Don Rose has a front seat to watch many of the emerging life science companies around North Carolina’s Research Triangle Park.
Rose is executive director of Carolina KickStart, a University of North Carolina at Chapel Hill program that helps faculty turn their university research and discoveries into new companies. Each year, Carolina KickStart hosts its Emerging Companies Showcase, a chance for companies to pitch their companies before an audience of researchers, fellow entrepreneurs and potential investors. This year, the event grew so large that the event was split into two tracks, one for technology and another for scientific companies. Of the 14 companies that presented, eight were in the scientific track. Most of those companies are pursuing some type of medical device or medical technology.
Rose is himself a veteran of the Research Triangle life sciences community. He worked in research at Glaxo Wellcome and later held executive positions at several Triangle biopharmaceutical companies. Rose will be one of the speakers at MedCity Media’s Converge conference in July. Rose took a few moments to share some of his life sciences perspectives.
Q: At the recent UNC Emerging Companies Showcase only one of the eight presenting scientific companies was a pharmaceutical company. Have there been more medical device companies coming from UNC than pharma? If so, what’s driving that trend?
A: No real trend. Some years we have more pharmaceutical companies. In the past, we have been heavy on the therapeutics side by the nature of the research at UNC. Going forward I expect medical devices to be more prominent as our biomedical engineering department, a joint department between UNC and NC State University, grows.
Q: When a UNC faculty member approaches you about an idea for a company, what are the common questions they ask?
A: It’s across the board, but it falls into two main areas. One, strategies for commercializing the technology: How will it be applied? What is the product? What are the customer needs? And two, the mechanics of starting a company: attorney recommendations, advisers and management, licensing, space, funding. The common theme is the almost universal desire for them to have impact. At some point in their careers, the search for knowledge rings hollow and they’d like to see some benefit come from their research. They can license the technology to an established company, but a startup provides them with a more hands-on approach where they are more engaged and most faculty love to learn, and the business world is so foreign that there is a great opportunity to learn.
Q: Entrepreneurs say it’s harder than ever to get funding these days. Investors say the best technologies will always find financing. From your position at Carolina KickStart, what changes have you observed in the funding environment?
A: The best technologies do get financing, but the risk tolerance of investors, as dictated to a certain extent by their limited partners, has decreased. Many of the firms I’ve talked with want to avoid regulatory risk at all cost. Others want to see revenue. This has lead to many more companies turning to SBIR (Small Business Innovation Research) grants for funding. As a result, the SBIR funding rate has dropped to around 12 percent. This, combined with the fact that many of these companies are “SBIR mills,” in that they have teams of expert grant writers and a stable of PIs (principal investigators), makes it difficult for a university startup to get an SBIR grant. The good news is that universities are stepping up to provide some of this gap funding. At UNC, as part of our CTSA grant (NIH Clinical and Translational and Science Awards), we provide awards for startups that have licensed UNC technologies. We are also exploring early stage venture funds that may or may not be associated with the university. A number of other universities such as Michigan and Texas have venture funds dedicated to unlocking innovation out of their universities. In addition to funding, universities are stepping up with programs like Carolina KickStart that provide mentoring and incubation in addition to funding.
Q: Besides funding, what do you see as the biggest challenge facing startup companies today?
A: There are several challenges for university startups. First, and this is funding-related, is the lack of coherent industrial relations function at universities. Many corporations want to partner with universities at different levels: sponsored research, investment in startups, clinical trials. However, the on-ramps for industry into the university are hard to find and navigation within the university can be challenging. Partnering with industry, especially for startups, goes beyond funding to include help with strategic direction, product development, etc. The second challenge is related to management. It’s not a lack of management but finding management who have the resources and risk profile to jump into a startup prior to funding. Ideal management has the experience in the industry combined with enough cash resources to work for equity alone for 12 months. This population is very small. Having management on at this early stage is critical because most technologies have multiple applications, products, customers, markets, etc. Helping to sort through the choices can be difficult and requires experienced management.
Q: Can you give an example of something developing in the life sciences sector that amazes you? And why?
A: One area that intrigues me the most is our intestinal system. Two developments point to how little we still don’t understand, and thus are ripe for opportunity. The first is gastric bypass surgery. Although I’m a proponent of preventing obesity vs. treating it surgically, the results of surgical intervention have been astounding. Morbidly obese patients with type 2 diabetes come out of their surgeries with no diabetes and shedding hundreds of pounds. Last time I checked, it’s still not clear the exact mechanism since caloric reduction does not alone account for these changes. The second area is gut bacteria. We are just coming to understand the effects of microbiology of the gut on human health. The probiotic movement is an attempt to manipulate the bacteria, but understanding how to do this effectively is still in the dark ages. One of our faculty recently published a paper in Science that showed how the inhibition of an enzyme in intestinal bacteria prevented the conversion of a chemotherapy agent into a toxic substance that leads to significant diarrhea, thus limiting dosing. He was able to demonstrate 100 percent elimination of diarrhea in a mouse model. Think of all the bacteria and enzymes that could be manipulated to affect health. We have just begun to see the tip of the iceberg on this.