How to Start a Biotech Company—11 Key Steps Every Early-Stage Founder Should Follow

By now you’ve probably heard that roughly 90% of startups fail, and in biotech, that number may be even higher. But this figure, while certainly sobering, isn’t meant to scare you. Instead, it highlights how intentional and committed you need to be to get your biotech company off the ground and avoid the "valley of death" along the way.

The key is being aware of what it takes to build a biotech and being willing to adjust and recalibrate when things don’t go as planned or you don’t get the results you anticipated—even if that means going in a different direction than you originally envisioned.

Steven Quay, MD, PhD, founder of Seattle-based Atossa Therapeutics Inc. (Nasdaq: ATOS), a clinical-stage biopharmaceutical company addressing breast cancer and other breast conditions, advises not to be afraid of failure or changing direction.

“You never learn from your successes,” said Dr. Quay, who has founded six startups and holds 92 issued U.S. patents. “Your successes were because you were a genius and you worked hard, but your failures are where you really learn things. There are 10,000 reasons a biotech company can go wrong, and there’s only one path through those that gets you to success.”

When it works, he said, it’s one of the most rewarding career paths possible.

“The drugs I’ve invented have been used by about 120 to 130 million people,” he said. “And while I have seven FDA-approved drugs, I probably have 30 drugs that have failed in the clinical pathway, because that’s the nature of the beast. Looking back, I really wouldn’t do anything differently.”

If you’re considering starting a biotech company but aren’t sure where to start, several experts shared with Cure the crucial steps to follow.

1. Make Sure You Have a Valid Idea

Biotech companies almost always begin with an invention, novel idea, new technology, or proposed drug or therapy. But just because you have promising research doesn’t automatically mean your company will be successful. The big question is: Are you developing something that is both feasible and needed?

“Inventions have two parts,” explained Dr. Quay. “Number one is an unmet need, and number two is actually meeting the need.”

To determine if your idea meets both criteria, you have to critically examine it. Will the drug be too toxic? Too expensive to make? Is there truly a need or demand for it? Ask those questions early and do market validation.

“You may think that if you build the field, people will come and play baseball on it,” he said. “And that can happen. But one of the challenges of progress is when you flip it around and ask, ‘Where is the incremental unmet need?’ It sometimes gets smaller and smaller.”

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2. Conduct a “Killer” Experiment

According to Dr. Quay, it can be extremely challenging for scientists to perform what he calls a “killer” experiment—one that, if it works, could invalidate their concept. “It’s very hard to do those experiments because your ideas are almost like children,” he said.

Still, he advises doing that experiment early rather than later. “You can either do the killer experiment before you spend a lot of time and money, or you can do it down the road,” he said. “But when you wait, all you’re doing is wasting everybody’s time—and time is finite. Find out what experiment would kill your idea if it worked, and do that experimentally.”

The outcome, even if negative, strengthens your research and credibility with investors by demonstrating rigor and realism.

3. Consider Getting a Patent

Once you’ve validated your core technology, consider pursuing a patent, said Katarina Klett, PhD, Innovation Discovery Program Manager at QB3, a biotech entrepreneurship hub at UC Berkeley that connects founders with resources to launch startups.

“There are still circumstances in which folks haven’t realized that you need to patent your technologies before you talk about them publicly at something like a conference or in a publication,” she said. “All of the patenting needs to be done prior to sharing your science publicly.”

If you’re at a university, start by disclosing the technology to your tech transfer office and having those conversations early. They’ll help determine whether to file a provisional patent—which gives you about a year to make edits—and guide your next steps.

You should also consider a freedom-to-operate (FTO) search to make sure your idea doesn’t infringe on existing patents. An intellectual property attorney can help assess potential conflicts.

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4. Build Your Team

After securing your IP, focus on building your team.

“You need to identify somebody to take that baton and move it forward,” said Dr. Klett, who often works with researchers still in academia but eager to commercialize their work. “At a university like Berkeley, that might be one of your trainees, like a PhD student or postdoc, who you feel confident allowing to step into that leadership role.”

Sometimes, it might make more sense to recruit an experienced entrepreneur in your specific domain. The key, Klett said, is having a team capable of advancing the idea.

Arthur Klausner, MBA, Executive Chairman of Concarlo Therapeutics and co-author of a National Institutes of Health paper on how to start a biotech company, recommends covering three essential roles: a scientist leading the research, a medical expert who understands the disease area, and a businessperson who manages operations and investor relations.

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5. Craft Your Story

One of the biggest challenges in building a biotech company is communicating complicated technology to people of different technical backgrounds, often in the same meeting. “You have to figure out how to get the finance guy excited and the PhD consultant interested,” said Klausner. “You don’t want to lose the finance guy, and you don’t want to insult the PhD. Getting your story together in a way that resonates is a really important challenge. And your deck is part of it.”

Klausner also suggests tailoring your story to the person requesting your non-confidential deck. If the person is more technology-leaning, put more of your technology in it. If they are a finance person, include financial projections and how you intend to make money.

“Knowing how to communicate your story effectively is a key part of building a biotech company,” said Klausner.

One way to do that is to have regular conversations with key opinion leaders (KOLs) in the areas you are studying or researching, he said. “You’ve got to kick the tires on your idea of what the usefulness could be, and that usually involves speaking to KOLs. Plus, with the right introduction, they’ll almost always, no matter how many prizes they’ve won and how busy they are, take a half-hour call to hear what you’re up to.”

6. Talk to the FDA Early

Most experts indicate that you should be talking with the Food and Drug Administration (FDA) as early as possible. In fact, Dr. Quay said there are a number of pathways to get information from the FDA that can be hugely valuable for you and your potential investors and don’t cost a lot of money.

“There are meetings you can have with the FDA that don’t cost any money,” he said. “They’re called Type A, B, C, and D meetings, and each one has a different purpose for biotech companies looking for guidance.”

He advised using an FDA expert or consultant to help you. “You’re going to pay money to do that; but if you try to do it yourself, it will blow up so badly you can’t imagine. Why can I say that? Because I tried to do it myself. I thought I knew how to talk to the FDA, but I learned the hard way that I didn’t understand the nuances. So, find an FDA law firm or expert or a former FDA person.”

He also recommended having a meeting before you file an IND (investigational new drug) and before you do any clinic or animal work. These meetings provide useful guidance and can reassure shareholders earlier.

Dr. Quay said he didn’t do this with his first company, and it took him about 15 months to go from the first investment to the first human testing, when it could have happened much more quickly. “Being able to say, ‘Hey, we got this letter from the FDA, and it says if we do XYZ, we can go into humans,’ is hugely valuable and reassuring,” he said.

7. Build Relationships From the Beginning

Often people think of investments from private funds and venture capitalists as very transactional, said Dr. Klett. “You’re giving equity in exchange for some amount of money. But the reality is the fundraising process contains a lot of relationship building over time; and the earlier that you can start those conversations, the better poised you are to actually be able to execute that funding down the line.”

In her role at QB3, Dr. Klett brings investors in early for “gut checks” and to show them what scientists are working on. This helps investors learn what proof-of-concept data they might need to feel comfortable either making an investment themselves or introducing a colleague. It also allows them to see how far a team has progressed when they check in months later.

“Even if they’re just spinning out at the end of those 12 months, the person saw them in their very nascent stages and can already see the momentum and the progress that they’re making,” she said. “To me, that’s a clear value add that others might not have if they’re not having those conversations.”

Likewise, founders should leverage their broader relationships, too. Building a network of mentors, advisors, and peers creates learning opportunities and credibility that compound over time. “There are so many biotech ideas that sound like the most incredible thing in the world as long as they’re in your head,” said Dr. Quay. “But as you start talking to other people, the fallacies begin to come out. So find trusted friends, compatriots, and especially subject matter experts. And, if you have a university nearby, look up the professor that’s most likely to have expertise and talk to them.”

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8. Make It Official—But at the Right Time

Many people form a company around their research to limit personal liability, said Klausner. “This means if the company goes bankrupt—and that happens to the best of them—your creditors won’t come after your personal assets.”

Typically, startups start as limited liability companies (LLCs) and later convert to C-corps when ready for outside investment. Klausner advises hiring an attorney or a law firm with startup packages that provide template documents and limited legal advice for low or deferred fees. “The reason they do this is to establish an early relationship in case your company becomes successful,” he said. “More importantly, you’ll likely stay with that attorney, and then suddenly, the billable hours will start to go up.”

But don’t rush into incorporation. “Once you incorporate, it starts a clock,” said Dr. Klett. “Investors and other people you want to pull in will start expecting you to make progress on specific milestones within a set timeframe. If you’ve been incorporated for a year or two without progress, it can raise red flags.”

She suggested focusing first on the maturity of your technology and the timeline for key experiments. “Consider where the technology is and how long it will take to sufficiently de-risk it for investment,” she said. “Also, think about whether your team is ready to commit to your venture before making it official.”

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9. Seek Funding Strategically

Because biotech is incredibly challenging, it can be viewed as a riskier investment than software development, said Dr. Klett. This makes initial funding harder to secure, particularly from private capital. “You may need to consider non-dilutive resources like philanthropic grants, SBIR (Small Business Innovation Research) or STTR (Small Business Technology Transfer) programs to help bridge that early gap,” she said. “Angel investors can also serve as a bridge between non-dilutive and dilutive capital.”

Arthur Klausner recommends researching potential investors carefully. “Look for venture funds that have invested in adjacent areas,” he said. “It’s important to understand that while it’s the firm that writes the check, it’s an individual at the firm—a partner—who becomes your internal champion and likely your board member.”

He added, “My favorite scenario is to find a company in their portfolio that looks sort of like yours, but yours is next generation and better—and that company already had a successful exit. The venture firm knows your area of research, feels confident in it, and can evaluate why you’re different.”

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10. Prepare for Scientific and Market Challenges

The biggest challenge is translating lab research into clinical results. “Sometimes things look really incredible in the lab and then become really challenging in humans,” said Dr. Klett. “We’ve had promising research for decades, especially in neuroscience, but the models just don’t always translate into the clinic. That doesn’t mean we stop pursuing the problem—it means we keep building stronger models that make translational research more reliable.”

She also noted that the capital environment remains difficult. “We saw a lot of generalist investors get into biotech investing in the early 2020s, but many have since left,” she said. “It’s a tough time to raise money, and my worry is that we’re going to miss out on critical opportunities that could really move the needle for patients because founders can’t secure that initial capital.”

11. Be Resilient and Adjust Along the Way

Starting a biotech company rarely follows a straight path. “You’re going to experience setbacks, delays, and a lot of no’s,” said Dr. Quay. But persistence and clarity are what get people to join your vision.

When Dr. Quay started his first company, he believed MRI machines needed a contrast agent. Forty-two venture capitalists didn’t think there was a need for one, he said. But he kept going. Eventually, a few investors saw the potential. His pioneering work on gadolinium-based contrast agents—now used in MRIs worldwide—has been given to about 80 million people.

“Your real challenge is to see the future and talk about it with such conviction and clarity that people can join you in your vision,” he said.

He also suggests breaking the startup journey into manageable chapters. “Every step should be thought of as: ‘Here’s where I am and here’s where I want to go.’ And ‘why does that step increase the value of my idea by proving usefulness or de-risking what could go wrong?’”

Staying flexible, realistic, and persistent is what separates the 10 percent of successful founders from the rest. If you can adapt, iterate, and lead with conviction, your company might just be one of them.