Saturday, March 26, 2011

Questions investors ask

Fred Astaire.Up to this point, the most difficult standing challenge that I’d faced was my doctoral defense.  Lasting about three hours,the panel of professors lobbed questions, criticisms, alternative hypotheses, and prior papers from 1927 that I hadn’t read while I scrawled diagrams and constructs onto a whiteboard. At one (low) point, my advisor jumped up to start erasing what I’d written – we made a pair, with me re-establishing the text behind his erasing it.

Nonetheless, I got the degree.

Syndicate meetings rival these defenses: a roomful of investors chaining off of one another's questions, baying after signs of inconsistency and weakness.  I actually enjoy the experience but it’s very intense.  I think that it went well overall, but the three toughest questions were:

Tap 2Q:  How do reductions in infection rates expected from clinical trials correspond to reductions in colonization rates during your experiments?

My answer: Yes, they do.

The underlying truth:  Bacteria colonize the surface and secrete toxins that cause infections.  There’s no data linking the three: our assumption is that a 40% decrease in colonization (overall density or growth in patches) leads to a 40% reduction in toxins, hence to a 40% reduction or delay in infection. The last relation is likely to be non-linear though: a lower threshold level of toxin starts to provoke infection in some patients, and a higher threshold beyond which all patients are infected.  We just don’t know.

Ideal answer: We’ll certainly decrease the concentration of toxins in proportion to the decrease in colonization.  This, in turn, will have an impact on infection rates, but we won’t know how much until the clinical trial.

Q: Have you ever run a successful company outside of a corporate environment?

My answer:  There’s no difference.

The underlying truth:  Medical product development is a process, tailored to the product or service that you are trying to deliver.  As you successfully execute, assets and knowledge accumulate, evidence and confidence build, risk reduces.  This process is independent of the development environment: only the immediate sustained availability of cash and experienced people distinguishes the corporate version.

Ideal answer:  We are following established protocols and best practices set out by clinical, regulatory, and industry leaders.  These arte backed by contracts with experienced specialists doing the  market analysis, patent filings, product testing, and clinical trial organization.  Together, I’m leading a team that is stronger and faster than their corporate equivalents.

Tap 3Q: Without a central location and a staff comes to work every day, it doesn’t feel like a real company.

My answer: A virtual company minimizes costs and maximizes flexibility.

The underlying truth: A project gathers resources to achieve a goal – it has no longevity once the goal is met.  A business remains together to extend the product, serve customers, and  drive growth.It’s reassuring to walk into an office and to see the minions beavering away at their keyboards and telephones: there are people who care and are on-the-job getting it done.  In contrast, a virtual organization feels relaxed and uncommitted: what are the folks up at Sheffield and down at Brighton doing right now; what are you doing other than imaging what they are doing?

Ideal answer:  As development of our lead compound concludes, we will bring the chemists and biologists to a central location to support market entry and secondary products.  In the coming year we will hire a core staff, including a Technical Officer, Business Development, and Marketing Lead, and identify facilities where the company can relocate at the next funding round.

It’s a process: these kinds of questions help to refine the business and identify opportunities to make it better.   I just wish that it didn’t happen in the context of soliciting investment, where we want to put our best, confident foot forward.

And, nonetheless, we’ll get the money.

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