This document summarizes strategies for life science entrepreneurs in today's turbulent climate. It notes consolidation in the large life science firm sector, expiration of blockbuster drugs from 2011-2014, and constraints on venture capital funding. It recommends that entrepreneurs pivot to new ideas and markets, focus on revenue-positive business models, leverage strategic alliances, and increase capital efficiency. It suggests regions leverage their ecosystem by improving education, marketing tax policies, direct early-stage investments, access to university technology, and incubation models to attract talent and ideas.

1. "CLASS 5" ENTREPRENEURSHIP!
STRATEGIES FOR STARTING AND
GROWING NEW LIFE SCIENCE VENTURES
IN TODAY'S TURBULENCE
BATB  18 FEBRUARY 2011
MIKE PROVANCE
OLD DOMINION UNIVERSITY
MPROVANC@ODU.EDU

2. 2011-?, A CLASS 5 CLIMATE!
WHAT SHOULD LIFE SCIENCE
ENTREPRENEURS DO?!
HOW CAN THE REST OF US HELP?

3. “CLASS 5” ENTREPRENEURSHIP
“Extremely long, obstructed, or
very violent rapids ... Drops may
contain large, unavoidable
waves and holes or steep,
congested chutes with
complex, demanding routes.
Rapids may continue for long
distances between pools ...
What eddies exist may be small,
turbulent, or difficult to reach.”
- americanwhitewater.org

4. CLASS 5 CLIMATE
© Duke University 2008.
How is Life Sciences sector changing?
 Increasing complexity in industry structure
 Consolidation on large firm end
 Extinction of the ‘blockbuster’
 Labor pains
 Capital constraints on the new venture end

5. CLASS 5 CLIMATE

6. CLASS 5 CLIMATE
Extinction of the ‘blockbuster’
Wave of drugs coming off patent from 2011-2014
 23 drugs, ~$80 Billion
Big pharma shift to biotech projects
Industry moving towards personalized medicine

7. CLASS 5 CLIMATE
Labor pains
Paradox in Life Science labor market
 Labor-intensive, intellectual capital "
dependent
 Growth in employee levels
 Future strains on labor force
Source: Battelle, `2010.
 The real problem isn’t money;"
it’s management
Source: Battelle, `2010.

8. CLASS 5 CLIMATE
Venture capital constraints
Year-over-year declines for past 2-3 years
 2011 showing slight uptick, but…
Investments growing more "
conservative
 later stage and performance"
based
Worst is yet to come for VC "
industry
 Waterfall of losses coming "
2011-2014
 Finding a new model

9. WHY CLASS 5?!
WHAT SHOULD LIFE SCIENCE
ENTREPRENEURS DO?!
HOW CAN THE REST OF US HELP?

10. WHAT SHOULD LIFE SCIENCE
ENTREPRENEURS DO?
Pivot to new ideas, markets
 Decade of adaptation
 Observe, orient, decide, act
Focus on revenue-positive
business models sooner
Intensive strategic alliances
with a select few
Increase capital efficiency

11. WHAT SHOULD LIFE SCIENCE
ENTREPRENEURS DO?
Revenue-positive business model
CONVENTIONAL WISDOM
 Demonstrating the quality of technology is most
important to gain legitimacy within the industry and
financial markets
REALITY
 The technology must be solid, but successful
entrepreneurs demonstrate quality of their management
and ability to produce cashflow first.

12. WHAT SHOULD LIFE SCIENCE
ENTREPRENEURS DO?
Connect, connect, connect
A few partners yields higher
chance of survival
Networks offer flexibility
Focus on outcomes
Stakeholder perspective

13. WHAT SHOULD LIFE SCIENCE
ENTREPRENEURS DO?
Increase capital efficiency
More productivity with fewer
resources
Leverage relationships with
technological and market
partners
Develop and implement an
Agile methodology for growth

14. WHY CLASS 5?!
WHAT SHOULD LIFE SCIENCE
ENTREPRENEURS DO?!
HOW CAN THE REST OF US HELP?

15. LEVERAGE THE ECOSYSTEM
The challenges affecting
LS new ventures are
amplified in regions that
lack a critical mass of
life science industry
Diverse knowledge flow
Institutional gravity
Social capital
Search v. agglomeration

16. LEVERAGE THE ECOSYSTEM
FINANCING GROWTH IN THE ‘NEW’ VC ERA
Money will follow the people who have the most
promising ideas with greatest commercial
potential. This means connecting the region into
the inner workings of an international industry in
order to attract promising talent and select
promising ideas.

17. LEVERAGE THE ECOSYSTEM
How can VA – and Hampton Roads - encourage
the growth of Life Science new ventures over this
turbulent era?
Education and employment policies
 Distribution of employment favors Virginia (although capital investment not an advantage)
Marketing changes to tax policy
 Virginia Innovation Investment Act of 2010<$3MM technology business primarily
operating in VA -- tax deduction for angel investors on long-term capital gains
Direct investment in the early stages of formation
 Technology development
 Workforce training
Improve access to university technology
 Make it easier to license technology
 Focus on spinning off technology in start-up environments
New model for incubation
 Focus on talent; focus on screening for most promising ideas across nation
Shift attention to comparison with rest of the nation, world

18. CONCLUSIONS