Understanding the journey from lab towards a business

Once an experiment, process or product has been successfully achieved in lab-scale, there is a basis for moving forward to the next steps of the journey: increasing scales to pilot and later, to demonstration volumes to finally find a way to establish a commercial entity. Unfortunately, many spin-outs and start-ups face severe challenges with establishing a feasible business, it was reported in the Roundtable presentation from Gate2Growth (Gate2Growth | Strategic consulting across technologies and business sectors). A first challenge is to make sure the start-up has understood the supply chain and the risks connected with this specific supply chain. Supply chains in the bioeconomy can in most cases be characterised as transportation of low-cost biomasses over long distances, thus turning logistics into a critical factor for the business’ success. 

Another important aspect is to understand the route from lab to business. This calls for an understanding of the customer, the business model, and particularly, the funding model. At the early stages of a business, the most common funding sources are project grants and loans and, as the business develops, the funding sources turn towards investors. But the biggest challenge seems to be to overcome the Valley of Death. This is the moment in a business development process when (external) funding is needed to push the commercial activities, yet the income from commercial activities is not yet sufficiently established to cover the costs of running the business. The business must focus on the liquidity needs to avoid the risk of going bankrupt. The key message of the presentation was an underlining of the importance to think ahead, understand the business model and risks, and ensure adequate funding to properly establish the business. 

Author Karen Hamann, IFAU