Share the Risk not the Channel and Sell, Sell, Sell

by eramsay on October 23, 2011

Traditionally, companies that supply equipment to scientific researchers have used direct sales to drive adoption and growth. For start-ups this would typically require a partnership with an established entity. But recently a new strategy has emerged where the web is used both to create buzz about a product, and as a channel to convert interest to sales. A great example is Helixis, which in April 2010 was acquired by Illumina for $105M less than three years after the company was founded.

Helixis, led by CEO Alex Dickinson, emerged from the laboratories of Nobel Laureate David Baltimoreand Prof. Alex Scherer at Caltech. Financed with a $10M Series A round funded by Domain Associates, Advanced Technology Ventures and Okapi Venture Capital, Helixis sought to democratize DNA analysis by introducing a low-cost, better, faster PCR machine (known as the Pixo and after acquisition as Eco Real-Time PCR). By pricing their instrument at $13,900 compared to the $50,000 cost of the market incumbents, Helixis believed that the centralized PCR machine shared by an average of 10 researchers represented the past, with their product shaping the future – a PCR on every researcher’s bench. Helixis drove sales using an internet-based channel in the US, combined with 22 distribution partners worldwide. Less than 3 years later, and with a total investment of $17.3M, Helixis was acquired by Illumina ($70M upfront + $35M milestone-dependent).

This is a great story. The dream of every entrepreneur and investor. Indeed, this acquisition represented the first exit for Okapi Venture Partners, generating a 6 X ROI in less than 3 years. Clearly, the Eco Real-Time PCR was a disruptive technology in a rapidly growing marketplace. Further, the co-founders were exceptional, and were supported by a stellar board including Illumina CEO Jay Flatley. But what I found most interesting was the sales and marketing strategy.

Helixis adopted a novel sales and marketing strategy validated by NanoDrop, manufacturers of low-volume spectrophotometers, who were acquired by Thermo Fisher Scientific in 2007. NanoDrop used the web as a platform to create awareness and buzz around their product. This strategy drove traffic to their website where potential customers were offered a risk-free 7-day trial, with the company covering the shipping costs within North America.

The concept of try-before-you-buy is not new in the laboratory equipment market. Sales reps often arrange for potential customers to test equipment in situ, with the cost of any necessary consumables covered by the customer. By cutting out the direct sales, NanoDrop controlled the sales and marketing of its product and did not rely on a third-party who may, or may not be motivated to promote and sell their product.

The growth and expansion of social media enabled Helixis to refine NanoDrop’s strategy of web advertising, webinars, blogs and customer discussion forums. In 2009, they brought on advisors to help with the product launch, including Lynne Kielhorn a co-founder of NanoDrop. Xconomy reported in January 2010 that Helixis had more than 150 orders for its product, which was due to ship the following April, the same month that the company was acquired by Ilumina.

I would love to know the conversion rate of trials to sales for the NanoDrop and Helixis, and how it compares to the traditional model. Clearly if you have a disruptive product, web-based sales and marketing works as evidenced by the acquisition of NanoDrop and Helixis.

The advent of social media is a boon to suppliers of laboratory equipment. Scientists by definition develop new techniques and share new knowledge with their peers. Similarly, they rely on their peers to develop and validate new techniques and equipment. Using social media channels to create awareness and also to generate reviews accelerates the buzz around your product. Coupled with web-mediated decreases in the cycle-time from submission to publication of scientific articles in peer-reviewed journals, this offers start-ups in these markets new opportunities to promote their products. As interest drives traffic to the product website, sharing risk with potential customers through fixed-time trials of equipment, or alternatively offering to analyze samples using the equipment, a tactic used by Vancouver-based Boreal Genomics, is a proven mechanism to secure sales independent of traditional distributions channels that cut into revenue. Just ask the founders and investors of NanoDrop and Helixis.

Have used a web-based sales and marketing strategy? Or are you a rep involved in direct sales? Please join the discussion by leaving a comment below.

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