Page 51 - Mass General Brigham - Innovators Guide 1.2

51 INNO V AT O RS GUIDE | M ASS GENERAL BRIGH AM

8
Company creation

8 and investing

Spin-offs Venture-backed innovation

Startup companies are a central element of the global medical Venture-backed companies are funded and organized to manage the high
innovation model. risk often associated with early-stage programs. Solid intellectual property
is almost always a requirement for funding. A thorough due diligence
When the right conditions are present, the creation of a company may be processes which considers among other topics, market potential, freedom
the optimal route to bring academic inventions to market.
to operate and patent landscape is conducted prior to investment.
Most inventions are commercialized via licensing to an established Key considerations in determining if an opportunity is likely to receive
pharma, biotech, medtech, digital or diagnostic company. An invention outside investment are the stage of technology and the attributes of the
occasionally may be the basis for a new company. Deciding to create a product category. For example, new biology defining novel drug targets
company typically follows a detailed consideration of the characteristics of can be of great interest with only mouse data, especially if it addresses
the technology, its competitive position and market dynamics.
a disease with high unmet need. In contrast, digital technologies carry
The analysis assesses whether the invention can be the basis of a startup a high burden of commercial proof – investors expect to see pilot
company. A key consideration is whether a novel technology can be a implementations that demonstrate benefits in a real-world setting with
“platform”—i.e. the basis for or contribute to multiple marketable products ability to access meaningful/large markets. Pilots are often required.
or combinations of technologies which can serve the same purpose. Regardless of the product category, the more advanced the program, the
Such “newcos” (new companies) may ultimately be sold to an established more value and attention will be paid by venture community.
company when they have demonstrated significant potential to Product development can be characterized as a de-risking process which,
create value or alternatively, they may become publicly traded and if successful, adds value to the asset (the IP) acquired from the inventor’s
compete independently.
institution. Pharma, biotech and medtech companies de-risk assets in the
The potential for a new company often reflects the overall commercial course of product development for their technologies originating internally.
marketplace – in this period digital and therapeutic technologies are They also do this by acquiring select venture backed companies that
priorities in the investment community. Devices and diagnostics are have advanced their programs to a enough proof-of-concept stage for the
relatively less of a current investor priority. acquirer to take them through FDA registration and market entry. Large
established companies often use in-licensing and acquisition of venture-
When the right conditions are present, the backed companies as part of an open innovation model.
creation of a company may be the optimal

route to bring academic inventions to market.