What steps should I take to make a long-term plan for a startup business? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.
In the tech industry, going from research to development in five years would be a disaster. In biotech, that would be cause for a company-wide celebration.
The time frame for bringing a drug to market isn't measured in months or even a few years. It can stretch out well over a decade and take billions of dollars. It's a massive, long-term endeavor that requires a very different level and scale of planning from what most people are used to.
There are few products or industries with that kind of risk profile--long range, high capital investment with a high likelihood of failure. The only certainty is that you must plan for change.
I think there's a lot of value in understanding how a long-term process like that works. How do you operate when continual "pivoting" isn't a real option?
Here's what to think about:
The planning is what's truly valuable.
The reality is, your plan doesn't really matter much in the beginning. It's the planning that provides the value.
The act of creating a plan helps you understand the context of the situation you're facing. It helps you grasp the reality of the world around you.
Your plan is not going to be perfect. You can't be certain all its elements are sound. But uncertainty is no reason to avoid going through the process of planning. I've never spent time mapping out a situation and writing down everything I thought was important without learning something valuable.
When you look at models and projections, inevitably, people will leave out necessary assumptions because of the wide uncertainty. That's a big mistake. You're not trying to create the perfect plan. You're trying to model a wide set of outcomes. You're trying to gain an understanding of the world you're operating in.
There is an anecdote about Bill Gates--I'm not sure if it's true--about how he would quiz project managers on the cost of postage of a CD. Obviously, this was in the era where software was physically delivered by mail. According to the story, he didn't really care about the cost of postage but rather whether the project manager had command of detail and context.
It's essential to get to the point of recognized fundamental value.
With a timeline stretching out over a decade, a biotech company realistically can't make any money for a very long time. Yet they still need millions or billions of dollars to execute on their strategy.
That means the company is heavily dependent on capital markets, especially early on.
In order to lower that dependency and gain some control over their own destiny, the company must focus on getting to a point of recognized fundamental value. This is akin to getting to "cash flow positive" for most businesses. In drug discovery, depending on the drug and therapeutic area, this means performing certain clinical trials in patients to get a good sense of whether the drug works.
At that point, people begin to see your drug has a fundamental value, and an active market develops. There are potential partners you can rely on for financing. So if you're at a point where there is an active market, you have options. From then on, you can start to think of bigger and bolder strategies. You have more control over your own destiny because you've proven the value of your project--and you have a means of financing it independent of pure financial investors such as venture capitalists.
That's extremely important for any product or venture, because you don't want to be relying entirely on financial investors (such as VCs) where investment is correlated at some level with the financial markets.
Be prepared for a "nuclear winter."
Long-term planning has to take into account some things that are outside of your control. For instance, cycles in financial markets can play a large role in whether you'll be able to get the necessary financing to bring a product to market.
In the biotech field, we call a bad downturn a "nuclear winter." These are events that can drain enthusiasm for financing--a big trial fails or a high-profile treatment goes poorly. For example, gene therapy went through a nuclear winter scenario after died in 1999.
The point is, you have to keep your mind on a fundamental strategy, preferably one that isn't entirely dependent on financing markets. If nuclear winter should arrive tomorrow, how would you be able to move forward?
Always capitalize on markets when they are available. It may be better to focus on timing for good financing markets rather than the perfect timing for your company. Usually, the answer will lie somewhere in between.
You also have to also consider your own cash reserves and the type of investors you take on. In biotech, there are some investors who know the industry well. They understand the ups and downs, and are willing to ride it out for the long-term potential. Then, there are investors known as "tourists." They're only here when the sun is out. When they see trouble on the horizon, they tend to leave.
Keep an eye on what you have control over, and build from there. Because the plan will change. Some ideas won't work. Some processes will take longer than expected. The world will be a different place when you finish a project than it was when you started.
The important thing is to have the situational awareness of where you're at in the context of what's going on around you. And that only comes from planning, not the plan.
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