At the end of the day, biotech venture capital is a business and driving returns is the ultimate metric.

For twenty years, to deliver on that, I’ve embraced what I call the “first principle” of early stage biotech investing: if we can positively impact the lives of patients by discovering and developing an innovative new medicine, the system will reward that risk-taking with superlative investment returns.”  I stand by this today, even with the turmoil and uncertainty raised from the policy chaos on drug pricing.

Beyond great science and wonderful people, the third big ingredient required to deliver on this first principle is capital – which brings us to the business of biotech. This is the third post in my blog trifecta reflecting on the last two decades.

In this section, I’ll cover a range of topics around corporate development (like BD and fundraising), board governance, and investor syndication.  This only scratches the surface of these topics… thankfully, there are over 400 prior blogs on this site for those that want to dig into these and other topics!

Here are a few business-related observations.

Corporate Development

• The cliché is true: BD deals are never done until the ink is dry. I’ve seen too many deals fall apart at literally the 11^th hour.  11:59 in fact.  Press releases agreed, champagne on ice… only to have a wonderful pharma “partner of choice” change their mind. Getting that phone call is a gut punch. It’s so painful, and often hurts the morale of executive teams and damages the cohesion of a Board… the blame game ensues out of the deal wreckage and there are usually casualties. You really can’t count your chickens until they’re hatched. The other axiom is BD is that “time kills deals” which is also certainly true. Don’t let minor non-critical, non-business issues drag on too long. Lawyers get paid to redline and “add value” by fighting to win every point during contracting, but it can come at the cost of time. BD fatigue is real and partners can and do walk because of it. If there’s an impasse in the deal dialogue (either at term sheet or in contracting), don’t let it fester – escalate it quickly to the right senior business principal (often the Head of R&D or BD, or in some cases the CEO) to get it resolved. Don’t be shy about doing that (see Opener vs. Closer CEO point in the People blog).  Where needed, leverage your investors’ relationships to help – I’ve made that call to senior Pharma executives countless times to facilitate getting a deal done.
• Companies are bought not sold – but with caveats. The gravity of Big Pharma’s balance sheets is too big for most emerging biotechs to escape over the long run, which is why M&A is a fairly common exit, at some point, for those firms developing or commercializing high impact new medicines. But putting a “for sale” sign up in front of an emerging biotech is generally not a great way fetch an attractive acquisition offer. Instead, planning for the long-term and executing on the business plan is frequently what attracts M&A interest. But, obviously, you can put yourself into the position of being an acquisition target by proactively engaging Pharma around BD discussions. Bankers will frequently acknowledge that 80% of M&A deals start as partnering/licensing discussions, and then flip into M&A through the deal dialogue. If you didn’t engage in any BD discussions at all, M&A likely wouldn’t happen (especially not for earlier stage companies) – so there is a subtle balance in most deals. Sure, you aren’t selling yourself, but you are helping potential buyers appreciate the great things you have going on in your pipeline. Add into the mix a good set of strategic deal advisors and the boundary between getting bought vs getting sold blurs even more.
• Going public really isn’t for everyone. Being CEO of a company that successfully priced an IPO has for years seemed like the brass ring to grab on the biotech carousel. It makes for a great career milestone, so everyone seems to want to go public. The bell-ringing NASDAQ photo with the confetti is awesome. There are, of course, legitimate reasons to go public – the primary one being to access the “lower” cost of capital funding from the huge pools of public equity investors, including both generalists and healthcare specialists alike. It’s almost always easier and faster to raise money as a public company. Rather than a six-month endoscopic dataroom-dive in the private markets, as a public company a good data catalyst can trigger an overnight offering, which can fill up the coffers nicely. But it’s not always easier, and in tough times it can be brutal to be public. As a “going concern” you need one year of cash to be public (versus the all too common situation of running it down to weeks of cash in the private setting). It’s also expensive: banker fees, D&O insurance, legal and audit costs, quarterly reporting, etc… It’s not unusual to burn $50M over the first few years as just the cost of becoming/being a public company. Being public can be a total drag: countless IR meetings, annoying investors, analyst management, short sellers to deal with, and so many other headaches. All of the public market focus can easily distract a leadership team from strategy and execution. Not to mention having your entire organization staring at a stock price every day (and your Board… I’m guilty!). It can feel like every move is somehow a measure of their success (or failure). It’s not, obviously. But the truth is one should only go public if you really can’t fund yourself as a private company through the important data inflection points. I’ve heard plenty of regrets from CEOs who got beaten up in the public markets, who went out too early… and I’ve shared those regrets as an underwater investor on several painful occasions.  Stay private as long as you can continue to access capital.
• Raising venture capital funding is never easy. Or maybe better said: raising capital at a “good” price is never easy. Our definition of what “good” is depends on where we are in the financial cycle. When times are tough and money is tight, it’s common to hear the refrain: “flat is the new up” so we’re just happy to get the money. I’ve seen multiple time periods like this since 2005. But in more bubblicious go-go times, “good” begins to require a healthy step-up in value or the fundraise will disappoint. Getting that step-up might not be easy. I’ve seen this euphoric part of the cycle a number of times, too, in particular in the pandemic bubble. But regardless of where we are in the cycle, one of the best ways to make a private biotech fundraise “easier” is to focus on the highest probability potential investors. Simply put, these are the ones that previously bought into a deal that looks like yours and made money from it. For instance, if they’ve never done an investment in a single asset biotech, you probably won’t be their first. In contrast, if they made money off of a deal like that recently, they will be looking to do it again. In general, investors like to draw lines from limited data points, sometimes just one point. This worked, it will work again. Or the opposite. This type of pattern recognition behavior is very evident in raising capital, and focusing on this during a fundraise is helpful prioritization. I’ve seen teams spin their wheels chasing low probability folks; most of the time, it’s just not worth it. The other reality affecting the pain or ease of fundraising: it’s a relationship business and connections matter. If no one in your current syndicate or team knows anyone very well at a potential investor’s firm, it’s not a high probability conversation. Relationships build trust. Trust makes fundraising easier.
• Investment fatigue is real and can lead to loss of equipoise. Investments that become particularly long in the tooth can grind down the patience of even long-term investors, causing value-destroying decisions. Sometimes this fatigue is just a case of needing more electrolytes and stamina – convincing yourself to stay in because the thesis is still intact and it can still deliver positive returns. I think about Prestwick in 2008, where we sold it for a little more than our money back right after finally getting Xenazine approved, in part because the syndicate was tired after three CRLs from the FDA. We left a ton a value on the table. But other times the fatigue means it’s time to pack up and go home, and not throwing good money after bad. I’ve walked from several, and it’s painful after a decade of investing. Undoubtedly it’s very hard to walk away from a big loss rather than chasing it, but you have to fold up on occasion. Further complicating the decision, sunk costs shouldn’t matter in theory, until they do (in a closed end fun) based on marginal returns. Unfortunately, it’s hard to make this call and whether or not you made the right or wrong bet is only known with hindsight. To me, the key as a long term investor is to know you’re fatigued, be candid with your partnership, and try to get a fresh look at whether you should be more bullish (or even more bearish). And CEOs should try to spot a fatigued insider and offer to spend more time with their team, if salvageable.

Board governance

• Boards shouldn’t just be quarterly cheerleaders. Being supportive of the executive team and appreciative of their effort is certainly important, but Boards should know their role isn’t to just rubber stamp what the CEO wants. Good boards challenge their teams to be better – on overall strategy as well as the plan to execute against it. But Directors also need to do their work – be prepared, be helpful, engage productively outside of Board meetings, among other things (see blog here on high performing boards). Too many Directors (even some “celebrity” Directors!) are simply box-checkers who show up quarterly to pontificate; it’s particularly annoying if they simply cheer the CEO’s greatness all the time, when a more critical view might help the company. I could provide examples, but I’ll protect the innocent. As an aside, this point extends to Scientific Advisory Boards as well; SAB members should challenge and push the team, not just cheerlead. On Boards, the Chair and CEO should work together to ensure the right dynamic is at work in the boardroom – from the quality of the agenda topics and discussion framework, to the engagement level of the Directors themselves.
• Owner-Directors are critical voices in the Board. One of the major problems in many public company boards, big and small, is that long-term Owner-Directors (like VCs or public investors) are often absent. A boardroom full of “independent” Directors without any real skin in the game, clipping their quarterly paycheck and option grants, not rocking the boat since they are largely serving at the discretion of the CEO… is not a recipe for stellar stewardship of current shareholders’ interests. Board composition should certainly evolve over time, but at no point, in my opinion, should a few big Owner-Directors be absent. Early stage investors can rotate out as companies have line of sight to commercialization, but it’s critical to replace them with later stage downstream investors (e.g., Avoro, Baker, BVF, Deerfield, EcoR1, Orbimed, Perceptive etc all serve on Boards of many of their public biotech investments). I’ve worked with many of them over time and they are committed, highly engaged Board members. When you have real ownership stakes in the boardroom, they share an important and often different perspective that’s invaluable to the dialogue.
• Get independent viewpoints on Boards early in the life of a startup. By the same token, independent voices are also important – and valuable to have as early as Series A stage companies. These independents should bring different perspectives (e.g., sitting/former CEOs, mix of R&D vs BD vs Commercial experience, etc) – but they should also be good at challenging teams, and challenging their fellow Board members, including the owner-directors in the room. Independents that just “say yes” to what the CEO wants aren’t helpful, and the same goes for those that just go along with the lead investor in the room. Good “independents” bring real independent thinking and perspective to the discussion, and I’ve worked with many who are exceptional contributors.
• Compensation philosophy and execution is a core responsibility of the Board. In order to benchmark cash and long-term incentive compensation, every company uses compensation consultants. They are almost always hired by the CFO or HR head, and typically behave like that’s who they are working for. But this isn’t the case: Comp consultants work for the Board, and specifically the Compensation Committee (CC) of the Board. Having a clear understanding of this relationship is important, and they should have a direct line of communication to the chair of the CC. The never-ending escalator upwards of cash and stock compensation is in part driven by the Lake Wobegon benchmarking process: every biotech thinks they are above-average or above-median. “Exceptional performance” is actually quite common in biotech, based on my compensation discussions. I hate being Debbie Downer, but median performance is what is common – by mathematical definition. Further, what’s rarely included in the compensation metrics and discussion is the underlying median tenure/experience/value in the role. For instance, should a first-time CEO be at the median for compensation? If we’re intellectually honest, only if the “typical” CEO in the data sample is also a first-time CEO. But, alas, no one wants to be hired below the median. So everything marches upwards. Evergreen option reloads used to be 3% annually after IPOs… then 4%… and during the bubble moved to 5%. Why? Because benchmarking is largely devoid of market context and almost never goes backward. This why the overall compensation math feels like it’s forever rising even as the market cycles cools… Boards generally feel bad pushing back on these topics, and its uncomfortable, but it’s a core responsibility.
• Resource allocation is how strategy gets implemented and must be a key part of good Board governance. Having a detailed understanding of the cash burn is also a core function of the Board, and weighing tradeoffs between what, where, and how much to spend is critical. Scenario planning around future buy-ups (or no-go’s) helps provide resolution on the timeline to key decisions. Fully allocating all the company costs to the programs themselves is also important so that Boards know truly how much is being spent per program. This visibility helps evaluate the tradeoffs: are we spending too much on Program #3 vs our Lead Program? Why is G&A 30% of our spend rather than 15-20%?  In particular, understanding fixed cost infrastructure, like leases (!@#@!) or expansive internal FTE hiring plans, isn’t something to gloss over as a board.  I have recommended detailed financial transparency for Boards in the past (see an old 2012 post here); these data can help Boards understand where the money is going. When markets are hot and the cost of capital is relatively low, companies often get out over their skis… we’ve all been there. But you pay the price later because the Board didn’t push back on over-committing or over-building. As noted in the People blog, RIFs are often the painful hangover of partying too hard in the fast times. In short, though most executives might not like the sense of being “micro-managed”, I’d rather see a Board err on the side of being too deep into the weedy details of a spending plan than not deep enough.

 Investor syndication

• Big syndicates are like herding cats – a big headache. The bigger the syndicate of investors, the harder it is to manage so many elements of running a biotech. For instance, the chore of getting all inside investors on the same page for the next financing or whether or not to do a BD transaction. Big syndicates are also challenging in part because of the greater potential for misalignment: e.g., different liquidation preferences create seniority (vs pari passu), which leads to divergent views on downside protection vs swinging for the fences. Different stock price entry points mean different views on the target exit value. In addition, hiring/firing decisions around key executives, especially the CEO, are more difficult with big syndicates, especially if there are multiple investors on the Board with divergent viewpoints. In most cases, you only get to really unwieldy syndicates if things have taken far longer and cost much more than originally anticipated (e.g., the Series E round might asymptote towards maximal dysfunction). You often need a lot of co-investors to build biotechs, but too many lead or co-lead investors is where the havoc starts. Having been there before, especially in the 2007-2010 timeframe, we try to avoid that outcome. It’s also true that bad co-investor behavior – often revealing itself in these unwieldy syndicates – has populated our “blackball” lists for those VCs not to be invited into future deals.
• Which venture firm certainly matters, but which Partner matters more. VC firms have reputations and styles for how they like to invest. But in a boardroom, you have a person as a Director, not a firm. Whether you’re the CEO, or one of the lead investors, make sure you know (and like) that individual. Different partners at the same firm often have different styles and reputations. Collectively, they all, of course, represent the firm but working with different partners is a different experience. So choose wisely: when raising capital or trying to syndicate a deal, pick the one you “fit” with most and ask them to lead the deal. It’s certainly important that the individual partner or deal sponsor can “represent” their firm in the Boardroom (rather than running back to the “boss” for approval), but in my experience the firm is typically less important day-to-day versus the value of the individual partner – so long as they are with a firm with the ability to invest capital over time. I’ve often sought out specific individual partners, even as they hopscotched around different firms in the past two decades.
• There is no place for free-riders in early stage biotech venture investing. Nearly two decades ago one of my VC mentors (Kyle Lefkoff) told me that you have to be there at the end of the evening in order to hear your number called if you want to win prizes in the biotech raffle. In short, you have to have staying power to be there at the end – by investing in essentially all the future private rounds of the company. This is very different than tech investing, where “seed” funds don’t always participate or follow-on in future rounds. Biotech doesn’t have that dynamic. All existing investors are expected to do their pro rata of the insider portion of those future rounds, especially in tough markets. If a firm doesn’t want to participate (or can’t due to lack of funds), and new external demand is soft, terms like “pay to play” clauses will dramatically reduce their equity position in punishing ways (e.g., 10 to 1 conversion to common). The reason is simple: in tough markets, future investments often bail out past investments, so one can’t expect to free-ride on that new capital (and goodwill). As an investor, we make sure we have adequate reserves to support deals we have conviction in, and we expect the same from our co-investors. There are, of course, special situations that require special accommodations – but in general, a private biotech deal is like Hotel California… you can never leave. We’re all in this adventure together.

And that final note – that deals stick with you longer than you likely imagine at the time of original investment – brings me to the “full circle” moment for this blog post trifecta. Invest in strong science, good people, and be diligent about supporting companies through every stage of discovery and development.

In light of the science, people, and business complexity we all face, I’ve embraced a simple motivational phrase when working with teams: D.F.I.U.  I suspect most of the CEOs I’ve ever worked with have heard this from me over the years… mostly joking, of course. But when (not if) we do stumble and mess something up, let’s hope its from an original mistake that we can learn from!

I’ve loved the past two decades of this journey. It’s been full of great people, incredible science, and exciting business. Hopefully I’ll have better reflections in 2045 if I’m fortunate enough to celebrate by 40^th anniversary at Atlas.

Onward and upward!

Talented people make the magic happen in biotech.  This is the second post in my “Twenty Years In Early Stage Venture” trifecta. Yesterday’s was on Science. Today we’re talking about the People part of biotech.

After a couple decades and scores of investments in the early stage venture business, I’ve been privileged to work with great people and incredible teams.  I’ve also worked with some that were less than stellar. And I’ve tried to avoid working with others whose bad reputations preceded them.

Here are some observations on talent and teams:

• The power of luck! Many biotech executives (and investors!) are really one-hit-wonders who got lucky by being in the right place at the right time, rather than a result of their intrinsic greatness. Nothing wrong with this at all, but it’s good to acknowledge it. They showed up at the right time, with the right asset in a hot space, and managed to deliver an exit – wonderful good fortune. It’s a significant part of the stochastic nature of the business. Of course, “chance favors the prepared mind” and “hard work helps you make your own luck” – these axioms are very true. But given the high false positive rates – both of science and of exits – randomness plays more of a role in our outcomes than most practitioners acknowledge. There are several upshots once you appreciate the role of luck. First, embrace humility. Being humble and appreciating that the “gods of chance” blessed you is important. Second, the “celebrity worship” that happens in biotech (and startup culture in general) should be more tempered. Lots of folks can get lucky, but they shouldn’t drink their own Koolaid. Of course, once an executive has joined the rarefied air of those who have delivered several great biotech wins (or several drug R&D wins), then they’ve earned their “hero” status. Delivering long term batting averages far higher than industry’s typical rate is likely a real signal. That happens with some folks, but more typically luck only really strikes once. On multiple occasions I’ve worked with folks that were lucky in their prior deal; you’re absolutely thrilled to recruit them (yeah, we got a celebrity CEO!), only to realize they really weren’t that good. So be skeptical. Third, great and talented executives can easily be caught on the “wrong side of the dice” for prolonged periods – and that doesn’t make them bad executives. Testing a concept from start to finish can be a multi-year project, so each cycle (each throw of the dice) takes time. They generally get a chip on their shoulder after multiple bad outcomes, but they can still be far smarter and more competent than a Lucky Leprechaun executive – and very much back-able as an investor.
• Life is short… live by the NAR. The NAR is the No-Asshole-Rule. As I wrote in a 2017 blog on culture, “brilliance can’t overcome asshole behavior.” Sadly, we often face some element of the “dark triad” of psychopathy, narcissism, and Machiavellianism.  All of these traits suffer from a toxic empathy deficit of some form. Even if an CxO executive or star scientist has demonstrated an ability to make money for investors (or make successful drugs), if they violate the NAR, I’d rather not work with them. Bad behavior reveals itself in everyday practice: people who treat their staff poorly, or are totally coin-operated for themselves (rather than their teams), or are inappropriately abrasive or condescending. Do I want to hang out with this person for a beer?  If not, it’s a pass. Reference checks are relatively easy here too if you ask the simple question: would you actually work with this person again?  A candid “no” is all you need to hear, and I’ve very much appreciated hearing it on multiple occasions. Early stage venture investing is a long-term business, with only a deal or two a year, so I’m locking in to work with these teams for many years. Doing this with violators of the NAR isn’t part of my program even if they are money-makers. Life is too short indeed.
• By the time you know you need a leadership change, you’re probably late. Hiring and firing a CEO is ultimately the most important job of the Board (and by extension the lead investors). More often than not, the signals that you likely need a CEO change are visible far before you finally make the decision: a lack of traction in telling the “story” externally; a lack of accountability or detailed focus on execution; or an inability to recruit and retain a stellar team, etc… By the time a Board has fully processed those signals, some damage is likely already done. Not always, as some transitions are smooth and CEO skillsets evolve over the lifetime of companies. But usually tradeoffs are being debated in the backroom amongst the board/investors along the way: “we’re on the cusp of a financing so we can’t change the CEO”; “we’re in BD discussions and changing the CEO could jeopardize those”; “we don’t have the cash runway to make a change right now”… And the list goes on. We’ve all made those tradeoffs and choices, shaped by “transitory” status quo biases. Sometimes its ok and works out, but almost never is it great. In the fullness of time, and 20/20 hindsight, there’s usually the clarity of “we should have made the change a year earlier” or some version of that. So if the signals are there, it’s best to address them head-on and “sooner” than one might otherwise default.
• Surround yourself with data-driven truth-seekers. This relates to the several of the Science observations – being skeptical and doing great science – but is important enough to emphasize again. Investors often think they want (and glorify) the hard-nosed entrepreneur who runs through walls; but sometimes science puts immutable wall-studs in the way. If the data say we should kill a program or shut down the company, we love it when the CEO/entrepreneur actually comes and tells us that’s their recommended call. I’ve had CEOs do that in the past: “we saw an on-target tox signal and although we could ask to pull the next tranche, we think we should shut it down.” There are many variants of that – but fundamentally it’s truth-seeking and data-driven. That’s what we want in our portfolio leadership, helping prevent us from throwing good money after bad. Another version of this is the presence or absence of scientific rigor and discipline in the face of weak or confusing data; a truth-seeker might just say “we don’t know why it didn’t work as we hoped” and lay out a clear go/no-go case as a consequence, whereas the hand-waver often says “we sort of expected this” and will rattle off a bunch of vague (unsupported) scientific reasons for why. Hand-wavers are always trying to survive and spin the data via a deep narrative bias; truth-seekers are trying to learn from the data and be disciplined even if it means a “no-go” decision. Those are fundamentally different. This happens both preclinically and clinically. This is why truth-seekers, largely devoid of confirmation bias (as much as that is possible), are definitely the type of executive/entrepreneur you want in your biotech portfolio. The time spent by a truth-seeking executive is the ultimate scarce resource, more scarce than our capital, and they know it (and we appreciate it).
• The best CEOs understand and are aligned with their current shareholders. There are so many conflicts of interest for a biotech CEO and their shareholders: how much to raise and when; how big of an option pool or evergreen issuance should we have; how big should our compensation increase be this year etc… Fundamentally, all of these come down to questions of dilution. Every biotech has to take significant dilution along the long journey of raising capital, and burning it, to advance drugs through to market. On the tech side, founder-CEOs often own huge chunks of their company and so are by definition (intrinsically!) aligned with their current shareholders. In contrast, biotech CEOs typically own in the mid-single-digits, and get reloaded to that “market rate” after every private financing (or annually for public companies). This dynamic creates misalignment: CEOs in biotech know they are getting reloaded so are indifferent to the amount of dilution, both the size of the raise and the price. Great CEOs, in my experience, recognize that misalignment, openly acknowledge it and work to manage the tradeoffs by prioritizing equity capital efficiency. They understand that a CEO represents current owners, not future owners, and so are both disciplined on raising capital and exploring alternatives to equity sales (like when asset dilution through partnerships is a better alternative). Dilution in biotech is like death and taxes in life, it will definitely happen – but a good CEO helps constrain how much of it we face while building a great company.
• Most CEOs are either openers or closers, rarely both. Openers are great at “selling the sizzle” and networking their way into discussions with important investors and decision-makers in pharma; they are great are schmoozing, in a good way, and have superb connectivity in the ecosystem. They are often great and inspiring scientists. Closers have the killer business instinct to get it done; they are relentless in pushing BD or investor interest into term sheets and onto closings. At times, they may appear too aggressive. Closers don’t let issues in deal dialogues fester, as they escalate quickly to CEO-level discussions. Openers often let the play come to them (“if we build it, they will come”); closers go make the play (“always be selling”). Most CEOs are typically one or the other, and either can be successful; but complimenting them with “the other” phenotype on their executive team is often an important element of their success. On rare occasions, a CEO exhibits both profiles – one of the styles of the exothermic catalytic visionary who can transform companies. It’s not easy to figure out who is what phenotype, but years of pattern recognition certainly helps. Great companies are almost always bigger than single individuals, even catalytic ones, so building a leadership team of synergistic skillsets is a major lever for value creation.
• Build lean organizations by encouraging teams to “earn the right” to grow. When resources are aplenty, it’s easy to over-hire teams and over-build infrastructure; these come back to haunt you during the leaner times. RIFs and lease renegotiations are never fun, and are always costly. It’s often best to staff up internal talent for the trough workflow demands, using flexible support for peak demand periods. It’s also best to understand how hiring fits with the biggest risks a biotech really faces: we once had a company hire an entire sales and marketing team a few quarters before its first approval… only to get rejected by the FDA. The restructuring nearly killed the company, and the price correction killed our investment. Companies should earn the right to hire big teams: as risk is discharged and pipelines mature, the company’s fundraising accelerates with the cost of capital going down. Scaling a biotech in this thoughtful capital efficient manner is the way successful companies are most often built; it’s a rare exception where prematurely scaling a discovery story with $200M out of the gate actually generates positive returns. But being too lean can hurt progress, too. That said, there’s an axiom in venture that “indigestion has killed more startups than starvation” – so avoiding over-extension before you’re ready to grow is key.  Importantly, be vigilant about G&A bloat, too. A Chief People Officer often grows into an HR team, whether or not a company needs all that HR support in-house. We used to joke once you’ve hired an HR head in-house, you’re doomed as a startup; obviously that’s not true, but there’s a tiny kernel of truth in it. Other G&A functions are similar: the in-house GC often quietly takes on a few junior folks; finance teams quickly populate their FP&A groups, too. All of these functions have critical roles in biotech, especially in emerging public companies, but none create a real competitive advantage – real advantage comes from making real medicines. So keep the G&A to the barebones required minimum, be tight on growth, and focus any incremental spend on advancing the science and medicine. Being balanced – like a Goldilocks-level of hiring – is obviously the right approach, but sadly only appreciated in hindsight in many cases. I’ve been through far too many RIFs in tough markets to want more of them.
• Fractional leadership in a startup works until it doesn’t. Most of the seed-stage companies incubating in our offices have part-time leadership teams in place for various roles; for example, fractional CFO/accounting folks to track the spending, part-time CBO/BD support, or CMO/clinical consultants helping think about translation. We even have CEO/EIRs splitting their time across different seed-stage concepts at times. All this works for a while, especially as seed-stage risks like validation and reproducibility are being discharged. But running far with fractional leadership means no one is fully immersed in thinking about the startup 24 hrs a day and 7 days a week. This is the other side of earning the right to grow: with that in mind, as soon as “real money” comes in, perhaps with what used to be called a Series A (i.e., $20M+ financing), it’s time to get serious about full-time folks. CEOs need to be in 110%, and the same holds for CSOs and CMOs for early stage companies. It’s true, we’ve had fractional CMOs run successful Phase 1 programs for us in the past, but those are the exception rather than the rule: bring on a CMO as early as you can recruit a great one. Great singular talents hired early will often find enterprise-level leadership themes to contribute to… and an early CMO can drive the clinical execution planning that is so important for value creation (see Science blog). Once you’re ready to scale, get a full-time leadership team locked in – and preferably in person, in the office, unless you’ve truly perfected the virtual model.
• Leadership coaches/advisors are valuable for all types of performers. Running biotech startups, or teams within them, can be a very isolating and lonely job with few people to turn to.  A Board ultimately evaluates the CEO’s performance, so being vulnerable by sharing fears and challenges with them doesn’t feel great for many. Direct reports also don’t really want to sense edgy anxiety from their boss.  So this is where great leadership coaches come in: I fully recommend them for any CEO, includig both high performers and those struggling with the role, first-time CEOs and veterans.  A good coach can be a great sounding board when no one else can play that role well. This concept also extends to having a small group of CEO peers as informal advisors; they provide a shared experience in the markets and can help any CEO grow. I frequently connect my CEO’s to other CEOs that might compliment their styles. Further, this same idea applies to other C-level roles in the company (CSOs, CMOs, etc); having a group of external folks in the same role to share learnings with, and vulnerabilities, helps to improve everyone’s leadership game. Atlas organizes CxO groups across our portfolio to help facilitate these interactions. And all this coaching advice probably also holds for VCs, too – maybe I should get one.
• Build authentic multi-faceted relationships with people in your biotech community. Professional-only relationships are great and important, but can be unidimensional and somewhat transactional at times: the LinkedIn bio network isn’t really very personal or connected. Instead, I’ve derived great value and pleasure from building multi-dimensional work relationships – around family, hobbies, sports, and beyond. I called this “work-life symbiosis” in a prior blog: “find ways of integrating your passions into the workplace, and use them to create community, connectivity, and followership. We spend far too much time at work during our lives to not bring our personal passions into it in a beneficial way.”  To that end, I’ve built deeper biotech social networks around a few passions of mine: running (like Reach The Beach or RunningAtlas), fishing (Biotech Bait & Boats), hiking (the Atlas Hike in the Whites), and others. In my hometown of Wellesley, over the past decade I’ve learned there are over two hundred biopharma execs – and so I host a get together a few times a year to connect over drinks about our kids in the local schools, what’s going on in the town, and of course biotech itself. My Atlas partners also do the same around their hobbies and communities, and as a firm we do this through our annual Atlas Venture Retreat (which my partner JF Formela has spent 30+ years curating and cultivating as a premier relationship-building event). All of these things, and many more, help to build the longitudinal, trusted relationships that help scale our biotech ecosystem. Over time, I’ve become friends with many of the executives I work with. These close personal connections sometimes make it hard to make tough calls about leadership transitions, but it also can open up topics around honest trusted feedback that are otherwise difficult to tackle. As an early stage venture investor in particular, it’s our job to naturally convene the community around us and build deep connectivity – bringing the right talent to the right opportunities in our portfolio.

So many other themes to cover, so little time… at the end of the day, it’s all the talented people we get to work with that make biotech so special… and a fun industry to work in!

Tomorrow we’ll hit the final set of corporate and business observations!