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How to have a good business idea (but -
good for whom?)
Southampton. July 2010
William Bains
2
Our time together ...
• I will talk about ...
– How to have ideas (pretty much about anything)
– How to evaluate them
– A tiny bit on patents, legal documents and so on
– Why you will always be poor
• and then you will
– Select some ideas
– Evaluate them
– Decide which we will invest in
Theme for the session
I can do that
3
Our time together ...
• I will talk about ...
– How to have ideas (pretty much about anything)
– How to evaluate them
– A tiny bit on patents, legal documents and so on
– Why you will always be poor
• and then you will
– Select some ideas
– Evaluate them
– Decide which we will invest in
Theme for the session
I can do that
4
Warning!
• Pay attention – ~100 slides in 45 minutes
• I am not stopping for hitch-hikers
5
Me
• William Bains
6
Me
• William Bains
• associate faculty at IoB, Cambridge (wot that mean?)
• visiting scientist, MIT
• consultant, ex-VC, current entrepreneur
– 4 companies founded, another 6 major input to BP etc
• not yet rich, probably certifiable
• writing (compulsive)
• others – www. williambains.co.uk Opal Drug DiscoveryOpal Drug Discovery
7
Lessons in (cr*ppy) life
• Doing something entrepreneurial is a life-changing experience
Eating your first Vindaloo
Having children
Getting married
Doing a PhD
Buying a house
Buying a (decent) car
Moving country
How long does a bad decision
take to work out?Things that you can do
> 20 years
Overnight
3 – 6 months
a year
> 1 year
3 years
3 – 5 years
Having an idea
9
Most often heard query
• Where can I get a good idea for a company?
• THIS IS A VERY STUPID QUESTION!
• Because anyone can ‘have an idea’ – issue is making it into
something
10
How to have really good (business) ideas
1. Have lots of ideas
2. Throw out the ones that are not good
William’s infallible. secret recipe
11
Where ideas come from
• Implies ... have lots of ideas.
• How?
• Practice!
• And reading
12
Reading
• Read everything
– (nowadays means
newsfeeds, blogs etc as
well as paper)
• Talk to people
– physicists, chemists,
biologists, engineers
– and normal people
New Scientist
Medical Hypotheses
Genetic Engineering News
Waste Water World
Scientific Computing
Biophotonics International
Nature Biotechnology
Science
Drug Discovery and Development
Small Times
13I can do that
14
Amedis Pharmaceuticals
• Founded by academic (John Caldwell, Imperial) and commercial scientist
(William Bains, NFA)
• From realization of market need:
– need for chemistry (derived from experience with VC-funded biology start-
ups)
– loss of faith in ‘genomics’
– idea to rip off other people’s science
• and scientific background
– computational biology, ‘systems’ approach to biology (Bains), drug
metabolism and ADME properties (Caldwell)
15
MolecularStructure
Amedis Technology
StructureAnalysis
NumericalModelling
MolecularDescriptors
TargetValue
Amedis Technology Platform16
Silicon drugs
Silicon forms stable bonds like carbon
Silicon-containing molecules are stable, non-toxic, ‘drug-like’
→Amedis can build drug-like molecules containing silicon
17
Fungal 14α−sterol-demethylase with fluconazole bound (PDB 1EA1)
Silafluconazole – design rationale
↑ acidity = H-bond, ↓ distance
18
Amedis Pharmaceuticals
Software technology
ADME prediction Chemical space analysis Efficacy prediction
Chemical technology
Analogues and prodrugs NCE discovery
19
Where did the Si idea come from?
• To do it as science ...
– 19th century discovery of C-Si bonded compounds
– Reinhold Tacke – 1970s – development of methods and examples in Si drug
chemistry
– Others 1980s
• To do it as a business ...
– looking for new chemistry for analysis of compounds
– existing knowledge from other fields of chemistry
– thought ‘why not’?
– no-one else was doing it (big question as to why)
20
Where did the Si idea come from?
• To do it as science ...
– 19th century discovery of C-Si bonded compounds
– Reinhold Tacke – 1970s – development of methods and examples in Si drug
chemistry
– Others 1980s
• To do it as a business ...
– looking for new chemistry for analysis of compounds
– ‘stumbled’ on silicon – prior interest in the chemistry (20 years)
– thought ‘why not’?
– no-one else was doing it (big question as to why)
• Where did it really come from?
• WB:
• Messing about with silicon chemistry in his bedroom
• bye-bye eyebrows
• Brainstorm of Merlin CSOs about ‘what do we do in chemistry’
• Experience of Darwin Molecular / Andy Richards shows it can work
• Reinhold Tacke:
• Inorganic chemist with PhD in silicon complexes
• Looking for neat ‘niche’ exploiting silicon chemical properties to build academic career
• IE – from long past enthusiasm of some sort
• Where did it really come from?
• WB:
• Messing about with silicon chemistry in his bedroom
• bye-bye eyebrows
• Brainstorm of Merlin CSOs about ‘what do we do in chemistry’
• Experience of Darwin Molecular / Andy Richards shows it can work
• Reinhold Tacke:
• Inorganic chemist with PhD in silicon complexes
• Looking for neat ‘niche’ exploiting silicon chemical properties to build academic career
• IE – from long past enthusiasm of some sort
21
Learning experience
• Started in computational chemistry – ended in organosilicon
chemistry drug design
– founders knew nothing about this! Had to learn fast
– would not have started if they had been ‘conventional’ medicinal
chemists
22
Do you need to know what you are doing?
• Absolutely not!
• At foundation knew nothing about
– ADME, software or silicon
chemistry
– drug development
– how to make human stem cells
– ... I cannot tell you because I would
be locked up, but something damn
important
• Founders of
• Amedis (me) – ADME software and silicon
chemistry company
• Cyclacel – drug discovery company
• ReNeuron – neural stem cell company
• Ark Therapeutics – gene therapy
company in cardiovascular research
23
On ignorance ....
• You should know everything.
• But ....
• Clarke’s 1st law
• You cannot know everything anyway
• Paralysis by analysis
– (bash consultants again here ....)
• Ignorance discovered America
– but did not do Columbus much good
24
Look at this new stuff – opportunities and change
Socie
tialchange
Technological change
People
do t
his
... and you do this
25
Opportunities are created by change
• Technological
– we can now do X
– we can now do X cheaply
• Scientific
– we know about X
• Political
– we are allowed to do X / not allowed to
– we can import / export X
• Economic
– people are rich enough to buy X
– other businesses have arisen that need X
• Demographic
– there are enough people of type X that want to do/eat/create/drive/inject Y to make a market
• Cultural
– people want X
Traditional ‘tech’ thinking tends to concentrate almost entirely on these
26
Opportunities are created by change
• Technological
– we can now do X
– we can now do X cheaply
• Scientific
– we know about X
• Political
– we are allowed to do X / not allowed to
– we can import / export X
• Economic
– people are rich enough to buy X
– other businesses have arisen that need X
• Demographic
– there are enough people of type X that want to do/eat/create/drive/inject Y to make a market
• Cultural
– people want X
Traditional ‘tech’ thinking tends to concentrate almost entirely on theseWhat change can you create?
• Make it possible (Mab drugs, Internet)
• Make it faster / better / more functional (cars, laptops, vacuum cleaners, window frames, drugs)
• MAKE IT EASIER (painting and decorating, fertilizers, garden plants, office software, internet, car gear change, banking, exotic holidays, writing music, being famous,
27
Ideas:- ‘if this goes on...’
Or ... I have a bigger exponential than you have.
1.00E+05
1.00E+06
1.00E+07
1.00E+08
1.00E+09
1.00E+10
F-82 N-84 A-87 M-90 J-93 O-95 J-98
EMBL database size
28
Ideas:- ‘if this goes on...’
Or ... I have a bigger exponential than you have.
1.00E+05
1.00E+06
1.00E+07
1.00E+08
1.00E+09
1.00E+10
1.00E+11
1.00E+12
1.00E+13
1.00E+14
1.00E+15
1.00E+16
F-
82
M-
86
M-
90
J-
94
J-
98
S-
02
O-
06
N-
10
D-
14
F-
19
M-
23
A-
27
One bacterium/day
One drosophila/day
One mammal/day
One genomics conference/day
One bacterium/year
29
Riding exponentials
• Good idea, but no-one will believe you
• Ends up with a ‘cheaper-smaller-faster’ marketing ploy (commodity, not
attractive)
• Actually, often results in qualitatively different product opportunity
– Calliper
– gene chips
– bioinformatics
• Moore’s Law
• (but ... plot worldwide semiconductor revenues vs world GDP – in 20XX
they cross! Same with healthcare costs. So have to exercise some common
sense. Vision is where common sense cuts in. Is it at one base/second?
one genome/second?
30
Technological change (in completely different areas)
• This is hard to envisage before it happens,
dead obvious afterward
• Knock-on effects of
unrelated changes can
radically alter your business
Dr. Leo Baekeland
31
What can you do with technology? (eg)
• You are expert in vascular dilation w.r.t. erectile dysfunction
– but does the world want another Viagra?
– and do men want to admit to having a limp one?
– what other problems do erectile dysfunction drugs solve?
• Hence
• Durex (SSL International) CSD500 with Zanifil™
– Zanifil as a ‘condom safety device’ – pharmacologically active NO-mediated vasodilator
absorbed locally to maintain tumescence, stop condom slippage
• Only problem
– ' Zanifil™’ = ??????
– Do you want that, there just before sex?
32
Customization as an opportunity
• EG Lego – why sell ‘generic’ kits when people want specific model?
• Customization – the Lego Factory
• done by robots, AI software, automated packing lines etc?
• Lego found it cheaper and more reliable to assemble the customized kits by
hand, in Denmark
• This is a technological opportunity
•internet, design plug-in
33
eg Demographic change
• ‘The population is getting older’
• What population? How many? What do they actually want?
– health
– beauty
– sex
– entertainment
– their children off their hands (and bank balances)
– nice scenery
– things like they used to be
– legal recreational drugs
– an end to boredom
• The idea must be right for the opportunity, the market.
• Hence ideas from your own area of knowledge – you know what (at least one of) the people
want34
eg: Increasing drug use/abuse
• Obvious ones:
– sell drugs
– drug testing
– detox clinics
• Unobvious ones
– magazines aimed at junkies ...
– (only in Holland .....)
Sheldon, T. BMJ 2002;325:1368
35
So where do ideas come from?
One thing that all successful ideas tend to
have in common is that they are based on
some form of expertise, prior knowledge,
experience or a combination of all three.IBM ‘How to have an idea’ presentation (Imperial College Entrepreneurship challenge)
• Thinking / reading / talking about what you know
36
Not so good ways: conferences
• People who are advertising something
– Science, companies, products, expertise
– their presentations are as factual as any advert.
– about what was hot
• Great way to find out what ‘everyone is talking about’, possibly get general
market stats etc..
Mid-sized Pharma
11%
Large Biotech
8%
Small Biotech
26%
Consultancy
7%
Softw are provider
6%
CRO / Service
provider
5%
Product supplier
7%
Major Pharma
16%
other
2%University / Institute
12%
Presenter profile at Drug Discovery Technology series conferences 1998 -2004
What next? (with no money)
38
Is it a good idea?
• Papers / the literature / conferences
• The web
• Market reports
• ‘Experts’
• Just go out and ask someone!
• =‘market survey’ – write it up like a project
I can do that
39
Excitement
• ‘excitement’
– does if have the buzz?
– if not, then you will not be committed. Someone else may be – their
problem
– And can you make that excitement happen again and again
– technically (does it work every day)
– commercially (does the buyer come back and say ‘yes, I really do want
that)
• Major source of commercial buzz – finding how to do something
fantastic reliably
40
• Clarke’s Third Law
• “Any sufficiently advanced
technology is indistinguishable
from magic”
Excitement ...
41
• Clarke’s Third Law:
• “Any sufficiently advanced
technology is indistinguishable
from magic”
• Bains’ corollary to Clarke’s Third
Law:
• Any sufficiently reliable magic is
indistinguishable from technology
Excitement ...
42
Science on the edge
• Excellent science means science at the boundaries of the possible, probable or
believable.
• Do you believe it?
• Can it be repeated?
• Does it violate 100,000 person-years of research/basic laws of physics?
• Coherence (credible story, some data). Does the data match the theory?
Technical detail:
• Endpoints - who will buy what, when, for how much
– do not need detail now, but if the answer is “I have no idea, but it is just so cool” run
away
• Recognition (papers, grants, peer opinion, our opinion, imitators)
43
Science on the edge
• Excellent science means science at the boundaries of the possible, probable or
believable.
• Do you believe it?
• Can it be repeated?
• Does it violate 100,000 person-years of research/basic laws of physics?
• Coherence (credible story, some data). Does the data match the theory?
Technical detail:
• Endpoints - who will buy what, when, for how much
– do not need detail now, but if the answer is “I have no idea, but it is just so cool” run
away
• Recognition (papers, grants, peer opinion, our opinion, imitators)
It will be your business …
44
What is your USP
• Requires you now what it is you are selling ...
• Iterative!
Product
How you sell it = business model
How you protect and build it = IP
How you finance it
What your operations look like
Do you want to go there?
45
What is the USP?
• MPEG player?
• Thumb-pad?
• iTunes?
• iTunes sales channel?
• White wires and earpieces
46
Unique ideas
• Ideas must not only be buzzy and exciting, but something that someone
could not dead easily reproduce.
• EG: Software to simulate biological systems
– Systems Biology focus – very hot
– Fast-start-up, short sales cycle
– Sell to rich Pharma Companies
– who would not invest??
Mathematical engine: operates on basic mathematical properties (Variables, f(V), dV/dT etc.)
Pharmaceutical abstraction system
Sil
ico
Lab
(Vis
ual
tiza
tion t
ool)
Dat
abas
e ac
cess
tool to
acq
uir
e dat
a
Monte
Car
lo
sim
ula
tion tool
Scripting language
PK
mo
del
ling t
ool
Oth
er s
pec
ific
phar
ma
pro
ble
m-
solv
ing t
ools
Bay
sian
est
imat
or
too
l fo
r es
tim
atin
g
how
acc
ura
te
model
s ar
e
Core engine
Abstraction interface
Toolset ....
Mathematical engine: operates on basic mathematical properties (Variables, f(V), dV/dT etc.)
Pharmaceutical abstraction system
Sil
ico
Lab
(Vis
ual
tiza
tion t
ool)
Dat
abas
e ac
cess
tool to
acq
uir
e dat
a
Monte
Car
lo
sim
ula
tion tool
Scripting language
PK
mo
del
ling t
ool
Oth
er s
pec
ific
phar
ma
pro
ble
m-
solv
ing t
ools
Bay
sian
est
imat
or
too
l fo
r es
tim
atin
g
how
acc
ura
te
model
s ar
e
Core engine
Abstraction interface
Toolset ....
47
Unique ideas
• But ....
• someone did this 20 years
ago, for control and
engineering systems ...
• applied to PK, could be to
anything else (and is)
48
Remember the money!
• Good ideas all about money
• Manufacturing economy vs Knowledge Economy
• Money EconomyWe live in a capitalist economyAnyone who says we live in an information economy has not compared the salaries of the head of the British Library and the Head of the Bank of England
Information Money UK Government
Position Salary Position Salary Note Secretary of state for UK industry (responsible for science)
£86, 173 Chancellor of the Exchequer
£130,347 including staff and expenses
UK Institutions CEO of the British Library
£92,750 Governor of the Bank of England
£254,000 (2001)
Head of Department at British University
to £50,000 Head of department, Financial Services Agency
to £140,000 (2004)
Industrial – Top 10 paying jobs in Guardian jobs web site December 2004 Education average
£28,000 Financial £40,000
49
A test of what is important ...
• What if you detonated a 0.5kT Special Atomic Demolition Munition (‘backpack nuke’) on London...
• We could completely obliterate:
– Buckingham Palace
– The Houses of Parliament
– The British Library
– UCL
– ‘The City’
• Which has the most impact?
Complete demolitionSubstantial destruction
50
Research data (for no cash)
• General statistical trends
– National statistical offices
– CIA worldbook
– Major healthcare organizations – NIH, CDC, WHO
• Business data
– EDGAR (US)
– FAME (UK)
– British Library!
• Industry data
– Industry directories
– industry group homepages – BIA, BIO, Biospace
51
Industry reports
• Huge industry preparing reports on market segments
• Valuable data for conventional markets
• Interesting for emerging ones
• Issues
– cost ($1000 - $10,000)
– resolution of data
– analyse existing markets
– sold to people who want to make a point
52
For free?
• Major consultancies used to have USP from data access
• Google / Google Scholar / ScienceDirect etc. has wiped that
business out!
• You can get all this now without paying for it.
• Task for you – can you get
– a pay-for-access scientific paper
– a table of business data from a commercial report
– a UK private company financial records
• without being a member of Cambridge University (ie – throw away
your University card and .cam.ac.uk IP)
Easy
Pretty easy
Harder – may cost you as much as £20
53
How £17 bought me £10,000 of data …
54
Ask people!
• DTI ‘Foresight’ programme on life science technologies and crime prevention
• Remit – what changes in technology over next 20 years would affect crime/crime
detection
• After you have talked to all the professors and academics, what do you do next?
Paul McAuley Simon IngsGwyneth Jones(aka Ann Hallam)
Colin Greenland Mike Rohan
Why not Brian Stapleford?
55
Business model vs business case
Business model Business case
‘It looks like this’Fully worked out sales and production plan
Wh
at
Ho
w
Ma
rke
t a
cce
ss
Pro
du
ct sp
ec
Co
stin
gs
Cu
sto
me
rs
• Business model and business case blur into each other
• Many great-sounding business models fall down on the details of
the business case56
Headline value of genomics deals 1990 - 2002
1Date
0.1
1
10
100
1000
1990 1992 1994 1996 1998 2000
$ m
illi
ons
• Thesis – if you get a hot technology, Pharma will pay up to $500M to access it!
• This did not change even with the ‘commoditization’ of genomics in 2000
Total for the year
Individual deals
57
Genomics – the business case ...
Pathfinder
programme
Collaborative programmeDevelopment of results into drugs
Clinical development
Part
1
Pre
clin
ical
dev
elo
pm
ent
Phase
I
Phase
2
Phase
3
Reg
ula
tory
app
roval
Part
2
Part
3
Sa
les
Payment on success
Unconditional payment /
revenue stream
Progression from one project
stage to another
Progression with risk of failure
Genomics-based drug discovery model
Development of a programme
77
Ta
rget
dis
cove
ry
End
pre
clin
ica
l
End
Ph
ase I
En
d P
ha
se I
I
On
e c
om
pa
ny
do
es a
ll
Genomics
Pharma05
1015
20253035
IRR (%)
Hand-over point
Partner
Genomics
Pharma
Who makes money from this?
58
Throw them out?
• Many ideas are not bad, just half-baked.
• So keep them – think about them.
• Entrepreneur as intellectual magpie
• Save those neat ideas ...
59
Throw them out?
• Many ideas are not bad, just half-baked.
• So keep them – think about them.
• Entrepreneur as intellectual magpie
• Save those neat ideas ...
• But – evaluate rigorously.
– ‘Mine’ ≠ good (necessarily)
– ‘Cool’ ≠ good (necessarily)
– ‘New’ ≠ good (necessarily)
Technical founders very bad at this – ‘my cool new idea’ should be a Big Red Warning Flag
Technical founders very bad at this – ‘my cool new idea’ should be a Big Red Warning Flag
60
Do you need shiny offices for this?
Delta G
Amedis Pharmaceuticals
Choracle
MultiProSys
61
Second most frequent question
• ‘Don’t I need a management team?’
• You need a team
– Like minded, hard-working people you trust
– Lawyers, patent agents, corporate financiers, managers
62
‘The Management Team’
• VCs emphasise the importance of
‘the management team’.
• This is not (necessarily) the same as
‘the start-up team’
• ‘Management team’ should be able
to do
– science/ technology
– business /marketing/sales
– finance
• Founding teams usually cannot
• So – plan for later recruitment
Company Science / technology Business Finance
3D Molecular Liz Hill
Akubio Matthew Cooper Victor Ostanin Chris Abel
Amedis Pharmaceuticals William Bains John Caldwell
Robert Scoffin Liz Holt George Freeman
Auvation William Melvin Frank Carr
Cambridge Drug Discovery Mark Bushfield Barry Kenny
Mark Treherne
Critical Pharmaceuticals Steve Howdle Martin Whittaker
Bob Davis
Cyclacel David Lane Alan Balmain
Sue Foden
Daniolabs Paul Goldsmith Andy Richards
Delta G William Bains Aubrey de Grey
(William Bains)
Eurogene John Martin Steven Barker Seppo Ylä-Herttuala
Glaucus Ian Humphrey-Smith
Microscience Robert Feldman
MultiProSys (?) Sid Ghose William Bains Kenny Lang
Neurovex (now Biovex) Robert Coffin David Latchman
Numerator Genetics John Armour Huw Jones-Jenkins
Pantherix Bill Shaw Bill Primrose
Predictive Therapeutics David Fell John Savin
Protherics CAMD Jin Li Allen Millar
ReNeuron Jeffrey Grey John Sinden Helen Hodges
Scionix (?) David Pritchard Barry Bycroft
Vectura David Gough Merlin various
Xerion Liming Ge Vic Ilag Jocelyn Ng
Got somewhere
Made loads of cash for someone
63
• So, jump into it
– when you know what you are doing
– and why you are doing it
– but before you know how you are doing it
I can do that64
Do-it-yourself legal documents??
• Do all this yourself??
65
DIY patents?
• Scary stuff?
• Actually easy
– formalised, standard structure, language
– 10,000,000 prior examples to crib from
– Patent Office will help lone inventors
• Take on as much of the drafting as possible yourself
• And then hand over to CPA to take out the clangers...
66
Patent drafting
• Drafting does not have to be ‘clever’,
sophisticated, or easy to understand.
• e.g. figures. Very simple is good
– patent examiners are not experts, do not
have time
– usefully distorts what you are doing.
• e.g. US 6,754,472
67
What are you patenting?
• Key to your business
• Formal patent requirements:
– Unique
– Useful
– Achievable (enablement)
• Structure:
– Background/intro (need, what the prior art is)
– Statement of invention
– Details and examples
– Claims
Very similar to a scientific paper
• Introduction
• Methods
• Results
• Conclusions
Global replace ‘it is well-known’ with ‘it is surprising’ etc…
68
Claims
• Start with very general
– a combinations of atoms linked by covalent bonds useful for treating diseases
• Put what you really absolutely have to protect in as a specific claim
– 2-acetoxybenzoic acid for treating temporal hypoalgaesia
• Design a series of intermediate claims that cover the scale of generality
– an aromatic carbon compound useful for treating conditions characterised by
hypoalgaesia
– a compound of the structure where R1, R2 and R3 can be
independently any one of –H, CnHm, ... (etc ad infinitum)
HO O
R3
R2
R1
This is silly ...
69
The thing to remember about legals
• It is all about language, and basic logic.
• It is all (or almost all (in terms of logic anyway)) about (or (more accurately)
comprehensible in terms of) multiply nested brackets (parentheses)
• Why are scientists are quite happy with this ...
• It is all about language, and basic logic.
• It is all (or almost all (in terms of logic anyway)) about (or (more accurately)
comprehensible in terms of) multiply nested brackets (parentheses)
• Why are scientists are quite happy with this ...
• It is all about language, and basic logic.
• It is all (or almost all (in terms of logic anyway)) about (or (more accurately)
comprehensible in terms of) multiply nested brackets (parentheses)
• Why are scientists are quite happy with this ...
70
The thing to remember about legals
IF (PIVOT.GT.5994) PIVOT=5994
IF (PIVOT.LT.6) PIVOT=6
DECCNT=0
991 PIVOT=PIVOT-DIR
IF ((ONE(PIVOT+5*DIR).EQ.0.OR.TWO(PIVOT+5*DIR).EQ.0)
+ .AND.PIVOT.NE.(POSIT+DIR)) GO TO 991
C
DO 90 LOCONE=POSIT,PIVOT,DIR
DO 92 LOCTWO=POSIT,PIVOT,DIR
C
C ** Scan all the positions from the current one to one MAXDEL along the
C ** sequence, for both sequences.
C
CALL LEGO(ONE,TWO,LOCONE,LOCTWO,12,MATVAL)
ival=matval
MINDIS=ABS(LOCONE-POSIT)
IF (MINDIS.GT.ABS(LOCTWO-POSIT)) MINDIS=ABS(LOCTWO-POSIT)
MATVAL=MATVAL-(RANDOM*MINDIS/(10*LOOKWT))
IF (LOCONE.NE.LOCTWO) MATVAL=MATVAL-(BIAS+DELWGT*
+ ABS(LOCONE-LOCTWO))
C
C ** DLBIAS is the bias against this particular gap. the values
C ** BIAS< LOOKWT and DELWGT are constants.
C
C
C ** If DLBIAS is great enough, there is no chance that this is a better
C ** alignment, so we skip to the next try.
C
IF (MATVAL.LT.OPT) GO TO 92
OPT=MATVAL
BESTON=LOCONE
BESTTW=LOCTWO
jval=ival
92 CONTINUE
90 CONTINUE
IF (BESTON.EQ.BESTTW) POSIT=BESTON
IF (BESTON.EQ.BESTTW) GO TO 220
C
C ** If BESTON <> BESTTW, then there should be a gap introduced here. This
C ** section introduces the gap by shuffling the sequenecs back and forth,
C ** and then 'cleans' the ends of the gap by calling subroutine CLEAN.
C
IF (DIR.EQ.1) THEN
IF (BESTON.GT.BESTTW) THEN
DO 100 I=TOPWID,BESTON,-1
100 TWO(I)=TWO(I-(BESTON-BESTTW))
DO 110 I=BESTTW,(BESTON-1)
110 TWO(I)=0
POSIT=BESTON
CALL CLEAN(ONE,TWO,BESTTW,(BESTON-1))
ELSE
DO 130 I=TOPWID,BESTTW,-1
130 ONE(I)=ONE(I-(BESTTW-BESTON))
DO 140 I=BESTON,(BESTTW-1)
140 ONE(I)=0
POSIT=BESTTW
CALL CLEAN(TWO,ONE,BESTON,(BESTTW-1))
END IF
ELSE
IF (BESTON.GT.BESTTW) THEN
DO 160 I=1,BESTTW
160 ONE(I)=ONE(I+(BESTON-BESTTW))
DO 170 I=(BESTTW+1),BESTON
170 ONE(I)=0
POSIT=BESTTW
CALL CLEAN(TWO,ONE,(BESTTW+1),BESTON)
ELSE
DO 200 I=1,BESTON
200 TWO(I)=TWO(I+(BESTTW-BESTON))
DO 210 I=(BESTON+1),BESTTW
210 TWO(I)=0
POSIT=BESTON
CALL CLEAN(ONE,TWO,(BESTON+1),BESTTW)
END IF
• It is all about language, and basic logic.
• It is all (or almost all (in terms of logic anyway)) about (or (more accurately)
comprehensible in terms of) multiply nested brackets (parentheses)
• Why are scientists are quite happy with this ...
71
The thing to remember about legals
RIGHTS OF ALL SHARES 1. Restrictions on transfer1.1 The Shares and any interest therein shall not be transferable except:-
1.1.1 in the case of any transfer not otherwise permitted by this Article 6 and subject to Article 9, only with the prior written consent of each of the Investor Directors (as defined in Article 10.4) except where the intended transferee is a company in which both the Party-A and/or the Party-A2 and Party-B (each as defined below) have an equity interest in which case the consent of 85% of the B Shareholders shall be required;
1.1.2 on and after the earlier of (i) the admission of any of the Company's shares to the Official List of the UK Listing Authority and to trading on The London Stock Exchange Plc ("the Stock Exchange") and (ii) the granting of an application by the Company for the dealing in any of the Company's shares on any other public securities market (including the Alternative Investment Market) (each a "Listing");1.1.3 when a transfer is required by Article 7;1.1.4 pursuant to an offer or transfer required to be made by Article 8;
1.1.5 to the trustees of a trust of which the only beneficiaries (and the only persons capable of being beneficiaries, other than a charity as beneficiary of last resort) are the Shareholder who established such trust and who is transferring the relevant Shares and/or his spouse or partner and/or lineal descendants by blood or adoption provided that the trustees of any such trust shall not themselves be entitled to transfer any Shares or any interests therein pursuant to this Article 6.1.5, other than to replacement trustees of the same trust or otherwise in accordance with this Article 6.1;
1.1.6 as a transfer made upon the death of a Shareholder to his executors, administrators or beneficiaries after the expiry of two months from the date of death provided that such executors, administrators or beneficiaries shall not themselves be entitled to transfer any Shares or any interests therein pursuant to this Article 6.1.6, other than, in the case of executors and administrators, to the relevant beneficiaries or otherwise in accordance with this Article 6.1;
1.1.7 by Party-A Equity Limited to Party-A Ventures Limited and/or Party-A Limited or to any of their respective associated companies (the "Party-A ") or by Party-A3 and/or Party-A or any of their respective associated companies to Party-A4 or to any other associated company of Party-A3 and/or Party-A and/or by any such company to any co-investment or carried-interest scheme operated by any of them for the executives of the Party-A provided that, in the event that such transferee, being a company, subsequently leaves the Party-A or, the transferee being the trustees of such a scheme, in the event that such scheme is terminated or otherwise ceases to operate, the company or trustees as appropriate shall immediately prior to such event, transfer the Shares back to the original transferor thereof or any other continuing member of the Party-A at that time or to any other person so entitled to the same at that time. For the purpose of these Articles, a company shall be deemed to be associated with Party-A3 and/or Party-A as appropriate if Party-A3 and/or Party-A4 owns or holds, directly or indirectly 20% or more of the issued equity share capital of such company or if it is a company, wherever incorporated, owned and controlled directly or indirectly by the same persons, (or any of them) who own and control Party-A3. For the avoidance of doubt the Party-A shall not be entitled to transfer any Shares to any company or other entity (whether within the Party-A or otherwise) whose business does not consist wholly or mainly of holding securities for investment purposes;
1.1.8 by Party-A General Partner II Limited as general partner of The Party-A4. and as managing partner of the Party-A5, or any member of the Party-A (a) to any partnership (or to the partners of any such partnership) of which any of them is general or managing partner, manager or adviser or (b) to any unit trust or other fund or to the unit holders or other investors in any such other fund of which any of them is trustee, manager or adviser or (c) to any unit trust, partnership or other fund or to the unit holders or other investors in any such other fund, the managers of which are advised by any of them ("Party-A2 ") or (d) to any nominee or trustee for any member of the Party-A2 (whether on a change of nominee or trustee or otherwise); provided that in the event that such transferee, being a trustee, manager or adviser of such partnership or fund or a nominee or trustee of the Party-A2 , ceases to hold such a position it shall immediately prior to such event, transfer the Shares back to some other member of the Party-A2 at that time (including to any replacement trustee, manager or adviser). For the avoidance of doubt, the Party-A2 shall not be entitled to transfer any Shares to any company or other entity whose business does not consist wholly or mainly of holding securities for investment purposes;
1.1.9 by or to Party-C or Party-D to or from their respective spouses and/or their respective lineal descendants by blood or adoption;
1.1.10 by Party-B ("Party-B") to any limited partner or carried interest partner of Party-B which may include an individual, trustee, corporation, partnership or other entity which is a limited partner of Party-B or a member of the carried interest partner) or to another fund which is managed or advised by the same manager or adviser as the transferor (the "Party-B "). For the avoidance of doubt, neither Party-B nor the Party-B shall be entitled to transfer Shares to any company or other entity whose business does not consist wholly or mainly of holding securities for investment purposes and provided further that in the event that such transferee ceases to be a limited partner of Party-B, or a member of the carried interest partner or ceases to be managed or advised by the same manager or adviser as the transferor it shall immediately prior to such event transfer the Shares back to some other member of the Party-B . However, nothing in this Article 6.1.10 shall cause a transfer of shares by the relevant transferee in the event of the liquidation or other winding up of the original transferor;
1.1.11 by or to Party E, Party F and Party G to or from their respective spouses and/or their respective lineal descendants by blood or adoption;
1.1.12 by or to PARTY-H to a holding company or subsidiary of PARTY-H or a subsidiary of such a holding company (the "PARTY-H ") provided that in the event that such transferee being a company, ceases to be a subsidiary of PARTY-H or a holding company of PARTY-H or a subsidiary of any such holding company, the transferee shall immediately prior to such cessation, transfer the Shares back to the original transferor thereof or any subsidiary or holding company of PARTY-H ;1.1.13 by PARTY-H2 ("Party-H2"):
1.1.13.1 to (or to a nominee or trustee for) the holders of units in, or to any partner in, or to members of, or to investors in, (as the case may be) Party-H2 and any Share (and/or any interest in any such Share) held by any nominee or trustee for such holders, partners, members or investors may be transferred to such holders, partners, members or investors or to another nominee or trustee for such holders, partners, members or investors;
6.1.13.2 to a nominee or trustee for Party-H2 and any Share (and/or any interest therein) held by a nominee or trustee for Party-H2; and
6.1.13.3 to (or to a nominee or trustee for) another fund or partnership or other entity which is managed or advised by the same manager or adviser as the transferor (or as Party-H2 on behalf of whom any such Share or interest is held by the transferor as nominee or trustee) or by a undertaking of such manager or adviser (each of the entities covered in Article 6.1.13.1 to 6.1.13.3 being hereafter "Party-H2 Associate");provided that in the event that any transferee under this Article 6.1.13:-
• It is all about language, and basic logic.
• It is all (or almost all (in terms of logic anyway)) about (or (more accurately)
comprehensible in terms of) multiply nested brackets (parentheses)
• Why are scientists are quite happy with this ...
• but not with this ...?
72
RIGHTS OF ALL SHARES 1. Restrictions on transfer1.1 The Shares and any interest therein shall not be transferable except:-
1.1.1 in the case of any transfer not otherwise permitted by this Article 6 and subject to Article 9, only with the prior written consent of each of the Investor Directors (as defined in Article 10.4) except where the intended transferee is a company in which both the Party-A and/or the Party-A2 and Party-B (each as defined below) have an equity interest in which case the consent of 85% of the B Shareholders shall be required;
1.1.2 on and after the earlier of (i) the admission of any of the Company's shares to the Official List of the UK Listing Authority and to trading on The London Stock Exchange Plc ("the Stock Exchange") and (ii) the granting of an application by the Company for the dealing in any of the Company's shares on any other public securities market (including the Alternative Investment Market) (each a "Listing");1.1.3 when a transfer is required by Article 7;1.1.4 pursuant to an offer or transfer required to be made by Article 8;
1.1.5 to the trustees of a trust of which the only beneficiaries (and the only persons capable of being beneficiaries, other than a charity as beneficiary of last resort) are the Shareholder who established such trust and who is transferring the relevant Shares and/or his spouse or partner and/or lineal descendants by blood or adoption provided that the trustees of any such trust shall not themselves be entitled to transfer any Shares or any interests therein pursuant to this Article 6.1.5, other than to replacement trustees of the same trust or otherwise in accordance with this Article 6.1;
1.1.6 as a transfer made upon the death of a Shareholder to his executors, administrators or beneficiaries after the expiry of two months from the date of death provided that such executors, administrators or beneficiaries shall not themselves be entitled to transfer any Shares or any interests therein pursuant to this Article 6.1.6, other than, in the case of executors and administrators, to the relevant beneficiaries or otherwise in accordance with this Article 6.1;
1.1.7 by Party-A Equity Limited to Party-A Ventures Limited and/or Party-A Limited or to any of their respective associated companies (the "Party-A ") or by Party-A3 and/or Party-A or any of their respective associated companies to Party-A4 or to any other associated company of Party-A3 and/or Party-A and/or by any such company to any co-investment or carried-interest scheme operated by any of them for the executives of the Party-A provided that, in the event that such transferee, being a company, subsequently leaves the Party-A or, the transferee being the trustees of such a scheme, in the event that such scheme is terminated or otherwise ceases to operate, the company or trustees as appropriate shall immediately prior to such event, transfer the Shares back to the original transferor thereof or any other continuing member of the Party-A at that time or to any other person so entitled to the same at that time. For the purpose of these Articles, a company shall be deemed to be associated with Party-A3 and/or Party-A as appropriate if Party-A3 and/or Party-A4 owns or holds, directly or indirectly 20% or more of the issued equity share capital of such company or if it is a company, wherever incorporated, owned and controlled directly or indirectly by the same persons, (or any of them) who own and control Party-A3. For the avoidance of doubt the Party-A shall not be entitled to transfer any Shares to any company or other entity (whether within the Party-A or otherwise) whose business does not consist wholly or mainly of holding securities for investment purposes;
1.1.8 by Party-A General Partner II Limited as general partner of The Party-A4. and as managing partner of the Party-A5, or any member of the Party-A (a) to any partnership (or to the partners of any such partnership) of which any of them is general or managing partner, manager or adviser or (b) to any unit trust or other fund or to the unit holders or other investors in any such other fund of which any of them is trustee, manager or adviser or (c) to any unit trust, partnership or other fund or to the unit holders or other investors in any such other fund, the managers of which are advised by any of them ("Party-A2 ") or (d) to any nominee or trustee for any member of the Party-A2 (whether on a change of nominee or trustee or otherwise); provided that in the event that such transferee, being a trustee, manager or adviser of such partnership or fund or a nominee or trustee of the Party-A2 , ceases to hold such a position it shall immediately prior to such event, transfer the Shares back to some other member of the Party-A2 at that time (including to any replacement trustee, manager or adviser). For the avoidance of doubt, the Party-A2 shall not be entitled to transfer any Shares to any company or other entity whose business does not consist wholly or mainly of holding securities for investment purposes;
1.1.9 by or to Party-C or Party-D to or from their respective spouses and/or their respective lineal descendants by blood or adoption;
1.1.10 by Party-B ("Party-B") to any limited partner or carried interest partner of Party-B which may include an individual, trustee, corporation, partnership or other entity which is a limited partner of Party-B or a member of the carried interest partner) or to another fund which is managed or advised by the same manager or adviser as the transferor (the "Party-B "). For the avoidance of doubt, neither Party-B nor the Party-B shall be entitled to transfer Shares to any company or other entity whose business does not consist wholly or mainly of holding securities for investment purposes and provided further that in the event that such transferee ceases to be a limited partner of Party-B, or a member of the carried interest partner or ceases to be managed or advised by the same manager or adviser as the transferor it shall immediately prior to such event transfer the Shares back to some other member of the Party-B . However, nothing in this Article 6.1.10 shall cause a transfer of shares by the relevant transferee in the event of the liquidation or other winding up of the original transferor;
1.1.11 by or to Party E, Party F and Party G to or from their respective spouses and/or their respective lineal descendants by blood or adoption;
1.1.12 by or to PARTY-H to a holding company or subsidiary of PARTY-H or a subsidiary of such a holding company (the "PARTY-H ") provided that in the event that such transferee being a company, ceases to be a subsidiary of PARTY-H or a holding company of PARTY-H or a subsidiary of any such holding company, the transferee shall immediately prior to such cessation, transfer the Shares back to the original transferor thereof or any subsidiary or holding company of PARTY-H ;1.1.13 by PARTY-H2 ("Party-H2"):
1.1.13.1 to (or to a nominee or trustee for) the holders of units in, or to any partner in, or to members of, or to investors in, (as the case may be) Party-H2 and any Share (and/or any interest in any such Share) held by any nominee or trustee for such holders, partners, members or investors may be transferred to such holders, partners, members or investors or to another nominee or trustee for such holders, partners, members or investors;
6.1.13.2 to a nominee or trustee for Party-H2 and any Share (and/or any interest therein) held by a nominee or trustee for Party-H2; and
6.1.13.3 to (or to a nominee or trustee for) another fund or partnership or other entity which is managed or advised by the same manager or adviser as the transferor (or as Party-H2 on behalf of whom any such Share or interest is held by the transferor as nominee or trustee) or by a undertaking of such manager or adviser (each of the entities covered in Article 6.1.13.1 to 6.1.13.3 being hereafter "Party-H2 Associate");provided that in the event that any transferee under this Article 6.1.13:-
The thing to remember about legals
• It is all about language, and basic logic.
• It is all (or almost all (in terms of logic anyway)) about (or (more accurately)
comprehensible in terms of) multiply nested brackets (parentheses)
• Why are scientists are quite happy with this ...
• but not with this ... ?
• Poor layout, poor formatting, unfamiliar terminology
– everything should be defined within the document
• Remember – you are at least as bright as the lawyers!
• If you don’t understand it, either
– they have not explained the terminology, or
– precedent and law (this ≡ terminology – using words in unusual ways, eg ‘person’)
– it does not make sense
73
Things to remember about legals
• Put in the time to understand the documents
– meaning
– Situations clauses apply
– personal as well as company capacity
• You can draft them yourself! Style/terminology.
– copy someone else’s
– deconstruct the nested brackets
• Hand them to ‘the opposition’ for critique
• Check they still make sense
• Then give them to your lawyer to finish
I can do that
Why it will all go horribly wrong
75
The big problem with biotech
• Technical?
– selection of drug target
– adverse properties of combichem libraries
– closing of patent space
– early prediction of adverse events
– rising clinical trials requirements
• Business?
– pharma consolidation → reduction in collaborators
– drive for Phase IIb data before deal
– resistance to new technology post-genomics
– personalized medicine → shrinking markets
– NICE etc and cost control
• YOU DO NOT HAVE A PRODUCT
– what you are really trying to do is sell dreams to investors76
... in life sciences ...
• Not enough money
0
5
10
15
20
25
30
35
40
A B C D or E
Investment round
M$ (
US
)
US
Europe
UK
77
And it takes forever
• Basically,
• VCs like people like them.
– hence faster investment for ‘friendly’
companies
• A route to investment:
– work for a VC for a couple of years
• (worked-ish for me)
– disguise yourself as a VC
• speech, dress, sociopathy
Time to completion vs amount raised
R2 = 0.5138
0
50
100
150
200
250
300
350
400
450
0 10 20 30
Amount raised
Tim
e (
days)
to c
om
ple
tio
n
New investors
'Friendly' investors
Linear (New investors)
78
And ‘they’ will run the show
0 0.2 0.4 0.6 0.8 1
Alter Memorandum or ArticlesCreate/allot shares
Vary authorised share capitalRedeem shares
Create new classes/rights of sharesCreate share scheme
Pay dividendRepay credit reserve
Appoint auditorsChange accounting policies (esp
MergerPartnership or JV
Form subsidiaryChange nature of business / deviate
Enter into any contract † ‡Enter any non-arms-length
Create mortgage, charge or lienBorrow †
Lend †Lease ‡
Wind up / go into liquidationAppoint director
Delegate board powersGrant non-director authority to act
Hire staff ‡Appoint/terminate consultant
Create bonus/incentive schemeCreate pension scheme
Start, change or conclude litigationAcquire or dispose of IP
Dispose of assets † ‡Enter into contract with shareholder
Create overseas business
79
And they will not actually help
• Invest in as many companies as you can
– (spread the risk, look active)
• Sit on all their Boards
– (get the Board fees, look active)
• Hence cannot have time for significant support
Chances of sharing your director (IPO)
12
5
6
7
8
910
11
12
13
14
3
4
Number of additional companies you will have to share your VC director with
80
And your shares will not be worth anything
• Investors will insist on ‘prefs’ (also Preferred Stock)
– they have preference over the company’s assets
– at any ‘liquidity event’ (ie when people can sell shares)
they get all their money before anyone else gets anything
– ‘liquidation preferences’
• Can be at multiple:
– 2X prefs means they get 2X money back before you get
anything, i.e. the shares have to >double before you get a
bean
none
1x
1-2x
2-3x
>3x
UK Biotech Pref share multiples 2004-6
81
Specific example: Amedis :Paradigm
• Ordinary share holders (founders, Angel investors) squeezed out
completely by Pref share holders.
• Even though company was technically and commercially successful
• Disincentivises founders, entrepreneurs, managers ...
Before
founder / angel Investor Investor manager
Manager
Paradigm 11 5 0 1
Amedis 5 3 5 3
After
founder/angel Investor Investor manager
Manager
Paradigm 10 5 0 1
Amedis 0 3 4 0
82
Start a Company and GET RICH
• Oh Yeah?
30
peo
ple
in
~3
0 y
ears
Life sciences AcademicsMade money?
Times Higher
Educational
Supplement Feb
2006
83
Start a Company and GET RICH
30
peo
ple
in
~3
0 y
ears
Life sciences AcademicsMade money?
Times Higher
Educational
Supplement Feb
2006
• Oh Yeah?
• ~3x chance of winning a Nobel Prize .....
1978 - Chemistry, Peter Mitchell
1979 - Physiology or Medicine, Godfrey N. Hounsfield 1980 - Chemistry, Frederick Sanger
1982 - Chemistry, Aaron Klug 1982 - Physiology or Medicine, John R. Vane
1984 - Physiology or Medicine, César Milstein
1988 - Physiology or Medicine, Sir James W. Black
1996 - Chemistry, Sir Harold Kroto
1997 - Chemistry, John E. Walker 2001 - Physiology or Medicine, Sir Paul Nurse
2001 - Physiology or Medicine, Tim Hunt 2002 - Physiology or Medicine, John E. Sulston
84
Outcome
• One example....
0
50
100
150
200
250
300
350
400
450
1998
1999
2000
2001
2002
2003
2004
2005
2006
£k
Basic
id
ea
Seed
fin
an
cin
g
Seri
es A
Seri
es A
to
p-u
p
Seri
es B
Seri
es B
to
p-u
p
Seri
es C
neg
oti
ate
d
Seri
es C
realised
-m
erg
er
85
What to do with your great (academic) idea ...
Career cumulative value
of money-making options
100
10000
1000000
Career
Revenue
Risk
Career
Revenue
Potential
Career RP
for top 5%
£ /
care
er
Licence IPVC-funded start-upConsultancyWritingGet out
86
...and you will be fired ...
Average stay in a UK Biotech company of NVT
0
1
2
3
4
5
6
7
Academic
founder
Non-academic
founder
1st incoming
CEO
Time w ith company
Time as exec
After foundation
0
1
2
3
4
5
6
7
Academic
founder
Non-academic
founder
1st incoming
CEO
Time w ith company
Time as exec
After first VC funding
87
Why do it?
• Objective rational criteria for entrepreneurial activities
Listed in full in this box
88
• I have a lot of children
Why do this? (1) money
• I have a lot of children
• and expensive tastes in holidays
• I have a lot of children
• and expensive tastes in holidays
• and expensive driving habits
89
Why do this? (2) recognition
I WANT SOMEONE TO
TAKE
NOTICE OF ME!
90
Why do this? (3) Science
• Really interesting science away from
– pointless scholasticism
– applying for grants
– committees
– people with bad hair
– people with no ambition or goals
• i.e. away from academia
• Science with a purpose
91
Why do this? (4) Something new
What a ride!
• Often a tacit reason for academics
• 30 years running the same **** gel
• and business people
• 30 years having the same **** meeting
92
Why do this (5) Impact Factor
• Much of this is tied up with
wanting
– impact
– significance
– making something real
– to ‘make a difference’
93
Conclusions
•Hey, William, this was all about your
personal problems, not about doing a
start-up
•YES!
7
Lessons in (cr*ppy) life
• Doing something entrepreneurial is a life-changing experience
Eating your first Vindaloo
Having children
Getting married
Doing a PhD
Buying a house
Buying a (decent) car
Moving country
How long does a bad
decision take to work out?Things that you can do
> 20 years
Overnight
3 – 6 months
a year
> 1 year
3 years
3 – 5 years
94
Having an idea is only the start ...
• One step in a marathon
• That you will probably lose ...
• ... but just might win
• if you enjoy running
95
Have faith
I can do that
• In yourself
• In your ability to analyse, understand, decide
• In your understanding of your market/product/world
• because ........
How to have a good business idea. (but
- good for whom?)
Southampton. July 2010
William Bains
Thanks to Cambridge MBE programme and its students
http://www.biot.cam.ac.uk/mbe/The many people I have worked with who showed me the way
The good peopleThe bastards
Thanks to Cambridge MBE programme and its students
http://www.biot.cam.ac.uk/mbe/The many people I have worked with who showed me the way
The good peopleThe bastards