Entrepreneurship in Biotechnology:

The Case of Slovenia

Osijek, September, 19, 2009

Jaka VadnjalGEA College of Entrepreneurship

Jaka Vadnjal• MSc and PhD in business, BSc in

engineering• 19 years of managerial, board and

entrepreneurial experience in private sector and public administration with 13 years parallel teaching and research

• Director of the Research institute and assistant professor at GEA College of entrepreneurship, president of the senate

• Research: Entrepreneurship and VC• Biotech experience: From VC research,

targeted research in the bio-tech sctor and some consulting experience

• Proud husband and father• Drummer in an amateur rock band for

almost 30 years

Methodology for this Study

• A qualitative research among six existing companies in Slovenia:

– Limnos d.o.o.

– Bio-techna d.o.o.

– Celica d.o.o.

– Bia d.o.o.

– Educell d.o.o.

– Bia Separations d.o.o.

– Acies Bio d.o.o.

• Overview of other practises

• Consulting case from SLO

Biotech (entrepreneurship) features

• Academic research is driving the industry In SLO: All entrepreneurs are PhDs

• Many techniques, skills, processes, etc. fit under the umbrella

• A huge number of markets, products and services is and will be influenced by the technology

• In SLO: health, food, industrial…

Expectations from Biotechnology are High (Vanhemelrijck, 2006)

• To be the basis for the knowledge based economy

• To be competitive • To create jobs and wealth• To cure and prevent diseases.• To increase survival• To improve patients’ quality of life• To feed the world• To return to the plant based economy• To optimize renewable resources• To help the environment (KYOTO)

Biotech and Entrepreneurship Have RISK in Common (Rothaermel & Deeds, 2004)

• High degree of uncertainty:– What we’re going to do with it?– How it is going to work?– What can be achieved?– How will it be manufactured? (In SLO: completely confirmed)

• Long and expensive product development cycle• Required investors and

partners (In SLO: VC gap)

• The potential for serious challenges to the legitimacy of the industry (In SLO: Some failures with negative publicity)

Profit & Wealth Will be Created When Product Delivers Value to Consumers!

• Technologies do not create big wins unless they become a breakthrough consumer technology. (In SLO: People still do not understand what business is about, inluding inteviewed companies)

• Selling stuff to each other moves the money but doesn’t create a vibrant, growing and sustainable industry. (In SLO: Very relevant!!!)

• Only when the technology creates real value for end users so that sustainable revenues are generated and wealth is created.

The Times are turbulent

• The industry and segments will fall in and out of interest of investors.

• Ability to raise capital depends on the successes and failures of the other firms in your market.

• Bad actors and bad acts hurt everyone.• In SLO: 2006-07 everybody spoke about bio-tech. A failure

of a company happened. Evrebody knew it. Everybody feels that this was a downturn of the industry.

Partnering

• Big partners are generally a necessary evil• Research institutions often behave as they were

alone in the space, but those ventures that learn to work with them benefit from the relationship (in SLO: Completely confirmed):

– Leading-edge knowledge– Skilled work force– Legitimacy– Access to specific assets

• Partnering with other “ventures” can be beneficial, but involves a risk of helping competitors (In SLO: A fear of this is very present)

Academics and Science

• The Role of Public Science• Primary goal is creation and dissemination of new

knowledge that expands our understanding of the world

• Secondary goal is to improve the lives of the people of the world

• Academics succeed by publishing interesting findings in top academic journals that inspire others to build on their work. (in SLO: Completely confirmed)

• Status in “Public Science” is conferred by sharing – you have to present and publish to be a player and players get stature and access to new knowledge and higher skilled researchers. (it is true for SLO)

Place to be…• Geographic clusters provide substantial benefits

including:– Access to specialized labour– Specialized Suppliers

• Lawyers• Investors• Specialized assets, machinery and inputs

• Knowledge Spillovers• Outcomes from being located in a geographic cluster

– Higher Probability of IPO– Higher Value at IPO– More attractive to partners– Higher survival rate

• Clusters in science-driven industries have at least one great research institution at their heart

• Idea: If we don’t have one, we may be able to establish one by pulling together all the best we have! Idea from the research: Slovenia is to small…

Risk Taken by Biotech-Entrepreneurs

• Research risks

• IPR risks

• Financial risks

• Regulatory risks

• Market risk• Unfortunately: political risks

(in SLO: Completely confirmed)

My Case: Consulting to

Bio-tech Company• Academic research driven

• Core team:– Senior: Professor (as “mentor”)– Junior: his PhD project

• Project good enough for PhD and papers but not “prototype mature”

• Raising VC to complete the project

One of the Projects…

• Fire-blight as global problem• Bacteria• Copper substances: traditional

way of preventive treatment• Antibiotics • Bio-tech invention• Economically: Substitutes for the two

methods, more efficient, environment friendly, more cost-effective

Lessons Learned From Consulting Project• Consultant: Difficult to competently

consult something that you don’t understand• Company:

– Key people would prefer academic rather than entrepreneurial life

– Bright minded PhD guy was able to write a reasonably good business plan (technically) however,

– With lack of immagination of the appropriate business model

– And probably also lack of commitment for entrepreneurship

• VCs: Had many less risky and more “on-the-planet-Earth” projects to invest at that time (2005)

What can be done?

• Increase entrepreneurial culture among young people from craft-men to junior academics – make them participate in at least one business plan preparation.

• Stimulate clustering and partnership (both horizontally and vertically).

• Support multidiscliplinarity, make science and business students work together (Bologna should allow that).

• Attract bigger VC players to come to see what is going on in SLO.

• Recognize winners (heroes) also by not expelling them from their academic streamlines: PhD entrepreneurs may have less time for publishing but may be add an enormous value to students (see bullet one).

Thank you!

jaka.vadnjal@gea-college.si