Biotech startups have a lot to juggle.
While they face the typical challenges of spinning up a business, there’s also the added complexity of moving from product development to full-scale production in a highly regulated environment. Unlike a typical manufacturer, a biotech startup can ill afford a manufacturing defect or supply chain issue that temporarily affects quality due to the stringent regulatory requirements around biotech manufacturing.
A second reason that young biotech companies have a larger burden than a typical startup is the resources that must go into making a biotech startup a success. Because biotech is complex, there’s little room for starting small and learning as the company grows. A solid foundation must be set early, and scaling happens relatively fast compared with other young firms.
Why Biotech Needs ERP
For these reasons, having an enterprise resource planning solution (ERP) in place early is critical for biotech firms.
Gregg Beloff, Managing Director, Danforth Advisors, in a December 7, 2021, interview (Insider by DFIN) with Craig Clay, President of Global Capital Markets, Donnelley Financial Solutions, provides insight into what Biotech companies need to be doing to prepare for acquisition, advanced fundraising or IPO.
In the interview, Mr. Beloff, speaks to "The Tools for Success" mentioning finding systems to house your data and having all your corporate finance records in one place.
ERP solutions are end-to-end backend software that handles all aspects of a company’s operations, from financial management and human resources to production and logistics. ERP serves as the nerve center for a business, connecting all parts of a company’s operation and replacing a patchwork of unrelated software solutions that typically have trouble talking with each other.
For more on the basics of ERP, download our free guide, Understanding Cloud ERP.
On-Premise or the Cloud?
While ERP is critical for a scaling biotech startup, cloud-based ERP is particularly important. One of the first decisions that a startup will make when considering an ERP system is whether to go with an on-premise ERP solution or one based in the cloud.
ERP is complex software rooted in the manufacturing industry, so it began as an on-premise solution before the cloud even existed. And because so many businesses rely on ERP and are reluctant to make a big shift in backend technology, on-premise ERP still has a major footprint in the industry.
In recent years, however, cloud-based ERP has emerged as a more flexible alternative. At first these cloud-based ERP solutions were “light” versions of the industrial ERP packages, but those days are gone. The industry is rapidly moving to a cloud-first model, and cloud ERP is both full-featured today and the direction of the ERP industry overall.
Biotech startups should strongly consider cloud ERP both for future-proofing, and because of the unique benefits that cloud-based ERP brings to startups.
Lower Initial Costs
Heavy initial rollout costs do not favor startups. That’s one good reason why biotech startups should think cloud ERP.
Cloud ERP allows startups to get industrial-strength ERP technology without having to invest in hardware and large software licensing fees on day one.
While this is a general advantage of the cloud, it is particularly important when it comes to ERP since on-premise ERP systems are complex and costly.
When using a prepackaged industry solution for biotech firms, the rollout time for a new cloud-based ERP system can be as little as 4-6 months. That’s dramatically faster than the 1-2 years it typically takes for on-premise ERP rollout.
The big difference in speed comes both from having a relatively turnkey solution in cloud ERP without the need for hardware setup, and having the system pre-built with best practices already in place. For biotech firms, there’s also the added time and cost savings of having prepackaged cloud ERP validation ready, an FDA-mandated step for biotech firms.
A startup just doesn’t have the time for an on-premise ERP rollout. Even if they do, handling this large backend project takes away critical focus early in a startup’s life when attention needs to be on other scaling issues.
Reduced IT Needs
Scaling up a biotech firm is complicated enough, with plenty of hiring. Cloud-based ERP can help reduce this complexity during the scaling process by eliminating much of the IT needs.
By having a unified platform for all operations, there’s less need for managing and maintaining a host of software solutions. There’s less training involved since employees only must learn a single solution. There’s less hardware to maintain, since everything is in the cloud. There’s less IT security concerns, because the cloud provider takes care of system security.
Startups find that cloud ERP both simplifies IT management and reduces the number of employees needed for backend management. This is important for a scaling biotech startup.
Flexibility and Scalability
Finally, cloud ERP empowers biotech startups because it serves as a flexible, scalable platform as the business grows.
A cloud-based solution such as SAP Business ByDesign and SAP S/4HANA Cloud Public Edition can be used for an early-stage biotech startup without overly complicating operations, but it also can expand to encompass large-scale operations as the scaling journey progresses.
Cloud-based ERP is highly scalable, so biotech startups can start small and seamlessly grow without having their backend system hold them back as their needs expand.
For these reasons and many others, biotech startups should consider cloud ERP.
For more on the role that ERP can play in biotech, download our free guide, The Bioscience Startup's Guide to ERP.