How to Assess the Shelf Life of a Biotech Founder
Discover what makes an exceptional leader in the biotech sector and when it might be time to transition a founder out.
Written by: Paul Cashman
The Two Leaders a Company Needs
Recent reports from the life science industry confirm that despite the downturn in the value of biotechs, talented executives remain very much in demand. Exceptional leaders demonstrate the versatility and street-smarts to manage market changes and business flops and have a history of hitting milestones.
For most companies, the path connecting those milestones is well-trodden. They move from the “CSO as founder” stage, where a small group is working with promising science, into a recognised company with a significant workforce focused on delivering products to patients. And that change can be hugely rewarding. However, along the way, the needs of the business evolve quickly—sometimes even abruptly—and can place unexpected demands on inexperienced leaders.
For that reason, the most successful executives for early-stage biotechs are adaptable and capable of bringing energy to a company while operating with limited resources. What is invaluable at this stage are people who embrace ambiguity and can wrestle with and overcome multiple diverse challenges simultaneously.
In more mature companies, by contrast, exceptional leaders tend to be those with a steady hand. Whatever the chosen road, however, track record matters.
Listing on the public markets can be a sign of success, for instance, but it certainly isn’t the only one. Great partnership deals, M&As, asset prioritisation, and fostering a high-performance team are all routes for leadership value that shine through. We always advise our clients to prioritise those who have proven their ability to navigate complex choices at any stage of the business cycle. Exceptional leaders, in other words, consistently deliver value.
That’s important because, as biotechs develop, their needs change. Those changes necessitate the recruitment of leaders with more broadly applicable skill sets. The evolution from a preclinical start-up to a mature company running clinical trials can be problematic. The circumstances and experience needed for those later stages often don’t match the skill-set of the original team. It is also the case that relatively few people who are great at building a private company demonstrate equal excellence at managing their later-stage publicly listed counterparts. In more concrete terms, founders tend to be strong scientists, but not all have an appetite for team building or fundraising.
For all of these reasons, founders have a shelf life as CEOs. Our data tell us that, on average, founders last just over three years as top executives, with variation depending on the company’s growth rate. When it becomes apparent that leaders are out of their depth, that’s a sign that the executive structure needs to move on. The transition can be complicated, however, by the fact that the shelf life of a founder is limited by the business cycle. Leadership often needs to change at exactly the moment that operations and development are accelerating, and that can be a high-risk combination.
Planning Ahead and Navigating the Change
What is clear is that getting the right team in place prior to transition and then planning recruitment for the next milestone are crucial elements of success. Even though different points on the journey require other leadership skills, from a recruitment perspective, a few broad elements make a great biotech executive at almost every step along the way.
Firstly, executives have to maintain an appetite for risk. In a biotech company, you can be weeks away from not having any money in the bank; the whole thing could topple at any moment, and investors are looking for people who can handle that stress.
The second element is about staying focused. Great biotech leaders focus on their areas of development and resilience, and perseverance. These traits are even more important in complex bear markets when leaders need to be able to develop critical assets rather than pushing parts of the portfolio that may never make it.
Then there’s the ability to create the right work environment. Fostering a high-performance culture and a value set where everyone is on the same page are both hallmarks of great CEOs. This means recruiting for similar values and especially seeking out executives who prioritise transparency, work to prevent siloing, and drive the creation of good relationships across the sector.
Fourth, we have noted that diversity and inclusiveness are a struggle for many early-stage biotechs. In some cases, top financial backers actively hinder increasing diversity due to a preference for known quantities for executive and Board positions. But, happily, the industry is finally recognising that diversity builds value. We believe that great executives will have more gender, racial, and experiential diversity than they have in the past.
To ensure our clients can fill positions with executives who fulfill these demands, we have introduced psychometric profiling to all our shortlisting processes. Done well, this profiling helps guarantee that the right candidate choices are made, and that diversity is fostered. Our deep knowledge of the sector, together with the “success data” we have accumulated over the years, tells us that the best results depend on various perspectives and backgrounds.
In the context of leadership turnover and talent acquisition, there is another reason to invest in diversity. The sheer growth rate of the life sciences sector means we need more talent with more experience. There is not enough high-level expertise to satisfy the demand. Improving gender and racial representation is a real opportunity to bring in additional talent alongside fresh perspectives. Therefore, our firm’s advice to clients is that they must become more creative when hiring executives and not rely on the ever-decreasing supply of recycled talent.
We are always eager to discuss best practices, guidelines for hiring, and the practical aspects of building leadership teams. Reach out to Paul to learn more!
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