Addressing the Innovation “Valley of Death:” It’s the Products, Stupid!

Opinion

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new funding model for innovation, which we call the Distributed Partnering Model. While we explain in our paper how to apply this model to advance life sciences innovation, it can also be applied to high-tech, cleantech, and other technology sectors.

This model emphasizes the importance of advancing the innovative technologies and products— instead of a model that emphasizes building individual companies around each new discovery or invention. In our model, we have identified four independent entities that work collectively to advance innovation—based on the unique assets, skill sets, cultures, and risk tolerance to be applied. Each would have a rational investment risk and reward as a specific innovation gets relayed from one business entity to the next. They are:

Discovery: A research institute that focuses on new discoveries.

Definition: A company that invests in defining the initial product(s) from the research-based discoveries in a given field of expertise.

Development: A company with responsibility for funding and advancing product development.

Delivery: A company with a significant marketing and distribution channel.

Our model is fundamentally different than previous models in that it focuses on these independent groups to collectively contribute to advancing products from research discovery to commercialization. As senior fellow Frank Douglas says in a statement issued by the Kauffman Foundation, “The model focuses on advancing products as opposed to companies. We need thousands of new products, not thousands of new companies.”

There are two key enabling elements of the proposed model: the formation of a new type of company to address the “Valley of Death” bottleneck, called a product definition company (PDC), and a more efficient use of infrastructure and product development expertise provided by professional service providers (PSP). PDCs would focus on translating a portfolio of research discoveries into an early, development stage product. These would be managed by an experienced entrepreneurial team with significant operating experience in a given field. The PDC business model would call for SELLING the product or technology assets to VCs or distribution companies after the initial product definition phase for further product development and, eventually, delivery to the market by distribution companies. Potential PDC investors would include angels, large corporations, VCs, foundations, etc., and investor focus would be on their field of interest and the expertise of the operating team.

Instead of investing in infrastructure, as was the norm for the VC start-up company model, the translational experiments to reach “proof of relevancy” would be contracted to PSPs to perform the key development activities. In this model the PSPs would become a significant force for providing expertise in a given area. Furthermore, by transferring the product development (and technology) to the PSPs, acquirers will not be dependent on the PDC management team for expertise (with perhaps the exception of the project manger). Following acquisition, the product development company could operate in a … Next Page »

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Duane J. Roth was Chief Executive Officer and board member of CONNECT, the San Diego nonprofit organization that fosters entrepreneurship by catalyzing, accelerating, and supporting technology and life sciences innovation. He founded Alliance Pharmaceutical, and was a longtime life sciences industry executive. Follow @

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