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How to find the right startup to join

How to find the right startup to join

Hunting for good startups & a Deep Dive on the incumbent black hole of clinical trials

Giammarco Pacifico
August 23, 2023

Startups can change your life but not all startups are created equally.

Large companies are almost equivalent in terms of responsibilities for the same role, compensation, benefits and career progression.

Startups are not.

In the end, you only have 2 options: launching your own company (we’ll talk about this another time) or joining the right startup at the right time.

To build a successful career by joining a startup, you need to do 3 things:

Finding the right startup(s)
Get the job
Excel at your role(s) once you’re in

Before we move on to how to find the right startup…

Why should you spend time hunting for the best startups?

We all know there is no hack to sit down at your laptop and identify the startups that will succeed. Even the most well-known (and well-funded) startups fail all the time so the chances you’ll do some research and find the next Amazon are extremely low.

The good thing is that you’re not joining a startup to become rich quickly.

Your goal is to skyrocket your career by doing exceptional work with exceptional people.

This means that instead of trying to predict future success, you should look for signs of momentum.

Why?

At a fast-growing company, you’ll receive tasks that are beyond your years of experience and you’ll start solving more important problems as the company grows.

In other words, the only way to succeed is to grow as fast as the company (if not more) and this is going to set you up for life.

Maybe not financially (that’s a lottery ticket) but you’ll get the undeniable proof of being an outstanding operator who thrived and adapted in a challenging environment.

If you are not sure if startups are for you, check this out to see what it means.

Now, let’s dive deeper

The identikit of a good startup

Looking for momentum means looking for a company that is just about to raise or has very recently raised a major funding round.

Why funding rounds?

Truth be told there is nothing special about funding rounds and you should not consider them as a proxy for ultimate success.

They usually depend on the company reaching some important milestones, which are rarely publicly disclosed.

Instead, funding rounds are broadly advertised by the company, their investors and different types of media outlets.

What classifies as a major funding round?

Historically a Series A round is when the company shifts from fundraising on the back of a story filled with promises to an initial track record and metrics growth.

Of course, this depends a lot on the type of companies you are looking for.

For example, a hardware deep tech company unlocks capital and resources once it reaches milestones similar to these ones:

Functioning lab prototype (foundation, grants)
Work-like-look-like (pre-seed)
Design for Manufacturability (seed)
Product (bridge, Series A)
Sales, until profitability (Series B+)

For a biotech company, important milestones are about pre-clinical data, from in-vitro to animal models, on the path to IND and clinical trials.

The best time to make the most of ongoing momentum is immediately after Series A.

Choosing the right time

And because nomenclature has gone awry, this is what you should look for:

The company has previously raised $3-5M and has just closed an $8-25M investment round
Has a working product (best if in the market with some signs of success through customer adoption) or has strong data in animal models (best if it has a pre-clinical pipeline around a specific theme)
There are 15-30 employees

Closing a major financing round means that the company has a strong enough vision and track record to convince institutional investors to allocate capital after (hopefully) a Due Diligence process.

This guarantees a longer runway (usually 12 to 18 months) and it immediately leads to a massive hiring period where the company has to hire the right people to deliver on the promises made during the fundraising.

Where to look for these companies:

Media publications

VC firms & individual investors

Most investors invest around a theme so start following an investor you respect and track any new deals they do.

(Tip: for firms with <$300M AUM you can simply keep an eye on the firm’s portfolio. For large firms with $1B+ AUM, focus on individual investors because only a few partners invest in your area of interest but the firm overall makes new investments every week, which are almost impossible to track).

Social media

Everyone wants to celebrate funding rounds and they are usually all over LinkedIn and Twitter.

I also publish a post every Friday on the latest European funding rounds in health & bio (example). So don’t forget to follow for the next posts (shameless plug) or check the section at the end of every issue.

Befriend people who are smart and ambitious

They might one day launch or work at a great startup and ask you to join.

I know this is easier said than done.

As an introverted engineer, I always found networking cringy and disingenuous.

Until I realized I had no other choice and that if I had to do it, I’d do it my way.

(I’m considering writing a post about how to network without being awkward or cringy - if you’d like to read it let me know)

How to shortlist?

If you are looking for startups in a broad area (let’s say AI), you might end up with 100s of startups that fit the criteria above.

Such a long list won’t bring you far…it’s now time to prioritize to focus your efforts.

The easiest way is to remove companies with these red flags: 🚩

The company’s main investors are Family Offices, High Net Worth Individuals or government grants
There is a 30-50% yearly employee turnover (you can check this on LinkedIn in the analytics section of each company)
There is no other company working on the same problem (compelling opportunities have multiple players going after them)
You don’t care at all about the problem they are solving or the customers they are trying to help

❝

All good startups are alike. Each bad startup is bad in its own way.

Freely inspired by Anna Karenina (Leo Tolstoy)

Don’t be too overzealous about this: if you notice one or even more of these, go ahead and cross down the company from your list.

This does not mean that the company is bad but it’s simply not worth the risk.

Happy scouting!

The incumbent black hole of Clinical Trials

Despite technology advancements and cost reduction in life sciences, it’s no secret that drug discovery is becoming slower and more expensive over time.

Eroom’s law (the inverse of Moore’s law of transistors) has been proven right since the 1980s.

Why is this the case?

First of all, the majority of the progress happened in the R&D and pre-clinical phases, where high-throughput technologies, more sophisticated models and different types of automation have improved scientists’ output by 10x.

Instead, the way clinical trials are designed and run has had no significant improvement, despite hundreds of attempts by public and private organizations.

It’s not a secret that the primary goal of any large pharma company is to bring drugs to market, leveraging their sales and marketing channels while spending as little as possible on research and development.

One of the ways to reduce R&D costs is to “outsource” that process to younger biotech companies.

The balance between having enough evidence of getting through clinical trials while requiring large investments that only big pharma can afford has led to a thriving biopharma industry over the past decades.

Given this increasingly stronger collaboration approach, 2 out of 3 of the drugs that the top 20 pharma submitted for FDA approval originated from external sources.

Source: Schuhmacher, A. et al.(July 2023).
Investigating the origins of recent pharmaceutical innovation.

As all the top pharma companies are public, a lower in-house R&D cost coupled with strategic acquisitions of promising assets makes shareholders happy.

Also, innovation in pre-clinical research is driven by academia, governments, hospitals and foundations which provide a never-ending source of opportunities globally for buyers to scout, select and acquire.

In other words, there is enough offer of pre-clinical assets to drive competitive prices that satisfy the risk/reward equation of big pharma.

Surprisingly, this is not true for clinical trials.

Clinical trial outsourcing is in the hands of 10-15 global companies that have consolidated their market position by acquiring 10s of smaller CROs.

As these companies try to capture as much value as possible from clinical trials while competition is low, prices have skyrocketed.

❝

Show me the incentive and I’ll show you the outcome

Charlie Munger

Despite new regulations to speed up the approval process from the FDA and the EMA, new regulations to allow clinical trials to be run digitally through remote data acquisition practices, a lot of this work is still done manually with paper-based methods that lead to longer durations and higher costs.

The elephant in the room is that it’s astonishingly hard to successfully implement large clinical trials for very prevalent conditions.

Instead, many pharma companies and their CRO partners have been focusing on rare diseases, where CROs can run small clinical trials (covering up for underlying problems with brute force) and pharma can charge eye-dropping amounts for rare disease drugs.

As an example, check out the article published last week on the $2.25M gene therapy for spinal muscular atrophy that is not living up to its expectations (also one of this week’s top reads below)

Why exactly are clinical trials so expensive to begin with?

Where can we innovate to reduce spending while increasing the probability of success?

As you have probably figured out, it is not as simple as replacing pen and paper with a digital system:

Protocol design - 57% of clinical trial protocols have at least 1 substantial change and 45% of those were avoidable (Tufts CSDD)
Patient identification & recruitment - while only accounting for 2-3% of the total cost, the hidden cost lies in delays due to not meeting enrollment goals on time.
Each day a blockbuster drug is not on the market, the clinical trial sponsor loses between $600k and $8M in sales.
Patient retention & engagement - the average patient drop-out rate is 19% and non-adherence to clinical guidelines forces investigators to increase the duration and sample size to meet the required thresholds
Data management - on-site data verification accounts for up to 25% of the total cost, with 80% of the data scientists working on the clinical trial ending up assembling and annotating data, instead of analyzing it

And of course, clinical trial phases are very different from each other.

Source: Bio.org (New Clinical Development Success Rates 2011-2020)

There are many considerations that can be drawn from the graph above.

I’ll just give one example:

Phase II is considered a hallmark for efficacy and the fact that only 25% of Phase II drugs go to Phase III is a clear sign that we need better pre-clinical models, including in-vitro and animal models.

This market is ripe with opportunities for startups that are ready to challenge the status quo…and it’s not a coincidence that 2 of this week’s funding rounds below are about next-gen clinical trials.

This week's top reads

Read my comments on these articles and their implications here

Latest funding rounds in health & bio

Ready to turn this news into your next career opportunity? Here is how

Cytomos raised $5M to advance its cell analysis solution (Cytomos Dielectric Spectroscopy), allowing faster iterations and scalable 🇬🇧
Mable Therapy raised £3.1M for its digital health platform for children’s speech, language therapy and counselling services 🇬🇧
Meatable raised a $35M Series B to further scale its lab-grown meat production and commercialization 🇳🇱
Clean Food Group raised £2.3M to develop healthier and more sustainable oils and fats 🇬🇧
Xeltis closed €12.5M from the European Innovation Council Fund for their implants that help the body naturally create blood vessels 🇳🇱
Lindus Health raised an $18M Series A to make clinical trials faster and easier to run (after closing a $4M seed round earlier this year) 🇬🇧
Spexis AG secures $2.5M to support the upcoming Phase 3 studies of ColiFin® for chronic infections in cystic fibrosis 🇨🇭
Addex Therapeutics received CHF 5.7 million in equity financing (YTD) as well as CHF 2.7 million from Indivior in an extended collaboration for substance use disorder research 🇨🇭
BDD, raised £2M to expand their work as a next-gen CRO that optimizes clinical trial services, from recruitment to execution 🇬🇧

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