Forming a Start-up

Forming a start-up requires creating a legal structure and a tax entity in accordance with state and federal government rules and regulations. It also includes building a team to run the company. There are many legal, organizational, operational, financial, and personnel matters to consider during company formation.

For more information see the U.S. Small Business Administration New Business Checklist.

Building a Team: The People

Peter Kolchinsky, PhD, the author of The Entrepreneur’s Guide to a Biotech Startup, once said: “People are the primary building blocks of a company.” Venture capitalists often say that they invest in people more than they do in technology. Clearly, building a team is critical to the success of your company.

team

Assembling a competent team for a biotech start-up is the most difficult part of the entire start-up process, especially when the company is not based in Boston, New Jersey, California, North Carolina or other biotech hubs where competent entrepreneurs prefer to reside. In some cases, the scientific founder and OTT can initiate the start-up process. An initial goal is to recruit a business person with start-up experience to join the company. In other cases, a start-up can be initiated by an entrepreneur or a venture capitalist who recognizes that a business opportunity exists around the technology. Assuming you and OTT decide to form a start-up and have not yet identified a business person, the first step is to build a Scientific Advisory Board (SAB) to guide the technical development and to challenge the science. Members of the Scientific Advisory Board are typically selected based on their:

  • Reputation in their field of science
  • Experience and expertise in their scientific or clinical areas as related to the start-up
  • Connection with the scientific and business community

Until a business person is engaged to manage the company, it is recommended, as an interim strategy, to retain business advisors or consultants who can handle business issues and help identify and recruit a management team. In proof-of-principle stages, one or two key executives may suffice. One of the strategies utilized by early stage start-ups is to engage a Chief Scientific Officer (CSO) who directs the company’s R&D and/or a Chief Executive Officer (CEO) who structures and negotiates business deals and raises capital. Management team members are selected based on their domain expertise, previous start-up experience, and fund-raising track records. Another important factor to consider is whether the scientific founders and the management candidates can work together. For pharmaceutical companies, clinical development expertise may also be needed in the early stages of start-up development. As the company grows, more roles such as Chief Financial Officer (CFO) and Chief Operating Officer (COO) can be added to the management team.

The Board of Directors has the highest and final authority in the company. The goal of the Board is to maximize shareholders’ return. Shareholders elect Directors that, in start-up stages, consist mainly of investors, founders, the start-up CEO and executives from other companies.

Incorporating the Company

Incorporation is an important step in the start-up process. Understanding the issues involved and making the right decisions require legal expertise and professional advice. A competent legal or tax advisor can advise on where to incorporate, what type of entity (C Corp, S Corp, or LLC) to use, and how to set up the company’s initial equity structure. In addition to incorporation paperwork required by the government, there are also a variety of legal agreements to execute: Founders’ Agreement, Employment Agreement, Stock Option Grant, Non-disclosure and Confidentiality Agreement, and Scientific Advisory Board Agreement, to name a few. These agreements are designed to protect the company and to incentivize people. These corporate documents are important because future investors or partners, especially venture capitalists, will review each agreement before making investment or partnership decisions.

Developing a Business Plan

A well-polished, succinct business plan is the key to successful fund-raising efforts. A good business plan should have the following components:

  1. Company mission and executive summary.
  2. The opportunity: Why start a new company? What is the market? What are the markets driving forces?
  3. The technology and its development strategies: How it works and how to develop it further.
  4. Business model: How to be profitable (product, market, customers, strategic alliances, manufacturing and distribution, revenues/expenses, etc.)
  5. Competition
  6. Intellectual property position
  7. Exit strategies
  8. The team: faculty founders, management team, Scientific Advisory Board, Board of Directors, business/legal counsel
  9. Financials
plan

Many business plan assistance programs and consulting services are available. However, the most effective way is to work with an entrepreneur who has start-up development experience and has a potential to eventually become a member of the management team. Emory OTT has a small contact database that includes executive candidates. Feel free to contact us or call (404) 727-2211.

Entrepreneur Magazine ran a very nice series on how to sell ideas.

  1. Want to Sell Your Ideas? Tell Engaging Stories
  2. Why TED Talks Are Impossible to Resist
  3. The Magical Number that Will Amplify Your Next Presentation
  4. Avoid the PowerPoint Trap by Having Less Wordy Slides

Business Plan Writing Web Resources

Bplans.com
Entrepreneurs Guide to a Biotech Start-Up
“Have Your Own Business” Start-up Manual
Kauffman Foundation - Entrepreneurship Website
Small Business Administration - Business Plan Basics
bytestart Top 10 Business Plan Mistakes

Southeast BIO/Plan Competition
The Southeast BIO Investor Forum runs an annual BIO/Plan Competition. This year-long program was designed to foster the creation of venture fundable start-ups in the Southeast. Working closely with technology transfer offices and entrepreneurs throughout the region, the competition seeks out and pulls forward opportunities from research institutions and entrepreneurs. Principal investigators submit a short application through their offices of technology transfer. A selection committee chooses eight to ten of the best ideas and pairs each investigator with a mentoring team consisting of a venture capitalist, a company executive, and a service provider. The group works for four to six months to create a development plan and submit it to SEBIO. A small group of BIO/Plan finalists is selected by a panel of experts. These finalists present their opportunity at the annual SEBIO Investor Forum held each fall. The winner of the BIO/Plan competition receives in-kind services provided by the investment community to help further develop the opportunity.

The BIO/Plan Competition is a great opportunity for Emory faculty founders to develop their preliminary business plan. Emory OTT has been an active participant since the inception of BIO/Plan competition in 2007. Emory won the BOP/Plan Competition in 2007, 2011 and 2012. For more information about BIO/Plan Competition, please visit there website/.

TAG Business Launch
The Technology Association of Georgia (TAG) organizes an annual business plan competition to launch Georgia’s most promising technology start-ups. The completion is designed to help a Georgia technology-based start-up develop a business plan and launch its business. For more information about this year’s TAG Business launch, please visit http://www.tagonline.org/events/businesslaunch/.

Obtaining a License from Emory

Investigators should be aware that although they are scientific founders of the company, their primary role, as faculty inventors, remains unchanged. Due to conflict of interest matters, it is not appropriate for an Emory employee to represent the company and negotiate licensing terms with Emory OTT. Faculty founders often ask when their start-ups should secure a license from Emory. Licensing discussions can begin at any time. However, as a rule of thumb, OTT prefers not to execute the license agreement until a company secures sufficient financing to fund product or business development. The following requirements should be met prior to initiating license negotiations:

  • Company incorporation is complete.
  • Company has the right entity type (prefer C Corporation to other entity structures).
  • Company has at least one executive or business advisor who represents the company for license negotiations.
  • A preliminary business plan or development plan is available.
  • Capitalization table is available.
  • Evidence of investment commitment from investors.
agree

Deal structures vary depending on the nature of the technology and licensee’s development plans. A license can be exclusive, non-exclusive or just an option to license (to reserve the right to license in the future). A license can cover the world or it can be country-specific. It can be for all uses or just for a certain field of use. Financial terms normally include Emory’s equity in the company or signing fees, milestone payments, royalties, license maintenance fees, sublicensing consideration, and reimbursement of Emory’s patent expenses associated with the licensed technology portfolio.

You can find an Emory OTT's template agreements on our website. Because of the complexity of biotech licensing deals, every license agreement is different if you have any questions, feel free to contact us or call (404) 727-2211.

Building Relationships with Local and National Biotech Communities

OTT helps build synergistic partnerships with local and national biotech industry partners that are mutually beneficial to all parties involved. Emory faculty entrepreneurs can also receive assistance in fundraising, management recruitment, incubator facilities, pre-clinical and clinical product development, prototype development, manufacturing facilities, and business consulting. We offer these services by strategically aligning Emory start-up initiatives with local and national industry partners committed to commercializing Emory technologies.

There is a listing of some of the locally available resources for start-ups on our website.

Pre-Clinical and Clinical Drug Development

If a start-up company focuses on drug discovery, the founders will need to think about pre-clinical and clinical drug development in order to bring the product to market. It takes a long time, a large amount of capital, and a lot of effort to bring a drug candidate from the laboratory to the marketplace. For information about pre-clinical and clinical trials, please click on the links listed below.

There is a listing of some of the locally available resources for start-ups on our website.

Business Consulting

Faculty entrepreneurs are encouraged to seek advice from professional service providers during all steps of the start-up process, especially when it comes to legal services, intellectual property protection, regulatory due diligence, and major financial transactions. Numerous business consulting firms can be found through the Internet. In addition, Emory OTT has a small matchmaking database that can help with identifying and selecting consulting services.

There is a listing of some of the locally available resources for start-ups on our website.