From Bootstrapped Startup to $190 Million Exit: Lessons from Biotech Entrepreneur Garren Hilow

Garren Hilow's journey from bootstrapped biotech startup to $190 million exit offers valuable lessons for entrepreneurs. As the co-founder of Averis, an antibody discovery service company, Hilow navigated the challenges of building a business in a complex industry with limited resources. His story highlights important insights on fundraising, productizing services, and managing the acquisition process.

Bootstrapping a Biotech Startup

Hilow and his co-founder started Averis with just $200,000 from his partner's parents. In an industry where $5 million is often considered too small to start, they managed to bootstrap the company through careful cash flow management:

• They operated on a fee-for-service model, requiring 50% payment upfront from clients
• Hilow worked two full-time jobs for the first 2.5 years to support himself
• The founders took minimal salaries, reinvesting profits into the business

This lean approach allowed them to maintain 100% ownership for the first several years as they slowly grew the team from 3 to 45 people.

Pivotal Moment: Buying Out the Co-Founder

After 4 years, differences in vision emerged between Hilow and his co-founder:

• Hilow wanted to grow aggressively and eventually sell
• His partner wanted to keep the business small and pass it to his daughter

This led to Hilow buying out his partner in a complex deal:

• $2 million total valuation
• $25,000 cash upfront
• $200,000 promissory note
• Hilow personally guaranteed $1.5 million in business debt
• The partner retained 10% equity

While risky, this move allowed Hilow to pursue his growth strategy.

Productizing Services and Scaling

After the buyout, Hilow focused on scaling the business:

• Raised $1 million from individual investors for 12% equity
• Invested in next-generation technologies and top scientists
• Productized their custom services into three standardized packages
• Added guarantees to justify higher pricing
• Simplified marketing with case studies

These changes transformed Averis from a custom service to a more scalable product offering. Revenue grew to nearly $10 million within a few years.

Preparing for Sale

Hilow implemented several strategies to make the business more attractive to buyers:

• Promoted the COO to CEO, demonstrating the business could run without him
• Had other team members give sales presentations instead of himself
• Focused on building a strong leadership team

These moves aligned with principles from the book "Built to Sell," which Hilow credits as influential.

The Sale Process

Hilow hired an investment banker to manage the sale process. Key steps included:

• Creating a compelling one-page company description
• Reaching out to 30 competitors and 100 private equity firms
• Securing 12 initial bids
• Conducting management presentations with 6 finalists

The process was intense, with multiple rounds of bidding driving the price from $50-80 million initially to $120-180 million.

Deal Complications

Hilow accepted a $140 million all-cash offer, but it fell through at the last minute due to:

• Averis missing recent sales targets
• Concerns about their core IP being an unpatented trade secret

Ultimately, Hilow sold to competitor Twist Bioscience for $190 million in stock. However, this introduced new challenges:

• Hilow's shares were locked up for 18 months
• The stock price fell from $118 to $18 during the lockup period
• Averis missed earnout targets, receiving $0 of a potential $20 million

Key Lessons for Entrepreneurs

Hilow's experience offers several valuable takeaways:

1. Bootstrapping can work even in capital-intensive industries
2. Align with co-founders on long-term vision early
3. Productize services to scale more effectively
4. Build the business to run without the founder
5. Use professional help (bankers, lawyers) when selling
6. Be prepared for the emotional rollercoaster of selling
7. Don't count on earnouts - focus on upfront consideration
8. Have a strong peer network for support and advice
9. Plan for life after the sale to avoid burnout

Conclusion

Garren Hilow's journey with Averis demonstrates both the potential upside and challenges of building and selling a biotech startup. While the outcome was life-changing, it came with significant stress and unexpected twists. His story offers a wealth of insights for entrepreneurs in any industry looking to scale a business and navigate a successful exit.

Article created from: https://www.youtube.com/watch?v=u_jCGurWdd0