It is often estimated that at least 90% of startups fail. For healthcare and pharma startups, the product is rarely the problem. Failure is often the result of an unclear business model, the lack of a go-to-market strategy, or a poorly defined value proposition.
Funding rounds succeed because they are able to overcome the major challenges that healthcare and pharma startups face. They have a clear focus, remain agile, and find partners who can support their work in multiple ways.
During the COVID-19 pandemic, the obstacles facing startups are even greater, as many investors have looked to the public health and infectious disease space. There are still investment dollars to be had but companies now more than ever need to make sure they have a clear business model, product roadmap and go-to-market strategy. Alan O’Connell, Partner at Seroba Life Sciences VC, recently said that he has seen a number of impacts of the pandemic including delays in patient enrolment in trials and funding rounds taking longer as investors are focused on protecting their existing investments. However, he said that the fundamentals of the industry are robust and the emergency is a reminder of just what a vital role the life sciences industry plays.
As a co-founder of a specialty pharma startup that recently secured Series A funding during the COVID-19 outbreak, here are a few tips that we learned along the way.
Identify a clear focus
The first step is to identify a clear focus for your startup. Find your passion and match that with your experience. My co-founder and I have five little boys between us and we are passionate about improving pediatric and women’s health. We married that passion with our complementary skillsets and our expertise areas to develop a plan for our company early on. We worked together previously at a fast paced, dynamic start up pharma company that successfully exited to a multinational; this was not only inspiration for us but also pivotal in building our experience and knowledge of what it takes to start and scale a specialty pharma company.
It is important to spend time developing your business plan as it will take much longer than you anticipate. We took two years to develop our plan and spoke with numerous experts in the field across the globe to confirm the market need actually existed. This is a very common misstep as many companies move too quickly to develop a technology or solution before finding out where the need is, and perhaps even more importantly, what the payment model will be. You could have the most exciting new therapy on the market but if no one will pay for it, then you are back at square one. In healthcare this is crucial as often things don’t get reimbursed or companies may not have the scale to break through the noise.
A clear focus for your company is crucial as well. It’s important for a startup to align this focus with what the market truly needs. In our discussions with clinicians, key opinion leaders as well as leading oncology groups, we learned that women and children affected by rare cancers are often small patient populations that can be easily overlooked. This is a clear unmet need – and an opportunity for us to address underserved markets, apply regulatory strategies and incentives and obtain market exclusivity. Focus on a product or treatment that will bring both clinical and commercial value.
Embrace agility
The second tip is to embrace agility. We have a saying at our company: “You need to develop an intimate relationship with the problem you are trying to solve but be emotionally detached from the solution.” A startup doesn’t have the luxury of time. If a product isn’t achieving the results you want, take that as a sign that you need to move on. That’s why at Shorla we set our sights on a small number of treatments that continue to hit their manufacturing and regulatory milestones instead of a large number of unproven products.
A startup also needs to remain agile as it develops those products that are working. We have been able to continue to manufacture our treatments during COVID-19 as pharma is considered an essential business in the countries where we operate, but we have had to contingency plan. It has been harder for our company to predict when we will receive raw material deliveries, so we have had to build flexibility into our production timelines. Delays are part of any business process, and it’s important to anticipate them before they have a major impact on your business.
Find the right partners
The third step is to find the right partners to help you grow both personally and professionally. For us, the idea of “the right partners” came about in two key ways.
Our initial strategic investors included a raw material supply partner, which granted us access to the main raw materials we needed for product development. We were also supported with non-dilutive funding in the early days by our Local Enterprise Office in Ireland. These partners were able to provide valuable support in addition to funding, which is critical to early-stage startups looking to make their mark.
There are a lot of venture funds out there so do your due diligence on them as well. It is important to find investors that believe in and are supportive of your company. Find a true venture partner that can provide expertise, create connections, and help build a pipeline, all with an eye toward long-term growth. Good, long term venture funds are investing in your company for the long haul and are equally committed to your success. It’s one thing for a venture firm to help a startup raise capital early on but the real success comes later when treatments are delivered to patients in need.
In addition, my co-founder and I are very lucky in that we complement each other – and it’s not just because the company name is a combination of our names. My co-founder’s focus is manufacturing, product development programs, and supply chain activities, while I focus on business development, fundraising, and commercialization. When co-founders come from varied personal and professional backgrounds, they are better able to fill gaps in expertise, which better helps the startup identify potential problems that could come from many different directions.
Taking a startup from ideation to Series A funding is both a challenging and a rewarding process. A clear focus, agility, and the right partners are by no means a guarantee of success, but they will help to put you on the right path and steer clear of the obstacles you will inevitably face.