By Mike Sassano, CEO and co-founder of SOMAI Pharmaceuticals
Start-ups operating in highly-regulated sectors, like the world of pharmaceuticals, have to navigate many more obstacles compared to other businesses – whether that’s understanding laws, dealing with medical boards, building trust in their company or translating insights from the laboratory to the real world. But I believe that the lessons learned from handling these obstacles can help any business grow and scale.
Here are four ways start-ups can learn from highly regulated industries:
When setting-up a pharmaceutical manufacturing facility it’s imperative to start lean. Employing too many staff too early, or being too top heavy at the C-Suite level, can cause any start-up to burn through cash at a rapid rate. The advice here is simple – you only need a small team while going through construction to get you over the line in the most minimum and cost-effective manner. As you get closer to launching a product, solution, or opening a facility, you can start layering in staff and slowly building out the C-suite.
It’s tempting to fall into the trap of thinking having a large C-suite full with an extensive industry background can help raise credibility. However, top-heavy structures inevitably fail either in the start or before a product or solution is ready for the market.
Build your brand early
Medical and pharmaceutical brands have to be trusted. Failure to build that trust can not only hit the bottom line but can also threaten any hopes of future growth.
However, this issue of brand awareness and brand trust is becoming increasingly important across all sectors. For example, according to Deloitte “many tech customers, both end users and business-to-business (B2B) purchasers, lack trust in the organisations from which they purchase.” With the analysts concluding that, “this lack of trust can make it challenging for technology brands to drive growth and achieve their mission and purpose.”
To negate this, start-ups across all sectors need to build their name and their reputation – and do it early. Most EU startups wait till they have a product to sell, waste energy trying to sell something that doesn’t exist. Often this is too late.
If a business wants to be taken seriously when a product or solution is eventually ready to enter the market, they must have put in the groundwork before launch – raising awareness of the brand, highlighting the expertise and generating excitement about the solutions that are ‘coming soon.’
Business leaders may want to consider opening up their business and hosting tours of their facilities, even while under construction, to show progress. It’s called the “imagination tour,” where a brand can build excitement of what is being created and showcase why they should be trusted, why they are the experts, and why what they’re doing will be the best in the business
Finally, make sure your brand is engaging people – whether that’s potential customers, investors, or even the general public – across multiple touch points. Whether that’s at conferences, in the media, or across social platforms.
Budget cautiously and do your homework
In Europe, the pharmaceutical sector is a patchwork, comprising different approaches from different countries, but it is growing. And while emerging parts of the market are growing at a rapid pace, the ever-changing regulatory market forces companies to be strict with their cash flow. But keeping a close eye on the bank balance and being realistic about future growth is an approach all start-ups, regardless of sector, should consider – particularly when looking to attract investors.
After all, raising funds for operational costs puts employees at risk and is not generally what investors want to see. At a minimum, investors want to see revenue after the first round of investments is completed, alongside a clear vision regarding how additional money will improve those revenue lines.
To protect against running out of cash too early, business leaders should double the timeline to complete construction and operational targets, double expenses and half revenue projects. This leeway will be an excellent start to being over budget only slightly instead of massively.
Finally, business leaders must do their homework, understand all costs that could be coming their way, question everything regularly and force themselves to think at least three years in advance.
Set reasonable expectations of revenue generation
Because SOMAI Pharmaceuticals is part of a sector in its infancy in Europe, revenue generation can be a long game. But many businesses developing new innovations, such as renewable energy technology, AI solutions, and electric vehicles are all facing similar headaches.