Brian Dovey provides a practical and enthusiastic guidebook for entrepreneurs to make informed decisions throughout the entrepreneurial journey.
It’s often portrayed in media that entrepreneurs can quickly achieve celebrity and billionaire status with little more than a brilliant idea and a catchy pitch. However, the reality is quite different.
Brian Dovey, an expert in entrepreneurship involved in developing over 300 pharmaceutical and life sciences startups—including the company that developed the EpiPen—provides a guide to navigating the startup world in The Idea is the Easy Part.
The excerpt below, from the book’s second chapter, challenges the reader to reconsider the stereotypical image of a risk-driven entrepreneur.
RISK APPETITE: STAY HUNGRY YET CAUTIOUS
The stereotypical entrepreneur is an adrenaline junkie, placing huge bets on strategies and tactics that might make or break their startup. That might be true for a few prominent daredevils, like Elon Musk. But most successful entrepreneurs are not risk driven—they’re opportunity driven. They learn how to minimize or mitigate risks, not chase them.
Of course, startups are risky by definition. But those who go out of their way to take unnecessary risks tend to fail in the long run. The more cautious and calculating risk-takers succeed. They think strategically and look for asymmetric opportunities where they might have five-to-one odds of success. Like great poker players, they have the discipline not to draw to an inside straight, even if they see others occasionally winning large pots by pursuing a high-risk strategy.
I can’t recall ever meeting an entrepreneur who truly loves working on the edge and courting disaster just for the adrenaline rush. Big ideas are inherently risky, but great entrepreneurs identify an opportunity and then rigorously work to mitigate its risks. Their true competitive advantage is spotting reasonable risks, not taking crazy risks. They are generally optimistic, to be sure, but there’s a big difference between optimistic and reckless. As Rob McGovern, founder of CareerBuilder, told Fast Company, “We make a big deal about saying ‘these people are risk-takers.’ It’s more basic than that. It’s not about being defiant. It’s about the ability to calculate and mitigate.”
The most important way successful entrepreneurs limit risk is by figuring out whether there’s a real market for their idea before wasting much capital. If possible, they put a very basic version of the product in front of customers to test demand before going wide. Their goal is to reduce the role of luck, not rely on their luck holding up.
Consultant Deborah Mills-Scofield agrees that most entrepreneurs aren’t more attracted to risk than anyone else is; they just define risk differently. “For some I’ve known, the risk of losing autonomy and control of one’s ‘destiny’ was far riskier than losing ‘guaranteed’ income and benefits. Working for someone else’s company, reporting to a boss, and living under rules they weren’t sure made sense were a lot riskier than creating their own business. The risk of not pursuing their passion, of not making a meaningful and significant impact on the world around them, feels much riskier than starting their own venture... risk isn’t as defined by losing tangibles (e.g., income, benefits, ‘stuff’) as it is by losing intangibles: fulfilling a passion that won’t let go, defining their own sense of purpose, sating their own curiosity, looking themselves in the mirror.”
One great example of an inherently cautious but very successful entrepreneur is Eckard Weber, whom I’ve collaborated with for years at Domain. He’s a master of pursuing highly ambitious startups with minimal risk by setting up opportunities for cheap and fast failure.
Eckard was born into a family of modest means in postwar Germany, which contributed to his frugality and reluctance to waste money. He worked his way through university and medical school and then came to the United States as a postdoc at Stanford to focus on medical research. When I got to know him, he was an academic at the University of California, Irvine, and could have stayed in medical research his whole career. But then he founded a startup that was acquired by one of our portfolio companies and was invited to join the acquiring company as head of research.
My partner Jim Blair worked with him at that startup and recognized his brilliance, so we decided to bring Eckard to Domain as what we call a venture partner. Unlike a general partner, a venture partner draws a salary with the mandate to develop ideas for new startups and launch them. It was almost a hybrid role, in between entrepreneur and venture capitalist, and it gave Domain first dibs at funding his companies.
This model allowed Eckard to roll up his sleeves and launch startup after startup, almost twenty by now, based on his own ideas. This doesn’t even count all the ideas he dropped before they became companies. These ideas are never aimed at modest, incremental improvements but at solving big, unmet needs, with a shot at creating massive, industry-shaking companies. This ambition may sound like a contradiction for someone I just described as risk averse. But it’s not a contradiction because Eckard has refined a brilliant approach that minimizes risk without minimizing his ambitions.
He starts by observing what’s going on in a given field or disease, such as obesity, Alzheimer’s, and heart disease, and asking lots of questions about existing treatments. He forms a hypothesis about a possible new approach, ideally one that can find new uses for existing drugs that have already been tested and approved for safety. So much of the risk and expense of pharmaceuticals is related to safety, so avoiding those risks can give a startup a huge advantage. Eckard often looks for new uses in drugs that may first show up as a side effect. There can be tremendous value in asking whether a side effect in the treatment of X might become the desired main effect in the treatment of Y.
At any moment, Eckard might be exploring ten of these ideas, consulting his wide network of experts to develop his theories. Maybe eight of the ten will turn out to be dead ends, but Eckard can eliminate them for a relatively small cost, usually less than $100,000. Finding an experiment that quickly proves an idea is wrong is as valuable as one that keeps an idea alive. A cheap, fast failure is nearly as good as a success.
Consider his current startup, Transposon Therapeutics, Inc., which is working on a new treatment for neurodegenerative diseases, including Alzheimer’s. Eckard noticed in the scientific literature that patients who have HIV and survive to old age have a greatly reduced incidence of early-onset Alzheimer’s compared to that of the general population. There’s some evidence suggesting a genomic connection between these seemingly unrelated conditions. Transposon’s research has the potential to completely change how we fight neurodegenerative diseases.
Once he concludes that an idea might be scientifically valid, Eckard turns to a community of talented outsiders to staff a startup. Instead of putting a lot of people on a payroll, he works as much as possible with contractors—one law firm, one financial manager, one HR expert, a few contract research firms, clinical consultants, and so on. It’s a plug-and-play business model, much like the movie business, where great producers and directors hire the same cinematographers and crew over and over. Then they go their separate ways when each movie is finished.
If one of Eckard’s startups is making good progress with an innovative treatment, he moves on to another project, and we find an experienced, professional manager to take over. Eckard has no desire to scale something that’s already working; he wants to start over with a new idea. That’s how he turns the extremely risky world of pharmaceutical development into something approaching a reliable, repeatable process.
Excepted from The Idea Is the Easy Part: Myths and Realities of the Startup World by Brian Dovey, published by Matt Holt. Copyright 2023 by Brian Dovey.