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The 3rd AnnualAmerican Chemical SocietyEntrepreneurial Summit

September 17-18, 2015#ACSERCsummit

@ACSERCNational Education Association Auditorium

1201 16th Street, NW, Washington, DC 20036

CONFERENCE PROCEEDINGS

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INTRODUCTION

The American Chemical Society’s Entrepreneurial Resources Center offers

a variety of services and resources to aspiring chemistry innovators,

including its annual Entrepreneurial Summit. At the 3rd Annual ACS

Entrepreneurial Summit on September 17th & 18th, 196 attendees gained

a greater understanding of how to translate chemistry ideas into successful

technologies, products, and services. Attendees came from a diverse

array of backgrounds, including the research, corporate, entrepreneurial,

investment, government, and nonprofit communities.

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DAY ONEFollowing opening remarks from ACS Innovation Counsel Kenneth Polk, ACS President, Dr. Diane Grob Schmidt and ACS Executive Director & CEO, Dr. Thomas Connelly, attendees heard a keynote address from Rita Gunther McGrath, a professor in executive education at Columbia Business School. McGrath’s talk was themed “An Entrepreneurial Mindset is Not Optional.” After a networking lunch sponsored by Wiley Rein LLP, Dr. Connelly himself delivered his own keynote on “Core Concepts for Successful Innovation in Chemistry.”

In addition, the summit featured its first-ever, day-long segment of “TED-like” talks as Corporate Spotlights. Interspersed throughout the first day, talks were given by nine industry leaders each about their companies’ innovation processes and technology needs and how they work with entrepreneurs. Collectively, these sessions on the summit’s first day sought to inform and empower aspiring chemical entrepreneurs on ways to be more successful in partnering with industry.

The Theory Behind a Smart Entrepreneurial Mindset

In her keynote remarks, McGrath delivered a message that centered on the importance of smart entrepreneurial thinking in successfully bringing new technologies to the marketplace. It’s not as straightforward a concept as it once was, she suggested. Traditionally, entrepreneurs used a “build it and they will come” approach, she said.

Not anymore, McGrath suggested, as competition can be much fiercer these days in today’s highly globalized, digital age. “I think we need a different mindset for thinking about what we do, how we plan, how we connect to customers,” McGrath said.

That’s where “discovery-driven planning” comes in, McGrath said. In discovery-driven planning, an entrepreneur takes a highly iterative, multistep approach to planning how to bring a new product or service to the marketplace.

The first step involves coming up with at least a rough image of what success might entail in terms of profits. With that in hand, the next step involves examining how similar types of businesses work in order to set benchmarks for potential revenues, market share, costs, and other business considerations. Next, given all these conditions, the entrepreneur can think of how the business’s operations would have to work.

In the course of planning, entrepreneurs must address uncertainties by making assumptions, McGrath said. Entrepreneurs should document these assumptions and revisit them from time to time. A key undoing for several high-profile failed innovations, McGrath said, was that managers failed to revisit and revise their assumptions.

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To reduce risk associated with the uncertainty, entrepreneurs can also set “checkpoints” in which they periodically test and retest their assumptions before deciding whether they should invest more money or advance to the next step in planning, McGrath said.

McGrath walked the audience through some examples of where discovery-driven planning would work in the real world. In the most prominent example, she recounted the story of a California toy store, known as G. Willikers, whose entrepreneurs had initially envisioned the business as focused on selling toys.

That changed after they adopted discovery-driven planning with help from McGrath. They realized that a store that sells toys alone might not work well, at least in this case. Instead, after benchmarking against companies like Build-A-Bear Workshop, G. Willikers decided to also sell experiences between parents and their children. G. Willikers incorporated experiences such as birthday parties into the business to provide additional revenue. After opening in 2006, the store is thriving today, McGrath said.

In concluding, McGrath stressed the scientific, hypothesis-driven nature of discovery-driven planning. Along the way, McGrath said, entrepreneurs should prepare to be wrong about some of their ideas and assumptions—and that it’s OK to be wrong, just as it’s OK to be wrong in the lab, she suggested. “You want to be wrong on purpose,” she said, in order to improve your product or service’s business prospects.

Translating Theory to Practice: Smart Ideas for InnovationWhereas McGrath’s keynote touched on the theoretical, Connelly’s keynote offered a range of tips and concepts on how to apply entrepreneurial to a chemistry-related innovation process. Despite the difference in approach, a common theme between the two keynotes emerged early in Connelly’s: The key to successful innovation is more than the development of a new technology.

A scientist could invent a great technology, but “the role of entrepreneur is to make that all work,” he said. Therein lies the distinction between innovation and invention. “The central goal of all innovation is to provide a solution to the marketplace,” Connelly said. That idea holds true regardless of whether the innovation involves a brand-new technology, improving on an existing technology, or becoming more efficient at delivering that product (“efficiency-related innovation”), he said.

Connelly agreed with McGrath that the paradigm of how to innovate has changed. “In the old days, industry created a product that the customer wanted, shipped it to them, and got back some money,” he said. “However, in the last decade or two, that model has really broken down.” Today, entrepreneurs must engage in a very iterative, hypothesis-driven approach to innovating, he said, one that involves reducing, but not necessarily eliminating, uncertainties as they arise.

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Entrepreneurs also would benefit from being forward-looking. “It’s not just about where the market is today, but where the market is heading…what technology we have today, and what technology we believe can develop,” he said.

Connelly offered three “innovation essentials” for entrepreneurs to keep in mind. First, entrepreneurs shouldn’t underestimate the importance of assessing the marketplace, especially beyond people they already know. A key innovation failure involves not gauging whether consumers value the entrepreneur’s technology or service, he said.

Second, entrepreneurs would benefit from taking intellectual property seriously, even if they don’t know if their new technology will ultimately pan out; patents can serve as a major part of what an entrepreneur is selling to investors, he suggested.

Finally, he stressed that entrepreneurs must establish the credibility of their business idea and their team to potential investors—“without that, the money is not going to flow.”

Industry Leaders Make Their Reverse Pitches: Corporate Spotlights

This year’s summit featured a new addition to the lineup in the form of “TED-like” talks as Corporate Spotlights. Nine industry leaders from diverse backgrounds explained how their companies can help aspiring entrepreneurs and how entrepreneurs help them in return. The ways in which these companies collaborate with entrepreneurs are myriad, ranging from simple acquisitions and licensing agreements to venture capital financing to “company co-creation.”

Companies such as The Sherwin-Williams Co. and The Dow Chemical Co. often have divisions devoted to scouting for and forming partnerships with outside entrepreneurs, universities, labs and government agencies. These companies provide all sorts of resources to entrepreneurs through such collaborations. For example, Dow can offer the entrepreneurs it partners with anything from marketing intelligence to R&D and manufacturing support, according to Doug White, director of Dow Ventures and Business Development.

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The benefits to entrepreneurs flow back to the companies. One example of this mutual benefit comes from Eli Lilly & Co., a pharmaceutical company based in Indianapolis, Indiana. The company’s Open Innovation Drug Discovery online platform offers outside scientists several of the company’s scientific tools to screen compounds for potential use as drugs; in the process, those scientists maintain intellectual property rights and ownership of the data. But in exchange, the company has first rights to negotiate with scientists for access to the data for commercialization purposes, said Saba Husain of Eli Lilly & Co. As another example, Sherwin-Williams has a proof-of-concept laboratory for testing ideas and chemistries suggested by people outside the company. “If we see that it might answer one of our problems, we’ll take it in,” said Mike Cameron, program manager for external technology at Sherwin-Williams.

Many presenters offered a common message to entrepreneurs in the audience: Don’t be discouraged if a certain company declines to make a deal with you. Sometimes a deal is in neither side’s interest and other potential willing partners are out there, they said. “If they’re not that interested at the moment, ask for someone who might,” said Wael Safi of Proctor & Gamble, a consumer-products company based in Cincinnati, Ohio. Above all, said John Homoelle, director of new technology and regulatory affairs at Michelman: “Don’t lose your passion.”

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DAY TWOOn the second day of the summit, a series of panel discussions covering various facets of the innovation process gave chemistry entrepreneurs practical ideas on how to turn the inspiration they received on the first day into successful innovation.

Customer & Market Development Panel

Assessing the marketplace and discovering what consumers want is easier said than done. That’s where I-CORPS—a National Science Foundation program that seeks to take ideas from the lab to the market—could come in handy. In I-CORPS, NSF-funded researchers get a crash course on how to gauge customers’ interests and wants, after which they are sent into the field with funding to do that market evaluation.

What started in 2010 as a product of economic stimulus legislation has blossomed, and its funding has multiplied, said Anita La Salle, I-CORPS program director. “In a nutshell, it has been working,” La Salle said.

The concept behind I-CORPS is also being used in similar regional programs geared toward non-NSF-funded researchers, and university entrepreneurship courses are drawing on its curriculum.

Business Value Proposition Development Panel

During the session, panelists exhorted entrepreneurs not to forget about the importance of the developing a strong value proposition. Although scientists’ natural inclination is to focus on what their technology is capable of, that’s not the most important factor in determining its value. Dan Daly, director of The Alabama Innovation & Mentoring of Entrepreneur Center, said that the key question is, “Will it satisfy the customer?”

What goes into a good value proposition? As ACS’s Polk explained, a wide range of factors, from the entrepreneurs’ market strategy to their intellectual property strategy and portfolio to their management team to their advisors and board of directors.

Phillip Badger, CEO of Renewable Oil International in Maryland, noted that ACS’s Entrepreneurial Resource Center offers a program, known as Tiger Teams, to help entrepreneurs fine-tune their value propositions. In this program, entrepreneurs present their business idea to a number of panelists, who offer feedback on how to improve the value proposition.

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Investor Relationship & Pitch Development Panel

Not only is your value proposition itself important, so is how you interact with investors and pitch that value proposition to them. Investors on the panel offered insights on how to forge good investor relationships and make solid pitches to them.

First and foremost, panelists said, entrepreneurs should do their homework on investors they’re pitching, whether they’re angel investors or venture capitalists. Doing so doesn’t just verify that the investors might have interest in the entrepreneurs’ ideas. It’s also for the sake of due diligence. “You have to understand you have to do as much due diligence on the investor as they do on you,” said John May, managing partner with New Vantage Group.

Lex McCusker, director of George Washington University’s New Venture Competition, said that entrepreneurs face something of a double battle. Early in a pitch, they must excite the investors in the room. If they get beyond that stage, entrepreneurs have to show that they’ve done their homework. Investors will try to gauge businesses’ weaknesses to determine how risky of an investment they might be. McCusker advises entrepreneurs to be honest and transparent. For instance, it’s okay for an entrepreneur to answer a tough question by saying “I don’t know.”

“If an investor gets a whiff that you’re not 100% honest and upfront, you’re gone,” he said. May echoed McCusker, saying simply: “Disclose, disclose, disclose.”

ACS Divisions & Collaborative Organizations Spotlight

Following a networking lunch sponsored by the New Jersey Innovation Institute, attendees heard from representatives of various ACS divisions and outside organizations that offer resources and assistance to chemistry entrepreneurs. They included:

• Gianna Arnold, ACS Mid Atlantic Regional Meeting

• Krista E. Bianco, chair of ACS’s Chemistry & the Law Division

• Dan Daly, former chair of ACS’s Business Development & Management Division

• Talitha Hampton-Mayo, president of the National Organization for the Professional Advancement of Black Chemists & Chemical Engineers

• Douglas Hausner, chair of the Younger Chemists Committee

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ACS Entrepreneur Spotlight

To wrap up the second day, attendees heard from four energetic entrepreneurs who have sought to bring a new product or technology from the lab into the marketplace.

• Jamie Bacher, founder and CEO of Pareto Biotechnologies, told the audience about his company’s efforts to develop bio-based designer molecules, amid consumer concerns about sustainability and food additive safety.

• Steven Isaacman, founder and CEO of PHD Biosciences, discussed his company’s work on a potential new therapeutic for an aggressive and rare form of breast cancer.

• Darcy Prather, president of Kalion Inc., remarked on his company’s effort to use engineered bacteria as a renewable source of chemical building blocks.

• Alon Singer, founder and CEO of HelixBind Inc., described his company’s work on a quick, sensitive diagnostic tool for identifying bacterial infections in blood.

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KEY TAKEAWAYSAfter two days of keynotes, presentations, panel discussions and networking lunches, attendees at the third-annual ACS Entrepreneurial Summit came away with a range of lessons and messages about how to assess what customers want, successfully pitch investors, develop a good “value proposition,” and, more generally, operate as an smart entrepreneur. In particular:

• Partnerships with companies are just as much about benefiting entrepreneurs as they are aboutbenefiting the companies themselves.

• A good technology alone does not necessarily mean a good value proposition. Instead, a crucialfactor for a good value proposition is how much the consumer will benefit.

• In the course of finding investors (who not only do their due diligence on entrepreneurs),entrepreneurs benefit if they do due diligence on those investors.

• ACS, large companies, government agencies, and other institutions offer a range of resources andpartnerships to support entrepreneurs.

• The idea that “if you build it, they will buy it” doesn’t hold as true anymore in a global, digitalworld full of uncertainty and high competition. Entrepreneurs can benefit from a hypothesis-driven, iterative approach to planning their ventures.

Written by Puneet Kollipara