David Blair - founder of the DBA Group
"...investing in a biotech companies is like jumping over a chasm – there are no prizes for getting halfway!"
David Blair MA MBA FCA CF qualified as a Chartered Accountant with Price Waterhouse in 1987 and he held several senior positions in industry before developing his career as specialist advisor to early-stage technology companies. He is founder of the DBA Group, which provides a portfolio of financial management services to potential high-growth companies. 1. How does your approach to financial management for the early stage high growth company differ from – and improve on – what is already out there? It is easy to be wise after the event, what we aim to do is help companies to look forward and execute a complex business plan in the face of uncertainty and limited resources.
A challenge in this area is that most accountants are trained in ‘normal’ businesses with revenues, gross profit and overheads to manage and control. But biotech businesses for example rarely have the former and it is important to distinguish overhead costs from investment when driving the business plan and core technology forward.
Our innovative approach is to focus on the cash in the business and use information about the day-to-day expenditure to feed into a model that tells you exactly how the company is doing against target based on real information.
The nearest analogy is in the motor racing world. Although it is always the driver who is hailed as the hero in Formula One, behind every Lewis Hamilton there is the engineering team on the pit wall. They are monitoring real world data about piston pressure; engine temperature and fuel burn and then modifying the instructions to the driver based on this rich data and the track conditions. They can’t eliminate climatic influences but they can ensure that the car and driver perform to their highest ability.
I would see us as being in the pit team providing the vital information that informs the winning strategy. And we call this integrated financial management. 2. What is the biggest challenge facing early stage biotech companies? As my good friend Andy Allars comments, investing in a biotech companies is like jumping over a chasm – there are no prizes for getting halfway!
You’ve got to make sure you’re funded to the other side, and if you don’t, you’re in trouble. And this is a particularly interesting problem for biotech companies because as you take your run up and you leap, it is as if a ‘divine being’ is changing the width of the chasm as you go. Promising compounds don’t perform as you thought, drug delivery mechanisms take longer to develop; vital components get delayed in customs – all of which makes life quite interesting!
The need to reach a value-added milestone before entering the next funding round is particularly vital in the current economic environment and this can involve existing investors pushing the company as near to the wire as possible before they part with any more money.
This is when accurate information becomes crucial; we have known companies with the equivalent of 18 months cash in bank but having to consider “wrongful trading” issues as the money was already committed. 3. What is your business model? We have found that early stage high growth companies don’t just need an interim chief finance. What they need is a full range of financial skills together with particular specialist services that can be accessed flexibly as and when they are required.
The DBA Group offers a portfolio of financial services that can complement existing in-house resources or provide a stand alone solution. As the company grows our service delivery also changes and this is proving popular with early stage fast-growth companies. 4. How do you expect the economic downturn to impact on your business? To really get the engine running early-stage companies need about £2.5m. A few years ago there were several funds available for this type of investment. Now directors need to be more creative in their financing plans and investors are looking for higher quality management inputs. Specialist support is needed to achieve this.
I think that we will be seeing greater reliance on funding for start-ups coming from a variety of sources including government grants and angel investors. 5. Do you think the government does enough to support early stage companies? I do think that both research and development grants are very useful, and in the Cambridge area we are fortunate that the grant appraisal teams are used to dealing with the particular needs of early stage technology companies. The grant process itself also demands a discipline in planning and executing these projects, which benefits the company management and can far exceed that of the cash introduction alone. However, additional funding models do exist and of particular relevance to technology firms is the US SBIR programme which provides a structured and transparent mechanism for companies to access public funds based on ‘market pull’ rather than ‘technology push.’ This facilitates a ‘soft-start’ approach which is altogether more commercially focussed than the usual product-led strategy adopted by UK companies, leading to a better cance of success and lower risk.” Owlstone is one of the companies that we have helped to access US government support, it has attracted US government contracts and over $2m of private investment. 6. Do politicians understand the needs of technology companies? Anne Campbell was a good champion of technology companies when she was the Cambridge MP and her efforts with David Connell to get the government to adopt a UK version of the SBIR deserve praise.
The ICAEW (Institute of Chartered Accountants of England and Wales), MP Pairing Scheme is a useful way of providing grass roots briefings and I have worked closely with Andrew Lansley MP in this. It has also provided us with some fresh insights into the workings of Westminster. 7. Do you have any plans for physical/international expansion? Our group has seen significant expansion in the last year – gaining both in head-count and size. However, our specialist niche is to be accessible and provide pragmatic advice for life science and high tech clients. Our role is to help our clients to grow therefore our client base wants us to be accessible not big! 8. What three pieces of advice would you give any budding entrepreneurs thinking of starting their own business? Firstly, all sources of investment are not equal. An angel investor that understands the business, has contacts and knowledge of the supply chain is invaluable in the early stages. Secondly, cash is fact and everything else is opinion. If you can create a model that accurately reflects your business plan and is constantly updated then you are in a position of strength and able to pre-empt problems before they occur. Thirdly, you need to be investment ready at any time so that you can rise to the challenges of fundraising as they present themselves without putting the operation of the business on hold. New technologies often have a finite window of opportunity and if development work is delayed every time you concentrate on fund-raising you are not going to hit the milestones. 9. What would you highlight as you biggest achievements as a company so far? Our biggest buzz comes from seeing the success of our clients. We recently won the Cambridge 100 award for financial mentoring of SimuGen. SimuGen has developed technology for predictive toxicology products that will substantially reduce the cost of drug development. The company was established in 2005 by a team led by Dr Quin Wills, of the University of Cambridge, with advisors from the Wellcome Trust Sanger Institute and the European Bioinformatics Institute. By working closely with the technologists to develop a financial model that worked for them, we helped them to raise over £150k and the company currently developing its first commercial products 10. How do you spend your leisure time? Good food, wine and the company of friends.