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A Guide for First-time Technical Founders


Scientist smiling and gesturing at biosafety cabinet

As a scientist myself, I've had the pleasure of engaging with passionate founders eager to commercialize their innovative ideas. It’s always exciting to learn about their technology and its potential impact. However, in navigating these conversations, I've noticed a recurring pattern—these discussions often revolve around securing lab space and funding, even when the founder hasn’t answered some primary questions about their business. These founders could benefit from developing a clearer business model and understanding of their value proposition and target audience.


To assist budding technical founders, I've compiled a checklist of questions based on working with dozens of startups since 2015. This blog post aims to streamline your journey, save you time, and bolster your confidence to make the best decisions for your business.


Here we'll go over the following:



Let's dive in together!


 

Before you spend a lot of money on your startup:


1. Have you determined that the problem you are solving exists?


This does not mean determining the theoretical benefit of the technology you’re creating. It means, are there enough customers with the same problem for which your technology is the solution? A technology being “better” than what’s out there does not necessarily mean that the current customers have a problem with the status quo. If your technology can reduce costs, improve quality in a meaningful way, make a process faster, or make something more convenient, that is a great place to start. At a basic level, “enough customers” means a sufficient number to not only pay for the product itself but also pay for its development. In industries with expensive R&D, you have to demonstrate a plausible path to a 10X return on investment, which drastically increases the definition of “enough customers.”


The best way to determine if you’re solving the right problem is by talking to potential customers. This is called primary market research or customer discovery, and it is essential. It may feel rather unscientific to have a bunch of conversations and call that data, but you will get so much more information from talking to a person who is a potential user of the thing you are trying to sell than you will by Googling. 


Engaging in multiple conversations might seem less scientific, but speaking directly with potential users of your product will yield far more valuable insights than simply relying on online research.


When you talk to potential customers, do not ask them if they like your product. That’s like asking, “Isn’t my baby cute?” Everyone will respond positively to avoid hurting your feelings rather than providing honest feedback. Instead, research what questions to ask potential customers. Great sources for this are YouTube videos by YCombinator, a famous Silicon Valley startup incubator. Another great resource is the NSF I-Corps program. This program will pay for you to do market research if you meet their requirements, such as having a team, which leads to the next question on this list.


2. Have you recruited a co-founder who is strong where you are weak?


For many technical founders, their expertise lies in science rather than business. It is much more efficient to find someone who can bring their business skills to the table and collaborate with them than it is to master these skills all by yourself. This is not to say that it can’t be done, but there are other benefits to not being a sole founder. Having a sounding board—another individual to bounce ideas off—is invaluable. It not only enhances the credibility of your idea by convincing someone else of its worth but also doubles your team's work capacity.


Starting a company is hard and time-consuming, so getting help is not a sign of weakness; it is a strategic move that will benefit you in the long run.


Two young men standing next to each other in front of a wall and smiling.

Finding a co-founder can be challenging. I hate to perpetuate a stereotype, but I find that many of the scientific founders I’ve had conversations with are hesitant to go and meet new people - a requirement for finding a co-founder. There are some matching systems, such as YCombinator’s online co-founder match, but more often than not, you’ll have to meet people in the local ecosystem and develop relationships. Becoming a co-founder requires a big commitment, so approach this with the mindset that you’ll be working closely with them for a long time. They must also have the right skill set and be willing to commit sufficient time to your venture.


3. Are you committed to working for this company full-time?


With few exceptions, co-founders should work full-time on their startup; if not, the equity split should reflect the differences in effort (more on that later in the list). Working full-time shows investors that you are fully committed to the company, and part-time startups are unlikely to succeed due to the immense amount of work required.


Understandably, it can be a difficult decision to give up a well-paying job to start a company. If you are recently out of graduate school or a postdoctoral position, you may not have a lot of savings to live off. Answering this question will tell you a lot about whether you should start a company or not. If you can’t work on it full-time, the answer is probably no.


Before you quit a paying job, you can address questions 1 and 2 on this list by putting in time on evenings, weekends, and lunch hours. But once you start spending money or raising money, it’s time to fully commit.


4. Have you determined how much of your own money you can afford to spend?


Even though you will primarily use grant and investor funding, you are still likely to spend some personal money early on for things like registering your corporate entity, establishing a business address, paying for grant writing assistance, some legal fees, and maybe even paying for a few months of lab bench space. Therefore, it’s a good idea to determine what these costs could be and decide how much money you can afford to lose. 


Record all out-of-pocket expenses incurred on your startup, as it shows commitment and that you have “skin in the game,” which investors value. Plus, once you do secure funding, you may want the company to reimburse you for these expenditures.


5. Are you comfortable with uncomfortable conversations?


Starting a company can require many uncomfortable conversations, so being able to have them when they are called for is important. One of the big conversations that many people find uncomfortable is about the equity split between co-founders. Most investors agree that for full-time co-founders, the split should be equal or almost equal and should always be vested, with the standard being a 4-year vesting period with a 1-year cliff. This essentially means that you earn your equity over the course of 4 years working for the startup, and if you quit (or are let go) before the end of 1 year, the company has the right to buy it all back from you. This incentivizes the co-founders to remain committed.


The founder shares conversation can be more complicated for co-founders who are not going to work for the startup full-time. In general, equity is best used to reward future value creation, so use that as a conceptual starting point. Technology and ideas are valuable, but without effort to develop them, they won’t go anywhere.


Other uncomfortable conversations that founders might have include delivering bad news to board members, firing employees, and negotiating pricing with vendors. Prepare yourself for such conversations.


An audience watching a presentation showing a picture of Spongebob with a rainbow over his head and the word, "Networking."

Given the common fear of public speaking, it's essential that at least one, if not all, co-founders can deliver a pitch to a room filled with potential investors. I mentioned meeting people in your local startup ecosystem back in number 2 on this list, and that is a great place to practice pitching your startup. By learning to talk to new people, you will develop relationships that will help you throughout your career. Building your network can be uncomfortable initially, but the more you practice, the better you will get.


6. Have you figured out the practical steps in operating a business?


A guide for first-time technical founders would not be complete without discussing practical business requirements. Not all of the back-office business operations have to be set up before you step into the lab, but you should at least be aware of what will eventually need to be done. If you get yourself a good business-savvy co-founder, they can handle much of this.


Forming the entity: Most science-focused companies are incorporated as C-corps because that is a business structure that is easier to invest in. A C-corp has a board of directors who are legally responsible for the company, and shareholders who own the company. These groups may have some overlap, but not always. You can explore other business entity structures and should understand them before deciding which one is best for you.


Before signing up to use lab space or entering into any kind of contract, you should form the entity so the company can rent the lab instead of you. This makes the company take on the liability rather than you taking it on as an individual. 


Intellectual property: If you are coming from a university where you developed any part of the technology your company will use, you will have to have a conversation with the university’s technology transfer office. In the US, any intellectual property (IP) developed using government funds (which is basically anywhere on a university campus, with some very specific exceptions), the university owns that IP. You will need to have permission to use that IP for a commercial purpose, which will mean paying for a licensing agreement. You want to obtain this permission in order to prevent potential competitors from obtaining the IP, but since it can be expensive, you may not be able to pay for it right away.


It is usually okay to wait until you have gotten some of the other items checked off this list before you sign an agreement with the university, but you’ll want to have a conversation with them pretty early on. You need to know that they will agree to license it to you when you’re ready, and the best way to do that is with an option agreement. Some universities will give you a specified amount of time in which you have the right to license the technology if you so choose, but no obligation.


Finance and taxes: As a business, you will have to file taxes, so you need to keep your books in order. Your board will also want to know where the money is going. Early on, you can get away with keeping everything meticulously organized in a spreadsheet and keeping your receipts and PDFs of your bank statements, but it’s a good idea to get some bookkeeping help as soon as possible. When you file taxes, you’ll need to pay for a good CPA to ensure everything is correct. 


Insurance and workers' compensation: You will need commercial general liability insurance in order to use any lab or office space, and you may want other types of insurance depending on your level of risk tolerance. Once you have employees, including once you start getting paid, you are legally required to obtain workers’ compensation insurance.


Payroll and human resources: Payroll is not just writing a check for how much you owe your employee; there are also taxes that you have to pay. Platforms like Gusto make it easy to handle this yourself while you’re very small. You may want to work with a company that provides payroll and human resources (HR), as there are many laws and regulations in human resources that you might not be aware of. A proficient HR professional can help prevent future lawsuits, offering valuable legal protection.


Safety Training and OSHA/Cal-OSHA: The Occupational Safety and Health Administration (OSHA) enforces workplace safety. Even if you did university-mandated safety training a month ago, once you become an employee, your employer must provide you with training that keeps you safe on the job. Once you start paying any individual (yourself included) as a W-2 employee, it is crucial they are trained to work safely and that you maintain a record of that training. Incubators may provide some level of safety training, but they often can’t accommodate the level of detail that is needed to do specific procedures safely. 


OSHA also requires that employers keep track of any safety incidents or injuries on specific forms, which can be found on the OSHA website. For California-specific forms and required postings, the Department of Industrial Relations website provides comprehensive resources.


7. Found a mentor or advisor who has started and run a science-based business before?


A valuable mentor offers more than just practical guidance; they empathize with your journey.  There are so many variables when starting a company that it’s impossible to predict them all ahead of time, so having a person you can turn to when in crisis really helps.


As a new founder, some people will try to take advantage of you. A mentor can help you assess what is fair in a negotiation, recommend service providers they have already vetted, help you understand terms in a contract, and identify pitfalls before you hit them. Similar to how the best athletes benefit from the best coaches, successful founders cultivate sources of sound advice.


Man with a beard smiling in front of a mirrored wall with the name Karma Biotechnology printed on it.

Finding a mentor begins by meeting people in your industry and developing relationships with them. A mentor-mentee relationship can be as informal as a friendship where you chat about business over coffee or beer semi-regularly. There are also mentorship programs that some industry organizations run, but I don’t have experience with those so I can’t speak to how effective they are. Personally, I have found mentors by gravitating toward people in the industry who I like, whose backgrounds include skills I lack, and who are the most receptive to my requests for advice. I don’t have regular meetings with most of them, but I don’t let too many weeks go by without some kind of contact.


Having mentors is incredibly valuable because it's much easier to comprehend the big picture when you're standing and observing it compared to being immersed in it. This perspective shift is one of the reasons why I highly value my mentors.


 

If this list feels overwhelming, that’s alright. If I were to distill everything into one crucial piece of advice, it would be this: Ask for help. Utilize tools such as LinkedIn and Twitter to find and connect with people who seem like they might have the expertise to help you and ask for a conversation. Most people will either be happy to help or introduce you to someone else who can. People enjoy giving advice because it allows them to feel helpful and capable. 


Please reach out if you would like to ask questions or if you're looking for advice and mentorship. marie@lablaunch.org


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