Building Successful Startups in Industrial Biotechnology

Industrial biotech startups are typically founded by technical individuals — engineers and scientists with little experience in the world of business. This article describes ways to avoid some of the pitfalls that budding startups face.

Starting a company in the industrial biotechnology field requires an entrepreneur to develop varied skills that contribute to its success, such as communication and negotiating skills. Although success is not entirely defined, we often consider a successful startup as one that creates an innovative product, demonstrates its economic viability, and then either sells the product and becomes profitable, or partners with a large company to jointly commercialize the product. At some point in time, this process leads to a so-called liquidity event for the company’s shareholders, such as a public listing or acquisition of the startup by another company for cash or shares.

Sofinnova Partners has been helping entrepreneurs build startups for more than 45 years and has invested in more than 550 companies over that period. The goal of our industrial biotech practice is to develop new products that can address multiple societal challenges. Fundamentally, we believe that biology can provide the world with an unprecedented ability to develop more sustainable, better, faster, and cheaper solutions to pressing problems in the agriculture, food, materials, chemicals, and energy sectors.

When we started our efforts in industrial biotech a few years ago (after focusing the entire firm on life sciences), we leveraged our experience in building pharmaceutical biotech companies and expertise in working with early-stage entrepreneurs. Currently, we have 15 investments in the industrial biotech sector. Our objective is to tap into a new and growing market to leverage mature biotechnology tools and apply them in an industrial context.

The key advantage of an investment firm (over an entrepreneur) is that it often invests in a portfolio of companies, allowing it to have a helicopter view of the sector and rapidly apply knowledge and learnings it gains from one company to its dealings with others. Whenever possible, Sofinnova Partners attempts to generalize some of these teachings and develop a working set of guidelines for us and for our companies. This article shares some of the lessons that we have learned and describes some of the common challenges that young startups face. The article also describes how startups can communicate value and develop partnerships, as well as raise capital and generate liquidity for investors...