You’ve developed a great idea that will change the standard of care, dramatically alter the way doctors treat a frustrating disease, or improve the quality of life for people undergoing treatment. So you’ve launched a startup, leased space, and you’re hiring people as you spend long days proving your concept and catching the industry’s attention. There just aren’t enough hours in the day to accomplish everything you need to do and to make all the decisions that must be made.
As you’re moving forward with enthusiasm and confidence, you’re probably not focused on protecting yourself from what could go wrong. All too often, a lack of risk management is what ends up derailing promising life science startups. They’re moving ahead according to plan when something unexpected happens. It might be a product liability suit, a supplier that goes belly-up, or a serious traffic accident that takes a key person out of action for months.
At this stage of your business, your startup’s risks are minimal, but that doesn’t remove the need to start planning today for how those risks will change in the future. By addressing four key issues, you can protect the future of your company and your investment of time and money from being disrupted.
Address These Four Key Issues Early
1. Protect your intellectual property. Your life science startup is built around a new idea. You want to make sure it doesn’t fall into the wrong hands or walk off with a disgruntled employee. Your future investors will want to be confident that a competitor won’t be able to duplicate or undercut what you’re doing before they provide the financing you’ll need. The services of a top intellectual property attorney might seem pricey, but you’ll thank yourself down the road for making that investment today.
2. Hire the right people. Companies usually start with a handful of colleagues, and early hires tend to come from your personal networks. You may know and like those people, but do they have the skills and contacts you need? For example, if you’re creating what will be an FDA-regulated product, you need someone who has experience working with regulatory matters and can help you navigate through the gauntlet of regulations and agencies.
You also need an attorney with solid experience in helping life science startups, because that attorney will become one of your most trusted advisers as your company grows. They’ve been down this road before and know how to protect you.
Overall, human capital will become increasingly important. As the company moves through its early steps, you’ll soon need an operations person, a financial person and a host of others. You can’t do everything as CEO or president, so you’ll need to have people you can trust to take those areas off your plate and bring your strategies and vision to fruition.
3. Think ahead about funding. It’s easy to get focused on finding the money you need right now, but if you’re going to get through the coming stages of your business, you need a sense of where you’ll turn for the funding you’ll need down the road. The key is developing strategic relationships with the people and organizations that can introduce you to the right sources when the time comes. Start nurturing those relationships long before you’re ready to make the ask.
4. Connect with the right professionals. As with funding, you may not need the services of specialized professionals who know your industry right now. However, building connections with them now gives you access to their expertise and advice when you need it.
Also, those professionals have extensive networks you can use. For example, someone recently introduced me to a startup medical device CEO who mentioned he was negotiating an agreement with a Japanese company and was looking for guidance. I was able to connect him with a Japanese attorney I knew and another CEO who had sold his company to a Japanese concern.
Plan for Future Risks
To protect your startup from the risks you’ll face later, you first need to know what those risks are. Then you need proven strategies to address each of them. Taking the steps outlined here will not only help you avoid some early potential pitfalls, they also will enhance your ability to obtain the highest valuation for your company when you’re ready to exit. That’s where risk management really pays off.
The above information does not constitute advice. Always contact your insurance broker or trusted adviser for insurance-related questions.