Potential biotech entrepreneurs have a guide to help them find a business model that suits their business. In this way they will be able to find ways to monetize their goods and services adapted to their business profile, which is very different from other sectors.
The market study “Monetization models for biotechnology goods and services”, carried out by the Promotora del Comercio Exterior de Costa Rica (Procomer), establishes 7 ways in which entrepreneurs in the sector can generate income, savings or investments throughout their developing.
“A substantial difference in biotechnology is the timeframes for research and development (R&D), which can be extended for years and delay the generation of income. This causes them to resort to angel investors or investment clubs to raise capital, with requirements different from those of traditional financing such as banking, ”explained Marta Esquivel, director of Business Intelligence at Procomer.
Another option is the possibility of licensing intellectual property, among others, Esquivel added.
The monetization models determined by the study are:
Capital raising or financing: Personal or partner capital, non-refundable funds, investment clubs, cash flow and banks. According to the type of financing, they must meet requirements such as letters of purchase intention, formalization of the company, among others.
Intellectual Property (IP) Licensing and project development. The 3 most used IP protection mechanisms are patent, trademark and industrial secret. The patent has a more direct monetization (licensing to a third party), while the others are more protective, although being IP assets they give value to the company.
Alliances in R&D. The high and increasing costs of research and development have led companies to join forces to access third-party resources, generate savings or accelerate the project. These alliances enhance the reputation of the company and can be capitalized on in the future.
Research services sales. The broad R&D needs represent spaces for companies with their teams to sell services. It is important that the company has a portfolio of capabilities (equipment, accreditation, human resource capabilities, etc.)
Manufacturing services sales. Companies with idle capacity can sell these services. As in the previous model, it is important to publicize your capabilities (processes, production capacity, etc.)
Product sales. They can sell them directly, with distributors, or both. For international sales, the company has the option of directly exporting its product or licensing it to a specific country.
Company sales. It is vital to manage strategies that increase the value of the company from the initial stages (increase in IP assets, greater product registration in different countries, consolidation in markets, etc.) and have a robust communication strategy to disseminate milestones, alliances, company networks and contacts.
Viewing these models from early stages facilitates the generation of a business strategy, said Roberto Coto, economic analyst at Procomer in charge of the study. “For example, depending on the conditions of a country of interest, the company might prefer the licensing of its IP than the traditional export of the product. If its model is one of alliances in R&D, it will seek to associate with organizations that allow it to capitalize on IP, human talent, technology and other aspects of the parties and thus establish a win-win relationship”, he exemplified.
If, on the other hand, the entrepreneur seeks to sell the company, he must generate specific actions that value the company: more intellectual property assets, robust communication of company milestones to investors, more records in different countries, among others.
The study was carried out from interviews with biotechnology companies in Costa Rica. The objective is to capture your experience in the monetization of your goods and services. This made it possible to detail the characteristics, requirements and other relevant considerations for the seven models identified.
The information collected also made it possible to show the substantial differences according to the type of biotechnology. For example, the research and development deadlines in red biotechnology (human health) are very different from the other categories.
Therefore, there is no single standardized monetization model or value chain for biotechnology. This, given the wide differences in the business line, the specialist pointed out.
Biotech is a promising field that more entrepreneurs need to explore.
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