“Thou Shall Nots” of Business Development

By: Brett A. Hoover [Follow me on Twitter and LinkedIn]

1) Thou shall not tell the science story and neglect the market story!
-Do realize the market is the story and focus on it. Weave a succulent picture of success, keeping in mind that your audience is not stupid and will not fall for “our target market is $50B”.

2) Thou shall not assume the market is static!
-Do project the future market and make sure your forecast and financial assumptions make sense. If you hand-wave, it’s off with your head…and your paws!

3) Thou shall not design a product based on what you think the customer wants!
-Do get off your haunches and KNOW THY CUSTOMER.  Email them. Call them. Interview them in person. Let them beta-test a demo. Take their family out to dinner…whatever. Just don’t guess when you can know.

4) Thou should not ignore a physicians’ financial motivations! (Ok, this one’s for BigPharma and BioTech. Bare with me)
-Do understand that docs are just as interested in making money and keeping their business out of the red as you are. In other words, never assume patient outcome trumps negative financial considerations. Variable levels of healthcare reimbursement will affect the doc’s behavior. Build this into your assumptions.

5) Thou shall not ignore the importance of reimbursement on future profitability!
- Do understand who pays for what and why. Further, you need to know what the “reimburser’s” price sensitivity is and what drives it. A drug or biologic will rarely (“never”) become lucrative without first being reimbursed. As soon as your product enters FDA trials, get the reimbursement call rolling (Medicare and Medicaid).

6) Thou shall not speak in strange valuation tongues.
-Do use the valuation methods of your audience. Different strokes for different folks. Biotech is not Pharm is not Venture Capital is not… you get the point. For example, Pharma loves to use the net present value (NPV) and risk-adjusted NPV (rNPV). BioTech, on the other hand, prefers to only use rNPV. Lastly, VC’s tend to focus their eyes on comparable analysis, which compares an investments ‘exit value’ across various exit strategies and with similar exits values. The licensee performs the deal(tech)-valuation. The valuation is a crucial part of the investment decision. As such, it behooves you to learn the preferred valuation methods of your prospective investor and either follow suit or give the investment team the exact inputs it needs to quickly make a valuation estimate.

7) Thou shall not pitch thy product as ‘perfect’!
-Do be honest and disclose potential problems and pitfalls. Nobody’s technology is perfect. Investors know this, and assuming they don’t will only get you laughed at. Come right out and mention and address any disadvantages. Feel free to run down you list of way to mitigate risk. This will build credibility and allow you to damage control. Better to mention it early, then to have an investor ask you about it later.

Slainte Mhath!

Ref: Stewart J and Bonifant B. “The Seven Deadly Sins of Business Development.” Nature BioEntrepreneur. April 2008.