Smart Money for Smart Entrepreneurs
By Roger Laurent Bernier, Ph.D., P.Ag
Vice-president Quebec and the Atlantic Region
Foragen Technologies Management Inc.
After working for more than 16 years in biotechnology research, 10 of them at a UK-based multinational, I decided to change fields in 1996 and joined a business incubator for high-technology companies. Unlike traditional business incubators, which are generally limited to renting office space and offering shared administrative services, this incubator provides business support or professional assistance by making available to entrepreneurs a multidisciplinary team as well as a network of contacts. Our clients in the life sciences sectors are mainly high-calibre university researchers whose business experience is often limited.
At that time, the incubator staff included a vice-president of financing with solid business experience who had been involved in the start-ups of a number of high-tech companies. I will always remember our first conversation, when I asked him to rank, in order of importance, the three main requirements for the successful start-up of this type of company. His answer, delivered with a stern look and the smack of his fist on the table, was both simple and surprising: the first requirement was management; the second, management; the third, management. The years that followed only confirmed what he said then, and his words have acquired a special meaning for me now that I am a Foragen employee directly involved in the financing of emerging companies in the agri-food and forestry sector.
The scientists that I work with often have considerable experience managing university research projects, which may include building and leading teams and administering research grants. They almost always have a vast international network of contacts, particularly in the scientific community. Some of them have even acquired additional skills and added the letters "MBA" to the end of a long string of degrees and professional certifications. But that is a far cry from the type of business experience needed to manage a high-tech company and meet the challenges involved in such an undertaking, such as globalization, the convergence of life sciences markets and mergers of life sciences companies, the complexity and concentration of intellectual property, a financial market that is often unpredictable and capricious, and so forth. Even managers who have worked in the business sector all their lives find it hard to meet these challenges!
It often seems, especially to the career researcher, that innovative technology automatically guarantees success in the business world. Unfortunately, this is not the case, as many scientific studies (to say nothing of business failures) have clearly demonstrated. The key to success lies in good strategic planning, in-depth knowledge of the target markets and enough business experience to make quick but good decisions.
At Foragen, we consider business support and guidance and participation in company management just as important as the investment itself, and we have put in place an experienced team to help fill out the internal resources of the companies we invest in. Many working venture funds describe themselves as passive investors. To me, this is an oxymoron, as anyone who reads the letters of intent and shareholder agreements will realize. Some type of control and follow-up is necessary to reassure financial backers that the money they invested has been well spent. However, what happens when those same investors, concerned with protecting their capital outlay, get involved in business development? How well do they really know the industrial sector in which their companies are operating? Do they have a good network of contacts that will let them identify key players and build solid business partnerships? Do they have a theoretical knowledge of the target markets, or have they actually been involved in real projects? For example, the establishment of effective strategic agreements requires an in-depth knowledge of the target companies, their corporate cultures, their strategic orientations and their needs. In this case, the most important factor is still professional reputation and the business dealings of your team and your investment partners and, in some cases, the friendships established over the years, which are what make these indispensable networks possible.
Business support and guidance and the presence of active investors doesn't mean that outsiders are taking over the company. In fact, we prefer to think of it as a true business partnership based on mutual respect, aid and a shared vision of the company and what it is going to become. By joining the team that is already in place, we become co-managers who add value to the company. At the appropriate time, we are in a position to seek additional financing, and attract complementary seasoned administrators to take the company to the very top.
An increasing number of private and institutional investors are setting a premium on some form of business mentoring, and in Quebec there are financial programs especially for incubated start-up companies. The formula of business incubation is becoming international, and more and more regions are adopting it to stimulate and encourage the emergence of innovative technologies and companies, some of which will become our next small and medium-sized firms and multinationals. At Foragen, we offer a hybrid financing formula in which business guidance and support are provided by skilled managers with experience in the agri-food and forestry sector. They know how to get your promising technologies off the drawing board and into the marketplace. The choice is yours!
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