Kein Folientitel

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Establishing as start-up company in South Africa
An industry perspective

Dr Christoph Beck Inqaba Biotechnical Industries
Building Biotechnology Together Industry
Scientist Workshop AfricaBio 21 22. October 2002
AfricaBio_e/1/ 15-Oct-02
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Content

• Introduction What does inqaba biotec?
• Success factors and obstacles for South African
  start-up companies an experience
• Benefit of local business to science a company
  perspective
• Tips for starting biotechnology business in South
  Africa

AfricaBio_e/2/ 15-Oct-02
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Introduction What does inqaba biotec?

AfricaBio_e/3/ 15-Oct-02
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Introduction What does inqaba biotec?

• Objective of the enterprise (short term)
• Offering of DNA synthesis and DNA sequencing
  services
• Objective of the enterprise (medium and long
  term)
• Offering additional services for recurring,
  standard genetic laboratory tasks

Taking away routine work from research and
diagnostic laboratories and thereby increasing
their overall cost and performance efficiency.
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Introduction Who is behind inqaba biotec?

• South African private company
• 27 individuals from South Africa, Germany,
  Switzerland, USA, South America, as well as a
  small South African company
• Funding
• Project loan from the Swiss Department of
  Economics (SECO) (quasi equity)
• Leasing loan from a local bank
• Management
• Dr Oliver Preisig Production
• Dr Christoph Beck Finance and Marketing
• Mr Joaquim de Gama Legal Advisor
• Four full time employees

AfricaBio_e/5/ 15-Oct-02
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Introduction Brief Founding History

• Kick off meeting Definition of business
  idea August 2000
• Market analysis January 2001
• Business plan June 2001
• Funding March 2002
• Set up of laboratory and equipment May 2002
• Test phase for establishing of processes August
  2002
• Market launch from August 2002

At the beginning a personal need for
oligonucleotides fast delivered at stable prices
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Introduction Unique Selling Proposition

• Who is our major end-user target customer group?
• Genetically working researchers at universities,
  hospitals and pharmaceutical or diagnostic
  companies in South Africa and neighboring
  countries.
• Positioning Statement
• Inqaba Biotechnical Industries offers a prompt
  delivery of oligonucleotides and DNA sequencing
  results at best prices and excellent customer
  support to all customers at universities,
  hospitals and companies to meet the customers
  need for a fast and supportive assistance of
  their genetic research or diagnostic work.

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Categorisation of Biotech Business
Academic research
Food processing
Contract research
Therapeutics
Environmental
Agrobio
Diagnostics
(Product development)
Industry and research suppliers
(Services)
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Success Factors and Obstacles for South African
Start-Up Companies
Area
Success Factors

Economic trend

• Need for catching up will positively impact on
  demand for biotech products

Market

• Limited market size, but rapidly growing in the
  next years
• Increasing awareness for locally manufactured
  goods

Labour market

• The right local skills are available right now
• Labour cost are comparably low

• Well developed financial market for outside
  (borrowed) capital

Financial markets


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Success Factors and Obstacles for South African
Start-Up Companies
Area
Success Factors

Exchange rates

• Contracts from overseas might be attracted by
  weak exchange rate

• Active promotion policies for biotechnology
• Launch of a national biotechnology initiative

Government policies and administration

Infrastructure

• Infrastructure for biotechnology start-up in
  preparation
• Few regulations on set-up of biotechnological
  facilities

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Success Factors and Obstacles for South African
Start-Up Companies
Area
Obstacles

Economic trend

• Accelerated ZAR-devaluation and high inflation,
  slow economic growth may adversely impact
• the short-term prospects for biotech
  businesses

• Skepticism about product and service quality for
  locally manufactured goods

Market


Labour market

• Labour market for highly skilled personnel is
  still small

• Equity capital market is still reserved for
  biotechnology business ideas
• High real interest rates and possibility of
  accelerating inflation might push up the cost
  of local loans

Financial markets


AfricaBio_e/11/ 15-Oct-02
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Success Factors and Obstacles for South African
Start-Up Companies
Area
Obstacles

Exchange rates

• Rapid devaluation of ZAR increases cost of
  additional investments, imported materials
  and foreign borrowed capital

• Financing restrictions for foreign owned
  companies
• Long or unpredictable waiting periods for
  applications or registrations

Government policies and administration



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Benefit of Local Business for Science a Company
Perspective
Delivery Time

• Delivery time for oligonucleotides Europe and
  USA 2 days
• Delivery time for oligonucleotides in South
  Africa on average 5 days (imported)

Full competitiveness of South African research
requires necessarily the same response time for
auxiliary services
AfricaBio_e/13/ 15-Oct-02
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Benefit of Local Business for Science a Company
Perspective
Prices

• Researchers in South Africa pay up to 40 more
  for oligonucleotides than researchers in USA
  and Europe
• In contrast to USA and Europe prices for these
  services increased over the last two years

Full competitiveness of South African research
requires comparative costs for auxiliary services
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Benefit of Local Business for Science a Company
Perspective

• Relief from dependency on exchange rate
• Cost advantages in terms of e.g.
• Gross personnel costs
• Space costs
• Local production direct distribution avoids a
  double margin
• Foreign companies have in most cases a mature
  manufacturing with high degree of automation and
  smaller total cost per unit

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Benefit of Local Business for Science a Company
Perspective
Customer Service

• Biotechnological services even if they are
  standard services reveal a considerable
  demand on a customer service
• Consulting, requests, additional product
  varieties

Proximity supports a more intensive
communication between supplier and scientists
AfricaBio_e/16/ 15-Oct-02
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Benefit of Local Business for Science a Company
Perspective
Joint activities

• Projects (concentration on core activities)
• Common technology development
• Funding

Local business offer a number of collaboration
opportunitieswith scientist with a high degree
of synergism
AfricaBio_e/17/ 15-Oct-02
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Tips for Starting Biotechnology Business in South
Africa

• Careful market analysis
• The better you know the market the better is the
  correlation between the market response and your
  expectations
• Focus on customer and their needs
• Researchers tend to think more about scientific
  problems and solutions than about the customer
  needs!
• Offer only products for which a market exists
• Personal contact
• Biotechnology is a sophisticated area and needs
  to build up trust between customer and supplier
• Requires direct contact ? plan enough resources
• High product quality

AfricaBio_e/18/ 15-Oct-02
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Tips for Starting Biotechnology Business in South
Africa

• Strict cost controlling
• Resources of start up companies are often in
  short supply
• Avoid to make your company to a barrel that you
  try to fill and you dont know where are the
  holes!
• Management must hold together
• Differences in expectations and reality causes
  often strains
• Efficient problem solving instead of being
  absorbed by tensions
• Motivated employees
• A start up has high demands on motivation and
  stamina

AfricaBio_e/19/ 15-Oct-02
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Thank you

Building Biotechnology Together Industry
Scientist Workshop AfricaBio 21 22. October 2002
AfricaBio_e/20/ 15-Oct-02