Scott Thacher, SDEE founder & CEO of Orphagen Pharmaceuticals,  shares the story of how early stage entrepreneurs needed an association where they could discuss their issues and find ways to work together. A few like-minded entrepreneurs decided to share business strategies, space, insights and connections, and San Diego Entrepreneurs Exchange (SDEE) was born!

I was SDEE’s first president and I’d like to offer a personal view of how SDEE got started and why it’s important now. The idea of SDEE caught on so quickly that my perspective is only one of many. We need to hear more!

I got my start as an entrepreneur by submitting and winning a few SBIR grants from the National Institutes of Health (NIH). Given the nature of our projects—discovery of the first ligands to potential but not yet established drug targets—this kind of high risk funding was critical.

Soon I learned that the SBIR program was in danger of radical overhaul by Congress. A coalition of VCs, and trade groups, including San Diego’s own BIOCOM, were lobbying intensively to open up SBIR funding to VC-backed (and controlled) companies. This was a clear danger to entrepreneurs working on high risk problems that did not have VC backing: future grant funding was in danger of being cut. In effect, Congress was about to transfer part of that funding stream to better financed companies with more costly and lower risk projects. This would violate what I thought was an important goal of SBIR, namely to fund companies that are owned primarily by individuals rather than by equity firms.

To be honest, when it came to my next steps, the issue of survival of my company probably trumped the larger public policy issue. I wrote to Congress and testified when the SBA came to LA. But public policy was important, too. Was Uncle Sam going to encourage high risk entrepreneurship or invest alongside VCs? Now that I had a taste of starting my own company, I thought the latter outcome would be a tragedy. And it puzzled me. Why would the so-called “powers that be” in San Diego biotech want to undercut the scrappy end of the entrepreneurial spectrum?

Slowly, I made a couple of key observations. First, I wrote to all SBIR grant holders in San Diego to suggest that we lobby Congress to provide a balanced view. I got a few warm replies, held a few meetings, and met some really fine entrepreneurs, but the idea was hard to sustain. It was clear this kind of advocacy wasn’t going to catch fire.

Second, I realized that our business model, to generate technology with a combination of SBIR grants and then partnership funding, was kind of invisible. You were supposed to get VC funding. Or license technology from academia and then get VC funding. I had heard so many presentations along these lines that I thought I could give one in my sleep.

So it hit me. Early stage entrepreneurs needed an association where they could discuss their own issues and find ways to work together. By harnessing a desire to solve common problems, not just funding issues but finding resources and sharing business strategies, space, insights and connections, a viable and effective organization might be created.

I floated this idea with friends, sent more e-mails to SBIR grantees. One Orphagen employee introduced me to former Neurocrine scientists who were starting their own companies. Another employee joined our new steering committee and found local entrepreneurs that fit our model. Very soon, we named ourselves, created a web site, and organized our first event, “How I Started My Company and Why” in early 2010. Four entrepreneurs spoke and the auditorium was packed!

A key concept for this event and for the choice of our name, San Diego Entrepreneurs Exchange, was that we wanted to hear primarily from entrepreneurs, not investors. Yes, money makes the world go around. But why not learn how entrepreneurs used and found the money rather than hear investors telling us what to do? Wouldn’t that broaden our vision of what was possible?

From here, SDEE has grown, created a 501(c)(3), spawned more events, and, most importantly from my point of view, led to friendships and connections that I might not otherwise have made and that are vital to keeping a company alive and effective. I know this is also true for many other members—active participation in SDEE has enabled them to thrive or expand in surprising ways.

And the SBIR program? It did get renewed by Congress more or less intact and with a modest expansion. And yes, in the end, SDEE members sent in many letters of advocacy. A happy ending!