Now today’s webinar will be presented by Dr. John Bilello. Dr. Bilello has a PhD

in molecular biology and a former Director of Technology Development at GlaxoSmithKline.

In addition to an established track record of innovative basic and clinical research,

Dr. Bilello has experience in both project and organizational management. As an entrepreneur, Dr. Bilello is founder

of Ridge Diagnostics and a co-founder and managing partner of Innovalyst, LLC. At Innovalyst, he works with companies

from small businesses to Fortune 500 companies as well as Invest NI, Northern Ireland’s Regional Economic Development

Agency. Thank you so much for being here, Dr. Bilello, and I’ll turn the presentation over to you now.

Okay. Let’s start with a poll. And essentially, the question is, well, what does every entrepreneur require?

And the answers are a thoroughpolished business plan or a one to two-page executive summary or a really cool

elevator pitch? 30 seconds. So I’ll wait, and you can submit. And we’llsee if all three or four of you out there make a

decision about which do you think is best. I wish we could play some music, Sam. Thiswould really…Sorry. I didn’t

have anything prepared. Ah, I mean. All right. Everybody says a business plan. I guess you’ve read the title of the

talk. So I don’t have to take on people that think just an executive summary is enough. Let’s move on.This shows my

version of what entrepreneurs need to be successful and obviously, I feel that the number one issue is a thorough,

polished business plan. Although, I think we will agree that number four here is actually would be a really great way to

start, but none of us really have that. If you have all the money, you probably don’t have the patience. I gave you my

perspective on the importance of a business plan, but I venture to guess that many, if not most of you, have the

perspective that a business plan is just something to write to get cash. In fact, the business plan, or an executive

summary, is the first thing that people will ask for if they’re interested in your company. While you can create that one

to two-page executive summary without putting the plan together, you can actually really cover all the bases by

constructing the executive summary after, at the end of after you’ve defined the business concept. All business plans

that I know of, and I’ve seen a number of them, the ones that really are successful always include sections on the

opportunity, the product, the technology, the market, the competition,intellectual property, a business model, the

management team, and most importantly, an exit strategy. While the substance and methods are different, basically

that formula works for every business plan out there. Just to go over it, this slide shows some of the reasons why you

need a business plan. Business plans have both internal and external value, and it’s pretty obvious from this slide that

there’s a significant internal value. Having a solid plan enables the company team to move quickly forward by

communicating the priorities, and actually those are defined early on in the development of the plan. And one useful part

of any business plan is a SWOT analysis, and I’ve talked about that earlier in a previous webinar. With that SWOT, you

can identify strength and weaknesses of your organization as well as the opportunities and threats to your business.

Having that business plan allows you, also, to easily integrate new personnel. You give them everything they need to get

up to speed with the goals and the overall thrust of the company.Most importantly, however, if you periodically pull out

your plan and review it, you can provide a basis for  measuring the company’s performance relative to the goals that you

set when you first put it out.

Externally, the main value is that business plans are a vehicle to attract and solidify, solidify relationships

with investors or potential partners. What are the objectives of business planning? And note that I do not

differentiate the business plan from business planning. Basically, business plans are forward-looking. They

attempt to forecast the course that the company will take, and similarly, they forecast risks so that the company

can plan to avoid them. Also, they really foster communication. Initially, that communication is between the founders,

and later, it’s with the investors. All business plans also establish milestones and clarify what the company needs in

terms of capital and personnel. While we’re on this, this is just a note about business planning during

the pandemic. I put it in here because biotech companies are generally pre-revenue, so they fund their research

and development from capital. And during the pandemic, they will be going to investors for financing. You may have to

formulate immediate actions in responding to the challenges in obtaining financing. It’s also important

to develop tactics to move your R-and-D effort forward while many facilities may be closed or unavailable.

There’s no magic format. You just use a traditional structured approach. And those, we’ll go through all of

the steps one by one, but within the structure, there’s plenty of room for you to present evidence of a sound

business opportunity. That’s one of the key points, to present a clear plan for how the opportunity will be realized,

and lastly, to show the financial benefit to the investors. That’s the whole enchilada, so to speak.

Another question that comes up oftentimes, what’s the scope of the business plan? How long a term are

we looking at in terms of a biotech business plan? Well, biotechnology investment is long-term, and the

time frame, the period of time from when the company initiates until it exits is quite different from some

businesses, for example, software or IT companies. The time frame to an exit, particularly for a wet

biotech company, is measured in years and not in months. Traditionally, the scope of a biotech business

plan is three to five years, and that is dependent upon where the technology is to start with and how

long it’s going to take to get it to market.

By the way, a business plan can either be a whole company plan, or it can look at being a separate plan

for R-and-D and then a separate one for marketing. In my standalone company, we used to do formal

written yearly plans for the board of directors, which had seats for our major investors. Interim reports

were also made orally at individual board meetings, which were mostly internal, but on a regular basis,

we actually looked at aspects of a business unit plan and compared it overall to our goals.

What are the key research questions? I emphasized that putting a business plan together is a research

opp deal. Lost the word there. What are the research questions? Well, this slide actually outlines the

real questions for both the company and for potential investors. Therefore, each of these questions

need to be answered in your business plan. Very quickly, is the product viable? Who are the customers?

Who’s the competition? What is the market like? Who’s on the management team? And what are the

future needs for both capital, and what are the financial goals? And lastly, what is your exit strategy?

Now we come to the real fun part. We’re going to actually start skipping through the individual sections

of a business plan. Right at the top of the document, you have an introduction, and it should start off

with a short summary. And this is not the executive summary. This is a different section, and it should

concisely state what the company will do and what it’s products will be.

There also should be a company vision statement, and that’s a concise, one or two sentences that

everyone in your business knows and can speak to other people by heart essentially. Then, there’s the

mission statement. I used to say that there’s only been only three or four mission statements. Most of

them were written by Harvard Business School Graduates. But essentially, all the mission statements

that are really effective will really elegantly present the company’s vision a little bit more in detail than

the vision statement will. The mission statement also should not be too rosy. Something like, “We’re

going to be the first billion-dollar company making widgets” doesn’t necessarily work well as a mission

statement.

The opportunity section discusses the reasons for starting the company and why it can succeed. The

primary question is, how will the company officially generate a significant profit? And beyond that, what

is the product that you’re selling? Who are your customers? What is the size and the growth rate of that

market? Then you need to understand what criteria do customers use to determine which product that

they’re going to buy, yours or a competitor’s? Then, why is that competition not a significant barrier?

One thing is that when you get to the opportunity section, if and only if your potential investor is not

familiar with biotech, particularly something like looking at a new drug or brand new kind of

nanotechnology, it may be important to outline some of the broader aspects of the field, such as

healthcare reform, whether or not something needs FDA approval. That you should also address those

when you’re getting to why your company can be successful sometimes in a market where there are

other competitors.

Well, in biotech, technology is usually the product or the service, and oftentimes, the founders believe

that technology is the only important element to the investors. Well, that’s only partly true. We’ll get to

a little bit of that later. Nonetheless, you really need to describe your technology in enough detail that

experts will both get and appreciate how it works. The failure to do that may cause knowledgeable

readers of the plan to doubt your credibility. And I can assure you that any investment group will either

have the capability in house or engage a consultant to review your tech. With my first company, I had

multiple half-day meetings to discuss our technology and research and development, excuse me, in

great detail with outside experts that were brought in.

One piece of advice I can give you also that’s important is that investors may request you to disclose

everything about your technology, so you should have a CDA in place to protect you when you divulge

trade secrets. Many of the potential investors are really looky-loos. They may even have connections to

your competitors. In reality, you, as a company, and actually most serious investors will want to protect

themselves as well and will either have a one or a two-way CDA in place. And if they do not agree to

work under a CDA for a particular conversation, then I would do my best to make a presentation without

sharing any confidential or proprietary information.

We now get to another area of protection, and that’s intellectual property. This section should

summarize, essentially, how the company will protect the IP that enables them to commercialize the

product and actually keep competitors at bay. If a company does not currently have the IP it needs, then

it will have to develop a way to describe the licensing or filing strategy to make someone else not block

your freedom to operate. This slide lists a number of questions that actually need to be researched and

addressed, and they’re as follows: What patents protect the technology? To whom do they belong?

When do they expire? Because those patents expire. How can they be used to block competitors?

Many biotech’s spin out of universities, so you may be able to license the patents you need from the

university. I really don’t want to spend too much time on this, but let’s just say that usually licensing

benefits both the spinout and the university. Oftentimes, a university patent is available for exclusive

use, and they like the royalties that a patent that they filed and spent some money on eventually will

bring in some royalties to the university.

One point I want to make is that if you do get involved with a university, I would try to get a broad right

to improvement agreement, and that covers any improvements that you make to the original patent.

This agreement should be based upon the date that you finalized the agreement. That’s done so you

don’t really need to renegotiate every improvement that you make over time. And obviously, you can

pay a lot of money to get your product protected, but by doing much of the research and stuff, back to

research, you can get a reasonable assessment of whether you can file a patent. It’s also fairly easy to do

a patent search, and you can just go online. There are several different online services. Some of them

are free. Some of them have a small fee. If you went to a IP professional, that fee to do a very significant

search also has a significant price tag.

You can even file a provisional patent application to establish prior art, and these don’t really cost that

much. You can put one together with not a really substantial amount of effort. There are some websites

that actually talk to you about how you can put together and file a provisional patent application. But

I’m really not a patent attorney, but I’ve worked with at least three different large firms. In every case, it

comes down to the more work that you do, the lower number of billable hours you will pay for. Those

billable hours come with a pretty good price tag.

All right, competition. Well, how many companies commercialization plans or executive summaries that

I’ve read say that there’s no competition for their product? If I’ve seen one, I’ve seen a thousand. There’s

always competition. If no company offers exactly the same product or service as you do, there’s still the

status quo that you have to overcome. Think for a moment. If there are really no competitors, why have

other companies not pursued your target market? Perhaps it will be difficult to create or enter the

market. If you do create a market, you have to expect that competitors will enter it. Therefore, defining

your competition is an area where you really need to do your research.

You will need to develop a profile of significant competing companies describing their technologies,

their products, their business model, their pricing, their current customers, and you have to explain why

those companies are successful or unsuccessful and why you can do better. I can guarantee you that if

you do not do a good job researching what the competition is, your potential investors will.

People, people, people. Now we come to a key point. As this slide indicates, many investors consider the

team behind a startup more important than the idea or the product. The investors will want to know the

that team has the right set of skills drive and experience, as well as the temperament to grow the

business.

I mentioned needing the patience of Mother Teresa. You really do need a different temperament to

grow a business than to work in a laboratory. Anyone putting together the team section of a business

proposal should anticipate these questions really. Who are the founders and key team members,

obviously? What relative domain experience or experiences to the team members have? What are the

key additions that are needed in the short term, and what will be the needed eventually in the long term

as you get closer to full blown commercialization and eventually an exit? And why, now this is really

important, why is this team uniquely capable to execute the company’s business plan?

To put it simply, it’s the people, and investors don’t invest in ideas. They really invest in people. You

need to focus on business leadership as well as the scientific and technical expertise. From a practical

sense, you need to include short biographies of the management team. Add to that scientific advisors,

and if you have a board of directors, you should also use their, I guess, status as part of this section on

the management team.

At the end, you should add resumes of each of the founders and members of the management team as

an appendix. The worst that you need is to deliver a business plan where you have CV after CV of the

team members. You have to keep those biographies rather short and then use an appendix to add any

CVs.

Let’s see. Oh yeah. You don’t have to do all the work on a business plan alone. You can use others to do

some of the heavy lifting. You’re really going to need people to do research, particularly on comparables

and what you might want to do is to bring folks from outside the organization with specific expertise

into the mix around putting the final business plan together.

Many incubators, I think we have at least one here today, and accelerators as well, have staff to help

you. When I was building a business in North Carolina, their biotechnology center provided me with

market research tools, including access to rather expensive industry reports. They provided advice and

introduction to business experts, IP professionals, and potential partners even. Since many of the

founders are more savvy about technology than familiar with business, there are also groups of retired

entrepreneurs that can help you put the financials and business model on the right track. From the very

beginning, find a brainstorming group. Bring in the advisors and use whatever help and whatever

resources are out there to put the best business plan out there.

Really, despite the commercial success of several biotech companies, and actually the stunning growth

and revenues over the last couple decades for this industry as a whole, really most biotechnology firms

earn no profit. That’s why so many of them fail, actually. The business model section really describes in

detail how you will make money. It needs to take all of the areas indicated on this slide. There really is

too little time to discuss business models in any detail. But this is an area where external help should be

acquired.

Actually, if the model that’s chosen is correct along with information on comparables, it should actually

help you to estimate the revenues and expenses for the first few years. The model should take into

account, what do you offer the customer? How is the value created? Who is the customer? Right in the

center, who is that? How is the value created, and how is revenue generated?

And that leads us to the financials. You got to remember, investors are looking in a return for the

investment that they’re going to make in your business. Financials are used to document, notice,

document, justify, and convince the investor that this is a real opportunity. Unless someone on your

team is a CPA or a Harvard MBA, I usually advise entrepreneurs to seek outside help with the financial

section of the business plan.

Most if not all of the investors that you meet with are well-versed in business financials, so they can

easily evaluate that aspect of a business plan. They will know when revenue predictions are too rosy or

when production costs will severely cut into profitability. Make sure that you research relevant

comparables. I really want to emphasize the relevant. It’s hard for a fledgling company to compare

themselves with the GlaxoSmithKlines of the world.

Both cost estimates, the number of employees, comparables and other data should be developed, and

that should be shared with the finance guru. Again, if you have an outside financial consultant, they will

probably charge you by the hour, unless you’re lucky enough to be able to work with a volunteer or

somebody that’s associated with an incubator or an accelerator. The more you do, the less that’s going

to cost you. When you’re paying somebody by the hour, that cost is dollars. When you’re using

somebody who is a free resource, what you’re doing is costing that person time. The more that you do,

the better this process to go.

I’m going to just show you an example of a five-year financial profile. It goes through revenues, cost of

sales, margins, expenses, income, capital expenses, how much equity you raise. How much cash do you

have on hand? As you can see at the bottom, the number of science staff, that’s increasing over that

five-year, projected to increase over that five-year plan. You might, depending upon how this is all

constructed, you might have sales staff, whatever. But this is just one example.

When you’re putting this business plan together, you might also want to provide a 12-month profile for

the first year. That could be more granular at breaking down expenses into labor, supplies, lab space,

rent. Really get down into the nitty gritty. It’d be a month-by-month for just the first year. That’s

typically seen in most business plans.

Now we’re coming near the end. This slide goes into really one of the challenges that a business faces

when it matures. You can really understand how investors feel about an exit strategy if you consider

what happens to investors who don’t get exits. If there’s no exit, they don’t have a return on their

investment. So you’re going to need to do some research to find comparable exits and strive to get as

close to your business size and model as possible.

Again, work with your financial people to project what your company’s valuation will be at an exit. That’s

certainly going to change along the way, but return on investment for technology-based biotech’s, it’s

really not as great as the return on investment for pharmaceuticals, so you really got to get that

comparable value to put that the proper, sorry. You have to get the proper comparables to put together

what the valuation will be at an exit.

Again, you have to avoid comparisons to the exceptions. I think in terms of exit strategies, it used to be

that many companies used to feel like they were going to go all the way. They were going to go all the

way from the initial technology idea out through manufacturing, licensing, all that other piece. Really

exit strategies for biotech has really changed. The exits are much earlier.

Remember from the earlier slide in terms of the fact that most biotech investments are fairly long-term.

Investors actually get nervous as the years go by without them seeing any return. There’s a lot of

pressure to exit early, and that exit can be any number of ways, from outright sale of the company to

partnerships.

I wouldn’t let anything go by without pointing out that every section of a business plan represents a

potential source of risk. You should do everything you can to prevent evidence, to minimalize the

perceived risk of an investment. I say that your writing style should be aimed at minimizing the risk the

reader will perceive, and by that I mean, don’t be cocky and over promise that you’re going to be a

billion-dollar company. Do your research. Find comparables. Get help. And in areas where there’s high

risk, discuss the contingencies.

Lastly, we come to what we call the executive summary. Few people read a business plan before they

read the executive summary. The executive summary must really entice the reader to ask for more

information, yet it must discuss the opportunity and technology in the market, the competition, the IP,

the business model, the whole business plan in one or two pages. And the only way to really get it right

is to write it after you’ve put the whole business plan together, and then you can pick and choose

exactly what you want and include into an effective and enticing, sexy executive summary. It’s really

important.

I’m going to end with business plans are really only good as the research that precede it. All of the

sections require some level of research, and that’s from the introduction to the exit. And the good news

is that most of you really know how to do research. But really, seriously, where you’re out of your depth,

get help. And there’s plenty of help out there, consultants, accountants, state programs, your

management team, incubators, accelerators, and the guys at ScienceDocs.

“Plans are really nothing. Planning is everything.” That’s from Dwight Eisenhower, former President of

the United States. There are no truer words I think. The plans themselves don’t mean anything. The

process really is everything. And with that, I’m going to take whatever questions are out there.

Thank you so much, Dr. Bilello. Yes, if you have any questions for us, please put it in the Q-and-A section

or in the chat box. The first question we had was, “Why is it important for the vision statement in the

introduction to be one that everyone in your business knows?”

It’s like somebody says, “Well, what does your company do” And you could say, “Well, we make

widgets.” But if you have a nice succinct, concise way to tell them, “Well, most companies really talk

about having the next great cure for cancer. We have always looked at the possibility of a world without

cancer.” That may be more a mission statement, but it’s pretty close. It’s a way that

everybody in the company that’s out there talking to folks actually has the same set of words. Trust me.

I’m a doctor. It really works well to have this formulated and not have people making it up as they go

along.

I guess earlier in the presentation you mentioned that a lot of biotech companies tend to don’t go into

fully. I guess what other recommendations or tips can we get for our audience if they’re trying to start

their biotech company?

Well, again, I think the biggest tip I can give anybody is that there’s a lot of help out there. This is not a

solitary kind of a exercise. It’s an exercise where not everybody has the expertise to address specific

sections. The other thing is, when you get a group together and you’re going to form a company, early

on people have different ideas about what the company is really going to look like. Having those

brainstorming sessions early on where you can come to a consensus about the product, where you can

come to a consensus about what the market really looks like, where you can do that all-important SWOT

analysis where you can identify what your strengths are. Those kinds of exercises, where you can do it,

maybe just of founders come together, but oftentimes this is really good to do with some input.

I said one of the businesses I had after I left GSK happened in North Carolina. In addition to the… Oh,

there were resources from the state, but one of the greatest resources was an incubator where you

actually got a chance very early on to present your company in a very short 15-minute or so chat with

other folks in the same boat as you were and also with some of the real gray-haired people, so like me

these days, although I guess I didn’t… Let me see if you can even put myself up. Oh. He looks so good.

Anyway, us gray-haired guys, we really can be really valuable. Sometimes having a group of folks just

come together and ask you some questions may get your whole team focused on areas that you didn’t

even think about.

That’s my biggest tip. Don’t do it alone. Actually work with folks to really put your business on a broader

perspective, not just you as a small group who think this product is the best thing since sliced bread, but

get some people who don’t eat bread to give you some feedback.

Awesome.

Anything else?

Can you elaborate on the broad rights to improvement for the license? Would this scare away potential

investors? Give me that again, Sam.

Yeah. So it was question. Can you elaborate on the broad rights to improvement for the licenses? Would

this scare away potential investors?

No, because this is actually an agreement that you make with the university when you’re going to

license out a patent from the university. So investors don’t even have to come into the picture. In

actuality, it’s just going to save you time, and it’s going to save you lawyers by making it clear that, yeah,

we’re going to make some improvements and an improvement that we make from that date if that

leads to increased revenue and we have to renegotiate royalties or whatever, we will do that. But we

will either share those improvements with you in terms of an increased revenue stream or less likely,

we’re going to just, any improvement is ours and we don’t care what you want. But it’s just a matter of

every time you’re going to go and negotiate something with a university, they have lawyers. You have to

hire lawyers. That’s all I’m really going to say. Somebody who deals with IP issues, especially around

universities is probably the best person to talk to before you go into a agreement with a university.

Financial projections seem like fairytales, except for known cost. They seem like minefields when one

wrong step means instant death. How can one ensure that this doesn’t happen?

Well, let’s look at the fact that we’re in the middle of a pandemic, and there are a lot of really good

business plans that right up in the air right now. You can’t, basically, guarantee that the financials that

you provide today are going to be in effect five years down the line. It’s almost impossible. But what you

can do is you can develop the business model, develop the comparables, take a look at what’s out there.

There are other examples of companies that have been successful, maybe not in your field, but maybe

in other fields that are somewhat similar, that you can actually use as a basis for those projections.

To be honest, very few investors are going to come to you and say, “Well, in your business plan that you

wrote in 2020, you said by 2025, you were going to have $6 billion a year in revenue” No investor’s

going to do that. They’re going to be involved in your process as you go along. They’re going to

understand that things change. Just look at, I know I’m being a little bit long-winded, but just look at

reimbursement. A few years ago, you could get an incredible amount of money for a particular

molecular bio-based assays, a small panel or something like that. Now, that same panel, the

reimbursement, usually from the Center for Medicare Services or other institutions, are cut way back.

What you could get 10 or 11,000 for, well, maybe that’s a little high, but you could have gotten several

thousand dollars for, maybe now the reimbursement is only a couple hundred dollars. You can’t figure

that out in 2020 what’s going to happen with reimbursement for that same product or test or whatever

five years from now. You just can’t.

Some of the attendees are asking if you happen to have a good experiment of a business plan. Do you

have one that you could possibly share, or do you know any resources where attendees can look at to

see a good example of?

Oh yeah. There are about a gazillion. Just type in biotech business plan and examples and you’ll come up

with a number of different sites. I was trying to think if I knew a good URL. Off the top of my head, I

really can’t give you a good one. And obviously, what you want to do is you want to find something as

close as possible to get something fairly close to what your business actually is. Like I said, there are

gazillions of them out there. And there’s no magic format.

I should say two things. The first thing is whatever you do, before you send that business plan out to

anybody, make sure that you run your spell checks, your favorite grammar Nazi to go through it and

make sure that the grammar ain’t so bad. You really need to put together something that’s going to

represent your business well. I went through the individual stages. Basically that should be a pretty good

guide, but you could take a look at some of those online, and you’ll get a pretty good idea in terms of

length and perhaps substance.

We have time for one last question. One of the audience members said that they had pitched their

business to the investment people, but they said the amount that the person was requesting, they felt it

was too small. What should they do to get a more realistic startup funding?

Well, one thing about putting a company together is never leave any potential money off the table. You

have to get as much as you need. The best way to get insight into that is, again, putting the plan

together and having a coach. I just thought that ULP probably has some really good people that can help

advise that are involved with your organization. But there are groups like this all over the country. This

whole thing about how much you need is really based upon how much other people have needed to get

things going.

One good thing about incubators in general, I want to say incubator, accelerators because there are

people that differentiate the two, but let’s just say incubators. One thing about incubators in general is

that they usually have people at different stages of maturity of a company. There are people that you

can walk up and say, “How much did you need to get this project started?” You may find somebody that

perhaps is very much like your organization. You might find people that are nowhere near like your

organization, but they can always give you advice. Get all the free advice you can get, and then don’t be

afraid to pay for really good advice when you need it. Go ahead and finish it.

No, I’m good. I’m good paying me. You can pay me. ScienceDocs actually does a lot of work in this area

as well.

Well, it is two o’clock, so I want to be cognizant of everyone’s time. Thank you again, Dr. Bilello for

coming up to speak with our audience. On behalf of ScienceDocs and ULP, I want to thank everyone for

joining us today’s webinar. We hope you have a wonderful week. Our next ScienceDocs webinar will be

Layered Intellectual Property Protection featuring Martin Medeiros on Tuesday, August 18th at 1:00 PM.

If you’d like to attend that webinar, please feel free to RSVP on the University Lab Partners Events page.

In the meantime, please reach out to us if we can assist in any way. Thank you again for joining us, and

stay safe and healthy, everyone. Bye-bye.

Safe everyone.