The Bowery Capital team is embarking on a ten week journey to cover B2B Marketplaces. We are doing deep dives on various companies, interviewing founders and investors, and learning what it takes to build success in the B2B Marketplace arena. Below is a part of our content series focused on insights from the founders shaping the next generation of marketplace leaders. This week, Elizabeth Iorns, Co-Founder, President & CEO of Science Exchange, answers some of our questions. You can read all of the posts in our series by going here.
Elizabeth Iorns is the Co-Founder, President, and CEO of Science Exchange, the world’s leading B2B marketplace for outsourced scientific research services. Science Exchange is revolutionizing how R&D is done by acting as a marketplace that matches the research needs of commercial manufacturers with the capabilities offered by contract research organizations and academic institutions. To date, Science Exchange has raised more than $60MM in venture funding and the platform offers a multitude of scientific services fulfilled by a network of over 2,500 qualified research providers.
What inspired you to launch Science Exchange and how has your vision as a marketplace changed over time?
I am a PhD-trained cancer biologist and I worked as an assistant professor for a number of years before starting Science Exchange. It was my experience as a scientist that gave me the marketplace idea; I was trying to solve a new problem presented by how we were doing research and development. R&D was becoming increasingly networked and there was a shift towards needing to work with lots of different partners and experts. I also saw a couple of key drivers that I thought were interesting like the rise in specialization and the need for highly specialized instrumentation.
This led me to believe that science would become much more collaborative and there would be an on-demand economy to access those skills, instruments, and services. I could see that a marketplace would be a much more efficient way to collaborate than what we were doing, which was relying on word of mouth and needing to establish these relationships over and over again as individual processes. The fundamental idea and the vision for Science Exchange – improving the quality and efficiency of scientific research through a marketplace model – has not really changed. What has evolved is that we have a much better understanding of the industry side of the market, and biotech and pharmaceutical companies are now by far our predominant users alongside the CRO (contract research organization) sector.
What steps did you have to take in the early days to assure quality among the “suppliers” of research who were joining the platform? How has that had to evolve as you have grown?
One thing that we have done well at Science Exchange is the implementation of marketplace standards. Before Science Exchange, the industry did not have standards related to contracting or even catalogs of services. We actually built the standard ontology that is used to categorize services in the scientific outsourcing space and how you think about quality. We started our enterprise offering going after the larger players from the start – companies like Amgen and Gilead – and once the outsourced research standards we put forth were accepted by them, these same standards were then adopted by smaller players.
In launching Science Exchange, what side of the market did you target first (supply vs. demand)? And which side was easier to get initial traction with?
With marketplaces, there is the whole chicken and egg scenario – you really don’t have anything of value until you have supply, but supply doesn’t want to join until you have demand. The B2B space is even more challenging in some ways than the B2C space, because it can be harder to get businesses to make an organization-level decision to really invest in a marketplace – but once you are in, this relationship can be very sticky.
We started by targeting discovery research services, which is a highly fragmented space where speed is a critical market component, and we made sure we had the top 700 providers in that space on our platform. This enabled us to really drive growth from the supply side – almost enforcing consolidation through the marketplace in those categories. Science Exchange has followed a category-led growth strategy over time – we look for categories where we can work with one of our key demand-side enterprise partners and collectively go out to the market. This helps us with onboarding major providers in the space in addition to the organic funnel we have built to bring them onto the platform.
Going back to the early days, was there a key factor or event that really helped kickstart the adoption of the platform?
I remember we had a party to celebrate our first $1MM GMV month – this was when we were first starting to see meaningful dollars moving through the platform. Our marketplace is different because we offer services and not goods. Moreover, it is a complex service where you are dealing with custom quotes and collaborating on delivery. We were able to position ourselves as the catalog for an area of spend that creates a lot of administrative burden for life science companies’ most valuable resource – their scientists. With our marketplace, we can make a business case that 30% of these scientists’ time is being spent on administrative tasks that no one wants to do: checking on a contract, setting up a purchase order, seeing if certain milestones have been reached, onboarding suppliers, and so on. With Science Exchange, we can eliminate that burden and allow them to re-focus on the bigger picture.
What use cases were driving adoption when you reached that $1MM GMV milestone?
Science Exchange has never been focused on a singular use case; one early thing that got us excited was the diversity of use cases we were seeing on the platform. We also were realizing that Science Exchange’s project collaboration components were valuable enough that we could leverage those to get the big providers onboard. This was historically an area that has been conducted ‘offline’ and we provided an easy way to bring those transactions online and better manage these research relationships. It is a fragmented supplier space and Science Exchange has helped put those suppliers in one place and enacted uniform standards for quality and contracting.
On the supply side, Science Exchange features both contract research organizations and academic institutions – how did you have to tailor your approach to get both of these supply channels onto the platform?
One of the core premises of Science Exchange is that we act as a standard-setter for contracting. For example, Science Exchange will have an MSA with an Amgen or a Gilead and each CRO will have an MSA with Science Exchange. The supply and demand side know that anyone on the platform can work with each other under this standard framework, and we have made sure providers on the platform are in adherence with these terms.
How have you been able to keep the “buyers” of scientific research coming back to your marketplace, instead of having them simply use the platform a few times to identify quality provider(s), and then going directly to them for future research requests?
In the enterprise setting we target, the supply and demand are already transacting offline (e.g., Amgen working with Charles River Laboratories), and they are deploying Science Exchange specifically because they want to take this relationship online. These buyers need Science Exchange because they are managing thousands of research providers and they need to keep the underlying contracts up to date, while also collaborating across dozens of projects, reviewing change orders, managing payment processing, etc. Science Exchange helps them alleviate the administrative burden involved in an ‘offline’ setting, providing immediate value to marketplace participants.
Another factor to consider is pricing. For our Enterprise users, as they start to use Science Exchange as their core platform for all research outsourcing, they will move away from being charged a take rate and instead shift towards a subscription model. This helps lower concerns about incremental transaction fees driving companies off the platform, because they have already essentially licensed the product. In the last year, we have seen how Science Exchange’s large-scale partnerships with major biotech/pharma companies have driven both us and our partner companies towards favoring a subscription model.
We have also been building out different value-added revenue streams. For example, we have a rapid payment program where providers can opt-in to get paid much faster than they would be paid otherwise in exchange for a percentage fee – effectively a factoring program. This can be much more palatable at scale as you are offering value-added services that marketplace participants can opt-in to, rather than just forcing a rake across the industry. With take rates, I think in the B2B space if those become too high that can become untenable.
Many B2B marketplaces need to do unscalable things in their early days to generate sufficient liquidity – was that an issue for Science Exchange? If so, what were some of the ways you had to hustle in the early years to fulfill your role as a market maker?
At the start, we had to do a lot of processes manually that we knew we did not want to be doing manually in the future. But we found that if we initially did them manually, we would develop a much better understanding of their nuances for when it was time to automate them. One example of this is our actual transaction process, which initially had separate systems for our ERP system and our actual marketplace. We have since fully redesigned this and now our end-to-end process is fully automated which has driven huge efficiency for us and lowered our cost-to-serve by 90% – this improvement was informed by the learnings we gained in managing that end-to-end transaction manually.
Once Science Exchange was getting some initial traction, what growth levers did you try to pull? What worked/didn’t work? How has your growth strategy changed over time?
We have tried a lot of different approaches – we would always be sure to test and re-test our approaches to see what was continuing to work as Science Exchange has entered different phases. At the beginning, conferences worked really well for us because it gave us the opportunity to meet people and for them to get to know us – it was very important to build that trust. We also had a lot of success using a PR strategy related to our work on the Reproducibility Project which became a high-profile initiative that was being run using Science Exchange. Today, much of our growth is driven by a very standard enterprise sales model; we have account managers, we have sales directors, we have marketing, etc. In addition, we have that ecosystem strategy of partners which has become a big growth driver for us, and we think this will lead to increased adoption by positioning us as a services catalog that is plugged into all of the ecosystems where scientists exist.
There have been a number of consortium-led marketplaces and acquisitions of B2B marketplaces by PE firms. Independence can be important to a marketplace’s success and can be put at risk if you are acquired by a large industry player. How do you look at this independence question when thinking about potential exit options?
For us, I think it is a little different. I don’t think a pharma company or a CRO would necessarily be a natural acquirer for us. More natural acquirers for us might be legacy life sciences companies that are focused on some sort of physical instrument/consumable and are trying to move from offline product sales towards a digital platform sale; I think that’s where there is more of a natural affinity for Science Exchange, in the sense that these companies are looking at huge disruptions to their businesses. These legacy firms historically sold instruments or reagents to the top 50 pharma companies but they have had to completely change their sales process because they increasingly need to sell to a hugely fragmented CRO market which represents where the R&D is actually being done. This shift in the customer type means their whole sales process has changed – I think those type of companies, that are thinking, “How are we going to understand how to sell in a digital environment?” are much more natural acquirers.
What have been some of the key drivers of platform retention for Science Exchange? Have these changed as the marketplace has matured?
In terms of KPIs, internally we really track two funnels – the requestor funnel and the provider funnel. Within those funnels we are looking at number of requests, number of requests that get a quote, number of quotes that are ordered, and then looking at when those orders are completed, and when payment occurs. The shift in revenue mix away from transaction fees and more towards access fees (e.g., subscriptions) has given us better visibility into our expected revenues for the year. On the provider side, we also look closely at how many inbound applications there are, and how many of those met our quality standards and actually go live on the site. We are a very KPI driven company, but that orientation feeds into our core goal of revenue growth
If you liked “From The Front Lines: Elizabeth Iorns (Science Exchange)” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog. Look out for more content on B2B Marketplaces from us in the coming weeks.