Episode 156: Answering YOUR Questions Part 2 – Founding and Building a Biotech Startup Company

Every technology is not a product, and every product is not a company.

Today, we're answering more listener-submitted questions on this episode of Bio from the Bayou.

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Welcome back to Bio from the Bayou. I'm Ian McLaughlin, the producer of Bio from the Bayou, and I'm here with James and Elaine for our second episode on listener-submitted questions. Today we're talking about how to actually start a company, and should this be a company is the big question. So I guess starting off then, y'all, what is the biggest mistake first-time founders make?

Hey, multi-first-time founder, do you know thyself?

Are you, are you talking to me?

I'm talking to you.

Oh, I mean, it's an easy one. I think that everyone knows is don't fall in love with your baby. As a parent, you should, but for a founder's perspective, you gotta be able to separate your love on occasion and take those, what we call happy ears off every now and then. And, and it's really hard, especially if it's yours and you made it. Uh, it's hard to hear feedback. So yeah, falling in love.

Fall in love with the problem, right? The problem, not the solution.

Oh, that's so much better. Oh, we'll have to get the editing in for that one.

No, that's good. It's not so much better. I'm just— I built on what you said.

Ooh, that's good. Yeah. Find a good teammate. Like, just like James.

Well, no, I think when you have that problem is like, you know, ask who actually has the problem. It's often not who you think it is. Is the problem painful? How do they solve it now? Do they have ideas on how to solve it? And would anyone pay for it? So basically looking at the I-CORE questions.

Yeah, it's true. I mean, I-COREs are I-CORE for a reason. I mean, they, they really force you to think outside of yourself and your solution. And is your solution just looking for a problem, which can frankly be a lot of the case. So, I mean—

Can I ask what the I-CORE questions are?

Oh, there's so many. They really push you into this concept of, and this is from, it started kind of from Steve Blank. He has a great book about this, but the, uh, a series of questions around, you know, understanding the business model and the different ecosystem players, and then really going and finding ways to ask the question if anyone cares and would anyone pay for it. It's a hard question to ask because people inherently want to be nice and not hurt your feelings. Or the most part.

That's why you have to ask a lot of people so that you get some people who are real.

Yeah, no, absolutely.

So I guess the mistake is taking the first or second yes as a yes without checking. Oh, there are going to be more than 2 clients or customers for this. Like, ask lots.

Ask lots of people, find ways to ask it in a different way too, because you put your bias on it. You ask questions. I mean, do you like my product is not a good way to ask the question. So there's a little bit of a science to it. And I like to think of those questions as science, as you're putting forth a hypothesis that people like your stuff. Um, now you have to go and prove it wrong. Um, and finding, and you have to do it in the most I mean, you, you wanna have passion, but you wanna be, you wanna not put your bias in when you're trying to find out those answers.

So. Yeah. And then how do you know whether an idea should become a company at all in the first place?

Will someone pay for it?

Yeah.

The money. I mean, seriously, in a lot of cases, is there a market? Will someone pay for it? It's huge.

Yeah. And knowing whether some, I mean, and people are inherently just that we, we like doing what we currently do. And so it's also whether someone would actually stop what they're doing, 'cause they're solving the problem somehow, some way. They may not be solving it in a great way, but they're, they're, they're making do. Are they willing to change how they're currently operating to actually buy your product and then implement your product? It's not just about the buying, it's whether they actually use it. And we see this constantly with physicians as a customer. Physicians have their way of doing things. And you really have to prove to them that you're not only valuable, but that it won't be too— it would be worth their time to stop what they're currently doing and change. That's hard. That's really, really hard.

So. I guess what should someone do if they want to become an entrepreneur, but don't know where to start?

Ooh, James, I think that you should answer that question because you are all about helping entrepreneurs and you've done that most of your career.

But I do think it comes down to talking with, talking with constant curiosity about the problems other entrepreneurs have experienced. You know, make sure this is for you. If you don't know where to start, you know, talk to folks who have gone down the path. Um, it's a hard path and it's a lonely path, especially as a CEO of, you know, in general, but as a CEO and entrepreneur, often it is just you on your team as you start and not many others. And I think, you know, you do need to take a look at that and decide, you know, Even if you want to do it, is what you have the best way to do it? Or should it be a licensing partnership or some other model? And I think too many people don't take time to ask that question. And it doesn't mean they won't be an entrepreneur at some point, but is this the right moment versus them just being in love with what they saw about some entrepreneur in a movie or on a TV show, which is very different than real life. Elaine, you've lived it. So tell me, is that accurate? Is that fair? I mean, I see it from the outside, but—

I would never, and I, I could not imagine that I would have been an entrepreneur. I think it would, I mean, that's laughable even probably 5 years ago. I didn't start out as a founder. I started out as someone who worked at the bench of a startup company. And then, I mean, I kind of worked around the ecosystem. I've been on all sides of the startup question. I've been on the investment side, the bench, the operations, and then the C-suite, and got enough experience to, and saw a lot of failures, to be honest. Where I could go, you know what, I think I know what not to do. And I also had to build the dataset that like, oh, if they can do it, I can do it, um, a little bit too. So I didn't start out by coming, becoming a, a founder or an entrepreneur. I worked with a startup, I participated in accelerators, I created accelerators, I helped people with SBIR grants. I mean, there's a lot of different ways that you can kind of figure out, is this the right path for me? By being on someone else's path for a little bit and learning the ropes and seeing if it's for you. Because if you, I mean, if you read all People survey, they, they say like, here's the, here's the typical personality of an entrepreneur. I'm not that person. I am not a risk. I'm not a risky person. They're always like the risk taker. Mm-mm. That's not me. But now I've been doing it long enough that it isn't a risk to me anymore.

So.

And sometimes you, you need somebody to help you. So how do you find the right co-founder if you're looking for somebody to help you start a company?

Ooh. That's a good question because that's, I have seen even recently, like, I mean, you think you're going down a business path that you're gonna be together forever, just like a marriage. You think this is, this is it forever and ever and ever. You have to plan like there's a prenup in place and that you are not always going to agree and that you don't, you're not always going to like each other and plan for that. I mean, I also have a business where I am married to my co-founder. Uh, and I am also, you know, my coworkers are my best friends since the 7th grade, and we had to put in those safeguards in the first place of understanding like business is business and personal is personal and how to, how to address that, but then also how to safeguard our business from those personal issues.

Mm-hmm.

The other thing is the people that I tend to pick going into business are people that I trust, and I've seen them in good situations. Which is great. Seeing people at their best is wonderful. I've also seen them at their worst. Startups are stressful. It is really hard and you're going to be discouraged and knowing how people respond to those hard situations, I think is the, the biggest key for me. So.

And this is why Elaine and I are such tight friends, cuz neither one of us has a worst. Oh my God.

Yeah, no. Yeah.

He was like, that is not true. In all seriousness, I think, you know, because a lot of this, you know, given where the questions are coming from, I'd say being a great lab mate does not mean you're great business partners. And I've seen companies spin out of labs where people are co-founders and down the line, they're having to figure out, okay, this is not working because one of us is doing all the work and the other one's not. And while they may still stay part of the company, maybe their role needs to change. And how do you do that and navigate? Where maybe you had an equal say to where one is now your boss. There's lots of things like that. And sometimes you can navigate that and sometimes you can't and someone has to exit and that's never comfortable. But, you know, it is, it is the business first and the relationship is separate when it comes to these things. And it's, it's hard to keep those things separate, as Elaine knows with the business that she opened during the pandemic.

And Having that conversation at the beginning is the key part of like, do you know, if, if you want to be this role, if that changes, what do you expect? You know, and if, like you said, if it starts from a science lab, there may be a point where you just want to stay the science person and being a CEO or C-suite or even a VP isn't for you and you want to go back to really directing the science. It's okay to step back. And that does mean your equity is going to change. But that doesn't mean that you can't still be part of the company. I think recognizing that earlier or sooner than later, I think is important, but you have to have those conversations of what happens when things go wrong. It's a prenup for business. I think it's, I think it makes a lot of sense. It doesn't mean that you're planning for failure. And that's when you look at agreements, 'cause you're gonna get into legal agreements. And that's the other piece of it. I mean, there is actual prenups when it comes to, you know, starting a business together. So laying it out is, it's just. Makes business sense.

Yeah. But then on the positive side, I think you need somebody who is as passionate about it as you are. You wanna be all driven by that mission. Startups are hard. You may not make money for a long time, and you got, you gotta believe in the dream while you're navigating the difficult things and, and putting the contracts in place with relationships. You also gotta have passion. Yeah. If you don't got the passion, maybe don't do a startup.

And compliment each other too. I mean, not like, like tell each other you're pretty. I mean, like—

I tell you you're pretty all the time.

Well, you better. That's why we're friends. Um, it's part of the requirement.

And I tell Ian he's handsome.

Yes, he is.

Why, thank you.

Um, no, I think that, you know, knowing like your skillset, the Venn diagram, you have to find people who are not just like you because someone's gonna be good at raising money. Someone's gonna be good at counting the money and you, you know, surrounding yourself with not little clones of yourself. Is really key. I am not good at selling wine. I am good at the business side, and social media is not my thing. So finding people as part of your team that cover those bases, I think, is very, very key.

Yep.

So as you're building a company, when should a founder start talking to customers, start talking to investors or potential partners? What stage in building a company?

Before they start one. Yeah.

Well, customers, this, this gets back to a bit of our first question, like, You should have talked to your customers before you decided this is for sure a thing, because what if there are no customers and you've done all this work?

Absolutely. I mean, you could spend a lot of money, I mean, going down this path just by setting up an LLC. I mean, if you're nervous about doing it the first time and you find a company that can help you set up your LLC, which I don't recommend, anyone can do that. You can spend money on patents. You can spend a lot of money and time and not really understand whether that's something that makes sense as a business. So the first thing I do is my own diligence. I mean, I'm lucky that I'm looking for technologies versus I'm not in the lab creating my own technologies. So I go through probably a 6-month diligence process of whether this makes sense to become a company by having conversation with my customers, which in my case is going to be big pharma and potential investors, and asking them those questions about, is this a problem that needs to be solved? And is this the way that we should solve it? That honestly makes it easier to raise money. Because if you say that, you know, Merck is the one that asks us these questions that we're solving with this round of capital, that makes it so much easier for them to wanna write a check.

Yeah.

Being able to provide, here's the list. And we do that in our diligence process, doing it currently. Like, you wanna hear like how our customers feel about it? Here's our list of direct quotes from them that you can see.

Love transparency, but also love that they can see that piece of it and know that this is real and not just, Well, and I think to be clear in that, that you're asking for 10 to 15 minutes to learn and that you're not asking for anything from them but advice, information. You're not asking for dollars. You're not asking for them to buy something. It is literally discovery at that point.

Yep.

And most people are happy to help out. Even investors will hop on and do that. Not all, but you'll get some if you're honest and open and say, hey, I'm not here to pitch you. I'm here to get insight on your knowledge of this sector because you're one of the sector experts. And to roll that in. And then you're also building a relationship that maybe enables you to ask for money down the line when you're ready to do it.

Yeah, exactly. I mean, this is something I work with professors here. I also work with WashU of, okay, great. We did this yesterday with a professor of like, let's see who's in this space and let's go get some feedback from them. Step 1, let's not worry about LLCs and C corps. So.

Like you were saying, like when someone makes a company, it can often be seen as their baby and they overlook certain aspects. What do founders often fail to see about their own companies?

I think James said it. It was that, that they hear a yes and go, yep, it's, that means they love it.

It's the best. Yeah.

You have to think about metrics that matter and you have to define that before you go and get feedback because you're gonna switch it in your head. So define like what matters. If you have a website, it's not how many people go to your website, it's whether they Actually put stuff in the cart and buy it and, and understanding what, what is a meaningful milestone for you. You know, an easy one is making money, but then is it scalable, repeatable, et cetera, et cetera. So I think that you have to, before you go into a business, what are the metrics that are going to be the most meaningful? And then you won't get deterred by the, oh, this is lovely. And then they never call you again, you know, like, like high school. It's fine. Mm-hmm.

A lot of these questions are coming from the nuclear community, who are people who are in the lab. They've lived their science for, you know, anywhere from 4 to 7 years. This is something they're passionate about. They can often be too close to it to recognize flaws, weaknesses, those kinds of things. And just because it moved forward in the lab, that kind of activity and scientific pace is not the same as business progress. You can't conflate the two.

Yeah. That was actually my first experience as a quote entrepreneur. I was, I created something in grad school cuz I was lazy and something that took me 2 weeks, I wanted to make faster and, and easier on myself, which ended up being a technology. Um, and I thought because it helped me, obviously it's gonna help other people. Turns out not so much. Not only was it that not everyone needed it, Those that could have used it, the amount of time and money it would spend to switch over to my technology didn't make financial sense. It didn't make sense to invest resources, personnel, money, infrastructure to take something down from 2 weeks to 2 days. And the people that actually did the 2 weeks to 2 days, they got paid regardless. They didn't care that it took them that long. So they weren't actually motivated to— they got paid regardless. So they did not care. Um, and that was a hard Very first lesson, I was like, "Oh, good job on this patent." That means I think I got $500 for it though, so that was nice. That's something going for me. Yeah, hundredaire living that life, money gun.

I guess I think this is a good question to wrap it up with. If someone is sitting on an idea that they maybe want to turn into a company, what is the first thing that they should do? What what is their starting point?

Ooh, James, I mean, since you're in the business of helping entrepreneurs, why don't you start?

We're later stage here at Connect, but it would have helped forever. I mean, it's, it's that, you know, go out and don't just talk to 10 people, talk to 100 potential customers, talk to people about your idea. And it has to be enough because, you know, 1, 3, 5, 10, that's not enough to really find out. 100, you're starting to get to a number and it's going to take some work. It's going to take you a few weeks. It's going to take a lot of hustle to get people to hop on the phone with you. And do it on the phone. Don't just do a survey, but hop on because you never know where something they may say may lead you to dig a little deeper and may help transform your entire company into something that is actually needed, where a written answer is not going to kind of give you that, which again is, I think, why the, the at least Zoom, Zoom to face, but face to face is always really valuable just because people interact differently and, and share differently and put more attention into it when It's human to human.

They share more, honestly. I mean, you have to learn the art of asking good questions. There's a couple of books on those and I'll share those. We'll put those in the show notes.

That's a really good point.

Because honestly, you have to ask the question the right way. And then you also have to allow for science because— or science, yeah, silence, also science, but mainly silence of giving people an opportunity to feel that because people don't like to feel— they don't like the silence. And so, they'll fill it, and you might learn all kinds of things. And James, you and I have done this even with when we moderate. We don't just always create a list of questions, we'll create a topic map, and that prevents us from sounding like a laundry list of questions and creating an actual conversation where you can get really good feedback. And I also think every time you have a conversation, think through what you wanna learn from them. And if you walked away from that conversation and you learned something valuable that gave you confidence or gave you confidence that you shouldn't start it, what did they say?

I think that's true. All those things are great. And on top of getting that information, you know, as Elaine would say, write your process, your project management thing, and what's next in your step. And don't just think out next week, think out 1 year, 3 years, 5 years, kind of have that plan and know it's going to deviate and then you'll deviate the plan. But at least have one, because if you don't and don't have those milestones and don't have dates, you can have these zombie companies that just drag on forever. And part of that plan should be your go, no go. Like, if I haven't raised X by Y, cut and run and we're on to the next idea. Yeah.

Yeah. On to the next thing. Being a scientist starting a company, you should already have a skillset that most don't. And that is you're going to create, again, that hypothesis. You're going to determine what equals success, what data is necessary to show that you have meaningful company opportunity and defining that before you go into it. So you're not going down rabbit holes and becoming the walking dead, as we call it. And Mm-hmm. I think starting that, being a scientist, you, you have that skillset and that's amazing. And so being able to leverage that as an entrepreneur, I think is awesome. And that's where you start, start with a question, a hypothesis, prove yourself wrong, the go/no-go decision. I mean, we knew with my company, Kairos, Latin for cirrhosis, cuz it was a fatty liver disease company. If we didn't solve fibrosis, we ain't got a company. Guess what the first experiment we did? Did we solve fibrosis?

Fibrosis?

We didn't. Controls looked exactly the same. It was depressing, but we knew, we knew we couldn't dance around it. We did a lot of good things for the liver, but it wasn't enough. We shut the company down. We returned money to our investors. They trusted us enough to then invest in my next company.

So, because you did the right thing and they knew you would kill it early.

Uh-huh. And we did it fast. We did it. Fiscally responsibly, gave him back a little cash, and then lather, rinse, repeat, hopefully. Well, not repeat. Hopefully we'll help cure a disease.

Yeah. That's awesome. I guess, is there anything else y'all want to say about starting a company, going through the process of actually building a company before we wrap up?

It's hard. It's—

Yeah, it's hard. I mean, it's hard. I mean, honestly, it's hard. It's not easy. It is not for the faint of heart. If you are a person who craves stability, benefits, knowing that your paycheck is roughly the same and is going to come in on time every week, this is not for you.

Yeah. A side hustle, like, you know, go marry someone who wants to open a wine bar and then, oh, don't do that. Um, because then you have to sometimes be the one that supports them because it's hard starting a company. So it can be really hard. So. Yeah. Yeah. I don't know if that's a positive note to end it on, to be honest.

But it's a realistic note.

I mean, that's, that's a realistic note. But the other is, if you're passionate about it and willing to take that on, go for it because the world has been transformed by people with vision and dreams. And there are people alive in the world because of people who have this dream and this hope. There are whole new technologies. I mean, we walk around with, with computers that used to fill entire buildings in our pockets, which Some might argue is not the benefit, some would argue is, but these things happen because of people with dreams who wanted to start a company and were willing to take the risk. And so the risk can, you know, the reward can absolutely be worth it if you're passionate. And so there's our positive endings. Do you like that?

Oh, I like that.

Actually, that company was a good lesson on my passion too, because I was not as passionate about fatty liver disease and my next company, I was much You know, that's a really good piece of advice, James. I wanted to find something that I lived and breathed, and I have the pictures of the patients in front of my computer. And so that's, 'cause that's what keeps you going at the end of the day.

Well, amazing. Thank y'all so much for answering these questions. And I, I, if anybody wants to submit any listener questions, um, in the future, we'd love to do more episodes of these. Feel free to email me at imcLaughlin@ tulane.edu. I'll put that in the show notes as well. Thank you all so much. Check out our show notes for all of our contact information and informational links, everything we talked about in the episode. And thank you once again for joining us for Bio from the Bayou.

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