations about the current environment of investing in life sciences:

1. The amount of life science venture capital is shrinking, making capital harder to find.
2. The pharmaceutical and biotech industry is in a state of turmoil.
3. The FDA is a nightmare, and probably at a 30 year low.

So what can an entrepreneur do against these strong headwinds? Henner advised those trying to raise capital to understand the business of people who are making investments. A venture capitalist’s job is to make money for the limited partners who invest in him or her. You need to think about how your business can generate returns for that investment. Keep in mind that clocks are ticking in the VC world as soon as money is put into a company: A venture capital fund has a lifespan of ten to twelve years, and a new fund needs to be raised every four to five years.

Henner also suggested bringing experienced management to the table. Though you might be tempted by the genesis stories of Google or Facebook to take on management roles, Henner pointed out that the capital requirement is very different in biotech versus social media companies. Building a team with people who know the business and understand the regulatory processes could avoid blunders that you cannot afford.

To listen to the talk, stream online or subscribe to our podcast on iTunes.

Pat Scannon. Photo: Christine Fu

When you open a medication package insert, have you ever wondered how it comes into being during the drug development process? How is that little piece of paper packed with fine print relevant to you as a researcher with discoveries?

The package insert evolves from a document called the target product profile (TPP). According to the FDA, “a TPP is a format for a summary of a drug development program described in terms of labeling concepts.” Think of it as a list that defines the end goals and guides the development process. In a QED seminar held on March 1 at UCSF Mission Bay, Patrick Scannon, Executive Vice President and Chief Scientific Officer of XOMA, presented a primer on the TPP and how budding entrepreneurs may take advantage of this information.

Although TPP is used mostly in the industry setting, Scannon made a convincing case that it is adaptable as a communication tool between academic discoverers and investors. Incorporating the TPP format could impart a competitive edge to your discovery that differentiates it from others.

The informative presentation slides from this QED are available as a PDF file, along with the audio MP3. To download both files as well as future seminar recordings with one click, subscribe to the QB3 Bioentrepreneurship Podcast here.

But will it work out in the long term? Doug Crawford gets to know John Steuart. Photo: Christine Fu

Charlie Rose meets The Dating Game – that’s what a recent QED seminar brought to mind. Let me explain.

QB3 associate director Doug Crawford talked with John Steuart, managing director of Claremont Creek Ventures, in a lively Charlie Rose style discussion on Feb 22 at the East Bay Innovation Center. As a venture industry insider with more than 20 years of experience, John provided a wealth of information and tips on early stage life science startup funding.

Matching startups with venture capital, according to John, is not unlike dating. What makes a good pitch? What do investors look for in a presentation? What are the big turn-ons and turn-offs?

“If you use The Dating Game analogy, the best way to get a boyfriend or girlfriend is to be empathetic to what the other person wants,” John said.

So what does John want to know? First of all: What do you do and what do you have? With the “what do you do” information, John can decide in five minutes whether your company is a suitable match with his firm or whether it’s out of his scope. Summarize your key data (“what do you have”), but avoid the major turnoff of rambling on without getting to the point first.

After engaging John’s interest, you can search for the path to his “heart” (bank account) by addressing the following: Who are you (the team and experience)? What is the market (characteristics, size, and competitors)? IP strategy? Product development and marketing strategy? Regulatory issues? It’s important to prepare a well-considered business plan. How much capital do you need to raise and how do you plan to spend it? When will you generate revenue and how much? John suggests breaking down your estimated growth year by year, and summarizing the next 4-5 years on one PowerPoint slide. The entire presentation needs no more than twenty slides, plus as many as possible backup slides to prepare for questions.

For prospective entrepreneurs choosing between multiple projects, John shared Claremont Creek Ventures’ perspective on assessing potential biotech investment. The current IPO market is much more difficult to access, causing suboptimal returns in venture. Claremont Creek’s portfolio consists of startups that do not require a lot of capital, allowing the firm to make the most profit when selling them to big companies, instead of counting on the IPO market.

What principal criteria does John’s ideal life science startup have to meet? It needs to not only move the needle in terms of outcome, but also distinguish itself in terms of cost reduction. “I’m looking for better, faster, and cheaper. And if I don’t get cheaper, I don’t invest,” he said.

As for how to achieve these virtues, John acknowledged that the rules are fluid. “Investing at the early stage is more an art than science,” he said.

This QED talk is available as the first episode of QB3’s new podcast. To stream online, click here. But why listen while tethered to your computer? Subscribe to our QB3 Bioentrepreneurship Podcast now and get automatic download of our future seminar recordings!

Thom Opal wants you to wear your safety goggles. Photo: L. Opal

“Aspiring to a drama-free outcome” is his motto. And he has achieved it quite well so far.

Meet Thom Opal, the safety specialist who provides environmental health and safety (EH&S) advice to startup companies in the QB3 Garage@Berkeley and QB3 East Bay Innovation Center (the latter as a freelancer). To help new tenants characterize their workplace safety needs and navigate different regulatory environments, Thom has compiled a rigorous hazard assessment questionnaire, which defines the types of hazardous materials, equipment and operations anticipated. After the companies self-identify applicable areas, he then follows up with an interview to discuss details, and issues a customized compliance report that directs them to specific regulatory resources.

Thom, who in his day job is EH&S specialist for Stanley Hall at UC Berkeley, also serves as a liaison between QB3 incubator tenants and regulatory agency inspectors. For example, if a company’s inventory contains hazardous chemicals that meet threshold quantity criteria, submission of a Hazardous Materials Business Plan is required. The City of Berkeley, acting as the regulatory oversight in this case, conducts inspections after this plan is filed. Thom accompanies the inspectors on site to facilitate the process.

“Put some thoughts in advance into what actions to take when experiments go wrong,” Thom advises startups. He recounts a story in which a researcher tried to extinguish a solvent fire with liquid nitrogen, causing blow-back of the chemicals. Entirely avoidable, if the person were familiar with a safety Standard Operating Procedure (SOP) for this experiment. For investigators with backgrounds in university research, be aware that startups are often governed by different regulatory guidelines. For example, waste disposal procedures depend on the amount of chemicals generated. Small businesses like QB3 Garage tenants may be allowed to dispose of chemicals through the county household hazardous waste program, if the quantity is small enough.

One major area of “gotcha” seems to be bench-top treatment of hazardous wastes before disposal down the sink drain, Thom cautions. He offers consultation to weigh the risk of violating waste treatment laws versus the expense of utilizing chemical disposal vendor services, and choose between alternative methods.

Failure to adhere to safety regulations could result in potentially dire consequences, ranging from a fine of up to $25,000 per day for improper hazardous waste disposal, to fatality and criminal charges in the most extreme case. Fortunately, no such drama has occurred in the QB3 incubators, Thom says, thanks to the conscientiousness of our tenants.

As someone who takes pride in the drama-freeness of his job, Thom nevertheless appears dynamic and friendly in person. When asked about his college education in botany, Thom enthuses, “Plants have extremely interesting chemistry!” What first drew him to chemistry was an early fascination with plant aromas, and then herbal medicine. After recognizing a campus-wide need for systematic identification and communication of research chemical hazards, he joined the UC Berkeley EH&S office, and worked on their chemical inventory program for over 9 years. Listening to Thom talking about chemistry, one realizes how much passion underlies this job that requires great discipline and meticulousness.

If you work at the QB3 incubators, make sure to tap the resourcefulness of your safety czar. If you are a prospective tenant, please contact Douglas Crawford to put you in touch.

Tony Gottschalk. Photo: Christine Fu

Safety and efficacy have long been the gold standard of bringing a new drug to the market. In our rapidly evolving healthcare industry, however, commercial success of therapeutics can no longer rest solely on these twin pillars. “Now there’s another dimension in that you have to prove value. You have to come to the table with a package that demonstrates where your product fits into the delivery of healthcare and what value it provides to the patients,” said Tony Gottschalk, director of Marketing Operations at Gilead Sciences.

How does a value-oriented approach influence strategies of different stakeholders? In a QED seminar held on Thursday, February 2 at UCSF Mission Bay, Gottschalk shared his personal perspective on emerging trends in the commercialization of new therapeutics.

Overall, the US medical system is faced with turbulent waters. Healthcare expenditure currently represents 17.6%-19.3% of GDP, and continues to grow unsustainably along with the aging population. Many big pharmas are plunging off “patent cliffs,” the precipitous decline in revenue upon patent expiration of blockbuster products. The 2010 healthcare reform, while beneficial for patients by expanding access to coverage, places downward pressure on pharmaceutical prices. Grappling with these challenges, pharmas appeared to be lagging on the innovation front, with decreased rate of new drug application and approval.

To help reduce the soaring healthcare cost, Obama’s 2009 stimulus package earmarked $1.1 billion for comparative effectiveness research (CER) studies, which compare the benefits and harms of medical interventions and inform the decision making processes. “CER is a big buzzword in the industry right now,” Gottschalk remarked. The demonstration of value through CER is vital in securing market access and commercial success. A drug that is safe and efficacious in clinical trials but proves marginal benefit in the market will fail to compete.

Gottschalk also noted a shifting power structure in the industry. The status of key stakeholder has transferred from pharmas to insurance providers. And with government agencies controlling the operation of CER, pharmas no longer provide the driving force behind product development. Big pharmas respond by forging alliances with insurance companies, such as the collaboration between Pfizer and Humana to share data on retrospective claim analysis and observational studies. One essential strategy for pharmas to cope with the changing landscape is to identify endpoints important to payers, and build them into early stages of drug development.

A glimpse into the pipelines reveals a trend of developing drugs for rare diseases. Despite the small market, such products command astronomically high prices. With the low-hanging fruit of drug discovery already plucked, this strategy appears to be economically viable within the short term, though unlikely to be sustainable in the long run.

The regulatory environment is also evolving significantly. Gottschalk commended the FDA for its effort in improving transparency and harmonization across divisions. He elaborated on Risk Evaluation and Mitigation Strategies (REMS), a relatively recent FDA-mandated program. REMS encompasses a set of tools the drug manufacturer puts in place to educate prescribers and patients on safe use conditions, as well as restrict drug distribution and monitor compliance. Gottschalk advised drug developers to consider REMS as early as Phase II of the clinical trials.

Gottschalk concluded the seminar on a more optimistic note. Venture capital funding for biotech has been on the rebound, and valuations are climbing for earlier stage merger & acquisition deals. For successful innovations, the rewards prove to be enormous. He encouraged the QB3 audience to rise to this new era of challenges, and “be bold, be inspired.”

Anabella Villalobos. Photo: Christine Fu

The number of possible small organic molecules spanning the chemical space is estimated to exceed 10^60 – a mind-boggling number. How could we navigate this enormous space efficiently to look for compounds of pharmaceutical value?

Medicinal chemists draw on the knowledge of how molecules interact with biological systems to predict their desirability as drugs. One particularly challenging arena of drug discovery is the central nervous system (CNS). This is essentially a “demilitarized zone” shielded from foreign chemicals by the blood-brain barrier (BBB), tight junctions between endothelial cells lining the capillaries. The dogma in the field has long held that high lipophilicity and low polarity are key attributes of a successful CNS-penetrant drug, allowing it to passively diffuse through the plasma membrane. This notion was challenged by Anabella Villalobos, PhD, head of Neuroscience and Antibody Directed Conjugate Medicinal Chemistry at Pfizer, in a Quadrant industry speaker seminar held on Jan 25 at UCSF Mission Bay.

Villalobos began the talk by posing a dilemma: Lipophilicity is a double-edged sword. In vivo toxicology studies have shown that more lipophilic and less polar compounds are more likely to induce toxic events, presumably due to their propensity of promiscuous off-target binding. How does one balance safety with the ability to cross BBB in neuroscience drug design?

Villalobos’ team undertook an analysis of over 200 marketed CNS drugs and Pfizer candidates. They identified optimal ranges for six fundamental physicochemical properties that impact key in vitro pharmacokinetic and safety attributes. Marketed drugs were found to be highly permeable, not a substrate of the P-glycoprotein transporter which pumps molecules back into the blood, metabolically stable, bind targets efficiently, and demonstrate low in vitro toxicity. The task of medicinal chemists is to align these favorable drug-like attributes in one molecule to maximize the probability of clinical success.

Manipulating only one or two properties in drug design is too restrictive, Villalobos argued. Instead, Pfizer scientists created a CNS multiparameter optimization (MPO) algorithm that utilizes the six physicochemical properties and calculates a desirability score for each molecule. 74% of marketed drugs exhibited high MPO scores, which correlated well with alignment of desirable attributes, validating this method. Incorporating multiple parameters is also advantageous over a hard cutoff approach by expanding the chemical space of interest to drug discovery. Currently, 44% of CNS drugs heed the “high lipophilicity, low polarity” dogma, placing them in a higher safety risk quadrant within the chemical space. In contrast, only 11% reside in the lower risk quadrant (low lipophilicity, high polarity). Villalobos made the case for a need to not only overcome safety hurdles in the higher risk space, but also move beyond dogma and explore the lower risk space, while optimizing CNS penetration. She says that MPO will be used as a prospective design tool to facilitate this new direction of neurotherapeutics Pfizer is pursuing, accelerate the identification of promising compounds, as well as mine the patent literature for competitors’ leads.

The reports are published here and here.

Business consultant and educator Leonie Meima shares ideas on marketing and positioning. Photo: Christine Fu

From Malaysia to the UCSF Mission Bay campus, from a developing economy to a major hub of innovation in a 36-year-old industry, participants in QB3’s 5th annual Global Bio-Entrepreneurship (GloBE) course flew across 16 time zones this week to learn from the experience of Bay Area biotech.

The five-day course, a collaboration between the Malaysian government and QB3, brought together nine entrepreneurs, four government representatives, two investors, eight academics, and one media communicator. Most participants this year have ties with the biomedical industry, highlighting it as the major thread that weaves through the course.

“We structured the class this year to focus more on the lean startup idea,” says GloBE director David Charron. The concept of “lean startup,” according to QB3 associate director Doug Crawford, encompasses a relentless pursuit of only what brings value to customers and striving for capital efficiency. Attendees were introduced to the Silicon Valley biotech ecosystem by an extraordinary panel of local entrepreneurs, venture capitalist, angel investors, and business development experts. Through lectures, case studies, and small group projects, they explored strategies to achieve “leanness” at progressive stages of a startup’s life cycle.

“This is not a one-hit class,” Charron says. “The Malaysian government has taken on a long-term view in developing the industry. I’m feeling very positive about how they’re building up that ecosystem.”

The Biotechnology Corporation (BiotechCorp), a privately-held agency under the aegis of the Malaysian government, sponsors GloBE. BiotechCorp has supported 207 local life sciences companies since its establishment in 2005. However, fewer than 10% of these ventures are founded upon home-grown technologies, according to Yazid Hamid, senior vice-president of strategic planning. The goal of their partnership with QB3 is to train scientists to become leaders in taking technological innovation through commercialization.

This year, BiotechCorp selected three biomedical devices companies and three contract research services companies to attend GloBE. These include freshly minted startups as well as three previous participants that demonstrated continued growth. Hamid also stresses adapting the Silicon Valley model to the unique circumstances of his country. Having no “deep pocket” for risky and lengthy pharmaceutical R&D, the emerging trend in Malaysia is to emphasize value-added services development. “We focus on the capabilities that we have, package them and promote development with different countries.”

GloBE students engage in a small-group project. Photo: Christine Fu

Undeterred by jet lag, participants were impressively interactive, asking intelligent questions and engaging in lively discussions. Lee Hong Boon is the director of a startup founded in 2011 called AseaCyte, specializing in primary cell culture products and analytical services. She enjoys the hands-on workshop format, and has been working hard on assigned reading from “at least five kilograms” of textbooks.

Romli Ishak, managing director of Granulab, is an alumnus of the 2008 GloBE. His company was founded in 2007 and produces synthetic bone graft substitutes for surgical applications. He credits GloBE for helping him understand the value of IP and filing two patents.

Another returning student, Calvin Thien, says that his molecular diagnostic services company DNA Laboratories has benefited from the marketing strategies he acquired from the 2008 GloBE. He also appreciates the networking opportunity with fellow Malaysian entrepreneurs.

Mahaletchumy Arujanan, executive director of Malaysian Biotechnology Information Centre (MABIC), will file a report on GloBE in her monthly newspaper The Petri Dish. “It’s a really good experience to see how a very conducive ecosystem exists, and why it’s so important to have this ecosystem to drive biotech enterprises,” she says.

At a Thursday evening reception hosted by Neopeutics, QB3 director Reg Kelly urged our Malaysian guests to “pat yourselves on the back.” He congratulated Malaysia as the only country to take a risk and do something imaginative by committing to this multi-year partnership with QB3. “You as a country have done something that, in our experience, no other country has ever done.”

GloBE wraps up this afternoon. To connect with friends and alumni of the course, look up their LinkedIn network.

Troubled capital market presents challenges for the biotech industry, but new mobile medicine technology holds enormous promise, Burrill explained. Photo: Christine Fu

Imagine: wearable and ingestible biosensors continuously monitor your vital signs and metabolic profile, and analyze them for anomalies. Medical data is transmitted wirelessly to your doctor, who writes a custom prescription based on your personal genetic information, emails it to your pharmacy who then delivers it by FedEx.

Still sometime in the future, yes, but this scenario is no longer strictly science fiction territory. “Most of the innovation in the world today is going to be disrupting how we deliver health care, not just…what we do about inventing health care,” G. Steven Burrill, founder and CEO of Burrill & Company, urged aspirating entrepreneurs to think outside the box at his annual State of the Biotech Industry address on Jan 9 at UCSF Mission Bay, presented as part of the “Idea to IPO” course sponsored by the UCSF Center for BioEntrepreneurship.

Burrill shared insights into main trends affecting the industry in 2011, as well as challenges and opportunities going forward. “The world has gotten really messy,” he said. The European debt crisis has intensified global financial turmoil, making capital scarce and expensive. Sixteen US life sciences companies managed to go public in 2011, compared to twenty in 2010. On average, they sold 28% more shares, raised 13% less money than they desired, and their shares fell 29% from the IPO prices by year end.

Given this unfavorable financial climate, is it viable to enter the biotech industry? Burrill pointed out that while big pharmas scramble to modify their business models, scale back R&D and focus more on merger and acquisition, smaller biotech companies continue to be the source of innovation. The biotech sector worldwide raised $82.4 billion in 2011. Capital is available globally, but entrepreneurs need to be aware of regional differences and explore emerging markets such as China, Russia and Brazil.

The changing landscape of health care was a resounding theme in Burrill’s talk. Currently 55% of drugs used in the US don’t work for the patients, who are genetically distinct and respond differently to treatments. Such ineffectiveness amounts to massive waste and poor quality of care. In November 2011, US patent expired on Lipitor, Pfizer’s best-selling drug , heralding an end to the era of one-size-fits-all blockbuster pharmaceuticals. Meanwhile, personalized medicine is making headway with the FDA approval of Roche’s Zelboraf and Pfizer’s Xalkori. Both drugs were developed with companion diagnostics to stratify patient groups and tailor dosage to their specific disease status. “Personalized medicine is a giant opportunity for us to move from the current dysfunctional sickness care system to an efficient wellness care system,” Burrill predicted.

How is personalized medicine going to be delivered? Burrill held up his iPhone. “There are 7 billion people in the world today and 6 billion of them have cell phones.” He argued that smartphone technology has the potential to empower patients, cut costs, and revolutionize the way medicine is practiced in the digital age.

This enlightening idea inspired me to look up advances in digital/wireless/mobile medicine after the talk. Thirty years ago, when “digital” in medicine referred exclusively to rectal examination (hat tip to Dr. Topol), who would have anticipated the advent of apps that track health data, measure blood pressure, analyze sleep patterns, and monitor blood glucose levels? Brave new world indeed.

To delve deeper into this trove of emerging opportunities, check out the upcoming Burrill annual meeting focusing on digital health.

Refactored hopes to hit it big with artificial spider silk. The critter shown is a Florida golden orb weaver, which the startup uses to produce silk for calibrating its equipment. Photo: Christine Fu

How much time per day do you spend “enabling awesome?”

“Most of the day,” says Dan Widmaier, CEO of startup Refactored Materials, created with the aim of manufacturing spider silk on a commercial scale. At a recent QED seminar (January 5 at UCSF Mission Bay), Dan recounted his journey from having an idea to forming a company.

While in the PhD Program in Chemistry and Chemical Biology at UCSF, Dan and fellow student Ethan Mirsky in Chris Voigt’s lab developed techniques harnessing Salmonella to produce spider silk, a material prized for unparalleled strength and toughness. Berkeley student David Breslauer came on board in 2009, and the three launched a company to engineer ideal silk proteins using Dan and Ethan’s synthetic biology know-how, and spin them into fibers using David’s microfluidics expertise.

The trio started applying for grants to raise seed capital. Both their NSF and Army SBIR applications were funded, despite the < 20% success rate, and they also won a Catalyst Grant from QB3. They started operations at the QB3 Garage@UCSF in 2010 with $600k. Speaking of differences between government grants and venture funding, Dan appreciated the freedom provided by the former in exploring their direction (“take our hammer and go searching for nails”). By contrast, Dan cautioned, with additional investors comes greater pressure and much less leeway for trial and error. The company recently landed a Series A round, and relocated into the QB3/Mission Bay Innovation Center.

Addressing many graduate students in the audience, Dan stressed the importance of a personal “exit strategy.” Juggling the need to publish, satisfy the advisor/committee and run a company can be highly stressful. Your graduation timeline and transition into full-time commitment with the company need to be planned well in advance. The timing worked out perfectly for them, but theirs is an atypical example, Dan warned.

David Breslauer and Ethan Mirsky, co-founders of Refactored. Photo: Christine Fu

Ethan and David, who sat in the front row, shared an obvious rapport with Dan, driving home his point about selecting the right people to be co-founders. All three agreed on taking the advice from other people (including themselves) with a grain of salt and only cherry-picking those that apply to you. “This is a story, not a road map,” Dan added. Lessons he learned include the slower and nonlinear maturation curve of biotech versus tech companies, as well as modest control over timing. He suggested that you should be prepared to bring in people with non-technical expertise, be flexible, and anticipate your ideal role from the early stages.

In terms of grant application tips, knowing the program managers is on top of Dan’s list. They differ greatly in their inclination to fund risky proposals. It’s essential to tailor your application to the appropriate section. He also suggested picking the brains of previous awardees, and checking in with funding agencies frequently to keep abreast of their shifting priorities.

For venture capital funding strategy, one secret weapon is to play hard to get. That ties in with the “most important piece of advice in the history of advice” according to Dan: take a negotiation class! All three have found it paid off tremendously when engaging investors. You, too, can enable awesome: for more information on the course they took, click here.