The celebrated venture investment guru Peter Thiel postulated a law that says "a start-up messed up at its foundation cannot be fixed" - Bruce Booth attempted a commentary of this law in the context of Biotech ventures through his blog post titled 'Foundings Matter: Thiel’s Law Applied To Biotech' - While Bruce's application of Thiel's law is based on a tacit agreement of the postulation, I believe this can be argued differently, as indicated by some campus talk here...
Below is my comment against the article by Bruce Booth, wherein I agreed and disagreed with the author in two independent contexts....
My comment:
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It bugs me no end just how little
the VC & PE literati out there ever attempts to explain all those lurid,
smart theories in the context of biotech enterprises instead of solely building
case-studies out of super-achieving IT start-ups that brought-in bags of cash to
the VCs very early into its life cycle. This peculiar penchant among the authors
for avoidance of anything called biotech enterprise I feel is owing to a general
investor impatience for acknowledging the veracity of any investment that can’t
be cashed out profitably within 3-5 years & thereby not showcased as a text-book
case of intelligent investing. While otherwise is a decently thought-provoking
& stimulating book, “Venture Capitalists at Work: How VCs identify and build billion dollar successes” by Tarang Shah is one such recent addition to my list
of disappointing treatise.
Peter Thiel too probably isn’t
greatly different after all, since a lot of the wisdom he’s been postulating is
validated only within the narrow context of IT start-ups - Your effort Bruce, at
‘pharmifying’ the ‘Thiel’s law’ is thus a very welcome diversion.
None of the mess-ups you listed
right from ‘un-reproducible science’ to ‘inappropriate capitalization’ can be
contested as inconsequential in any which way & together these six make a
great check-list for the entrepreneur on how not to go wrong initially & for
a full-fledged due diligence by the VC either at the initial funding or an
informal, abbreviated review prior to subsequent funding rounds. I however am
struggling a little bit to accept that the DNA can’t ever be repaired once
messed up – isn't disruptive innovation, which inherently amounts to re-coding
the DNA of the enterprise /or enterprise's innovation/ business model, an
accepted strategy now?
In the June 2013 issue of HBR,
Rita Gunther McGrath (Author of “The End
of Competitive Advantage”) talks on how the current day enterprise scenario
is all about moving away from the conventional ‘Sustainable competitive
advantage’ model and instead moving towards “Transient competitive
advantage’ – Biotechs' that operate within an ever evolving, dynamic
clinical scenario I believe can’t really base their strategy on sustainable
competitive advantage & have to necessarily adapt, quickly &
efficiently to the transient competitive advantage model & this may
necessitate periodic re-coding of the enterprise DNA - What I quote here is what
pretty much you and others said earlier regarding the need of emergence of ‘lean-start-ups’.
So instead of trying overtly to
ensure all loose ends are tied-up upfront (…including the phantom scenarios!)
& showcase a supposedly fine-tuned enterprise DNA to the VCs, the
start-up would do good to expand the scope of the business plan to incorporate
a well thought through set of situation-appropriate pivots & an alternate disruptive innovation
model or two.
*on a business trip in Switzerland at the time of posting this article