| 20th February 2003
INSIDE TRACK ENTERPRISE: Drugmaker
heeds tough talk - Financial Times
DanioLabs is a Cambridge-based therapeutics
company focusing on neurological and ophthalmic disease.
The company was co-founded by
Paul Goldsmith in October 2001 as a spin-out from Cambridge
University and the University of California, San Francisco.
It received funding from the Cambridge University Challenge
Fund and from the Department of Trade and Industry through
its Smart programme.
In June 2002, DanioLabs raised £1.3m
in seed funding from Catalyst Biomedica, a business
development and new
ventures subsidiary of the Wellcome Trust, and Cambridge
Angels, a consortium of Cambridge-based investors, including
Andy Richards.
Andy Richards, investor As I went along to my first
meeting with Paul Goldsmith I was deeply sceptical about
the business. I felt there had been an oversupply of
genomics companies, many of whose business models had
failed. And having been involved in several, I thought
they were very bad in connecting what they were doing
to human disease and how to cure it. I was preparing
a list of reasons to say no.
However, I was surprised. Paul was clearly very bright
- but most importantly he had a medical background and
related everything to his experience of medical science
and disease. The things I hated he didn't do; the things
I liked he covered.
Over the following months, Paul was very successful
at dragging me into meetings and I became increasingly
sucked in. I found Paul responsive and quick to pick
things up. I also discovered he was willing to tackle
the hard issues - what was motivating him, his role in
the team - not just MBA-type theory. This is crucial
for a good relationship.
Paul is driven: he sends e-mails at 3am and if you happen
to be sitting up and reply, he'll respond immediately.
As a medical doctor, Paul got into a habit of doing 120-hour
weeks and he hasn't stopped. My role is to temper his
energy and drive with proven business methods. The big
challenge for a biotech company - and where I can be
of most help - is in translating a 10-year drug discovery
process into a reasonable funding time-frame: to come
up with a strategy and targets that make sense to the
investment community.
Sorting out the investment was the most difficult and
contentious part of our relationship. The crux was sorting
out intellectual property rights - if you don't get this
right you will never raise venture capital. There were
times when it looked like these issues were not going
to be soluble. I had to tell Paul that unless he solved
them I would not do the deal. I think Paul found that
shocking but I couldn't afford to throw away my money
and that of the other investors.
Paul Goldsmith, co-founder with Bill Harris and Herwig
Baier, DanioLabs I met Andy Richards as part of the entrepreneurial
support process at the Cambridge Entrepreneurship Centre.
I knew it would be a crucial meeting as Andy has rare
experience. He has taken a biotech business, Chiroscience,
from inception to exit, has an in-depth understanding
of where biotech is going and has strong connections
with the investment community.
I could feel Andy was excited
by the idea. During the presentation he'd continually
interject and say: "You
need to think about it this way." And the following
slide would address that exact point. It was clear we
were on the same wavelength. Maybe he could see a bit
of himself 10 years earlier.
Over the following months, Andy became more and more
involved in plans for the business. I discovered I really
liked the way he worked: he is creative, he likes to
juggle a lot of balls and is good at cross-fertilising
ideas. I fed off his enthusiasm and creativity and vice
versa. I could feel Andy testing me to see whether I
would be able to cope: asking tough questions, seeing
how I responded to criticism, to projected circumstances.
Andy is a nice guy but he has a tough streak, and you
know you have got to prove yourself and the business
continually.
Andy has been invaluable in helping to identify the
steps to develop the business and tying it in to the
needs of the venture capital community. As a result we
have profoundly changed the business plan. At the beginning,
we were focusing on the early stages of drug discovery,
the basic science - now we have become more focused on
the clinical end, on drugs and the therapeutic areas
where we have a lot of expertise.
Andy helped us to recognise that we have to play to
the strengths of the team as well as the market.
Andy and I worked closely for nine months before he
became an investor. Negotiating the deal was the most
difficult part of our relationship as there was an inevitable
conflict of interest between Andy as adviser and Andy
as investor.
The best way to deal with this is to be as upfront as
possible at the start and say this is going to be confrontational,
but that's business.
At the time, I was disappointed with the valuation we
achieved and wondered whether I had been tough enough
during the negotiations.
However, my ultimate goal was and remains to build a
very successful company and there are certain parameters
you just have to accept. Now that I have discovered how
few biotech company start-ups were funded at that time,
I realise I should have been more content.
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