Surviving The Crash: BioCompany

Entrepreneurs: Surviving the Dot-Com Crash

JIM KLING
UNITED STATES
7 OCTOBER 2005

Back in 1996, heady times were ahead. Just like Science's Next Wave, the Internet was in its infancy. But unlike Science's Next Wave, in the next few years the Internet would make instant millionaires of numerous college dropouts.

In September of that year, six entrepreneurs submitted essays to Science's Next Wave describing their experiences wading into the world of high-tech business. Like most tech businesses, their companies thrived in the late 1990s. But then came the turn of the millennium, when high technology crashed. We were interested to know: How did our entrepreneurs fare? We caught up with three of them and asked. By all accounts, they thrived.

Lee Jensen, President and CEO, Bio Online (bio.com) Lee Jensen, Ph.D., helped pioneer biological information on the Internet. He started Bio Online (also known as bio.com) in 1992 as a side project to help fund his molecular biology research. He quickly realized that he had underestimated the time commitment required and turned his full attention to the business. Today, Bio Online is a portal for life sciences, industry news, job information, and industry analysis. It grew significantly in the late 1990s, and Jensen took advantage of that growth--and the revenue it provided--to custom-build the servers and software tools that form the backbone of the site today. Like other Internet and technology companies, Bio Online felt the pinch from the dot-com bust, and the site cut back on spending significantly. But the company survived, a fact Jensen credits partly to his passion and perseverance--to staying the course when some other people wished he wouldn't. When Bio Online received venture funding in the late '90s, the financial backers pressured him to step down from his leadership position in favor of someone with more business experience. "Coming from a science background, investors assume you don't know anything about running a business, and I think they were right," says Jensen. "But at the same time, if you turn the reins over to a professional manager, you take a big risk. I think that happened with a lot of dot-com companies. They grew, but when times got tough, everybody jumped ship." Jensen fought to retain control of the company and eventually convinced the investors. "Because I was still passionate about this, I stuck through it and managed to keep it running with lots of help from some very good people," Jensen says. "Now I have quite a bit of business experience." The dot-com bust, Jensen says, was ultimately good for business. It weeded out the weaker competition. "We're in a good position, having proven ourselves," he says. Joe Chung, CEO, Allurent In 1992, freshly anointed with a master's degree from MIT's Media Lab, Joe Chung co-founded Art Technology Group (ATG). His intent was to commercialize his research with electronic instruments and performance systems, but the company soon swerved from its original strategy, instead becoming a provider of technology, design, and business-strategy consulting. ATG's clients included organizations such as Stream Technology (www.stream.com) and the Harvard Business School. ATG rode the wave of the Internet, and Chung remained as the chair and chief technology officer until stepping down in 2001. He stayed long enough to steer the company through some of the downsizing caused by the dot-com bust, but then he decided to retire. Over the next couple of years he got married, had a child, renovated houses, traveled, and became restless. "Idleness didn't suit me well," he says. So when the tech economy began to pick up again, Chung returned to one of ATG's early roots: improving the customer experience online. Chung started Allurent in 2004 to develop software to streamline and clarify online purchases and ultimately to build software applications that harness the user's computer to add visual excitement and energy to a commercial Web site. In his new endeavor, he is applying lessons learned from his old one. "I felt we struggled at ATG because we were going after too many markets," Chung says. "We sold not just to retail, but banking, manufacturing, ... every single sector. Now we're focusing clearly on consumer retail." The company recently launched its first product, an interactive video that runs within the user's Web browser, automatically pointing out errors committed in filling out a site's checkout page. Instead of the usual vague messages to fix incomplete fields, the program provides a clear pointer to what needs to be done. Chung says that Allurent has recently signed up its first client, a major online retailer that will incorporate the software into its online store. Chung hopes Allurent will pioneer bigger changes in the near future. "There's a growing sense that the first wave of the Web has come and passed, and we're finally getting to the second wave, which I think will be much more exciting," Chung says. "The first wave was driven by adoption of brand-new users. Now that the technology culture is maturing, there are interesting new applications and experiments again. [After the dot-com crash,] people had stopped experimenting online, but now it's coming back with a vengeance." Bill Hunter, President and CEO, Angiotech Bill Hunter is modest, crediting luck and ignorance as key sources of his success. He co-founded Angiotech Pharmaceuticals in 1992, intending to market a drug to coat medical implants to prevent scar tissue from engulfing them. He went into the business with little idea of how difficult it would be to manage a corporate research program, navigate clinical trials and regulatory approvals, and negotiate corporate partnerships. If he had known, he says, the sheer complexity of the undertaking might have deterred him from starting the company in the first place. But he didn't know, so he waded naively into the morass, attracting talented partners and employees to help shoulder the load. He learned as he went, and in 1997 the company entered into an agreement with the medical-device company Boston Scientific, which planned to license Angiotech's drug paclitaxel to coat a new generation of arterial stents. The devices are implanted following balloon angioplasty to bolster the treated artery, but prior to the development of paclitaxel, scar tissue overgrew the stent in about 30% of patients--a phenomenon known as restenosis--to such an extent that it blocked the artery, requiring a follow-up procedure to be performed . Paclitaxel's promise held up. Better known as an anticancer drug, it also interferes with migration of the cells that would otherwise congregate on the surface of the stent. In 2003, the deal paid off, and Boston Scientific introduced its paclitaxel-coated Taxus stent to the U.S. market with a restenosis rate of less than 10%. The breakthrough immediately led to a dominant market position; Taxus stents posted $1.4 billion in sales in the first 9 months. Angiotech's earnings from its Taxus deal have put the company in a comfortable position, but it wasn't an easy ride. The dot-com bust hit the biotech sector hard, but Angiotech escaped partly due to good timing: It closed a financing deal in 2000, "literally weeks before NASDAQ was peaking and starting to turn," Hunter recalls. He'll tell you that Angiotech got lucky, but when pressed he admits "we had a pretty good sense that the market was pretty frothy, so we [got] in the queue to raise money." Angiotech has done well, but like most biotechs its stock has at times taken a beating. Of all the articles that have been written about Angiotech over the years, Hunter has only one framed on his office wall. It's the front page of the 18 April 2000 Vancouver Sun, with a story about the worst stock performers among Vancouver-area companies. Angiotech made the list. "It's the only time I've ever made the front page of my hometown newspaper," Hunter says. His favorite part? At the end of the column, it reads "See Losers, page D2." It's funny, but not apt. Add a sense of humor to Bill Hunter's keys to success.

The editors suggest these related resources at Nextwave:
	Entrepreneurial Role Models: Jumping Off the Cliff Joe Chung, 6 September 1996, UNITED STATES
	Entrepreneurial Role Models: Running Outside the Pack Lee Jensen, 6 September 1996, UNITED STATES
	Entrepreneurial Role Models: When Ignorance Is Your Greatest Asset Bill Hunter, 6 September 1996, UNITED STATES

Copyright © 2005 by the American Association for the Advancement of Science.