Luke. you might want to consider the fact (or at least my view) that the concept and the drive toward “innovation” has seemingly disappeared from the national discussion on to how get the economy going—hence the decline in start-ups. Nor do you hear any voices on how to development products (drugs) more efficiently. The biotech business model hasn’t changed much so you still operate like drilling for oil—all very risky and with fewer risk-takers.

Dan—I think people have been thinking much harder the past couple years about new biotech business models, i.e. ways to reduce the time/expense/risk equation of drug development. No one can point to a new winning formula just yet. I personally think we’ll need a technological breakthrough, and a big change in regulatory policy, to really solve the drug development productivity problem.

Lwilson—I tried to be very charitable in my screening of the founders of these startups. Basically if you have an advanced science degree and didn’t appear to be a convicted felon, I was willing to give these enterprises the benefit of the doubt, assuming they are sincerely trying to build real companies. I’m sure the list would be much smaller if I limited it to people with proven track records.

Dave—Tesaro went public in 2012, but it was founded in 2010, so that’s why it didn’t get counted in this analysis.

Luke – this was a nice article to write and as one of the listed companies, it’s great to get the acknowledgement of how incredibly tough it is out there. The bar has become really high the past few years – it took us nearly 4 years to raise money for ImaginAb.

But I have three comments to make…

Firstly, first-time financings are tough full stop, not just because of the nature of the industry at the moment, but the fact that many concepts need to go through a pain process to reach maturation. Ours probably took longer than most – a combination of a complex product and maybe … just maybe … a bit of time was required for the CEO (i.e. yours truly) to hit his stride and get his act together.

Don’t we all look back at the lessons we learned… and the dumb things we did!?

Secondly, there is no doubt that early stage revenue makes a difference. I know that this was a characteristic of several of the companies on the list, including us. I actually think that it’s probably reasonable for investors to go after companies that are starting to make money, even if the net burn is in the red. That’s because there are a boatload of ways to monetize your idea, even early on, and without giving away the family jewels. I think we are going to see this more and more…

Lastly, to those reading the article and marvelling at the (kind of crappy) statistics, don’t give up hope. You have to have a good idea, you have to grow into the “shoes” of the story, and you may even need to show some early revenue. But most of all you’re going to have to stick with it long enough – so keep battling.

I can put my hand on my heart and say that the biggest lesson I learned the past 5 years was that no matter how brilliant your idea is, IP portfolio, lab that you came out of (except maybe the Langer lab), whatever … it takes THREE years to get traction with biopharma partners. That means that if early revenue is now a requirement for getting a VC round in, then it’s going to take you three years to get there.

That needs to be in the plan – both for the company and for your personal life.

Good luck everyone … and again, Luke, thanks for writing the article.

Chris Behrenbruch

CEO

ImaginAb, Inc.

The Biotech Startup Class of 2012: How many received SBIR/STTR awards? http://storify.com/steen1969/sbir-sttr