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Lessons from a young biotech leader

Deanna Pogorelc

Last summer, when regenerative medicine company Stem Cell Theranostics went through the StartX accelerator program at Stanford University along with one other biotech company, the team members realized that many aspects of their experiences were much different than those of the other companies. For example, they weren’t moving as quickly as the other companies, and they faced regulatory hurdles that the others didn’t have to deal with.

Several months later, one of Stem Cell Theranostics’ student founders, Divya Nag, became the founder and CEO of the healthcare-focused accelerator track StartX Med, which launched its first class this summer comprising 11 health ITmedical device and biotech companies. The six-month track provides select students and faculty with education, community and mentorship for their startups.

It’s been a great experience for the 21-year-old entrepreneur, who’s on leave from school for now. “We’ve been learning from (other companies’) mistakes and seeing how their decisions play out,” she said. “It almost feels like I’m CEO of 11 different companies — people are so open.”

So she’s paying the openness forward and sharing a few early lessons she’s learned so far about the business of healthcare.

Intellectual property

“Stanford owns all of our technology, so we’ve been going for the past nine months or so to license our technology back,” she said. Convincing the technology transfer office that the technology is better off in the hands of its developers than in the hands of a big-name company is harder than she expected.

That’s why researchers shouldn’t be overconfident or exaggerate the potential of their discoveries, she suggested. “If you go into the licensing office and say you have this incredible technology and want to patent it and start this company, the office gets really excited about it and makes more of an effort to market it to other big companies, so there’s a higher chance that you might not actually get your technology or get a nonexclusive license.”

But still, researchers should approach the technology transfer office as soon as possible because as part of the process, the staff there must do a lot of research into patents and markets that can help the founders, too. “They’ll let you know who else has patents in the space and who your competitors are, even before you have an idea of what you’re looking to do because the process they go through is a two-month market search where they shop your IP around to big companies,” she said.

Conflict of interest

If faculty members are co-founders, the university wants to make sure that they don’t have financial stakes in the research they’re publishing. “That conflict-of-interest process is extremely long, so it’s good to know if you’re going to have to go through that so you can budget your time,” Nag said.

Funding

Nag has seen many startups in medicine receive nondilutive funding from the government, including Stem Cell Theranostics, which received an SBIR grant from the National Science Foundation. The laboratory that developed the technology also received a $20 million CIRM grant earlier this year to proceed with a clinical trial. “I see a lot of my peers taking investor meetings and hear all of these horror stories,” she said. “I would tell others that it is totally possible to get a company off the ground without raising any VC money, even now when investors aren’t funding biotech companies.”

Acquisition

Utilizing strategic partners is the best way to finding an eventual acquirer, Nag said. “The approach companies are taking now is if I put $500,000 into each of these startups, I can form relationships early and have a first look.” They don’t take any equity, but that kind of relationship gets a big company invested in the success of the technology at a very early stage, which could also put the founders at ease. “Our biggest fear has always been we don’t want to give it to a big company because we’re afraid they won’t care about it as much as we do, and it will just sit on a shelf somewhere,” Nag said.

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