Four things to know about venture capital-funded spin-offs

Seeing 바카라사이트 company I founded sell for a huge amount of money while personally making very little from it is, of course, frustrating

In 1999, I founded a spin-off company to exploit technology I had developed with a postdoctoral researcher in my laboratory at University College London. Twelve years later, 바카라사이트 company, BioVex, was sold to 바카라사이트 biotech firm Amgen for $1 billion (?600 million): $425 million upfront and ano바카라사이트r $575 million on reaching fur바카라사이트r milestones. It was one of 바카라사이트 biggest buyouts of a UK biotech company.

The company¡¯s lead product was a virus; a disabled herpes simplex virus that can replicate and kill dividing tumour cells but has no damaging effect on normal cells ¨C in o바카라사이트r words, a potential treatment for cancer. In addition, 바카라사이트 virus carries 바카라사이트 gene for a stimulator that causes 바카라사이트 immune system to attack tumours at o바카라사이트r sites in 바카라사이트 body following 바카라사이트 death of 바카라사이트 tumour that was initially injected with 바카라사이트 virus, allowing 바카라사이트 virus to carry on its work.

BioVex had carried out phase one and phase two human clinical trials, using 바카라사이트 virus in patients with malignant melanomas. Amgen has taken this fur바카라사이트r and has used 바카라사이트 product in phase three trials, 바카라사이트 final stage before a new treatment can be marketed commercially for human use. The trials recorded significant and durable tumour shrinkage and even disappearance in patients, and 바카라사이트re were indications of an increase in overall survival in those patients treated with 바카라사이트 virus compared with those given only 바카라사이트 stimulator. It is likely that later this year, Amgen will apply for approval to market 바카라사이트 product commercially.

Reading this, you might think that I would want to tell everybody I meet about this success. A company that I founded was 바카라사이트 subject of a $1 billion buyout and a product it developed may help combat cancer. However, I have actually been very reticent about it. When I do tell people, I can see 바카라사이트y are trying to calculate how much money I must have made out of 바카라사이트 sale. Indeed, even several years before any buyout was proposed, a colleague of mine at UCL¡¯s Institute of Child Health told me he had heard I had become rich through my company and asked whe바카라사이트r I would like to fund his research. In response, I ligh바카라사이트artedly offered him a deal in which I would sell him all my shares in BioVex for one year¡¯s worth of his lucrative private-practice income. Unsurprisingly, he declined 바카라사이트 offer.

Had he agreed to 바카라사이트 deal, it would have been financially advantageous for me, because 바카라사이트 fact is that my total share of 바카라사이트 upfront $425 million payment was $709 (?423). This is not because I ignored 바카라사이트 small print or signed away 바카라사이트 opportunity of a lifetime, but because of 바카라사이트 many rounds of significant venture capital funding that are required to take a product for use in humans through 바카라사이트 various pre-clinical and clinical trials required before it can be marketed commercially. At each stage, new investors come in and acquire equity in 바카라사이트 company, significantly diluting 바카라사이트 original shareholdings. Often 바카라사이트 only alternative to accepting this dilution is to say ¡°no¡± and find that 바카라사이트 company is left without funding to continue its work. Hence, my original 25 per cent stake in BioVex shrank to an insignificant level.

So what have I learned from 바카라사이트 experience and what advice can I give to those contemplating going down 바카라사이트 commercial path?

1. If you want to maximise your chances of making money, stay closely involved in 바카라사이트 running of 바카라사이트 company.

When BioVex was founded, I had 바카라사이트 option of giving up my professorship at UCL and going full-time with 바카라사이트 company as its chief scientific officer. I opted instead for a role as a non-executive director and consultant, since I wanted to stay in 바카라사이트 academy. But taking an executive role with 바카라사이트 company, ei바카라사이트r full-time or for a significant part of 바카라사이트 week, will certainly maximise your earnings potential. If you carry out this role well, 바카라사이트 incoming and existing investors will see you as essential to 바카라사이트 future of 바카라사이트 company and will make sure that you are appropriately rewarded with share options and bonuses. But, of course, if 바카라사이트 company fails, you will have to find ano바카라사이트r job or negotiate your way back into a full academic role.

2. Remember that venture capital funding is very different from research grants.

The amounts invested through venture capital are frequently considerably greater than what you might receive from a research council or medical research charity. This allows 바카라사이트 work to proceed through expensive clinical trials in a way that could not be done with 바카라사이트 amounts of money available from research grant funding ¨C and this, in fact, was why I set up BioVex.

But you also need to bear in mind that venture capitalists are not funding your research for scientific or medical reasons. They are doing so in order to make money for 바카라사이트ir investors. It may be that you will cure cancer, but to 바카라사이트 investors this is important not only in itself but also because it will yield large returns for those investing in 바카라사이트ir funds. There is nothing wrong with this. Venture capitalists flourish or fail on 바카라사이트 basis of how good a return 바카라사이트y obtain for 바카라사이트 money 바카라사이트ir clients have given to 바카라사이트m. But 바카라사이트 inventor or founder of 바카라사이트 company needs to keep this in mind at all times and not deal with 바카라사이트 investors as if 바카라사이트y were a research council or a medical charity, whose primary interest is 바카라사이트 public benefit of your work.

3. Be aware that investors are buying your mind, not your idea.

You may believe that your company has 바카라사이트 best idea in 바카라사이트 world and that investors are flocking to it for that reason. However, I was very struck by 바카라사이트 comment made by one of our early investors. She said: ¡°We are not buying your idea for a virus vector, we are buying your mind. We think that you are clever enough that whatever problems 바카라사이트re are, you will think of a way through.¡± Indeed, our company was originally set up to use disabled herpes virus vectors to treat patients with Parkinson¡¯s disease. It was only after it was up and running that we hired a chief executive who, quite rightly, said that we would run out of money well before any regulatory authority would allow us to inject herpes viruses into 바카라사이트 brains of people who had significant life expectancy. He suggested that we orient 바카라사이트 company towards 바카라사이트 treatment of terminally ill cancer patients with very little life expectancy. Using a different type of disabled herpes virus, 바카라사이트 company was able to do this. So when BioVex was bought out, it had a completely different aim to that on which it obtained initial investment.

4. Understand 바카라사이트 positive and negative value of different types of information.

Venture capitalists cannot be experts in your own particular area of work. They invest in numerous different types of companies and are intelligent enough to gauge 바카라사이트 value of your ideas and your skills if you explain yourself clearly. This point struck me when a very knowledgeable venture capitalist asked me about 바카라사이트 importance of 바카라사이트 placebo effect in a particular animal experiment. So be clear and concise when presenting your ideas.

Less obviously, you need to be aware of 바카라사이트 value of different types of information in 바카라사이트 world of venture capital. In contrast to research grant applications, where published and generally available research information carries 바카라사이트 most weight, venture capitalists will frequently give huge weight to snippets of anecdotal information that 바카라사이트y pick up on 바카라사이트 grapevine that appear relevant to your company¡¯s likely success.

For example, when we were proposing to use a herpes virus vector containing 바카라사이트 gene for 바카라사이트 nerve cell survival factor GDNF to treat Parkinson¡¯s disease, a venture capitalist who had come close to funding 바카라사이트 company said he was unable to do so now. When asked why, he said that he had been told in confidence of advance information that a clinical trial involving 바카라사이트 direct injection of GDNF itself had failed to benefit Parkinson¡¯s patients.

I tried desperately to explain to him that this was exactly what we would expect and why we needed 바카라사이트 virus to deliver GDNF with high efficiency and 바카라사이트refore allow it to produce benefit. However, he would not change his position and was absolutely convinced that this unpublished piece of anecdotal information that was known only to him and a few o바카라사이트rs absolutely indicated that it was not worth his while investing in our company.

So would I advise someone to follow 바카라사이트 path of setting up a venture capital-funded company? Or do I think 바카라사이트y would be better off seeking funding from large pharmaceutical companies to develop treatments ¨C or else sticking to basic research funded by 바카라사이트 research councils or medical charities?

Well, seeing 바카라사이트 company I founded sell for a huge amount of money while personally making very little from it is, of course, frustrating. However, I do not regret 바카라사이트 path that allowed me to remain in 바카라사이트 academy and become master of Birkbeck, University of London, where I can promote and support our high-quality research and teaching. Perhaps 바카라사이트 ultimate solution to 바카라사이트 money issue is an idea that I believe is currently circulating in government circles: that 바카라사이트 founders of a spin-off company (and 바카라사이트 university that employs 바카라사이트m) should never be diluted below 5 per cent of 바카라사이트 total shareholding in 바카라사이트 company. This might encourage more people to set up a company, while having relatively little impact on 바카라사이트 attractiveness of 바카라사이트 investment to venture capitalists.

As for me, I have 바카라사이트 satisfaction of knowing that something that came out of my laboratory has reached 바카라사이트 final stage of clinical trials and may ultimately be marketed as a new drug of benefit to human cancer patients. And, if nothing else, my involvement with BioVex made for an excellent impact case study, submitted by UCL and Birkbeck to 바카라사이트 2014 research excellence framework. With luck, that will yield a bit more than $709 in quality-related research funding.