There are many reasons not to start a business. It’s risky. It inevitably requires many long hours sweating all of the ten thousand details. Building a company from scratch requires wildly diverse skills that are not commonly possessed by a single person. And it usually requires more resources than a typical wage earner can easily muster.
A chemical entrepreneur with an eye on manufacturing faces some unique challenges that, say, a fledgling purveyor of roasted coffee beans could avoid. Most obvious it the issue of a physical plant. Not only must the chemist or engineer have a workable chemical process, but also have a highly specialized facility in which to do the processing. This requires suitably zoned land, local review boards, environmental permits, a local work force, process equipment, a minimum of raw material inventory, and buildings to contain it all.
Then the entrepreneur must provide an infrastructure of chillers, boilers, electrical distribution, liquid nitrogen for inert gas, an analytical facility, an R&D facility, quality control, as well as administration, sales, and technical staff. There must be a steady stream of cash flow to provide a steady payroll. Taxes must be estimated and paid in advance.
There are many sobering reasons not to go forward with a chemical business plan if one is risk averse or, shall we say, comfortable. Indeed, one of the common character traits of people who are analytically-minded is the tendancy to rattle off all of the reasons why something won’t work. We’ve all experienced this in meetings. A problem arises and meetings are called. After the problem is identified, much of the remaining time is spent in a recital of the additional problems that are expected. Soon, the problem mushrooms into a phantasm with imaginary components of awesome magnitude.
We’re all good at digging up reasons why something won’t work. And chemists suffer no lack of ability here.
But this is where the true entrepreneur stands out from the herd. One mark of a successful entrepreneur is the ability to ignore, or filter out, pessimistic predictions of an outcome. There is a spark within the some people that compels them to go forward. Sometimes it is a special insight. But just as likely the entrepreneur has an inner drive- some might unflatteringly call it “narcissism”- that moves them forward because they are certain of the outcome. It is not uncommon for an entrepreneur to consider him or herself the smartest person in the room.
In Part 3 we’ll look at examples of what kinds of businesses chemical entrepreneurs have started.
Lamentations on Chemistry 
“But this is where the true entrepreneur stands out from the herd. One mark of a successful entrepreneur is the ability to ignore, or filter out, pessimistic predictions of an outcome”
What a load of cr-p Gauss. It takes millions of dollars or near to it to start a serious chemical concern. You blithely wash away the near impenetrable starting conditions by saying I’m not “thinking positive enough”. So yes, if you somehow get some VC attention (which will rape the living daylights out of any future profit), thinking positive always helps.
So let’s swing that haughty judgmental pendulum back toward your own condition. Why haven’t you struck out on your own and started a company? Not thinking positive enough?????
Hello Mr. Complaint- I understand exactly what you’re saying. But remember that the chemical business is about adding value to substances. You don’t have to start a commodity products business or a pharmaceutical business. There are ways to begin modestly and grow organically.
There are many opportunities out there in the 1 g to 50 kg range of specialty chemicals that only require a kilo lab to start. You don’t have to buy all of your equipment new. You don’t have to buy all of your chemicals from Aldrich. And, you don’t have to start up in a sparkling facility in a posh business park.
If you want to start a drug company, I don’t know what to tell you other than it isn’t automatically the best business to be in. You will lose control to MD/PhD/MBA’s and marketing types. Ick.
You mentioned getting the attention of VC’s. This is a problem of course. But to get their attention you have to scale the proposed project to a level that interests them. And you have to present before many dozens of VC’s. You don’t automatically want the first VC who says yes.
Friends and former coworkers of mine begin construction of a multimillion dollar plant plant this fall only because they restructured their business model and expectations for the VC’s. In a few years they’ll have their “liquidity event” and cash out. They were persistant and in the end got most of what they wanted.
“So let’s swing that haughty judgmental pendulum back toward your own condition. Why haven’t you struck out on your own and started a company? Not thinking positive enough?????”
Friend, I do have a fledgeling company and I do have several products in the pipeline. I have also made many mistakes, upset a few people, and squandered much psychic energy on self-doubt. People will line up to tell you that your plans will fail. Go back and read your comment. I hope you find your way into a better space.
Very interesting series – I hope there are more installments to come.
Here’s my take on atoms vs. bits (I’ve changed my mind a little since it was written):
http://depth-first.com/articles/2008/04/22/thinking-of-founding-a-science-startup-look-to-whats-getting-cheaper
I’ve spoken with a few people who have started small chemical companies on a shoestring budget and who have done pretty well. Specialization seems to be the key to making it work.
I’m curious – what resources have you found most helpful?
Rich:
I would say brains – and attitude. Man, given what I see in kids these days I would say that old farts have a lot to offer in terms of attitude.
Good thread Gauss – it is a question that keeps coming up. Lots of offers for NMR’s on the cheap – can’t that be made into a “clean” analytical business?
Smarts and attitude can carry you a ways but it is a great sense/read of timing that can largely determine difference between success and failure of new ventures.
interesting
Gauss, Thanks for all the great info on chemical small business. Don’t let the trolls get you down!
Could you provide some case studies (or point me to a resource) that discuss the small 1 to 50 kg batch manufacturers? My only experience is with large suppliers. Who buys at such small scales and how do suppliers and these customers learn about each other? It seems like at that scale every product would be a custom synthesis for evaluation purposes. Such a business would be a consulting, one-off, synthesis lab…not a bad business but not one that lends itself to business and technical process optimization.
Also, elsewhere you mention “high value, labor intensive” chemical products. Could you give some examples of such products?
I’m very interested in starting a small chemical business. I’ve worked in many chemical tech start-ups, but all have been VC funded on the multi-million dollar level. I’d love to bootstrap a chemical business, but I have no idea of what types of things are made (and, more importantly, sold) on such small scales.
Some examples would help get me thinking along the right path.
Thanks!
Hi Jon,
I had to think about your questions for a while. My essays in this area have to be a bit vague since I (like any industrial scientist) am under various secrecy obligations.
Unfortunately I am unaware of formal case studies in this area. I have only my own experience in specialty and custom chemical manufacturing.
Siince your questions are those of an informed practitioner in chemistry, you deserve a well considered reply. I will write a new post on this topic.
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