Honesty is the best policy, says Myricx's CEO, who used authentic relationships with investors to help the biotech win major funding after a pivot.
The cancer therapeutics company received £90 million in one of the largest ever Series A rounds for a European biotechnology spinout, after its small molecule drug candidate programme did not quite convince investors and it pivoted to a pioneering class of treatments known as antibody-drug conjugates (ADCs).
Dr Robin Carr, CEO of Myricx, said the Imperial and Crick spinout's successful raise was down to several factors, which included its academic credentials, support from the wider biotechnology community, and a surge of interest in ADCs, which use antibodies to more precisely deliver their cancer-killing payloads.
Creating something of real value is rare. If it's a breakthrough, by definition no one has done it before. That journey isn't straightforward. Carmine Circellii British Patient Capital
He drew special attention to his team's trusting relationships with investors, which he said put the company in a strong position to be funded for its initial pilot ADC work and its subsequent pivot away from small molecules to ADCs. "Many investors told us, 'we really like your culture – it's not common for companies to share their negative data and be so forthcoming about lessons that need to be learnt," Dr Carr said.
Dr Carr spoke in October as part of a panel of experienced founders and investors at the Imperial Founders Forum, a regular event for Imperial academics involved in spinning out their research, which in October focused on the pivot – the shift startups sometimes make to a different product or business model.
His comments reflected a consensus that positive relationships with investors are valuable for helping spinouts not only to grow but also to change direction when needed. While experts at the Founders Forum said that entrepreneurs should exercise judgement about what information to volunteer to investors and when, several emphasised the value of candour.
"You need to build trust, and have the integrity and the ownership to step forward sometimes and say, 'this wasn't a good idea'," said Dr Carmine Circelli, Investment Director at British Patient Capital, one of the firms that invested in Myricx.
This was among several lessons the panel offered from their years of accumulated expertise in commercialising deep technologies.
Talk to investors at the right time
While entrepreneurs might justifiably want to have their business plans and pitches nailed down before approaching investors, the value of this could sometimes be outweighed by the benefits of beginning to build relationships with investors early on.
"I want to know what founders are doing – they reach out through LinkedIn, Twitter, every possible channel, and I will speak to them for a few minutes," said Dr Vishal Gulati, founder and Managing Partner of Recode Ventures. "Not every conversation will lead to a funding round, but it's important that you speak about it before you reach the point there has to be a financing conversation, because your whole personality is not in that business plan."
Understand your market
It's a truism that no plan survives first contact with the enemy, and smart founders are likely to adapt their business models when they gain deeper understandings of their target markets.
Professor Thrishantha Nanayakkara from the Dyson School of Design Engineering pivoted his agritech spinout, Permia Sensing, from detecting infestations of weevil larvae in palm trees to monitoring the health of coconut plantations more broadly.
First we built something customers didn't want, then something that wouldn't scale. But then we had a better idea, and things started picking up. Professor Richard Craster Dean of the Faculty of Natural Sciences
"I went to the farms, sat under trees, talked to the farmers in their local language. Soon I realised the problem is tree health, not just the insects. This also involves fertiliser and weather conditions," he said. The company is now providing major coconut growers with a platform for monitoring tree health using a variety of satellite and sensor data.
Another spinout, Quaisr, changed its product and business model after learning more about both customer and investor needs. Having started out applying machine learning to engineering data, the team discovered that what customers wanted more was a platform for allowing data science and engineering teams to collaborate. And after understanding investor demands for scalability, they decided to provide this as a product rather than a consultancy service.
"First we built something customers didn't want, then something that wouldn't scale," said co-founder Professor Richard Craster, Dean of the Faculty of Natural Sciences. "But then we had a better idea, and things started picking up."
Be wary of relying on a single customer
Quaisr's initial pivot occurred after its main customer, a fast-moving consumer goods company, stopped coming back.
Cognition Energy experienced similar issues, at first providing battery design to an online retailer that switched to off-the-shelf batteries, and following a pivot to cell testing, supplying its services to a major battery manufacturer that then went into administration.
Fortunately, the spinout wasn't wholly reliant on one big customer by this stage. "We had enough residual customers and we now have more, including blue chip anchors. We aim to become the biggest test house in the UK," said the company's chair Professor Peter Cawley from the Department of Mechanical Engineering.
Look for unexpected opportunities
Just as scientific research is valuable even when it yields negative results, commercially unsuccessful ventures can generate valuable insights and assets.
Even if commercialisation isn't immediate, these companies often generate valuable data that enriches the broader scientific community. Dr Karolina Zapadka Parkwalk Advisors
Dr Karolina Zapadka, a life sciences investor at Parkwalk Advisors, focuses on research-intensive companies emerging from UK universities and research institutions. She said: "Even if commercialisation isn't immediate, these companies often generate valuable data that enriches the broader scientific community. This work can lay the groundwork for others to achieve breakthroughs in the future."
Sometimes assets like these offer unexpected commercial opportunities. "We've been ahead of our time in many cases," said Dr Gulati. "One company I invested in started off doing telemedicine for CBT [cognitive behavioural therapy]. This was before video, so they started with text chat."
"The company did not realise how powerful their data was until we reached out to some Silicon Valley VCs. They said, 'you need to talk to this guy, [OpenAI founder] Sam Altman.' They gave us a version of GPT2, we used that with the text data we had, and it was very good. Having data in text format turned out to be an advantage above its competitors who were doing video."
Be prepared for setbacks
Failure is nothing remarkable in the world of high-risk scientific startups. "Our model is structured on some investments we make being so successful that it doesn't matter what happens to the others. If we knew which will be successful, we would only invest in those," said Dr Gulati.
Dr Zapadka said that she understands the inherent risks of early-stage investments, where outcomes may not always align with initial expectations: "At this stage, much of the focus is on scientific progress, and at Parkwalk we recognise that pivots are common in early-stage startups. It's just the nature of scientific discovery."
While this offers a stark reminder of the struggle that spinouts face to succeed, it suggests that clued up investors don't judge entrepreneurs harshly for experiencing errors and setbacks. "Creating something of real value is rare. If it's a breakthrough, by definition no one has done it before," Dr Circelli added. "That journey isn't straightforward."
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The Imperial Founders Forum was chaired by Professor David Klug, Associate Dean for Enterprise in the Faculty of Natural Sciences, and organised by Imperial Enterprise.
The university is working to increase the representation of women in entrepreneurship through initiatives such as WE Invent, a patent fund dedicated to protecting inventions by female staff, and WE Innovate, an entrepreneurship programme for ventures led by female students, alumni and early-career researchers.
Imperial staff are invited to contact Imperial Enterprise for advice about the full range of support they can access to commercialise their research.
