FOx Biosystems case study : A sound collaboration between a start-up and a Venture Capital fund

Data processing, speed, and efficiency are of key importance in the field of pharmacological research. The importance of these factors was evident during the development of the first COVID-19 vaccines. With their White FOx technology, FOx Biosystems is developing and commercialising a diagnostic hardware tool for pharmacological research.

Thomas, could you elaborate what the focus of FOx Biosystems entails?

Thomas: In pharmacological research, it is critical to examine how biological compounds and particles relate, react, and possibly bind to each other or to their target (such as a medicine or vaccine). Our White FOx technology applies the surface plasmon resonance (SPR) sensing principle for this analysis. This specific sensing technique has been around for some time and was successfully used for research on small particles and purified samples. However, the research focus is rapidly evolving towards analysing larger particles (e.g. viruses, or extracellular vesicles) in so-called ‘dirty’ samples (e.g. blood or serum). With our device, we are uniquely positioned to enable our customers to use SPR for these much more complex analyses.

What does the market look like?

Thomas: A lot of money is allocated towards pharmacological research. Our focus, the market for biomolecular interaction analyses, is a multi-billion-dollar market with several established companies and widely adopted technologies that have been around for decades. However, evolving research demands require in-depth innovation. This is because current technologies are limited: they are either slow, or not sensitive or specific enough, lacking real-time data, not able to handle large particles, or unable to measure in complex samples.  This is where the White FOx instrument has its competitive edge: measuring binding kinetics in the most complex environments, real time and with a very fast result within minutes instead of days. We not only enable breakthrough research, we also help accelerate it.  

With our technological offer, the market potential of our platform is substantial. However, developing and commercialising such a high-tech device also requires significant investment.  

Innovation requires capital. What about your investors?

Thomas: As an entrepreneur, you develop a plan for which you aim to obtain funding. Our investor syndicate is a diverse group of institutional and private investors. We work with parties which have different interests that you need to reconcile. Where one shareholder focuses on the creation of employment, others are more financially or innovation driven and bring other knowledge to the table.

With HERAN as lead investor (and with Katleen as Chair), we enjoy deep scientific expertise which is linked to their focus on a niche market. HERAN is truly aware of what is going on within the field of life sciences research and diagnostics. They are well embedded in this segment. They bring a sound understanding of the technology, the market, and the challenges. In addition, as entrepreneurs, they know what it’s like to successfully build out a start-up company.

A start-up usually fosters more ambitions than the resources it has at its disposal; what does the future look like?  

Thomas: Promising (laughs). We are currently still in the scale-up corner, but we definitely see great opportunities out there. The market is steadily evolving and the customer need for our platform is becoming more mainstream. FOx Biosystems is ready to handle higher volumes, both in terms of manufacturing and operations. We are a fairly small team, but we are working with partners and contracted parties for production and to allow scalability. If we need to deliver 10 times more devices tomorrow, we will manage to do so. The challenge does not lie within the scalability, but rather in tackling the S-curve for adoption.

Katleen: Gaining commercial traction can prove to be challenging. For the first five customers, you can typically rely on customers close to your network, but getting to 20 customers is significantly more challenging. To accomplish exponential growth in the next phase, you need to be able to show reference cases with sound customer feedback. You must go above and beyond!

Thomas: Actually, we are currently in the middle of that transition phase. However, we still need to focus on convincing people to buy into the long-term potential, and that’s a big challenge!

“Increasing efficiency and speed in research is crucial. We can boost innovation in healthcare if we collect more data and generate better insights, a strategy which we support through the start-ups we invest in” - Katleen Vandersmissen, Managing Partner HERAN Partners

Thomas: The path towards growth requires focus, a lot of money, and persistence. The customer acquisition process is not only lengthy, but also filled with hurdles. The key is to build the sales funnel by making a name for yourself in the industry. Customers require that you have a profound understanding of the market and the dynamics, regardless of the size of your company.

Thomas: We build a sound plan based on realistic assumptions and more importantly, we calculate the risks. We look 5 years ahead, but as a start-up, you are obliged to chop that into smaller pieces. In addition, you have to accept that some matters are out of your control. For instance, we had planned to enter the market when COVID-19 struck. Needless to say that we had to adapt and reset our priorities.  

How do you deal with difficult situations or conflicting interests?

Katleen: Personally, we haven't experienced any conflicting situations yet, although the discussions were sometimes challenging. The willingness to listen and not stick to your perspective is crucial for a constructive collaboration. It's all about brainstorming around potential scenarios as a team and collaborating in a solution-oriented manner.  

Thomas: At the end of 2022, we organised a financing round with the existing syndicate. The business plan was reviewed, and we assessed the funding requirements to reach the next value inflection point. Together with HERAN, we drafted deal terms which were acceptable for all parties involved. It boosts your confidence when your lead investor endorses your business plan and is willing to defend it in discussions with co-investors.

What about value creation? Because in the end, isn't that what it’s all about for investors?

Katleen: We don’t shy away from new technologies, as long as it has gained validation and follows market trends. As part of our assessment, we aim to quantify as many parameters as possible to make an informed investment decision. Initially, with FOx, we worked on a firm business case and on the commercial model. Now, we are mainly focused on creating the right added value and on attracting high-quality human capital who bring valuable knowledge & experience. That requires financing, so even early on, you have to balance the needs and resources. You build various scenarios, look at feasibility, how to make it manageable, including checks and balances.  

Thomas: Once your company is performing well, you must start thinking about ensuring long-term continuity and providing liquidity for investors through a possible exit event. Only at exit will the true value of all combined efforts crystallise.

Katleen: As an investor, you support a company throughout its journey of proving itself, its technology, and its commercial strategy. At that point, everyone should clearly understand the device, its capabilities and how it can address a user’s needs. At the time of investment, the pathway towards those have yet to become clear. In the end, HERAN aims for better healthcare, through additional insights, increased efficiency, and speed in research. We always keep that goal in mind.