Fundraising in Turbulent Markets: The Importance of Executive Leadership Hiring

Written by: Alex McGarel

Competition for fundraising can be cutthroat in a challenging economic climate. Investors want an experienced management team with a proven track record of delivering shareholder value and growth for the organization, especially in a downturn. Bringing in new board members and C-Suite executives with specific skills to engage investors will help your company achieve fundraising milestones. Here LifeSci Search explores why now is the best time to hire executive leadership in an increasingly competitive landscape.

“The management team is an enormous piece of the investment decision,” says Dr. Gary Phillips, Member Board of Directors at Oryn Therapeutics. “The investor wants executives that are recognized as a safe pair of hands. This is why you’ll see teams that exit one company quickly get hired to drive value for another.” 

Dr. Phillips has extensive experience with growing pharmaceutical and biotech firms, where he has served as CEO and CBO, amongst other senior leadership roles. He sits on multiple boards for several biotech companies attempting to raise capital and has witnessed firsthand the investor transformation that ensues with targeted or strategic hiring. “From my own experience, I’ve seen a biotech company that nearly went bankrupt,” he says, “get turned around into one with a $600 million market cap because of investor belief and investment in the management team.” 

If a company has an asset that is risky in the early development stages, i.e., leadership without the expertise, the investor will look for and continue to back an experienced management team. Unfortunately, finding such expert scientific leadership can be difficult, especially in a short period of time.

Consider the case of Variant Bio, which needed key management with expertise in genomics for an upcoming funding round. By partnering with a recruitment company, they hired a scientific advisory board member expert in genetics less than three months before a Series A round. In addition, the company was subsequently able to hire a vice president of computational genetics with an extensive background in disease control and a vice president of therapeutics discovery with expertise in various drug development stages. These key leadership hires helped secure Series A and B funding, banking over $110 million in raised venture capital between the two rounds.

The opportunity to access this level of funding can be more difficult for entrepreneurs not connected to the right social and professional circles. Smaller seed amounts usually start with local investors, but a company must cast a wider net for Series A and B rounds. Here the investment in management leadership with a pre-existing network can be critical in this post-pandemic landscape.

For example, RTW wanted to scale its investment mandate and offered services. The existing leadership team had been hired exclusively through networks within the organization. The company partnered with a recruitment company to support the buildout of new teams in recognition of this limited network. The long-term hiring partnership culminated in a $4.5 billion fund growth with a $5.5 billion increase. The CFO, Chief Development Officer, Chief Corporate Finance Officer, and Head of Business Development were some of the key hires.

Waiting for market improvements to make C-Suite leadership hires can result in millions of lost funding. Series B funding has already declined by 30% beginning in 2022. Series C and later rounds have dropped by 45%. One survey found that for each deal a venture capital firm closes, the firm considers an average of 100 opportunities. 

“The most obvious hire starts with changing the CFO in fundraising — from more of a CPA-controller type to an investor-facing individual,” states Dr. Phillips. Securing funding goes far beyond overseeing daily operations or future strategic planning that a more traditional CFO-type might be used to. As job cuts occur, company boards are rearranged, and prime candidates become more accessible. C-suite executives previously out of reach are now seeking other opportunities more actively.

If you’re reluctant to commit capital for key leadership additions now, consider this: an investor will only write a check when they’re confident you’ve got the right C-Suite on board. Investors are quick decision-makers who need to believe in your team at each growth stage. Hiring experienced leadership to carry your company through the many fundraising rounds before reaching your company’s IPO stage is far cheaper in the long run. Fundraising is extremely arduous and time-consuming; making a resource investment in C-Suite leadership today will set your company up for success in the future.

To discuss this topic further, we invite you to contact Alex McGarel.