Who are the “players” in entrepreneurship?
Christina Hernandez Sherwood, eMed Editor, MedCity News
“Players” in entrepreneurship refers to the universe of people a startup founder will need to work with in order for the company to be a success. Some of these people are important for personal support, such as family. Others are advisers offering professional advice, or board members who will have some control over the governance of the company. There are also co-founders and other employees who a founder will work with on a daily basis.
There are some distinct challenges for healthcare entrepreneurs around players, particularly for areas such as law firms who have worked specifically in this sector. But no matter what “players” you deal with, vetting, selecting and managing the “players” during the first couple of years can help make or break a company.
- Founding team
- Business advisory board
- Science/medical advisory board
- How to find the best people
- When to make a change
Family refers to anyone in your family you will require for consistent, personal support while building your company. Without support from your spouse and family, your entrepreneurial journey could prove all the more difficult over the long term.
Family members should be on board – at least on some level, said Nicholas Franano of Novita Therapeutics at the Life Science Ventures Summit.
“If you’re going to leave your job as a physician or a scientist to start a startup company, it’s an important kitchen table conversation,” Franano said. “[Your family is] there on the landing. At least if you crash, you asked them before you took off.”
There are no statistics on the impact of entrepreneurship on marriage, but conventional wisdom suggests entrepreneurs have a higher divorce rate than other professions. Most of the solutions to this problem are straight forward, from scheduling one-on-one time and asking a spouse to remind you they are not your employee.
The founding team refers to the people who launch the company with you. This includes co-founders, who would be considered partners who conceived or launched the company with you and will likely have a share of ownership. But this also includes the first employees, who may or may not have a share of the company. Where do founding team members come from? Research says its often co-workers (more than 40 percent), friends (nearly 25 percent), family (more than 10 percent), or strangers (about 4 percent). Team building, when it comes to early-stage companies, refers to the relationship between startup co-founders and the way entrepreneurs hire, manage and grow personnel in their business.
Co-founders are partners in the launch of your company. They typically receive a significant share of the company and therefore have significant control and can have an impact on the company’s reputation and its future growth. Some key issues to consider as you select a co-founder are:
- Complementary skills: Be sure to find someone with a different skill set to address other parts of the business you may not know.
- Social relationships: The best co-founder teams are made up of people who have worked together and have common ways of working.
Once the co-founders are in place, it’s time to establish your company’s culture and build human capital. Bringing together a founding team is almost as important as choosing co-founders.
Some experts suggest the following criteria:
- Use your network – and your potential teammate’s network – to seriously vet how the candidate works. "It's remarkable how candid a lot of those references will be," said Jason Greenberg, assistant professor at New York University's business school, at the Life Science Ventures Summit.
- Try before you buy, especially if your first hire is technical in nature. Put the candidate in a situation where you can assess whether she can handle the job under the same constraints as your business.
- Find out how the candidate handles stress. Is it in the same way that you and the co-founders handle it?
Early-stage life science and digital health entrepreneurs will typically need to work with at least two types of lawyers: corporate lawyers, which set up the structure of a business, and intellectual property lawyers, which protect unique attributes like chemical compounds, technologies or other patentable processes from being taken by anyone else.
In an attorney, you should look for someone who understands the startup world – and who has done a predominant amount of their work with startup companies, said Jennifer Hill, a startup lawyer in New York City. “At the end of the day your goal as an attorney is to help bring this company to life,” she said.
For a medical device entrepreneur, lawyers are the single biggest expenditure after salaries, said Avi Roop, an entrepreneur who currently serves as general manager at Raptor Surgical and CEO at Miret Surgical. It’s important to find the right attorneys for your business without breaking the bank.
Corporate lawyers help entrepreneurs establish their business, set up consulting agreements, create non-disclosure agreements, organize fundraising, and offer advice.
It’s a challenge to find a balance between skills and cost in a corporate attorney, said Roop, whose company Miret Surgical is working with its third corporate lawyer. Corporate lawyers can charge between $200 and $500 per hour, he said, but slow-moving medical device startups don’t necessarily need the best of the best. “You don’t need any sort of superstar lawyer to run a medical device startup,” Roop said. “You can pick somebody who you like working with who isn’t too expensive.” One way to keep legal fees low, he added, is to work with a lower-cost junior attorney or legal secretary at a larger law firm.
Your corporate lawyer should be business savvy, Hill said, but doesn’t have to have worked exclusively in the life sciences. What’s more important, she added, is that you’re comfortable with your attorney and that he or she will make time for you. “You want someone you feel comfortable picking up the phone and asking a question to,” Hill said, “and who you feel is an advocate for you.”
Intellectual property lawyers
The best IP lawyer for your life science or digital health startup depends on the project and the entrepreneur’s experience level, Roop said. If your product is a brand new opportunity where IP isn’t yet established, he said, you might consider an IP lawyer who can craft the most broad, ingenious language. But if you’re working in an area where there are already “mountains of IP” – say, general surgical tools – then a visionary IP lawyer isn’t necessary, Roop said. Instead, he added, the best choice would be an IP attorney who can help you craft claims that would fit into the remaining space.
“You need the best of the best in IP if you’re working on an idea that is disruptive,” Roop said. “I’m able to rely on IP attorneys who are a good value, rather than being seen as the best of the best.”
When it comes to therapeutics, it’s not only important to have a good IP lawyer, said Sofie Qiao, formerly of LEAD Therapeutics. The lawyer must also understand the science behind your product or service, said Qiao, whose IP attorney had a Ph.D. in chemistry. “That becomes really important when it comes to what patents to file and how to file,” she said. “This way, the attorney and the scientist can speak the same language.”
It’s wise to pitch your startup to attorneys, just as you would to investors. It’s a risk for attorneys to work with startups because there’s no guarantee an early-stage company will be around to pay for the legal services provided – or become a long-term customer. “For me to want to work with a startup company I have to do an assessment of whether this business is worth the risk,” said Jeff Jones, a longtime startup attorney who has worked with life science and digital health companies. “Obviously, you do that assessment any time you work with a new company. But with startups it’s a little more extreme.”
For early-stage life science and digital health entrepreneurs, it’s important to have advisers in your circle who can bring expertise to your startup and assist with key questions. Advisers can help accelerate your business through connections, access to customers, and employee talent, Hill said. “They don’t necessarily have to have the fanciest title in the industry,” she said. “You want people that actually have time for you.” Rather than a static group that remains the same throughout the life of your company, your group of advisers should change over time, evolving with your business model.
Business advisory board
A business advisory board helps advise an entrepreneur on business issues, such as funding, growth, and more. “Get the list of people you’re listening to down to a group of people that you trust and that are passionate,” said Geoffrey Clapp of Rock Health at Life Science Ventures Summit. “You can’t be one of 30 startups they’re working with. They’ve got to care about this nearly as much as you do.”
Most early-stage entrepreneurs could probably use about one to three advisers, Roop said. Though he has three business advisers, Roop gets most of his business advice from one: a personal friend who is a venture capitalist. Along with business insight, the other two advisers also provide brand value or “adult supervision,” meaning that they act as a well-known endorsement for the company, Roop said. “Early on, I struggle to see the strong value [in business advisers] other than adult supervision,” he said. “Oftentimes, a corporate lawyer could be the business adviser.”
Science/medical advisory board
A scientific or medical advisory board can offer help on the scientific or medical side of your life science or digital health company. “That’s the most important,” Roop said. “They’re worth their weight in gold.” On the scientific or medical side, entrepreneurs need – at a minimum – a senior and a junior adviser, he said.
The senior adviser should be “the biggest name in the field that you can get access to,” Roop said. These advisers are typically working in the administrative end of the field, he said, doing speaking engagements or editing a journal, rather than working in a clinic or operating room. Their role is to know what you’re working on and be ready to answer an email or phone call from a potential investor, Roop said. They likely won’t have much more time than that to devote to you and your business, he added. The junior adviser is more hands-on, Roop said, helping with product development, for instance. This person is likely able to give you an hour on the phone within a week, he said, and can help with testing.
The role of a scientific/medical advisory board isn’t to tell you about the literature or the clinical situation, Franano said. Instead, they’re important to serve as opinion leaders who can talk to venture capital firms and other funders about your technology. “Those calls were magical for us,” he said.
Mentors differ from advisory boards in that they help the entrepreneur in particular, Hill said. These should be people who can guide the entrepreneur as he and his business grow, she said, and can give advice on skill sets the entrepreneur lacks. “It’s the ongoing conversation that helps advance you further,” Hill said.
Clapp summed up the role of mentors this way: “Is this a great idea by a great team solving a meaningful problem with a real business model?” he said. “If they’re not helping you with one of those four things, if they’re not fundamentally the best in one of those four things, they’re the wrong people to be working with and it’s OK to say, ‘I want to upgrade my mentor.’”
It’s common for early-stage startups, especially in the medical technology sector, to identify successful serial entrepreneurs and approach them for mentorship. As these companies struggle to gain early funding, it’s these mentors who often become angel investors for the business.
From government and foundation grants to angel investors to strategics, funders should be aligned with your vision and support your company’s leadership team, Hill said. (Strategics are industry players that put funds together to invest in early-stage companies. These investments might represent in-licensing or acquisition opportunities, although that’s not always the case.) In the life sciences, many investors have deep industry experience before they go into a venture, she said, so that’s an area where early-stage entrepreneurs can get a lot of benefit from investors. It’s a good idea to talk with other companies the investor has funded before agreeing to work with them, Hill said, and be wary of investors who try to take control of your company.
Consider whom you’re pitching before making the presentation, Clapp said. Entrepreneurs should do their due diligence regarding why they’re pitching to a particular investor and should know what’s in that investor’s portfolio. A therapeutics company should only present to funders who have invested in other companies in that sector. You may want to avoid an investor, though, who has a direct competitor in its portfolio (they may only take the meeting for competitive intelligence).
Don’t be afraid to approach large venture capital firms, even early on, Roop said. VCs have insight into a broad spectrum of technology and can offer rapid guidance, such as whether you should approach a smaller VC or prove basic science before talking with more investors, he said. “They don’t have time to steal anyone’s ideas,” Roop said. “They’ll give you that rapid feedback and that’s probably all the time they’ll spend on it.”
It makes sense for an entrepreneur to develop a friendship with someone in the VC world, Roop said. “Venture capitalists are super clubby,” he said. “They don’t deal well with cold calls.” Roop met his friend in VC through connections. “We have this overlapping network and we became friends,” he said. But even if you don’t have venture capitalists in your network, Roop added, you can increase your chances of befriending one by providing them value for free.
How to find the best people
The best players for your business depend on who you are as an entrepreneur, Franano said. “Every person has certain strengths and weaknesses,” he said. “You have to understand yourself and what you need. If you’re an optimistic person, you need a pessimistic person. If you’re good in science, you need someone on the team who is good in finance. You need all the pieces in place.”
Considering your current relationships is a good place to start when seeking out the players to include in your entrepreneurial orbit, Roop said. “The first two people we worked with were people we had personal relationships with,” he said. “The doors open much easier.” Drug discovery and development is an experience-heavy field, said Sofie Qiao of LINK Pharmaceuticals at the Life Science Ventures Summit. “There are people around who have such experience, 20 to 30 years of experience,” she said. “They’re interested only if they think this idea will work and if they can work with you. Those are the only two criteria.”
Passion is important in the players, Hill said, but so is commitment. Look for players who can handle setbacks. Experience shouldn’t be overstated, Clapp said. “Gaining experience through building your team is important, but don’t confuse experience with getting someone smarter than [you],” he said. “Experience is the past. Innovation is the future.”
Word of mouth is the best way to find people, Hill said. Once you start hearing the same name over and over again, she said, you know you’ve done your due diligence. That person might not be the panacea for your business, Hill added, but could be one or two degrees of separation from the person who is.
It’s painful starting a medical device company from the ground up, Roop said, and working with people you don’t like can make the process even more difficult. Look for players you enjoy being around, he said. “There are certain areas where you might be willing to make some concessions,” Roop said. “You don’t have to be best buddies with your corporate lawyer.” But your relationships with your IP attorney and your junior science/medical adviser are more intimate. “It’s nice to have someone you’re friendly with,” Roop said.
When to make a change
The players in an entrepreneur’s orbit aren’t likely to remain static over the long term. Entrepreneurs should step back after every major goal, Hill said, and ask themselves whether the current players are the same people to help them achieve their next milestone. The people who can help you establish basic science, for instance, might not be the same group to push you through an early funding round. On an advisory board, Hill said, people tend to offer a two- to three-year commitment before being ready to move on to other ventures.
While your business advisory board will likely change when investors demand you create a formal board, Roop said, the process for changing your scientific/medical advisory board is less straightforward. Entrepreneurs will likely need new medical advisers when they start commercializing their technology or are ready to get in front of potential buyers, he said. “You’re going to need access to the medical advisers who are also the medical advisers to the companies that might buy you,” Roop said. “You can use that [person] to help you get an introduction.”
But when it’s time for a change, it’s important to be sensitive to the feelings of your medical advisers, Roop added, especially those who helped your company achieve growth and success. “Word gets around,” he said.