For an early stage biotechnology company to be successful it needs more than a single product. Although there are many good ideas, many biotechnology opportunities are turned into companies too early, often with a single product as their sole focus. While focus is good and required, a certain percentage of time and effort needs to be spent on second generation products. In biotechnology, many great technologies fail in the transfer from research to the clinic due to toxicity issues, manufacturing scale-up, efficacy, etc. Therefore, if a company is to survive, it must have a backup strategy, and products, in the event that the lead product dies an untimely death. Most venture capitalists look for a company with a platform or at least a product that can be used for several different indications, although this can be risky if the product fails due to toxicity or other problems that affect all of the intended uses.

An example of a failure due to lack of diversification was witnessed by a small biotechnology company that was shut down after a key proof of concept study failed. The company had a small but very effective team who had learned many valuable lessons about product development and the regulatory process by working on a single product. This team had very effectively solved a number of key challenges in developing their product and worked well together. Despite efforts to remove risk early in the development, the key proof of concept study couldn.t be completed until enough product had been synthesized and a formulation developed. After the failure, it was impossible to justify the burn rate of maintaining the core team and facilities. Neither the company nor the venture capitalists were able to quickly identify an alternate technology to place into the company; identifying and licensing good technologies takes a minimum of several months. It is likely that this company would have been very successful in future product development due to the lessons they learned with the first product. Unfortunately, the staff are now scattered and are more than a little frustrated at the venture capitalists who shut them down over something that was outside of their control.