Venture capital prefers focused products over platforms that ultimately generate much more value, observes Maarten Buijs.
As a scale-up, we at Surfix Diagnostics are continuously confronted with the need to attract funding. We’re bringing a point-of-care test to market, which can detect a large number of relevant disease biomarkers simultaneously. The test utilizes a photonic integrated chip sensor element, embedded in a lab-on-chip. The hardware of the test, ie the lab-on-a-chip cartridge and the readout instrument, is the same for every disease, and thus represents a platform that can be tailored to the detection of specific diseases, by applying the right coating to the cartridge and using the right software.
Although the overall value of the platform exceeds that of a single solution built on it, the former is more difficult to sell to investors than the latter. Most investors want a significant return fast, which is likelier to come from a single product brought to market in a focused drive than from a generic platform with an unclear endpoint of development and/or the promise of multiple first applications to be worked on in parallel (and thus without focus).
This comes as no surprise to me since I encountered the same challenge when working in R&D for large companies: how to allocate resources and priority to generic platform developments, which are needed for future growth and profitability of the company when every separate business unit and sales manager wants their dedicated product as soon as possible? In the end, many factors play a role here, not all of them necessarily logical or financially quantifiable.
The most interesting cases I remember are from my time at FEI, now Thermo Fisher Scientific. I was in charge of R&D for Europe, which included the R&D for transmission electron microscopes (TEMs) for the materials science and the life sciences markets. At the time, we were introducing the new Titan TEM platform, which was ultra-stable and precise, to allow for the addition of sophisticated corrective electron optics.
The main application driver appeared to be materials science, particularly the race to image single atoms in collaboration with leading key opinion leaders (KOLs). However, FEI also wanted to lead the way in cryogenic TEM of biomolecules, which could revolutionize, among other things, the structure determination of proteins for proteomics. At that time, nobody had heard of Alphafold. The only available technique was X-ray crystallography, which depended on the availability of protein crystals – which are extremely difficult to obtain. The structure of only a few and not very relevant proteins had been elucidated. A cryogenic Titan, later called Titan Krios, could have a great impact on this field.
The visionary product manager of the Krios, Werner Hax, was fighting an almost daily struggle to keep the momentum for his product, against the dominance of the materials science angle. Part of his arsenal was intensive stakeholder management, including almost daily visits to my office to make sure I gave his vision of the platform the right resources, as well as the tried-and-true practice of an early commercial launch.
For a complex system like the Krios, for which customers need to find significant funds first, this approach made good sense. But, intrinsically, I’d rather have waited until we proved that the system worked reliably, rather than run the risk of sending engineers to fix systems at the customers, which in general was what we ended up doing. In the end, though, it all paid off. Cryo-TEM received a Nobel Prize in 2017, in large part as a consequence of the introduction of the Titan Krios. And, importantly, the commercial success of the Krios significantly accelerated the success of FEI in Eindhoven.
Does this mean that I now know how to pitch this platform-versus-dedicated-product dilemma to outside (venture capital) investors? Ask me in half a year.