So your biotech startup’s graduated to a Series A financing and your investors believe there’s nothing but champagne and robust clinical data in your future. Some classic analogies are applicable here; you’ve found a way off the island, you’ve defeated the Empire, and so on. However, while Gilligan and Han Solo can roll off into the credits, your movie is only beginning.
The hard, less sexy transition from startup mode to an emerging company with a healthy Series A war chest is an important step in the biotech journey with relatively less guidance available (one great title here). I’ve been fortunate to collaborate with a number of companies (for example here here and here) that have emerged from startupland and have learned a few lessons on the way.
My observations can boil down to one paradoxical statement – after the startup phase, successful businesses plan to change dramatically without changing at all.
For the ”change” part of that statement – advance planning is required to transition from bootstrapped seed enterprise to a Series A financed company. I’ve focused somewhat more on the intangible elements of this transition since very little exists on these topics in particular.
- Invest in key needs well ahead of “graduation”: The CEO as chief janitor is a well-worn image in startupland that becomes problematic as a company grows. More resource means your Board expects useful but financially impossible activities from the seed phase to now become reality. In a Series A company, when balancing capital efficiency with speed of execution, take execution every time; plan early and spend what it takes to build a specialized team prepared to get the job done. For example, take the risk and hire key senior people even before the Series A is wired – I’ve never regretted it when I’ve done so, but I have regretted waiting. In my opinion if you build it . . .(cue the Field of Dreams sequence).
- Proactively manage roles and responsibilities: With new hires, overlapping skills and new expertise will mean a reshuffling of roles among the core startup team (and perhaps some bruised egos). Developing a team transition plan early and sharing this upfront can limit uncertainty and keep all cylinders firing as the transition happens. For example, a startup I have worked with gave new hires a view upfront of how their role in the organization would ideally look when the company scaled. In contrast, a startup team that shall remain nameless did not address this proactively and had an awkward moment while introducing themselves in largely overlapping roles in a pitch discussion.
- Invest in an internally motivated vs. externally motivated culture: Early successes such as proof of principle data and positive investor response can come in bunches and are hugely unifying for a startup team. However, the pace of big, unifying wins will slow down as a company grows. It pays to have invested in a culture that sustains that level of drive, execution, and team spirit even when the biotech world isn’t patting the team on the back. For example, newly minted Series A companies could do well to leverage their new Board members to help recognize team accomplishments even if they’re not transformative in the macro sense (see Dr. Farley’s tutorial on celebrating accomplishments here).
- Manage expectations with investors: The same shift of cadence is true for investors. It is crucial for startups both to raise their expectations of what will be required but also to manage them appropriately. Wiring Series A funds doesn’t automatically get a company to the next level overnight. Teams can feel whipsawed by expectations that come with larger checks ; these new expectations may yet be well ahead of the risks yet to be discharged and agreed upon timelines. The first, post-Series A Board meeting is crucial; companies that don’t spend quality time confirming alignment on the vision and key milestones for the company will buy trouble for themselves later.
On to the second part of my paradoxical statement: just because the team changes shouldn’t mean the culture changes. I’ve written about how a lack of hierarchy, a strong partnership between business and scientific leadership, and strong operations are crucial to a startup. I’d argue these elements are crucial to any biotech at any stage of growth. Perhaps the hardest part of growing out of startup phase is ensuring that those elements persist; this takes a concerted, consistent effort from the entire startup team to sustain what you’ve built so carefully. The startup movie has a much happier ending if this effort is successful.