How to have a good business idea (but - • I will talk about · – (nowadays means newsfeeds,...

How to have a good business idea (but -

good for whom?)

Southampton. July 2010

William Bains

[email protected]

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


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


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 ...









70


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





71


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:-





• 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:-






• 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


• and expensive tastes in holidays


• 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

[email protected]

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

How to have a good business idea (but - • I will talk about · – (nowadays means newsfeeds,...

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