BOSTON (Forbes) — Biotech startups share some similarities to tech startups, but the rules that govern their success seem different. Venture capitalists and experts talk about creating tech ecosystems, which create a sense of linear progressions, where people and companies play prescribed roles. But the right way to think about biotech success seems to be more about culture. Noubar Afeyan, one of the most successful biotech entrepreneurs at work today, is an expert at creating the culture and medium in which successful biotechs develop.
The first insight I got from him during our interview is that product-market fit isn’t the gospel in the biotech world that it is in Silicon Valley. (After a conversation with Clay Christensen a few years ago, I wrote about how building a successful startup isn’t about finding the right key for a lock; it’s about shaping the key and the lock at the same time).
Afeyan is CEO of Flagship Ventures, which has boiled the process of biotech startups down to a science. Afeyan has been involved in 38 successful startups over the years, according to Flagship’s site. Successful means they made it out of the startup phase, to a follow-on round or other growth phase, and five are listed as acquired. One of the companies in his portfolio, Moderna, is producing innovative protein-based therapies and is considered a leading IPO candidate. It had a valuation reported at $3.5 billion in 2015.
Born in Lebanon, Noubar is the grandson of an Armenian refugee who landed in Lebanon after he was saved during the genocide by German officers. His father was an entrepreneur, with a small import/export business. But when the civil war in Lebanon came, the family moved to Canada.
Afeyan got a degree in chemical engineering from MIT. There by chance, at a National Science Foundation meeting, he met an electrical engineer in his 50s, who described to him how he had built a company that supplied tools to the new and burgeoning field of electrical engineers. That man? David Packard.
Noodling on the idea of building tools for biomedical engineering, Afeyan went on to found PerSeptive Biosystems, which was acquired. After that, Afeyan turned to his passion, which is startups — not founding individual companies, but creating a process for startups.
“I became interested in figuring out whether I could start companies for a living, professionally,” he said.
A big, affable man, Afeyan loves to teach — he’s a lecturer at MIT’s Sloan School of Management — and seemingly has a gift for taking new cut at old ideas. He spent some time in our interview talking about how wrong the word “entrepreneurship” is.
“It’s a complete misnomer. Do you know what the root of that word is? It’s the French word for undertaker,” he said. “It’s the state of being something.”
“I think it should be ‘ing.’ Entrepreneuring.”
Here are five ideas for entrepreneurs, culled from the Afeyan’s scientific startup process. And if anyone can draw the connection for me for how the French word for undertaker came to mean the insane endeavor of starting and building a company, please do in the comments!
First, here’s how Afeyan wrote out his formula for me in an email — or at least, his suggestion for the way to think about the process of a biotech startup.
I would say it this way – first envision several possible future states where in each case some combination of new science or technology can deliver value by addressing an unmet need. From among those, chose the one future state you want to pursue by trading off likelihood of reaching that state as well as the impact and value created by doing so. Then evaluate various paths to reach that future state. Keep in mind that the future states you envision will necessarily seem unreasonable at first (given that the technology/science and need are not yet clearly established). An entrepreneur’s goal is to define incremental steps from the present to that envisioned future each of which may seem reasonable but which in combination can take us to a place that initially seemed unreasonable to aspire to.
And here were five of the ideas that we talked about when I asked him to expand on this.
Be a paranoid optimist. Entrepreneurs should always be worried about what could go wrong, and yet believe that in the long run thing will go right. “You need a gas pedal and a brake pedal,” Afeyan said. I thought this was interesting because it adds a dose of realism to what sometimes seems like a false or overly exuberant sense of optimism out of Silicon Valley.
Follow a process of variation-selection-iteration. One of the key insights here is that it’s not just products. Silicon Valley is very focused on products, but in the biotech space, you can also use this process with hypotheses, jobs or marketing messages in your company, among many other things. “The pace of the variation is only limited by the resources you can deploy,” said Afeyan.
Recognize what creates value. Your company is not necessarily a product-building engine; it is a value creation engine. Your ideas have value, too. “You sell the idea to gain credibility and trade in credibility to get money. The more you build stuff from your ideas, the more credibility you have,” Afeyan said.
Be realistic. Realism imbues this process, more than I find in the world of tech startups, where the abundance of cash leads entrepreneurs to take pie-in-the-sky risks. Realism doesn’t rear its uncomfortable head until the end of a startup’s life, when it becomes apparent that your startup isn’t one of the rare winners.
Think about the destination, not the directions. One of the other differences between the Silicon Valley model and the biotech model is that creating product-market fit often means picking a direction and then steadily narrowing it. Afeyan has a different idea: he asks his team of about 20 to hypothesize in as many different directions as possible, but always with the aim of creating a use for a new discovery. “There is nothing like a game about this,” he said. If the science isn’t there, why are you talking about products?
How does this work in practice? Afeyan gave me an example of nine or 10 years ago, when researchers were just beginning to be able to measure the microbes that colonize the gut. There were multiple hypotheses for how that new science could be used, from the idea that you could diagnose different diseases by measuring microbes, to the idea that you could potentially come up with a subset of microbes that combatted a particular super-bug, to the idea of enabling fecal transplants. The third hypothesis led to a company, Seres Health.