Social Entrepreneurship in Biotechnology


We all know the biotech start-up life cycle and how it is valued. It all starts when the founders meet with the seed investors. The founders are usually people with technical expertise from academic institutions or even large biopharma companies who possess the intellectual property of a new technology, discovery or even simply to an innovative idea that is generally valued at an average of $1M. The seed capital usually comes from the 3F—friends, family and fools—or from angel companies or even government grants. The usual amount needed is of $2M, which put the start-up company at a value of $3M; 33% shares for the founders and 67% for the seed investors. The company is then brought to maturity if all goes well by going through the infancy and adolescence stages—raising additional funds, advancing drug candidates, building a strong structure and management team till the company has led candidates in phase 2/3 trial and is robust. Usually, at the maturity stage, the company is valued at about $24M, with 62% of the shares for the venture investors, 25% for the seed investors and 13% for the founders. At this stage, the start-up is either acquired and assimilated by one of the large biopharma companies for 150% of its market value, or it becomes an independent public biotech company in hope of conquering the market for the duration of its patent(s)—in order for the investors to make their money back, usually they sell their shares during the IPO for 4-6 times its market value. This is typically how a new biotech company functions…it is all about return on investment…you would be surprised at how many discoveries and new technologies go down the drain every year because investors can’t see the adequate return on investment on them. But what if there were a different way, a better way to create and value a new biotech company?

The recent years have seen a growing trend in the bioscience field, the partnership of the public and private sector in order to mobilize resources to be able to develop new technology based solutions to incur long and lasting positive social development and changes: Social Entrepreneurship. I know you probably think that it is just another social initiative created to generate some kind of awareness to raise funds, in other words, for most of you social entrepreneurship merely provides a different “social” setting in which to implement a new entrepreneurial project…and you might be right…might be. Social entrepreneurship is still in its infancy and is barely understood. Without any available real empirical knowledge to set it apart from anyone who claims to be bringing in social changes and still lacks a successful model even though there are plenty of successful social entrepreneurs today all around the world. Those people have not only impacted positively on their communities, their cities, but also on their countries and even on the world. But before we tackle social entrepreneurs who should be taken as an example, let me first try to better define social entrepreneurship, or at least try to!

First, it is good to remember that starting a business, according to economists Say and Schumpeter, is not the main goal of entrepreneurship. Stimulation of economic progress through innovation and action is actually the main objective of entrepreneurship. Social entrepreneurship on the other hand is about compassion for humankind and about inducing positive social changes. Social entrepreneurship should not be confused with charity, as social entrepreneurship is about investing in social ventures, which can then generate their own revenues to sustain themselves without relying heavily on donor funds. Social entrepreneurship aims to bridge the gap between business and benevolence by applying conventional entrepreneurship in the social sphere; it integrates economic and social value creation in order to achieve a long heritage and a global presence…how do you integrate economic and social value creation do you ask?

Well, economic value is basically a measure of return on investment, deb/equity ratios, price/earning ratios and various other econometrics. Social value on the other hand is created when resources, inputs, processes or policies are combined to result in improvements in the lives of individuals or society as a whole, such as anti-racism efforts, community organizing, and environmental protection. Social value is difficult to quantify into dollar value. In order to integrate both values, a social enterprise must be able to increase the value of the resources or inputs it utilized and then generate cost savings and/or revenues for the public sector—its community. By doing so, it is possible to quantify and monetize the elements of an activity’s social value. Indeed, these cost savings and revenues can be achieved in decreased public dollar expenditures and in increased revenues to the public sector through additional taxes collected, effectively translating the enterprise’s activity’s social value into socio-economic value.

It is not an easy task for a social entrepreneur to achieve such a goal, and it is even more difficult to convince potential investors to become social investors at the price of sacrificing financial return in favor of social return—the social investor takes on more financial risks compared to the traditional investor, twice or even thrice the risk, in order to achieve social or environmental impact. Social entrepreneurs and social investors are different breeds of people altogether. A social entrepreneur is by definition an individual, group, network, organization, or alliance of organizations that seeks sustainable, large-scale change through pattern-breaking ideas in what or how the governments, nonprofits, and businesses do to address significant social problems. Social investors are people, more often than not called philanthropists, who wish to invest their money in causes they feel most passionate about in order to incur social changes.

One of the most famous social entrepreneurs of our time would be Virgin founder Sir Richard Branson, and one of his latest “folly”, Virgin Stem Cell Bank, one of the pioneer hybrid model of cord blood banks, was created in order to respond to the fact that an increasing number of children were dying through lack of umbilical cord blood. Initially, Sir Richard had offered 3 million pounds to the National Health Service (NHS) to help them increase their storage capacity, but the NHS was not comfortable accepting funds from private sources, so Sir Richard decided to set up a company to do the job with a unique approach: “an individual’s cord blood is harvested at his expense and divided in two, one will go into a national blood center where anybody can get access to; the other half will be stored for the child. Furthermore, the generated profits will go to a charity to help groups who have difficulty sourcing cord blood due to lack of sample matching.”

So readers, what say you? Is social entrepreneurship in bioscience real or does it merely provide a different “social” setting in which to implement a new entrepreneurial project? If you think it is real, what are you waiting for? Stop looking for the right opportunity to fall on your lap and start creating it for your community and yourself!


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