The craft of science involves discovery. Because discovery is always pushing ahead and into new frontiers, new methods and tools are developed quite frequently to advance these frontiers or to solve new problems.

These tools can be adapted from other fields, or they can be invented. In either case, it is the practitioner—the scientist—who understands the specific requirements of their experiments and decides whether a new tool will be useful.

In this environment, the scientist as entrepreneur involves a change in mindset.

The scientific mindset is about completing the experiments and continuing on the path of discovery. The scientist who invents a new tool can continue to use that tool to make new discoveries, or to discover the intricacies of the tool itself. This continues on the path of the scientist.

Pivoting to the entrepreneurial mindset is about making two big leaps onto a new path.

First, it is believing that you are not the only scientist with this problem, but that the solution you devised may be of use to many other scientists.

This belief is not obvious. At the frontier of science, it is not always known how many others are working here. It’s not clear if this new frontier will grow into an important new field, or sputter out. If it is a big field already, there are other competing tools, often backed by large established vendors.

The business-speak here is about whether there is a market, what is its size and growth potential, and what is the competition. I have never encountered scientist-entrepreneurs who think about it like this. It is always about their conviction to the belief that this new tool will be of use to many others.

Second, it is abandoning the career path of traditional scientific discovery for the new path of making this tool available to others. This is about starting a company and taking on all the financial risks that go along with it. This choice is innate to one’s personality: what drives and motivates one’s actions.

The founder is the most important factor affecting the start-up’s success. When investors decide to invest, the entrepreneurial mindset is one element about the founder that is considered. The two defining characteristics of this are conviction and innate personality.

The origins of the idea for a startup from McGill University, Montreal, circa 1990

Let’s look at the case study of the founding of Advanced Bioconcept, Inc. by Clarissa Desjardins, who was performing her Ph.D. in neuroanatomy at the Montreal Neurological Institute, McGill University, from 1988-1992.

Her Ph.D. research was about the “role of the hypothalamic opioid system in estradiol-induced polycystic ovarian syndrome.”

She was studying how estradiol, a hormone, can cause neurotoxicity. The work involved identifying the location of three different opioid receptors (mu, delta, and kappa) in female rat brains, and then determining the number of these receptors under different conditions. Figure 1 is a side view representation of what these receptors may look like on a microscopic cross section of brain tissue.

Figure 1

To identify and “count” these receptors, one uses different peptides that bind to each of these receptors selectively:

  • FK33-824 peptide binds to the mu receptor,
  • DPDYN peptide binds to the kappa receptor,
  • DTLET peptide binds to the delta receptor.

How do you see and count these peptides? In those days, the peptides are “labeled” by attaching a radioactive atom.

Figure 2 shows the different labeled-peptides she used and how they are selective for their receptor. The red star represents the radioactive iodine-125 atom attached to each of these peptides.

Figure 2

Attaching the radioactive iodine is a time-consuming and complex process, as the experimental methods describe:

FK33-824 was iodinated using the lactoperoxidase method and monoiodinated 125I-FK33-824 was purified by gel filtration. DTLET and DPDYN were iodinated with chloramine T method and the monoiodinated 125I-DTLET and 125I-DPDYN were each isolated using reverse phase HPLC on a uBondapak C18 column with 0.25 M triethylamine formate buffered to pH 3 (50%) and acetonitrile (50%) as the eluent.

Brain tissue slices are washed in these binding peptides, and then they are exposed to photographic film, like an X-ray. Figure 3 shows the images. The patterns of how each of these three receptors are distributed across a cross section of rat brain is revealed in the three separate images. The intensity of darkness is proportional to the quantity of the receptor.

Figure 3

This type of work is slow and painstaking. It also exposes the scientist to radiation throughout the course of all the experimental steps.

Where do entrepreneurial ideas come within any scientific domain?

Halfway into her research work, around 1990, Clarissa came up with the idea of substituting the radioactive atom with an organic compound that fluoresces. This would eliminate both the radiation hazard as well as the long tedious protocols faced by the experimentalist.

From where did this idea come? As she recounts in a March 2011 interview:

Radioactive peptides are very standard and I was horrified that I had to expose myself to radioactivity. So I had a very simple and naïve idea which was, ‘Why not just replace the radioactivity with fluorescents?’ At the time, all kinds of fluorescent probes were coming out that you could link to peptides, so there was a technical challenge that we overcame and that formed the basis of a unique patent and our idea that we could make dozens and dozens and sell them to the world.”

She describes an entrepreneurial process that appears quite often.

There is an awareness of the surrounding technology environment, and from emerging patterns of activity and practice. This is where reading widely is important, as well as going to conferences, and being curious about ideas and activities outside of one’s field of specialty.

Awareness is necessary but not sufficient. The next step is applying judgement about the potential possibilities. The intuition of some scientists are more insightful than others.

Judgement or intuition is an important characteristic to probe during job interviews, but it is also very hard to discern, because it is not easily recognizable. Only a former track record, which is a backward looking metric, provides any objective evidence of this characteristic. This is why so many investors look for one’s track record when evaluating very early stage seed investments.

So what was the technology environment around Clarissa at the time?

Fluorescence as a biological method

Fluorescence is a phenomenon where a material emits light after it is excited by light of higher energy.

Various organic molecules can fluoresce. In practice, these molecules can be excited by ultraviolet light, and they fluoresce with a very specific colour, usually of a wavelength in the red to blue part of the visible spectrum.

Fluorescence experiments are performed with instruments that have an enclosed UV light source and a fluorescence detector. The method is very fast and very safe, compared to the radioligand imaging method Clarissa was using.

The use of fluorescence to probe molecular and cellular activity has been practiced for a few decades prior to Clarissa’s time, and in multiple fields. The methods started out by simply just adding a fluorescent compound to your system of study and doing fluorescence measurements.

However, by the late 1980’s to early 1990’s, the field was accelerating, and a number of trends were emerging:

  • new fluorescent molecules were becoming available for use as probes,
  • the use of many different peptides started to proliferate in biomedical research (as it did in Clarissa’s research),
  • different chemistries were developed to attach these fluorescent molecules to peptides,
  • many different fluorescence methods and technologies were emerging,
  • vendors (scientific instrument companies) were developing new, different types of fluorescence instruments, from fluorescence spectrometers and fluorescence plate readers to, eventually, fluorescence microscopes.

Each of the above bullet points comprise numerous small events and practices. No one ever tracks all of these disparate small signals (though new AI technologies might do this in the future). However, some scientists can be cognizant of a select cluster of these developments as convergent signals towards new technologies.

For example, the Fluorescence Imaging Plate Reader was invented in 1992 and became the FLIPR instrument. The Amplified Luminescence Proximity Homogeneous Assay (a light-based technique using the same instrumental technologies as fluorescence) was invented in 1994 and became the AlphaScreen product. Both of these technologies quickly became very popular in the pharmaceutical industry. Many other methods, from general ones to specialized ones, were also emerging. This is the competition part.

It was in this same time period that Clarissa came up with her idea.

The founding of Advanced Bioconcept

According to that March 2011 interview, while the idea was conceived in 1990, the McGill University Technology Transfer Office did not believe she had an invention.

Figure 4: archival photo from circa 1998.

So she completed her PhD in 1992 and sought seed funding for her company.

She received a CDN$2-million offer that she rejected because her gut instincts told her it was not right. This is that important characteristic of judgement noted above, which applies not only to the science and technology, but also to other critical aspects of execution.

The seed round was CDN$300,000 from angel investors.

The first priority patent application was filed in April 1995.

She hired a president in 1996: Lloyd Segal, a Harvard MBA and McKinsey consultant. Again, this is where judgement served to hire for business experience.

Their product line, branded “Fluo-peptides,” was launched at this point.

Figure 4 is an example of tissues labeled with one of Advance Bioconcept’s peptides.

Figure 5 is an image from a scientific paper from 2000, showing work done circa 1998 using Advanced Bioconcept’s fluorescent peptide reagent, Fluo-Ab1-42.

Figure 5: example from a scientific paper showing work done circa 1998 using Advanced Bioconcept’s Fluo-Ab1-42 fluorescent peptide reagent.

By this point, the commercial landscape for biomedical research reagents and peptide-based reagents had proliferated. In this field, the business driver is consolidation, where it makes sense to have all these products within one catalogue.

Hence, it is no surprise that in 1998, Advanced Bioconcept was acquired by NEN Life Sciences of Belgium, which in turn was acquired in 2000 by U.S.-based Perkin Elmer, a global enterprise vendor of diagnostics, research tools and reagents, completing the evolution of the product and technology cycle in this business space.

Technology hubs and economic policy

That was a successful venture in that it went from an idea to a set of products that were compelling enough for a business acquirer to buy. It also presented a presumably good capital gain to the original investors.

From an economic development perspective, Advanced Bioconcept did not continue to grow, and hire more employees, and build on Montreal’s tax base.

However, it did serve in contributing to the establishment of a potential biotechnology hub in Montreal. Clarissa and Lloyd became key nodes in this hub. They gained valuable experience and this venture provided the track record to validate them as entrepreneurs to future investors. Indeed, they co-founded their next company, Caprion, in 1998 with Clarissa as EVP of Corporate Development and Lloyd as CEO, both remaining until 2007 before moving on to other ventures separately. Clarissa would later found Clementia Pharmaceuticals in 2013 as CEO, which Ipsen acquired earlier this year for US$1.3 billion.

The “problem” is that we need at least ten times more such individuals and such ventures for a region to become a sustaining economic hub in this particular industry of life sciences.

There are multiple reasons and different interpretations as to why this is not the case.

One is that this industry is a global one, and multiple forces have caused it to settle into certain preferred hubs in other cities around the world.

Another concerns government policy choices. Over the years, I’ve seen provincial governments in Canada make varying attempts to create a life sciences hub in their major cities. Maybe this sector is not the proper choice, or maybe they picked the wrong policies. This is an unwinnable argument, so I won’t bother elaborating further.

The final reason is that there is dearth of talent and expertise.

  • For example, McGill University’s Technology Transfer Office did not believe Clarissa had an invention, because they did not have the expertise (or motivation?) to do so.
  • As another example, there was a Canadian company that could have been the ultimate consolidator of life sciences businesses, accomplishing what companies like Perkin Elmer or Sartorius or Thermo Fisher or Danaher or Wuxi have been doing. It was called MDS, Inc. The demise of MDS was due to management missteps. If not for that, another issue would be the access to capital to do such deals, for which Canadian investment banks have not shown an appetite.

This does affect the entrepreneurs themselves, because when they exit their company, there needs to be an ecosystem into which they can continue to build and contribute. For Clarissa and Lloyd exiting Advanced Bioconcept, the timing and situation in Montreal at the turn of the millenium worked out.

Take home messages

Scientific tools businesses evolve through a business cycle that will reach an endgame.

In this example, the tool was a set of reagents. This type of product limits the maximum size of the business. Furthermore, it makes sense for customers to buy from a large catalogue provided by one company. No one has the time to manage a library of catalogues nor to set up procurement process involving many accounts with dozens of vendors.

Consolidation will happen, so that customers eventually buy from a short list of high quality, affordable, and convenient brand name vendors.

In this case study we see a startup company set up, develop, and launch a portfolio of products quickly. The end game is that the company is acquired by exactly one of these brand name vendors. This also provides an exit for investors. The entire cycle is very short.

There are take home messages for government policy makers, aspiring entrepreneurs, and investors.

For economic development policy:

The mainstream model of venture investing will not invest in such a startup company, because it seeks investment opportunities with scalability and high growth potential. This does not mean that such investments are not worthwhile. There are many of these smaller scale venture opportunities, and their success can contribute to the growth of the local innovation ecosystem by providing experienced entrepreneurs, attracting investors to successes, attracting people with industry-relevant skill sets, and growing the industry cluster.

In aspiring hubs that have yet to reach a self-sustaining innovation ecosystem, there is a particular need for an investment structure that provides for these types of ventures that do not appeal to the current mainstream venture model.

This is a different economic value than a simple capital gain on a financial investment.

Government economic policies recognize this point. However, the structures they have set up—from “innovation centres” to various “matching fund programs”—have mostly failed, because they do not connect this investment thesis to the investment selection process. A government sponsored program quickly gets moved in different directions by all types of stakeholders and “elites.”

In a rare example of success, groups in the Montreal area attempted this decades ago. Now, I finally see a critical mass taking shape that is building a future-facing economy. This took 30 years of persistence and adaptation. This can be done better and not take so long.

For the aspiring entrepreneur:

While the upside in growth of a business is limited, this should not discourage its pursuit.

The real value is that the experience offers the stepping stone to the next venture. I have seen many cases where ventures started by a PhD graduate fail. In fact, the majority do. However, they can go on and get investment for their next venture based on recognition that they have “start-up” in their experience. If it was successful, as it was for Clarissa, the potential and the ambition of the next venture will be that much greater, not the least because there is validation of the capability of the entrepreneur.

What is important is to start early enough in one’s career to allow for this runway, but not so early that one is starting with no relevant skill sets and no network to rely on.

For early stage investors:

There is a corollary to above point. As noted in the above section on “where do entrepreneurial ideas come,” it is very hard to discern the judgement of a company founder. The only observable evidence is their track record, and this is a backward looking metric. Hence, there is preference for entrepreneurs who have “done it before.” The problem is when this approach is used blindly.

In the late 1990’s, the startup ethos was becoming mainstream. The term “serial entrepreneur” entered the lexicon, not only because there were people like this emerging in Silicon Valley, but also because having this on a resume provided a positive screen for investors and for social reputation. Today, “serial entrepreneur” is used loosely on biographies and on LinkedIn profiles everywhere. Many people, from investors to HR departments, just believe self-proclaimed titles without looking deeper at what the person did.

I see many profiles on LinkedIn where founders or founding CEOs spend just a few years in each successive company (or even a couple of companies at the same time). In all of those cases, the venture simply failed. That is a different outcome than what Clarissa and Lloyd achieved.

Geoff Yang, who co-founded Redpoint Ventures in Silicon Valley in 1999, provided this very blunt assessment of the investibility of an entrepreneur: he was reviewing a company founder who had a great resume of skills and experiences. Greg noted that this person was going from one thing to the next, because it was not working out. He said, “being an entrepreneur is good experience even if you fail, but repeated failures means you are a loser. It means that you don’t know how to pick winners, or that you have bad judgement.”

Rather than simply looking for “serial entrepreneurs” or the track record of an entrepreneur, better investors consider the judgement of the entrepreneur.

Now let’s take these case studies further

This case study was about fluorescent-labeled reagents for biomedical research. We will build on this theme by looking next at fluorescence detection instruments for pharmaceutical research.

The grad student entrepreneur who started a tools company
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