Sunday, March 10, 2013

"Under 40" Biotech Billionaires?

I assume he started young.
Credit: Forbes
Since the dawn of capitalism, Americans have been entranced by rich youngsters. Their quirks, foibles, and outrageous lifestyles make magazines' front pages and serve as cultural touchstones; Richie Rich, Eloise, Bruce Wayne, and Montana Max all represent the genre well.

Forbes recently got into the "Youngest Billionaires" game, with the 2013 list featured prominently on the website. Forbes profiled 29 individuals under 40 with net worths >$1 billion, whose life stories reveal several interesting trends.

How does one become an "Under-40" billionaire?
  1. Drop out of college to start a tech firm, or
  2. Inherit your wealth.
That's just about everyone on the list. By 'tech,' I mean computers, gadgets, or apps - nary a biologist or chemist among the ranks (there are three engineers, but they've made their fortunes on the business side of things).

Thought Experiment: What would one need in order to be a baby-faced biotech billionaire? 
(For the purposes of this exercise, we'll ignore inheritance, and focus on "bootstrapping" from a standard middle-class childhood.)

For one, you'd likely need to forego college, and probably grad school. A five-year Ph.D., coupled with a 3-year postdoc shaves eight potentially game-changing years out of your 20s and 30s. Not to mention you're still paying back student loans and likely making below-market wages the entire time. Make no mistake, you'll have to start early, and perhaps look to hire your Ph.D. friends on the other side.

Next, you need what folks in the tech sector call a killer app. What does that mean for biotech? Something cheap to produce, easy to sell, relatively non-toxic and easily handled, and usable by people around the globe. A simple cancer diagnostic, perhaps, or a revolutionary photocatalyst. Maybe a new strain of fungi or bacteria for food production, or a serendipitous discovery of a new dye or drug (Hey, it worked for Perkin!)

Credit: Shutterstock
Third, since you'll have to weigh each wild idea or ground-shaking concept you create against its future commercialization value, you'd need a fundamental shift in your view of scientific communication. Open-access journals, blogs, national meeting presentations? Not for you. Timely patent applications and I.P. guardianship will be your bread and butter, so no sense in risking inadvertent disclosures. 

So, follow these easy 1-2-3 steps to biotech billions, right? Well, of course it's never that easy. Luck plays a crucial role in start-up ventures, as do connections. In this field, one's credibility might be undermined without a college degree, which might make initial fundraising tough. The barrier to entry might also be too high; tech entrepreneurs can start with a laptop, but biotech needs lab space, reagents, journal access, safety gear...the list goes on and on.

Readers, I'm sure this sounds nice and logical on paper, but I must have missed something along the way. Can you think of any high-net-worth youngsters who cut their teeth in chemistry? Why don't more young people see science entrepreneurship as a valid career direction?

5 comments:

  1. You touched on a couple of big factors against making it rich before 40 for the non-computer side of tech. For me they would fall into three categories: 1) the high cost of failure, 2) it takes time, and 3)lack of visible role models

    1)The high cost of failure: for (non-physical) computer related success, the barrier to entry is pretty low, a laptop, some servers, etc. In addition, scaling is pretty straight forward compared to any kind of physical manufacturing (which is also costly and it's own headache to scale). When you're writing code and the business idea flames out you don't really need anything besides a new idea to start again. Physical tech doesn't have that advantage for entrepreneurs.

    2) It takes time: a lot chemistry/biology related products that would make you money involve time consuming government approval (i.e. FDA in the US for most products). In addition, it's such a crap shoot, a lot of time (and money) goes in before you even know if you can make money.

    3) Lack of visible chemistry/biology entrepreneurs to model/inspire. The last big wave of young biotech entrepreneurs seems to have come in the 1980s (e.g. Promega)with developement of DNA/gene manipulation tools. Related to that, the money in biotech as young entrepreneurial seems to be on making tools for other people (Linton of Promega making restriction enzymes for biology researchers). You don't have to "save the world" (e.g. cure cancer) to make it rich, you just have to make the tools for other people to try to "save the world". Also related is that it seems a lot of bright minds in chemistry/biology go into research without much exposure to the business side, so it's kind of just expected that that's what you'll do.

    ReplyDelete
  2. Jack Andraka. He would be the only one I can think of with a chance. We'll see what his future holds.

    ReplyDelete
  3. I think the time factor pointed out by Scott above is crucial. It usually takes so much time to validate a new drug or biotech product that by the time the product is battle-tested you may be a billionaire but you will probably not be under 40. Blame this on the complexities of biology. Not to belittle the tech sector but fixing bugs in software is a tad more predictable and deterministic than fixing bugs in cells. That being said, it's perfectly possible for a young biotech entrepreneur to come up with the right product for a thorny problem. In principle at least, especially with the advent of synthetic biology.

    ReplyDelete
  4. Just today I was listening to the most recent This Week in Startups podcast and the CEO of Revision3 (never heard of it) was the guest. He was describing how he sold Revision3 for around $35 million to the Discovery Channel, a modest outcome for notable investors Greylock Partners, Marc Andreessen, and Mark Cuban, but a positive outcome nonetheless as they had chipped in $10 million.

    In biotech, there would be absolutely no way for a VC win with a $35 million acquisition (unless by some miracle). And here is the rub, in order for a VC to see a 5x or even 3x return on their money, the exit needs to be well over $100 million because the amount of startup capital required is just so darn high. Biotech is a cash burn business and until we solve that problem, I just don't see how we'll be seeing 22 year old biotech billionaires in the near future. Though, I hope I will eat my words.

    ReplyDelete