The « life cycle » of an university Spin Off

A personal experience…

Benjamin DAMIEN – 15/12/2014

Who?

Benjamin DAMIEN (40yo)

No Entrepreneurs or Self-employed in the family

Scientific backgroundMaster in Molecular biology (Liège, 1996)Ph.D. in Immunology (Universität Tübingen, DE / Univ. Liège, 2001)

Back in Belgium (December 2001) : Looking for work in the pharma industry But : Burst of the « dotCom bubble » in 2001-2002 , the industry has suspended all hiring.

The middle way : « FIRST SPIN-OFF » project, at the University of Namur(Create your « own » Spin-off)

Need : Life sciences companies are looking for « bioinformatics » expertise

Emerging needs (« big data »), very rare profiles.The lab has a good track-record in the field and some industrial collaborations.

The company would provide high-level expertise and technology for data analysis.

A business plan was written from the end of 2002(and some business training followed)

What?

Company incorporated in 2003 (at 29yo)

Goal : Provide expertise and bioinformatics software to « Life sciences » comp.

Headcount: 2

Capital : 75,000 € (51% owned by the founders)

BioXpr

Growth

2004 2005 2006 2007

-200,000 €

- €

200,000 €

400,000 €

600,000 €

800,000 €

1,000,000 €

1,200,000 €

Revenues and profit

Chiffre d'affaires Benefice

Positive Spin

Everything is fine, but…

• Service company is fragile, low cash reserves• Growth is limited• Niche activity• Only one type of customer (big pharma companies), high risk linked to lack of diversification

The board suggested to switch to a « product » business model (to sell software)Financial Round A completed in 2008 (+500,000€).

In June, I forecast that the results of 2008 will be event better than 2007. Headcount : 10

In the USA, we hear about a « financial crisis » but there are no signs of it in Europe…

Perfect story?

Et puis…

The next morning, the phone started ringing…

Crisis…

Revenues are decreasingNew projects are more difficult to get.New Software is not selling well (budget embargo)The company is losing money for the first time since startup

What should we do?

Wait, and hope it cures by itself?

Fire people?• Loss of expertise for the company• It costs a lot of money• They are my friends…

Caution…

We (the board) decide not to fire anyoneWe will cut the expenses to the maximumWe will make our products more flexible (as « software as a service »)

To compensate: Enter Regional/European Research projects

But the public subsidies are coming very late, and made the situation worst

Half 2009 : labeled « Company in trouble », which opens access to « temporary unemployment » (6months).This should have stayed confidential, but 3 days later, Graydon called to have more info…

This was therefore communicated to our remaining customers… and to the banks.The bank withdrew our credit openings, cutting our cash reserves.

First year with major financial loss (-250.000€)

Damage control

January 2010.

The situation has become really difficult. The « economic unemployment » will end soon.Our shareholders are unable to help us : Most of their participations are suffering too

Two last-stand initiatives:-To negociate a merger/acquisition with a complementary company-Request a « Chapter 11 » (Gerechtelijke reorganisatie/Réorganisation judiciaire)

Internally : Be open with the team. Tell them that if they find a position somewhere else, take it…

Desperate measures…

End June 2010:

Failure of the discussion about the fusionNo cash leftAlmost no customers leftManagement is burning out…

The board commit a general assembly, who votes to declare bankruptcy

Crash…

And then nothing…

A « curator » is sent by the Tribunal of commerceThe assets of the company are sold to the highest bidder.

All the employees would find a new job within a month of the bankruptcy

Back to square one

Broke, but at least I can sleep at night…

Disapointed, exhausted… but relieved

After a few days, I could get access to my old e-mail account...

In reply to my « farewell » e-mail, I got HUNDREDS e-mails of support, from customers, partners, other entrepreneurs sharing their own stories, etc

And amongst them, a few proposals of « collaboration ».

Return as « Consultant in spin-off creation, development, strategy and business development »(But I prefer « Interim Entrepreneur »). ;-)

I use my international network (Universities, VC, Companies) to get new projects.

I offer my experience to your startups, for a few months, as CEO, Business dev,…

A new beginning…

New project(s)

2010 20142012 20132011

Keep your eyes on the horizon

Stay flexible. Problems WILL happen, but they are all manageable.

Do not put « All your eggs in one same basket » (customers, projects,…)

Do not act in panic. Get the advice from external advisers.

Cash reserves give you time to react. Do not « undersize » your projects.

Get a team (or partner/co-founder) with complementary skills/personnality

Develop your professionnal network

Do not build your project on the promises of public funds

Be sure to keep a balanced life! (Family, sports, holidays,…).

New vision, born from experience

…your company is your job, not your life.

…you should keep in mind the « the big picture »…(meaning, do not hesitate to fire people in necessary)

…you should not be stubborn if the situation becomes unrecoverable

…you should not « sink with the boat ».

…you should trust your wife/husband/partner.

In case of troubles, remember that…

Your first company is like your first love…

• You are probably too young and unprepared when it happens

• It’s great, it’s a new world, and you think it will last for life (Sometime, it does).

• … but usually, you get dumped, it hurts and you think you’ll never love again.

• But you will do it again, and use the experience from your past mistakes.

• You have become wiser, better, more cautious,…

• The new relation could be less intense, but more stable, more durable, …

What to take home

Thank you for your attention

Benjamin DAMIEN

Tel : +32 475 42 93 13

benjamin.damien@skynet.be