Notes on Starting a Scientific Organization
I worked at Convergent Research
this summer, which incubates and launches Focused Research Organizations
(FROs). FROs are an example of a new organizational structure for solving scientific problems. There’s a boom in new scientific organizations these days
, from the Arc Institute, to Arcadia, FROs, New Science, the list goes on.
It turns out that a lot of work is needed to start a new scientific initiative — besides just the science. Unfortunately, these tend to be the kinds of things scientists don’t learn in grad school. I put this post together to share what I learned about the operational tasks involved in getting a new scientific organization off of the ground.
Supposing you’ve got a great scientific idea and funding in hand, a crucial initial step is assembling a founding team. The founding team almost always consists of a CEO and individuals who are managing different research areas. Then, the team will hire for additional roles depending on the goal of the organization.
The Founding Team
A founding team needs to have:
- 1. One person who’s the ultimate decision-maker (usually called Chief Executive Officer).
- 2. At least one person with the technical/scientific knowledge to achieve the scientific mission.
These could be the same person, but usually they’re 2+ people.
When assembling the founding team, a large focus is on the areas of responsibility (AORs) for the organization. Co-founders have specific expertise relevant to the organization goals. Each member of the founding team should be knowledgeable and in charge of an AOR. For example, some scientific and operational AORs might be:
- Molecular Biology
- Advanced Imaging
- Computational Biology
- Employee Onboarding
- Employee Payroll and Company Taxes
What Does It Mean to Be a Co-Founder?
Assembling a founding team is a non-formulaic process that is different for each project. In all companies, people join at different stages with different levels of seniority. This makes it difficult to determine co-founder versus early hire status.
Co-founder status is a delicate conversation. Founders take up more front risk by committing to the organization early-on, ensuring that it keeps going when others leave. For that, they’re rewarded with different compensation packages and different authority status.
Common Early Hires for Scientific Organizations
Eventually, you will recruit other members to help hit project milestones. These positions often include operations, research and engineering. Below are the most common early hires for running a scientific organization.
Technical hires are the core of the organization, responsible for the brunt of scientific progress and research. However, with niche areas of research, there are few available scientists who have the correct expertise. It seems that manual outreach by contacting professors to ask about relevant postdocs that fit your research interests works well.
Note: Every organization should have its own pace for hires depending on its roadmap. However, you don’t want to hire too many scientists too early. A heuristic is to hire 1-2 hires to begin protocol research and figuring out equipment needs. Hire additional scientists once you have lab space to begin working.
Assuming you do not have a COO as your co-founder, an operations manager builds the ecosystem from ground up to conduct research. This includes onboarding hires, establishing vendor relationships, and streamlining inventory purchasing.
Chief of Staff
A CoS helps support the executives in their roles. For example, a CoS can attend meetings on behalf of executive leaders or help lead strategic planning processes. The CoS tends to have a lot of autonomy and doesn’t manage routine correspondence for executives, which is handled by the Executive Assistant.
The Executive Assistant augments the capacity of the co-founders and supports day-to-day tasks for the founding team. They are in charge of coordinating meetings with stakeholders, leading communication via phone and email, and organizing work plans and documents daily.
Once the founding team is assembled, you work together to determine the organizational and incorporation structure of the initiative.
I’ve learned that in the simplest form, there are two steps in the incorporation process. First, you have to determine whether you’re a nonprofit or a for-profit. Second, based on this, you have to make another choice about which legal structure to use for your organization.
Step 1: Should My Initiative Be a Nonprofit or a For-Profit?
Your incorporation structure will largely depend on the goal of the organization. Nonprofit organizations require a charitable mission which must benefit the public. In principle, for-profits may focus on a charitable cause. However, for-profits can also only exist to generate returns for shareholders. Nonprofits cannot do this.
Note: Nonprofits are often associated with being small, slow-moving, public-good organizations. However this doesn’t have to be the case. Scientific organizations can be fast-growing and fast-paced. Incorporating as a nonprofit allows you to benefit from a similar legal structure, but it does not change the fundamental progress of a scientific institution.
This is a list of common decision-making factors for incorporating as a nonprofit or for-profit. It is ordered in what is generally important for most scientific organizations. Depending on your initiative, some things will matter more than others. You may find things beyond this list that are also important.
1. What does your funder want? This decision may already have been effectively made for you by your funder.
a. If your potential funders want to make a charitable donation to fund your company (which is common), you should start a 501(c)(3) nonprofit. This allows funders to receive tax assistance from charitable donations.
b. If your potential funders want equity, you should start a for-profit corporation.
2. Who are you employing? If your organization is based in the United States and you want to hire non-US citizens, you’ll have to get them a visa.
a. For-profits in the US have a cap on the number of visas they can get.
b. Research nonprofits are exempt from work visa caps. If you want to hire a lot of foreign nationals, it is better to incorporate as a 501(c)(3) nonprofit.
3. Do you need to collaborate with other institutions? It’s generally easier to gain academic collaboration and create partnerships as a nonprofit.
a. Some catalogs (ex. The Jackson Laboratory) are license limited for nonprofits. Generally, nonprofits have maximum access to lab resources compared to for-profits.
b. There are cost-savings when licensing technology from academia as a nonprofit.
4. How are you allocating funds? It is easier to handle and allocate finances as a for-profit organization.
a. As a nonprofit, taxes are harder. You have to file a 990 form with the IRS which provides the public with financial information about your nonprofit organization.
b. For nonprofits, there are limits to what you can do with your money. If you are a public charity you have to raise at least 30% of funds from “the public” (ex. government or DAF).
c. There are IRS nonprofit specific laws regarding wage minimums and requirements.
5. Do you plan on moving from a nonprofit to a for-profit? Moving from one status to another is possible, but has many restrictions.
a. Nonprofit organizations can and frequently decide to spin out for-profit ventures to deploy their work into the world using market mechanisms, just like universities often spin out companies.
Step 2: What Legal Entity Should My Initiative Use?
Once you decide if you will be a nonprofit or a for-profit corporation, you’ll have to select the underlying business structure of the organization. The structure determines liability, taxation, and company hierarchy. Below are some of the legal entity structures you might choose to follow.
Note: Business corporation structures are for for-profit organizations. Nonprofits follow a nonprofit corporation structure, which is different from a business corporation.
1. What is a business corporation?
a. A corporation is a legal entity owned by shareholders, individuals or other corporate entities who own shares of the company.
2. How do business corporations operate?
a. Corporations have a more standardized and rigid operating structure. This includes more reporting and recordkeeping requirements than other legal entities.
b. All corporations are required to adopt bylaws, issue stock, hold shareholder and director meetings, maintain a registered agent and registered office, file annual reports, and pay annual fees.
Types of Business Corporations: C-corps versus S-corps
For-profits can incorporate either as a C-corp or an S-corp.
1. What type of corporations are C-corps?
a. C-corps usually have foreign owners and unlimited shareholders.
b. Examples of C-corps include Apple, McDonalds, and Starbucks.
2. What type of corporations are S-corps?
a. S-corps are suited for smaller, domestic businesses that are easier to maintain than C corps.
What's the Difference Between C-corps and S-corps?
a. C-corps file a corporate tax return (Form l1120) and pay taxes at the corporate level.
b. S-corps file an informational federal return (Form 1120S), but do not pay income at the corporate level.
a. S-corps are restricted to 100 shareholders, and shareholders must be US citizens/residents. They cannot be owned by C-corps, other S-corps, LLCs, partnerships or trusts.
b. C-corps have no restrictions on shareholders or ownership.
Note: Fiscal sponsorship is a business structure for for-profits organizations or organizations that have not received non-profit status. It helps provide them with some of the benefits of nonprofit organizations.
1. What is fiscal sponsorship?
a. A fiscal sponsorship is a relationship between a for-profit and a 501(c)(3). It is when an existing nonprofit ports over their status to another entity to provide fiduciary oversight.
2. How does fiscal sponsorship operate?
a. As a for-profit, there are many limitations you may face. For example, it may be more difficult for your organization to access specific grants. A non-profit may apply for a grant on your behalf using their 501(c)(3) status. Then, they will take a financial cut from the grant for their assistance.
Limited Liability Company
Note: A Limited Liability Company (LLC) is available for both for-profit and nonprofit organizations.
a. In the U.S. an LLC protects its owners from personal responsibility for its debts or liabilities. It is owned by one or more individuals rather than various shareholders.
2. How does an LLC operate?
LLCs are less complex than corporations. They do not require a board of directors, meeting minutes, or shareholder meetings.
Note: 501(c)(3) status is for nonprofit organizations.
a. In the United States, nonprofit corporations can incorporate with 501(c)(3) status, a federal designation provided by the IRS.
2. How does a 501(c)(3) operate?
a. Nonprofits under this category are tax-exempt charitable organizations that are eligible to to receive tax-deductible contributions.
b. Earnings from the 501(c)(3) cannot financially benefit a private shareholder. It also cannot influence legislation as a substantial part of its activities.
These are some of the common ways you may structure your initiative. The incorporation style and legal entity structure are largely dependent on the stakeholders and scientific goals of the organization.
Once you have hired your founding team, you will need to find lab space that can effectively house your research. This will depend on your milestones, experiments, and the equipment you need to run protocols.
Things to Consider for Your Future Lab
Think through these questions before you start looking at labs. It’ll give you an idea of what to keep in mind during your search and what you want in your future space. These are all equally important but some will matter more than others depending on your organization.
1. What kind of equipment do you need?
a. What kinds of space/connections/airflow requirements/building codes does your lab need to house this equipment?
b. How are you going to get big equipment into the lab?
2. Do you need a vivarium?
a. Does it need to be in-house, or can you source animal models from other vivariums?
3. How many team members will you approximately have in 5 years? Think about how much space and benches you will need.
4. Where will the lab be located? Is it near CROs, vivariums, or other research facilities? Get a local broker to help you look for lab space.
Types of Lab Space
There’s a variety of lab spaces to choose from. Below are a few of the commonly available spaces. You’ll have a better idea of what works for you once you tour different labs.
A general rule of thumb is that a turnkey space is optimal since it already houses most equipment and systems. A turnkey is a completed lab space you are moving into once the previous owners have left. A turn-key space is optimal if the previous owners used similar equipment. However, these spaces still require installation of any missing equipment and systems that you might need to complete your research.
Incubators provide lab space to researchers and biotechnology companies so they can affordably reach proof of concept. They provide lab benches, private lab suites, shared equipment and services. Since there is limited space, accessing bench space requires a competitive application process.
A speculative build is a lab space project undertaken with no formal commitment from any end users. The project is built in hopes that a buyer will take the property (close to) as is, avoiding any additional construction.
A shell lab space is found in newer construction and refers to a suite or a floor within a building that has floors, walls, windows, and a roof, but no interior improvements. Warm shell space typically includes interior walls, electrical outlets and wiring, sealed concrete floors, finished ceilings, lighting and HVAC. However, it does not include all of the lab necessities and may only include partial systems.
Lab Space Transaction Timeline
Once you have an understanding of what you’re looking for in a lab, you’ll need to go through the real estate market to acquire a space that fits your needs. This is usually a lengthy and iterative process.
This is a helpful flow chart when thinking through the steps, timelines, and people involved in lab space acquisitions.
Definitions of Terms in Figure
Request For Proposal (RFP): A proposal document from the tenant to the Landlord for the lab space. The RFP usually includes information about the tenant, the purpose of the lab space, and tenant budget.
Letter of Intent (LOI): A document that outlines the lab space agreement between the tenant and the Landlord. It usually includes the rental cost, construction, and timelines.
Tenant Improvements (TI): These are the alterations a tenant makes to a rental space as a part of their lease agreement. This includes new HVAC systems, mechanical closets, or additional construction to the space.
Building Out Your Lab
Designing your own lab space is time and cost intensive. There are a few steps and key considerations involved when starting a build out:
1. What type of lab space are you starting with?
a. You usually want a turnkey space since it already has most of the necessary infrastructure.
b. Going from a warm shell to a full lab space is difficult. Warm shells usually have partial HVAC installed and may require electrical closets and mechanical rooms.
c. It takes 9 months to 2 years to build a full lab from a warm shell. This process is faster with a turnkey space.
2. Who are you working with to design the space?
a. You need to get a project manager early to tour spaces with you.
b. Your PM should be aware of your lab needs and work with you to develop a floor plan.
3. What should you consider when designing the space?
a. How many people will you have 5 years down the line? What type of space will they need? How much meeting space versus bench space will you need?
b. How much equipment will you house? What systems will you need to use that equipment (HVAC, etc.)? How much power does the equipment need?
Note: Even with a lab space, it is still advised to use a CRO for your vivarium. Running your own vivarium involves lots of regulations and staffing which creates more hurdles for your research progress.
4. How long are the timelines for your buildout?
a. The proposal stage lasts days to weeks.
b. Letter of intent stage takes 3 to 4 weeks.
c. Lease negotiation takes 6 to 8 weeks.
d. Once a lease is negotiated and you are handed the keys, you can begin the process of construction and moving in equipment.
Once you have lab space, you can start to figure out what equipment your organization needs and the types of vendors which provide these services. I’ve found that vendors are the main point of contact for many scientific resources.
Vendors Are Commonly Used For:
- Cultures, strains, and animal models.
- Lab coat and cleaning services.
- Scientific instrumentation and equipment.
- Database and software services.
Which Vendors Will You Need?
Your research instrumentation, reagents, and software services will come from vendors. There are a few effective approaches to figure out what your equipment needs are before talking to a supplier. Though these are listed, your scientists might have other ways to determine the equipment they need.
Note: Be aware of the extensive lead times, think about your lab needs down the line. It is advisable to buy equipment that your lab will need in 5 years.
1. What does your current lab already have?
a. Determine the equipment you will need for your research by scoping out each room in your lab.
b. Look at what your current lab has in place. Turnkey lab spaces will already have a lot of the equipment you require for different protocols. Order anything that's missing.
2. What protocols will you be running?
a. Read scientific protocol papers. Find the equipment your lab will need to run a similar protocol.
b. Hire an operations lead who can read protocols and coordinate equipment purchasing.
Note: It's advisable to have 3-4 technical options to complete one process/protocol.
3. What protocols are you running in-house?
a. Buy equipment for protocols you can easily run in-house.
b. Outsource protocols which require equipment you cannot access.
Setting up an Inventory System
Inventory and purchasing is crucial for running a lab. Scientific organizations consistently need different types of equipment to perform their research. I’ve learned that streamlining the inventory process makes it easier to stay on top of reaching research milestones. Here are some things to think about when setting up an inventory system:
1. Where are you getting your equipment from?
a. Resources often made for academics are also accessible to nonprofits. Some catalogs (ex. The Jackson Laboratory) are license limited for nonprofits.
2. What documentation does your vendor need?
a. Vendors require different types of documentation before providing equipment to organizations. Documentation ranges from banking information, verifying nonprofit status and government documents.
3. How can you effectively manage inventory?
a. Have a centralized place for your orders (ex. Quartzy) which has context for each purchase.
b. Each team member should be able to access orders and purchase equipment. This allows everyone to see what is incoming and what is still required to complete a protocol.
With lab space and equipment underway, you can begin working on scientific research. From here on out, it’s usually all dependent on the goals and specific research areas of the organization.