B733 Biomedical Entrepreneurship Class 1 Slides on September 10th 2024 (1).pptx

BUSADMIN - B733 course at McMaster university
Prof. Peter Sibold

1. Peter D. Sibold [email protected] B733 Biomedical Entrepreneurship

2. My Background BBA WLU (Marketing) MBA SMU Dallas, TX (Finance) Teach Marketing & New Venture Creation/Entrepreneurship courses at the SBE WLU Product Manager/Consumer Goods Marketing Senior Management Positions in the Middle-East for 10 + Years (based in Saudi Arabia) with responsibilities for the Bahrain, UAE, Qatar, Oman and Kuwait markets Building out a network of businesses throughout Asia/Middle-East with regional offices in Muscat, Oman

3. Entrepreneurship? What are the key characteristics of a successful entrepreneur? Why are you taking this course? Do any of you come from a family with a history of entrepreneurship/ownership of businesses?

4. So You Want to Become an Entrepreneur? Entrepreneurship isn’t Linear…..you need to be able and prepared to pivot fast! Even with the best Business Plan….rarely anything goes as planned! Everyday is “hand-to-hand” combat until you reach that promised land called “CRITICAL MASS”! Critical Mass = Sustained Cashflows and ROI = Create Value = Exit With NET WORTH! Not everyone is cut out for the jungle!

5. Not everyone can be a great Entrepreneur, but a great Entrepreneur can come from anywhere!

6. Why the urgent need for Entrepreneurship in Canada? SMEs account for almost 68% of the private workforce 98.1% of all employers are SME SMEs foster Creativity + Innovation + Productivity (all declining in Canada) Canada lags most developed countries in Productivity & Innovation due to limited competition and emphasis on social spending

7. Canada’s Declining Standard of Living! The level of output per hour worked is essentially unchanged from seven (7) years ago (Fraser Institute). Late 2014 GDP stood at $58,162….by the end of 2023 it was lower …thus living standards have not increased in a decade. Early 1980’s Canada was roughly 88% as productive as the USA (measured by the value of output per hour of work across the economy)…..by 2022 that figure has dropped to 71% and continues to decline.

8. Urgent Need to Create More Jobs! Canada needs to create a minimum of 50,000 new jobs each and every month just to keep pace with our immigration driven population growth. April 2024 was an excellent month as over 90,000 new jobs were created BUT this didn’t keep pace with the 108,000 people who entered the labour market (immigration & existing)

9. Canada’s Concentration of Wealth! 87 families in Canada hold roughly as much wealth as what everyone living in Newfoundland & Labrador + New Brunswick + PEI collectively owns. Just over $260 Billion in wealth This concentration and their control of key economic sectors contribute to reduced competition, investment, innovation, productivity, job creation, etc.

10. The Tadpole Theory of Life & New Business! Frogs can lay up to 30,000 eggs at a time. Only 1 in 50 eggs/tadpoles survive to become small frogs…meaning only 600 small frogs come from the 30,000 eggs (just .2%) Only 1 in 50 small frogs survive to become medium size frogs…meaning only 12 of the original 30,000 eggs (just.0004%) Only 1 in 50 medium frogs survive to become a large frog (e.g. bullfrog)….meaning only .24 of the original 30,000 eggs (just .000008%)

11. Tadpoles and Entrepreneurship? Canada needs to cultivate a fertile and dynamic environment for Entrepreneurship to drive and create new SMEs and deliver the job growth for the future given our high population growth and the product life cycle of existing business enterprises…no small challenge considering an 85% failure rate for startups in the first year! Micro Enterprises employ fewer than 10 employees Small Enterprises employ 10 to 49 employees Medium Enterprises employ 50 to 249 employees Large Enterprises employ 250 or More Employees

12. Start-Ups Failure Stats in Canada…like Frog Eggs! A brutal Statistic….85% of all start-ups in Canada fail within the first year of operations due to: Not Budgeting Burning through Cash too Fast Not doing their Research Not Defining/Identifying a Specific Target Market Failure to Establish a Business Plan Hiring New Employees too Quickly

13. How Government Can Drive New Job Creation In Canada…Not by the VW Example! Canadian Government provided VW with $13.9 Billion incentives package to build/open a battery plant in St. Thomas (FP June 14 th , 2023) to ultimately create 3,000 jobs $700 Million Grant for Capital Cost $13.2 Billion in Production Subsidies

14. Driving Entrepreneurship with $13.9 Billion! If the Canadian Government instead provided a $50,000 Grant to support/encourage the creation of SMEs….this would create 278,000 new business enterprises in the country. Average start-up in Canada employes 3.3 people (Stats Canada). 278,000 new startups would generate 917,400 new jobs compared to the 3,000 by VW (and further diversification of our employment base)

15. Course Objectives Course focuses on Entrepreneurship and the Entrepreneurial Process. Gain an understanding and appreciation of the complexities, challenges and issues related to entrepreneurs/intrapreneurs and business formation. Address such challenges as identifying opportunities, decision-making under conditions of uncertainty, raising capital, managing venture growth, etc. Acquire the skills and knowledge to write an effective Business Plan to facilitate the launch of a successful new business.

16. Course Content & Evaluation

17. Entrepreneurship Paper = 10% Self-assessment of your strengths, abilities as a potential entrepreneur. Maximum 2 pages. Due by 11:59 PM on Monday, September 16 th .

18. Case Study = 20% Groups of 4 or 5 to be formed by 11:59 PM on Friday, September 13 th Fibroheal case study due by 11 AM on Monday, October 21st

19. Class Participation & Attendance = 20% Please bring your name cards for at least the first couple of weeks. Please let me know in advance if you won’t be able to attend classes. Please email me by each Tuesday at Noon a summary of your class contributions/attendance for the week (include your ID#).

20. Online Assignments = 10% There are eight (8) assignments to be completed online linked to specific subjects from chapters of the course text. Each assignment is worth 1.25% of your final grade. Assess to the assignments are provided the Friday prior to their due time on Monday.

21. Business Plan/Team Project = 40% Working in groups of 4 to 5, you are to develop a business plan for a new business enterprise/startup. Maximum 40 pages (including exhibits). Presentations the final two classes of the term. Group selection to be completed by 11:59 PM on Friday, September 13 th Submission of one-page Executive Summary outlining the proposed new business enterprise concept for approval is due by 11:59 PM on Friday, September 20 th Report is due by 11:59 PM on Monday, November 18 th

22. Business Plan: New Business Enterprise Requirements Canadian based company (but can derived most of its revenues from international markets) Product or service with scalability (defined as: your idea can grow & adapt to changing market conditions, customer needs, and competitive pressures…..you can increase your revenue and profits without increasing your costs and risks proportionally) Break-even by end of Year #2 of Operations, Profitable by end of Year #3 of Operations Provision of a minimum of 5 Years of Financials (IS, BS, Cashflow Analysis, BE, etc.) Business must show a cumulative minimum ROI of at least 15% over the first 5 years of operations Provide competitive wages for the founders/entrepreneurs involved with the day-to-day operations of the business from Year #2 on-wards

23. Chp. 1: The Role of Entrepreneurship & Small Business in Canada! Why should I study Entrepreneurship? More likely to start a business Earn more money Gain key knowledge regarding business plans, managing growth, financing, creating wealth, family businesses Develop critical thinking & problem-solving skills Most likely will end up working for yourself given trends 99% businesses in Canada are SMEs likely will work for one

24. Nature & Development of Entrepreneurship in Canada!

25. Self-Employed as %age of all Workers!

26. Growth of Social Entrepreneurship! Earning money and helping society are not mutually exclusive outcomes. Make money and also work towards making the world a sustainable community Examples? Ben & Jerry’s Ice Cream Company of Vermont

27. Positive Trend Entrepreneurship in Canada! Increases in the Number of Business Establishments over the past decade (SMEs employed over 7.7 million Dec. 2020) Increases in the Number of Employees of SMEs (84.3% of all new jobs were created by SMEs from 2019 to 2020) Increases in the Number of Small Business-Related Courses at schools Increases in Intrapreneurship in Large Businesses Increases in Political Power of SMEs (Canadian Fed. of Indep. Bus.) Improved Image of SMEs among Canadians

28. Profile of Entrepreneurs Segments! Young Entrepreneurs – 50% of university students in Canada believe they will one day become entrepreneurs Senior Entrepreneurs represent the fastest growing segment Women Entrepreneurs rapid growth of self-employed has tripled from 1976 to 2018 to over 1 Million or over 37% of all self-employed ….27% female managers in corporate settings plan to leave to start their own businesses someday…..1 in 3 entrepreneurs globally women

29. Seniors Entrepreneurs! Ray Kroc was 52 when he started McDonalds Restaurants! Martha Stewart was 56 when she centralized her efforts and achieved success! Colonel Harland Saunders was 62 when he founded KFC!

30. Facts About Women Entrepreneurs!

31. Contributions of SMEs!

32. SMEs Future in Canada!

33. HBS Reading #1 The Questions Every Entrepreneur Must Answer

34. Key Talking Points! Are my goals well defined? Personal Aspirations Business sustainability & size Tolerance for Risk Do I have the right strategy? Clear definition Profitability & potential for growth Durability Rate of Growth Can I execute the strategy? Resources Organizational infrastructure The founder’s role

35. HBS Reading #2 A Note on Corporate Entrepreneurship – Challenge or Opportunity?

36. Key Talking Points! Corporations are always on the hunt for the “Next Big Thing” hence they covet for small things/entrepreneurial ventures Although there are mutual benefits for Established Firms & Entrepreneurial Ventures to work together….there are big challenges

37. Key Talking Points Continued! Primary Challenges: Strategy: Lack of Integrated Decision Making (Resource Allocation) Cyclicality (Budgets) New Business, Old Lenses

38. Key Talking Points Continued! 2) Incentives & Organization Challenges: Risk & Failure Avoidance Not Invented Here Mentality Organization Design Dilemmas Emphasis on Organizational Harmony/Standardization

39. Key Talking Points Continued! 3) Decision Making Challenges: Rigid Application of Financial Metrics Reliance on Traditional Market Research Linear Stage Gates & Cumbersome Decision Making Performance Measures & Compensation

40. Key Talking Points Continued! Adapting Management Practices (blend with VCs) Selectively Insulating Ventures (New Venture Organization, etc.) Alternative Support Models (Corporate incubation, Venture Funds, Co-creation, etc.)

41. 30 Years of Studying Corporate Venturing? Conclusions not encouraging: Resources get cut with first downturn cycles Large companies prefer to pursue incremental drivers of growth rather than via break through business ideas Avoidance of disruptive innovation and instead look for small changes to existing products

42. HBS Reading #3 Six Keys to Release Ideas for Profitable Growth

43. Key Talking Points! Are We Asking the Right People? Top Management needs to get closer to the customer-facing employees and middle-managers 2) Are We Looking in the Right Places? Look to other market segments & different countries

44. Key Talking Points Continued! 3) Is Our Review Process Right? Old processes to generate new business ideas don’t work (Venture Capitalist example: 50% looking for new investment opportunities/50% managing existing investments) 4) Is There the Right Level of Enthusiasm? Implementing a Team Approach to new business creation

45. Talking Points Continued! 5) Are We Giving the Right Support? Senior management mentorship/sponsorship 6) Are We Making the Right Evaluations? Most new businesses are non-linear and rarely follow the road maps of their original business plans

46. Reading #1: A Biotechnology Entrepreneur’s Legacy –Henri A. Termeer’s Story Key Take Away Points: Henri A. Termeer served as one of the longest tenured entrepreneurial CEO of any company in the biotechnology industry. His innovative approaches, achievements, and successes transposed Genzyme from a fledgling start-up to an international  biopharmaceutical  company with more than $4.5 billion in revenue annually. Path to Entrepreneurship….interest in business….MBA….then Baxter Baxter had also acquired a reputation as a company with great entrepreneurial instincts, where young people were given the chance to do something great. Move to Genzyme…rest is history

47. Key Take Away Points Continued! Risks of Joining a Biotechnology Company In 1983, while at Baxter, I was approached by venture capitalists at Oak Ventures who invited me to become involved in the beginnings of Genzyme, a small biologics company, they recently seeded with capital in Boston Genzyme in the Early Days Developing and growing a biotechnology company has never been easy, which was especially so in the early 1980s when there were no successful biotechnology business models to follow. When I started at Genzyme, there was nothing much, just a few very impressive scientists and the beginnings of a business infrastructure. However, we had the latitude and freedom to chart our own course and build something special. 

48. Key Take Away Points! The Importance of Understanding Business and Finance For a scientist without any financial experience or business background, starting a company can be very challenging. In order to be successful, an entrepreneur must have confidence in both business and finance. Biotech entrepreneurs do not necessarily need to be accountants or financial analysts, but they do need to understand what is appropriate for a financial deal structure…. Raising Capital The single most important value creator for a biotechnology company is sustainability. Unfortunately, young biotechnology companies often give up their best asset in order to raise the capital they need. I believe that a better approach is to use your second-best asset rather than giving up your most important asset.  The First Born

49. Key Take Away Point! Managing the Uncertainty of Biotechnology It is not uncommon for young leaders to look for and follow tried-and-true methods of success. However, building a biotechnology company and developing biotechnology products do not have straightforward prescriptive paths. Every biotechnology company’s path to success is in some way different from each other. Successful entrepreneurs understand the principle of “hedging your bets.” They plan for alternatives and think about “What would happen if this approach fails?” It’s a non-linear environment

50. Key Take Away Points! Core Values One of the most important things for an entrepreneur is to develop and establish a foundational purpose for the company. At Genzyme, we created a very purpose-driven culture that came with important breakthroughs as we developed and began to understand unique medical solutions; this purpose was larger than any single individual Integrating the Science and Business I am a firm believer in having every stakeholder participate in examining what we did as a company, including the scientists, the business people, the receptionist, and even the person in the warehouse. This shared responsibility created a collective sense of purpose, because we were all aligned to one goal. I made sure that our scientists never had separation between what they were thinking and doing, and what the business people were thinking and doing. We were an integrated company, and we kept it that way.

51. Key Take Away Points! The Value of a Business Background and Experience Building and growing a biotechnology company is a combination of business and science. Successful entrepreneurs understand the important aspects of each discipline.  Driven from Within There is no formula for building a company and developing a biotechnology product, nor is it something you simply fill in the blanks to succeed. Every entrepreneur must have an internal navigation system and a high degree of self-motivation. I absolutely believe that you cannot be successful without being driven from within yourself. You have to feel it. It requires total sensitivity 24/7. You live it.

52. Key Take Away Points! In Touch with Events Outside the Company All entrepreneurs need to be able to work effectively with the world outside of the company’s four walls…. Biotech CEOs also need to be engaged with individuals outside of their company. Leaders need to become engaged in important meetings at the Biotechnology Innovation Organization; they need to have colleagues they can talk to and exchange thoughts with. Good Fortune and Success Occasionally, good things happen to companies, such that when they look back at an event, they can say “that was a fortunate break!” The entrepreneur must not forget that the opposite situation can also happen. Fortunate breaks occur when you create an environment that has ample opportunity and foresight to capture them; in other words, create a big umbrella. Companies that do not plan for contingencies or alternate events rarely have a chance to take advantage of fortunate breaks.

53. Reading #2: A Biotechnology Entrepreneur’s Story: From Start-Up to International….. Dr Magda Marquet and Dr François Ferré during the early days of Althea Technologies We had managed to raise $2 million, which was no small feat in the spring of 1998 when all the rage was about  dot.com  ventures. Although we had a decent business plan, we had no idea how to get started. The most daunting realizations were that we were responsible for other people’s money and that we were racing against time. One of the best pieces of advice we received later on when we were contemplating starting a different venture was to make sure that you triple the money needed and double the time required in your business plan. 

54. Key Take Away Points Continued! Reinventing the Company—Again After the first year, we felt really good about Althea’s potential D eath of 18-year-old Jesse Gelsinger. He was the first person publicly identified as having died in a  clinical trial  for gene therapy….this tragedy pretty much destroyed this nascent field of clinical investigation We had made such a strong investment in serving this specific clinical space that for a while, the future of the company looked rather bleak. For one thing, we had to reinvent ourselves fast and furious The PIVOT…. Our Board was very concerned and unsure of what direction to take moving forward. We had one thing going for us—we hired very resourceful and bright people…. With their help, we redirected the energy and focus of the company toward developing new tools to further advance the  research  side of the gene therapy field

55. Key Take Away Points Continued! Our Own Trademark: Co-CEOs To this day, we believe that this was a great move for the company. At the time, Althea had two very separate lines of business, and we each had our own. By having the same title, we immediately informed the teams that these business branches were of equal value to the company (which was absolutely true at the time), and therefore we were able to minimize the internal tensions that inevitably arise when growing two very different sides of a company.

56. Key Take Away Points Continued! Building a Great Culture We set out to create a very entrepreneurial culture based on trust and a can-do attitude where people would be rewarded for taking risks, being creative, and reinventing themselves. We also built a culture of celebration and fun. The fascinating thing about creating a great culture is that it is truly an evolutionary process.

57. Key Take Away Points Continued! Accelerating the Growth of the Company In 2002 the company was doing well. However, it became more apparent that with the on-going lines of business, it was going to be challenging to get to an accelerated phase. As a venture driven business, this was of course a real concern, as entrepreneurs and companies are rewarded on growth. One of the key impediments was linked to the fact that building a CMO business was incredibly capital intensive due to the need for costly equipment and strong customer support on the regulatory side. Rick had been at the forefront of our CMO business and, in that capacity, had been talking to many customers. He noticed that a number of smaller companies struggled with getting their clinical products in a final form for use in clinical settings….their new product line of business…

58. Key Take Away Points Continued! Turning a Challenge Into an Opportunity The biotech industry is not immune to the financial conditions in the market as 2009 was a very tough year for Althea. We were still trying to recover from the 2008 financial crash…. Our CFO announced that our main customer Altus Pharmaceuticals was unable to raise additional capital and just filed for bankruptcy protection….. “Why don’t we try to buy them?” ….. Although there were no immediate financial rewards to contemplate, owning this technology could boost Althea’s perceived value and therefore attract new venture capital. The Board decided to go for it, and in the spring of 2010, Althea acquired Altus Pharmaceuticals. 

59. Key Take Away Points Continued! Orchestrating a Successful Exit—New Beginning with Ajinomoto By 2012, the company was in an accelerated growth phase; thus we had to decide how to fuel it. It turned out that it was destiny when in the spring of 2012, at the International BIO Convention…. A cquisition of Althea Technologies by the Ajinomoto group just a few months later in the spring of 2013……

60. Key Take Away Points Continued! Final Words As we further reflect on our experiences as entrepreneurs and creators of a successful life science company, a few key messages come to mind. We believe that the first and perhaps most important characteristic of a successful entrepreneur has to be perseverance … Building a company from scratch is a marathon, not a sprint. Let us further define perseverance in the context of successful entrepreneurship. We believe that it has to be connected somehow to the upmost conviction on the part of entrepreneurs that they will not be denied the right to realize their dreams….. Perseverance is very different from stubbornness. When facing the wall, it is not about trying to plough through it, as all too often the wall will prevail. It is about humbly recognizing one’s limits, genuinely asking for help with the deep conviction that a solution does exist somewhere, and being able to spot it when it shows up. That’s when the miracles happen…….

61. Important Dates Coming Up Fast! Assignment #1..Economics: Acing the Interview….Due by 11:59 PM on Friday, September 13 th via on-line… Groups selection for Business Plan and Case Study…Due by 11:59 PM on Friday, September 13 th …. Entrepreneurship Self-Assessment Assignment …Due by 11:59 PM on Monday, September 16 th …. Executive Summary Group Term Project with idea proposal due by 11:59 PM on Friday, September 20 th ….

62. Assignment: Entrepreneurship Self-Assessment Paper Maximum two (2) pages 1) Based upon our discussions, readings, your own experiences, etc…what are the three or four absolutely essential character traits of a successful entrepreneur? Why are these traits so critical? 2) Do you have any of these same essential character traits? 3) Why are you taking this course, and what are your expectations? 4) Do you come from a family of entrepreneurs/business owners and/or have you ever been involved in your own business? 5) Would you rather be rich or rich and famous (assuming rich is defined as a Net Worth of over $50 Million)? 6) If you had $1 Million given to you today, what would you do with it? 7) Bonus points: Watch either “ The Social Network ” or “ The Founder ” and evaluate Mark Zuckerburg of Facebook ….OR…. Ray Kroc of McDonalds….Did they have the key character traits you identified as being critical for success? Or were they just lucky?