Tom Willis, who co-founded ParAllele BioScience and eventually sold it to Affymetrix, says that scientists who are pursuing their own dreams of starting a company should heed a simple rule: keep the fundraising to a minimum.
Most importantly, avoid venture capital for as long as you possibly can. "In general, I think a lot of companies can fail by trying to be companies too early," Willis says. "From the second that you take … cash from venture capitalists to the moment that you have to have some productive exit for investors … is a fairly narrow window."
Keep to a shoestring budget, and try to get your company up and running with grant or angel funding — those will have a lot fewer strings attached than VC money would. "My advice is to move things along when you don't have that question of capital pressure as far as you can," Willis adds.
Also remember: the earlier the venture capitalists come in, the bigger the stake they'll want in your company. If you take on more of the risk of developing your product for a longer period of time, your reward is getting to keep more of the company — and, of course, a bigger share when your startup begins to rake in money.
Willis says a hallmark of the companies he's been involved with recently – including microparticle firm True Materials, which was acquired by Affymetrix for $25 million, and sequencing startup Avantome, bought by Illumina for as much as $60 million – is that "all of them had raised relatively small amounts of money" before they showed enough appeal to be acquired.
Currently, Willis is chairman of the board of Boreal Genomics, where he helped scientific founder Andre Marziali establish a business plan that required very little money up front to develop and commercialize a DNA purification instrument.