Autopsy of a Start-up Disaster

When a business flatlines, it's tempting for all involved to play the blame game in an effort to stave off humiliation. And then, just as quickly, the whole ordeal is swept under the rug. But what does anyone learn? Paul Ryan meets a former biotech start-up CEO who had the courage to put her lifeless company under the knife. in the name of science.

Failure. It really is the hardest thing to do well.

Most new businesses fail inside the first three years. The figures vary, but generally the start-up attrition rate is said to be somewhere between 50 and 80 percent. With so much failure around, you'd think we'd have a healthy attitude towards it. After all, we learn more from mistakes than successes, right?

In Australia, particularly, we have a propensity to sweep failure under the rug and move on. But failure is a good thing, as long as the correct lessons are drawn from the ashes. A culture that is petrified by fear of failure rarely succeeds.

Earlier this year, Dr Roslyn Brandon, former CEO of the once promising and then extinct Australian biotech start-up, Genetraks, bucked the cultural trend and compiled a brutally honest case study analysing the reasons for the company's demise - a sweeping overview of the mistakes made and lessons learned.

Brandon, a veterinarian by training, dedicated much of the document to the specifics of Genetraks's case. As she pointed out in the introduction, part of her reason for writing it was to set the record straight ("the truth is, after all, more instructive than rumour"). Yet, from a slightly loftier vantage, Brandon's more pressing motivation was "to constructively assist other entrepreneurs (and potentially VCs) on their paths to success in the commercialisation of high technology in Australia".

The result provides a compelling insight into commercial failure in Australia and the way we, as a culture, cope with this common occurrence.

Lesson 1: have a go

When I finally get Dr Roslyn Brandon on the line, the first thing she does is thank me for taking an interest in her failure. I tell her, in earnest, that it is my pleasure.

"I get very tired of the attitude towards failure that we have here, compared with the States," she says. "You wouldn't wish failure on anyone, but when they do fail, you expect that they should learn and be a lot better off having made those mistakes. Unfortunately, in Australia, it seems, when you fail you fail, and that's the end of you. It's a fairly defeatist attitude to have, because how else do you learn? As children grow up they learn from their mistakes. I don't know why that should change when we become adults."

The Queensland-based Genetraks group commenced in November 2000. It was established to develop and commercialise gene expression technologies for monitoring health in performance horses initially, and then for human athletes. The ultimate aim was to market a point-of-care device that could be used by veterinarians track-side to monitor the status of the horse's condition, particularly its immune system.

By way of example, when Northerly was scratched from the 2002 Melbourne Cup due to questions over its fitness, Genetraks claimed that its technology could have been used to accurately determine whether the champion thoroughbred was fit to race.

Genetraks, which began in Dr Brandon's house, raised a total of almost $12m in private equity and public grants. But by August 2005 (when Brandon resigned as CEO), following a deferred listing on the ASX, souring board relations and still no product in the market, Genetraks failed to raise further necessary equity capital in the US and was placed into voluntary administration in December 2005.

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