Business Plan Executive Summary template
A guide for developing an executive summary for technology based businesses
The Executive Summary is the most important page in a business plan. Its primary objective is to get an investor to want to know more about the opportunity.
Company and Technology Background
Company information and brief technical description
We are Biotechassets. We are a broker organisation equipped to gain the maximum value for distressed and redundant Biotech companies by supporting and speeding the sale process.
Our core trading asset is insider knowledge of the industry and possible investors and the ability to present the company as a going concern – facilities, IP, people, equipment – before the loss and fragmentation of key assets and the rapid descent from premium prices to fire sale prices or even disposal.
Our reference case is that of MNL Pharma. A successful Biotech with six sugar based proteins drug candidate including 2 at phase one clinical trials stage. The premium value of the company was £10M but because we did not exist key assets were sold at £250K and the company disbanded. Our commercial proposition is that through the services of BTA we can prepare the company for sale and obtain a ‘fair price’ for MNL Pharma of £750K with our fee of 20%.
In Cambridge (UK) there are approximately 200 Biotech companies employing 9000 people. Based on conservative figures of 10% annual attrition this provides a catchment of 20 companies as possibles for our services, assuming a 50% market capture and 50% success ratio we would earn 5*£150,000 annually.
As much as the commercial imperative we are driven to sustain good science and to keep the science locally. By sustaining Biotechs through disruptions between funding cycles and investor strategies we support the science and the individuals supporting the science. As industry veterans we have seen too many cases of excellent research setups being lost to UK plc: the laboratories destined to become cultural centres, trained scientists employed as taxi drivers and good equipment in land-fill.
The social benefit of a successful BTA far exceeds the company profitability.
Briefly state who you are and what you do. It is critical to say what makes you compelling and sets you apart (i.e., your sustainable competitive advantage, the potential for an expedited regulatory approval pathway, growing market, etc.) and a positioning statement for the business. Note: investors are typically looking for an “unfair competitive advantage” something making this a unique opportunity.
Describe the core technology in the context of an unmet market need
The Life Science Industry is facing a continued innovation crisis. Big Pharma continues to invest in research for new medicines without satisfactory return, small innovative and entrepreneurial Biotechs as supposed to deliver new medicines but are suffering from a shortage of VC funding and now a withdrawal of government grants.
For those at the ‘coal face’ of a small Biotech (typically 50 people, market value £10M, burn rate £1M per month, funding horizon 15 months) it is a difficult time. As staged funding reached exhaustion they enter a period of uncertainty, progress can be slowed, targets missed and the company can fold. The process is a financial relay race as each new round of funding absorbs effort and threatens delay. A simple delay or slip in the process can introduce terminal decline where progress drops below investment.
In the event of a company exhausting the funds or patience of its investor we offer a specialist service to help market the company as a ‘going concern’. We will deliver to the company and/or its owners …
- Access to our network of potential investors – maintained through our positioning activities and regular subscription to our ‘trade’ magazine
- Gateway access to specialist resources, primarily former Pharma employees, for activities in preparing the sale prospectus and due diligence
- Expert professional help in the process of developing the company prospectus and sale documentation and knowledge of the channels to market
- Recommendations for key professional expertise, such as legal, facilities or HR
- Active support, mentoring and facilitation in the preparation for sale
[Our concept is best described a s cross between an estate agent, involved in the professional sale process, and specialist outplacement organisation but working at the company level].
Our target market is the struggling Biotech: we know from experience that such companies fail to gain good quality support from conventional disposal professionals (such as the receivers) and the companies size and experience limit their access to experienced company marketing professionals or scientific expertise.
Small companies also imply small incomes. Here we use our knowledge of the Cambridge area and former Pharma employees to propose a low cost, contingent resourced model. It reduces our financial burn rate and costs.
At maturity we expect the core, recurrent, company costs to be met by subscription and/or grant income with the significant and profitable work of company rescue being resourced on a contingent basis as the need arises.
– This can be in the form of a problem statement and/or a description of the underlying technology and the opportunity it provides. It is preferable to convey a sense that acknowledged unmet need is driving the opportunity rather than “a really cool technology” in search of a problem.
Intellectual property (IP)
Biotechassets will trade on its reputation and strength on contacts in a very specialised and closed industry sector. The trading position will be strengthened by a regular ‘trade’ source of scientific opportunities which we anticipate will be unique in the industry: copyright and trademark opportunities exist.
Subsequent plans (year 3 on) include franchising the concept: delivered as a template website and educational / how-to material generating licencing or consulting fees.
Business model/value proposition
Briefly describe the “value” you are offering the market and how you will make money
Market Opportunity
Describe the unmet market need
The Cambridge area is world renowned as a high tech cluster. Of this Biotech is the largest single sector:-
-
Over 43,000 people are employed in the Hi-tech community representing approximately 15% of the total employment in Cambridgeshire, having fallen marginally by 1.5% since 2002. This may just be a symptom of the continual rise and fall of business fortunes and Greater Cambridge remains a significant hi-tech cluster within the UK, Europe and Internationally.
-
60% of hi-tech businesses employ fewer than 10 people.
- Biotech companies provide just under 27% of the total hi-tech community ’employment’ and are mainly located in the South of the Greater Cambridge area.
- In the first half of 2007, the Cambridge Cluster attracted 18% of all venture capital investment in the UK (including £50m raised by Plastic Logic).
- On the basis of venture capital funding received and disclosed in 2006, Cambridge is the fourth most significant cluster in Europe behind only London, Paris and Tel Aviv. On a per capita basis, Cambridge is the most vibrant cluster in Europe, with twice as much invested per capita than Tel Aviv and six times that of London.
- In the first half of 2007, 5.6% of the venture deals into Europe’s top clusters went to Cambridge, down from 9.3% in 2005. Library House suggests this reflects the growth in Services and Retail companies (‘soft’ innovation) as a target for venture capital investors, whereas Cambridge has traditionally focussed on ‘hard innovation’ derived from academic research.
Biotech is a risky business : science is unpredictable and often once a company emerges from the academic genesis it has to rely on Venture funding. Venture funding in the sector has tightened significantly since the start of the credit crunch. As a result Biotech organisations are struggling for funding, in addition the large Pharmaceutical companies which traditionally have the UK as their research base are closing.
Provide concrete evidence of demand and document the size of the potential opportunity. Many entrepreneurs appear naïve in this area because they “assume” a market without providing validation/documentation, or don’t really understand their niche.
Core competencies
Establish that you have the core capabilities to address the unmet needs. In addition to the core technology, this may include IP, development, regulatory, or reimbursement expertise that are necessary to support the company’s commercialization strategy.
Market dynamics/industry structure
Any commentator in the life sciences will be familiar with the ‘innovation deficit’ of Pharmaceutical R&D: that large Pharma companies Research activities are not producing the pipeline of new drugs despite heavy investment in research.
The Biotech industry has been seen as the saviour of Pharma with small innovative companies making dramatic breakthroughs and selling out their company, or products to big Pharma. The Biotech industry draws from a mixture of financing – including grant aid & Venture Capital – seeking promising results and Pharma buyout once the promise of their approach has been demonstrated.
In 2010 it is apparent that Pharma has significant funds available but the early investment model is under pressure: the first Biotech VC funding winter in 2002 has been followed by a second winter starting 2008. Although some analysts predict funding starting to flow many VC funds remain closed. In the last 6 months in Cambridge alone Kudos and Alizyme have, for different reasons, ceased operations.
Industry survey indicate that VC funding for Biotech is down: 30% by volume, a further 30% by quantity with the added constraint of smaller tranches of funding with more regular progress assessement (stage gates). In Europe funding was down 47% compared with 22% in the US.
We know that there is a rich supply of specialist firms in Cambridge who can deal with aspects of employment law, IP protection, specialist facilities etc. However we know of no organisations which treat the distressed company as a whole and we believe the financial forms and accountants, at this scale of company, do not have the specialist knowledge to improve returns.
Our plan is to work in conjunction with the specialist professional firms, indeed we seek their involvement as founder sponsors, but they will have an independent relationship with the company [our model is the estate agent – where solicitors, removal companies etc may be introduced by the estate agent but work under their own contract].
GoIndustry, one of our putative partners, have established specialist markets for scientific equipment but again these seek to profit from the elements of the firm not as a going concern.
The financial crisis and the resulting lack of VC funding could lead to a severe funding gap for innovation and technology development (Block and Sandner, 2009). Technology transfer offices, seed funds and other early stage technology investors may not be able to support start-ups until they are sufficiently de-risked to attract new owners or reach profitability.
Within the health care space, where technology- and product development tends to be extremely costly and lengthy, a functioning ‘relay race’ in terms of funding and business development support is particularly important. If venture capital funds disappear from this investment chain, fewer innovative start-ups will reach their full potential. This could have repercussions for the wider economy, including loss of health innovation; loss of jobs; loss of economic growth potential; and exacerbation of pharmaceutical companies’ product pipeline problems.
Rival (life science) VC funds and new market entrants
• The presence of ‘rival’ VC funds brings advantages as well as disadvantages. The ease for companies to attract VC funding from other sources impacts investment and divestment terms. Funds will also compete for sources of investment capital, with repercussions for their remuneration levels. But VCs like to collaborate as well; qualified co-investors are often a prerequisite for capital allocations.
• VC investments outside the US were reduced by 47% in cumulative value between 2008 and 2009. The median size of VC deals decreased to US $2.2 million in Europe in 2009, a 24% drop from the year before. In the US, the decline was 22%, to a median amount of US $4.7 million (Dow Jones Venture Source, 2010).
• Many VC funds have reduced their activities or closed down recently. Funds that remain in operation may need to wait and/or reduce fees before a new fund can be raised.
• The resulting scarcity of life science VCs may result in these funds being financially more aggressive towards investee companies, which will have fewer funding options.
Customers – defined as start-up acquirers (industrial/financial)
• The current economic climate provides few opportunities for initial public offerings. Worldwide IPO markets in 2009 fell by over 60% both in deal numbers and funds raised since 2007 (Ernst & Young, 2010). Venture investors try to take advantage of IPO windows’: periods when capital markets are receptive for new relatively young companies listing on a stock exchange.
Survival strategies for cash-strapped life science Venture Capital firms
• The number of exit deals dropped by 28% between 2008 and 2009 in Europe (Dow Jones Venture Source, 2010).
r* • Notwithstanding the above, established industry players in the health care and biotechnology sectors remain under pressure to supplement internal R&D with licensing and acquisitions, in order to improve their revenue and profit outlook. A high consolidation of market power causes these to have considerable negotiation power.
At an individual level suitable options exist – such as http://www.yourencore.com/
Specialist organisations exist for asset disposal – goindustry – only physical assets but not ip or people
Redundancy outplacement services exists – very expensive for little benefit
New technology is changing quickly – downsizing and garage labs
Significant public sector investment in the region without the mechanism to commercialise it – all R no D
Demonstrate that you understand the relevant market dynamics (such as competitive structure, size and trends) and how you are positioning to take advantage of them. Entrepreneurs may also appear naïve if they fail to adequately address their competition.
Commercialization strategy
Elaborate on your business model/value proposition. Focus on a clearly defined market and develop a clear strategy for positioning your company in that market; include a discussion of strategic partnerships/alliances, product and/or service offerings, etc. that are key to the overall strategy.
Company specific milestones
Describe the key steps in the process of taking the technology/product /service to market. These are objectives that when attained reduce an investor’s perception of the risk involved, thereby increasing the value of the business. Milestones are often directly linked to the technology development, product development and/or regulatory development path.
Management Team
Establish the company’s ability to execute the plan
In the early thinking on Biotechassets the founders were offered £30000 seed-corn funding to establish the concept. Whilst welcome we were hesitant to accept before the idea was properly developed: in particular the reliance on external funding was a risk given the uncertain path to regular income: fundamentally the company sells an event driven distress purchase (“umbrellas”) so we can do well but only if it rains.
Subsequent development and modelling of the business plan and financials validate our caution. But now we have a considered and mature proposition ready for launch. External funding may be required and the development of a prospectus and evaluation is identified at the end of year 1: once we can validate the trading community required for success.
In the medium to long term the offering of BTA is secure and sustainable. We model our operation on that of an estate agent: we assist the sale process with specialist resources, we help, advise and position other professional specialists and we generate our income from the sale itself.
Our business plan is built around the process of High technology development: if High tech remains driven by the serendipity of science and the uncertainty of VC funding then our services will continue to be required. If our business dries up it suggests an even bigger crisis for the Cambridge venture economy as a whole. If our business fails to be effective it will mean more closed facilities, redundant scientists and wasted technology.
Although BiotechAssets is established as a profit making venture the founders did also consider operation a social enterprise. The major beneficiaries of the success of Biotechassets are the companies salvaged, their employees and the local economy:
The activities of BTA could be undertaken by scientific institutions and quangos in the area. Whilst this is a possibility our view is that without the single-minded focus and fierce commercial determination it will not be effective. Central to the operation of BTA is the mobilisation of ready to go experienced resources supporting the distressed organisation. Managing the sale process and period of critical negotiation required a dedicated team and dedicated expertise.
It is critical to show that the company has a team with skill sets appropriate to the stage of the company that can execute the plan (i.e. reach the milestones that you are asking investors to fund), and a plan for growing that team as the needs change. Often startup companies need to use advisors/consultants to complete their teams. Note: typically the company will at first be dependent on its founders, but ultimately you must show that it has value as a separate entity apart from the founders.
Introduce key players and highlight their accomplishments
David Gee Founder & CCO
David, aged 48, has 20+ years experience as a senior executive in the healthcare industry working for mid-sized Pharma companies (Altana, Byk-Gulden, Mundipharma, Purdue, Organon) and biotechs (Argenta, Arexis, Pharmexa). With a scientific research grounding, he has experience in pharmaceutical sales, marketing, sales and marketing management before becoming specialised in strategic planning, licensing and business development. With extensive experience of working in EU and USA, David has been responsible for most major forms of transaction be it licensing, M&A or instigation and management of research alliances and has also been a COO of a $100 million industrial investment fund. Whilst the majority of his experience lies in the pharmaceutical products and projects sector, David has also broad experience of managing a commercial service-based business in preclinical research as well as having an extensive knowledge and experience of the health and wellness and cosmetic markets.
Professor Roger James Founder & CTO
Roger, aged 56, has 20+ years as a senior executive in the healthcare industry working in research for global and mid-sized Pharma companies (Glaxo, SmithKilne, Napp). A chemist by training and an IT Director by profession he has an extensive academic pedigree in technology, informatics and healthcare. He has led international groups focused on innovation at Glaxo and Napp and is a patent holder in Medical Informatics. He was technical advisor for Glaxo’s venture fund investing $25m in clinical trials technology. Working on the advisor board and as consultant he has developed business plans for start-ups in patient administration, competitive intelligence, information management and high performance computing. He is on the board of the London Metropolitan Network and teaches the MBA in Strategic Life Science Management for the Open University.
Discuss their background as it relates to their role in the company and give any other information that enhances their credibility and demonstrates their knowledge of the business space (domain knowledge).
Investment summary
Funding to date
Describe amount and type of funding received to date.
Sources and uses of funds
It is critical to include a discussion of how existing and future funding enables the company to reach key business objectives, usually framed in terms of milestones.
An abbreviated financial table
A table that includes basic, projected revenues and expenses through at least the period for which funding is sought should be included. The full business plan must include detailed financials, generally including a timeline showing how long and how much money it will take to reach significant milestones as well as an estimate of the overall amount required for the company to reach an exit.
Miscellaneous
Mission & vision statement
Values oriented statements can be included in the business plan but generally should be on a separate page; it is critical to let the business case stand on its own merits, or investors won’t respect your mission. Having said that, a larger mission can be a key intangible element, the underlying cause driving the commitment of the team to the company’s success. This can also contribute to creating a vital “culture of execution.”
Describe the technology and underlying science at a level of complexity understandable to an educated lay audience. In addition, although the document is intended to “sell” your business, the tone should be that of a professional communication and not promotional literature. It is the underlying story that must be compelling. Words such as “tremendous”, “exciting,” etc. sound like hype and undermine credibility.