Doriot's Rules of Investing
Seek companies demonstrating:
- New technology, new marketing concepts, and new application
possibilities
- A significant participation by investors in management
- Staff of outstanding competence and integrity
- Products or processes that have been prototyped and have
intellectual
property protection
- Promise to enable an initial public offering or sale of company
within a
few years
- Opportunity for a venture capitalist to add value beyond dollars
invested
General Georges Doriot of American Research & Development, the
first
dedicated venture capital firm
Successful biotechnology business development relies on three factors:
technology, management, and capital. The essential value proposition
of biotechnology companies is to develop applications based on
proprietary technologies, granting them monopolies on the products of
their R&D investments. Management is responsible to identify commercial
possibilities for the markets a company wishes to target and position
the company to realize them. Capital is required to fund research and
development
and ultimately enable commercialization.
An examination of the qualities sought by offices experienced in
launching biotechnology companies provides practical examples of factors
important for long-term success. According to the MIT’s Technology
Licensing Office, 'Positive indicators include very early-stage
research, a technology that has several potential applications, no
existing companies dominating the field, and an inventor who wants to
participate actively in his or her invention's commercialization.'
They observe that emerging technologies with multiple new markets are
often best exploited by focused and dedicated entrepreneurs who are
funded by venture capitalists with an understanding of technical and
business risk and reward.
