The Three (or Four) P's of Entrepreneurship

The Colorado BioScience Association (CBSA) convened an all-star cast of Colorado biotech entrepreneurs yesterday morning for a Q&A session. On the panel were Richard Duke, President of Apoplogic, Larry Gold, CEO of SomaLogic, Steve Orndorff, President of Accera, Tim Rodell, President of GlobeImmune, and Jack Wheeler, CMO of MicroPhage.

All five were serial entrepreneurs; they had endured the highs and lows of entrepreneurship multiple times and had lived to tell about it. What does it take to be an entrepreneur? Jack presented his "three P's of entrepreneurship": patience, persistence and perseverance. To this Steve added a fourth P: passion. Since persistence and perseverance seem to be synonyms perhaps we should substitute passion for perseverance.

Patience is good, you've got to wait for the right opportunity, not act simply because of the lack of time (which is synonymous for money for the most part). You must persist in your endeavor despite obstacles that will indeed arise. If you tend to avoid difficulties and rejections, entrepreneurship is not the path for you. And what carries you through the difficult times is a true belief in what you're doing; a passionate belief in the product or technology.

When it came to what the biggest stumbling blocks to success were, most stated the technical hurdles they had to overcome. Larry's company had overcome those hurdles and was now facing an even more daunting challenge: the U.S. healthcare system. How to get payers to pay for new diagnostic tests? Although the life sciences industry can be very entrepreneurial and open to new ideas and technologies, the healthcare industry is much different and imposes many obstacles for new products.

A Blessing for Angels

The Access to Capital for Entrepreneurs Act of 2007, (H.R. 578) was introduced to congress last January. This bill would provide a 25% tax credit on up to $500,000 in investments per year in start-up businesses. So far the bill has received favorable response from the Kauffman Foundation, the Angel Capital Association, Women Impacting Public Policy and the National Association for the Self-Employed.

The beauty of this bill is that it provides tax incentive at the front end of the investment, where the incentive is sorely needed, rather than the partial capital gains exclusion given investors now. The Wall Street Journal quoted Susan Preston of the Kauffman Foundation as saying that the bill would double the number of angel investors.

Will this type of incentive cause investors to throw caution, and cash, to the wind? Does spending $500,000 to buy $125,000 in tax credits sounds like a good deal to you? Although the tax incentive reduces the upfront risk, getting a return on the investment is still essential. But with the reduced risk, maybe more investors would be willing to pull their money out of CD's and invest in the next Google.

CTEK Angels Live

I attended the first open session of the CTEK Angels last Wednesday. For those of you who may not be familiar with CTEK (Capital, Technology Transfer, Entrepreneurship, Knowledge), it is an independent Colorado, non-profit group that assists entrepreneurs with the expertise, resources and capital sources they need to grow their companies to the next level. CTEK Angels are the investors associated with CTEK; a loosely associated group of independent investors that meet once a month to give entrepreneurs an opportunity to make a pitch and combine their experience to evaluate the pitches. Although the Angels evaluate the presentations made by the entrepreneurs, investment decisions are left up to the individual investors.

CTEK provides a very effective way for entrepreneurs to approach angel investors, a very elusive group for the most part, but nevertheless instrumental in funding a major portion of small businesses in this country. Although the CTEK Angels meet once a month, this was the very first time the meeting was opened to the public. And despite the first snow of the season and the difficult parking situation at the University of Denver (no valet parking for the angels!) the event was a sell out. I guess everyone wanted to see the entrepreneurs thrown to the lions.

Chatting with some people in the audience I met both would-be entrepreneurs and investors; the entrepreneurs were curious about the process and the investors... looking for deals the Angels pass on? This event went a long way to expose the process and perhaps reduce the intimidation and confusion factor. CTEK may be seeing an increase in the number of applications for their funding program as a result.

The presentations by the entrepreneurs were well done and demonstrated the coaching they received by CTEK advisors in preparation. We heard from Ashif Dhanani from X Inc., Michael Sitarzewski of Hypersites and Magic Home. All of these companies are selling products and generating revenues and are looking for revenue for marketing and business development to get them to that next level. We'll be watching for them in the coming year.

The Value of Evangelists

I had a conversation this morning with long time medical informaticist Rob McClure. Having been at the forefront of health IT for years, Rob has seen his share of companies rise and fall as the healthcare industry has struggled with its information issues. His belief is that our society values the evangelists over producers; that we are all too easily pulled in by the next great thing. He does admit that when he uses the word "value" he means "attracted to." Put that way, I tend to agree with him. If he meant "value" as in "invest resources in," all academics would be billionaires. But the days of throwing money at good ideas before they've been demonstrated are over as any entrepreneur can tell you. Nevertheless, ideas are sexy, and we'd much rather listen to someone telling us about the way their new idea will save us time, money and make our belly's flatter than to listen to someone tell us that nothing less than 1,000 sit-ups a day will do the trick.

I continue to be reminded of the film Envy (obviously left a better impression on me than the vast majority of the film going audience) where the Jack Black character comes up with a winning, although completely unproven, product idea and the Ben Stiller character dismisses the thing outright as inane. Sure enough, Black makes a mint while Stiller wallows in mediocrity. And sure enough again the whole thing comes crashing down when one LITTLE detail (as originally foretold by Stiller) was overlooked. Oh well, off to the next big thing...