How to Avoid Hiring Too Early: CMOs, CBOs, and Venture Support for Interim Hires

Critical early hires like the CBO and CMO can be make-or-break moments for early-stage biotechs. Andy Cronin offers a guide for companies wrestling with tough choices about resource investment in leadership and points to the often-overlooked role of interim hires.

| October 31, 2022

Written by: Andy Cronin 

Right now, startups in biotech face a cash-starved environment where only the most adaptable and agile companies can succeed. Venture capital (VC) firms are pulling back on even the most promising new ideas, while traditional investors are moving money out of high-risk, high-reward domains like biotech and into safer economic sectors with slower but more predictable growth. There are fewer financial resources to go around. Mistakes are both costlier than ever and easier to make. And among the most critical errors a first-time founding team can make is investing too much too early in senior leadership they don’t actually need yet.

Today, we will focus on two roles where estimating the value of an early hire can be especially complicated: the Chief Medical Officer (CMO) and the Chief Business Officer (CBO). Both are essential positions for any biotech, and—despite current economic conditions—large companies are waging a bitter war for top talent, even as I write. But the timing is important. Often, it makes sense to bring in an interim executive to handle early-stage projects, building the assets that will appeal to investors before making major financial outlays.

Traditionally, interim hires have been used to meet specific needs during periods of volatility either within a company or in the wider market. They have four major advantages:

  1. Because the position is temporary, you have the freedom to hire based purely on technical capability, per-day or per-week cost, and immediate operational need. No need to worry about cultural fit, long-term direction of the firm, growth potential, breadth of experience, or the other factors that make permanent hiring such a tricky process.
  2. You avoid the risk of a high-cost early hire that might not pan out. The cost of a C-Suite hire can easily exceed $1 million in the first year, once you include salary, equity, and the search process itself. That’s money that could be used developing your product, and you don’t exactly get a refund if the person ends up being a poor fit.
  3. On the other hand, interim hires also let you avoid the opportunity costs of failing to hit a critical data inflection point or other early milestone.
  4. Finally, they can be viewed as a continuous part of the permanent hiring process, a test run for what you actually need in terms of culture, diversity of experience, and other long-term considerations.

Of course, those considerations need to be modified for each specific position you’re looking to fill. With that in mind, let’s look at our two key roles.

Chief Medical Officers

Where the Chief Science Officer (CSO) typically handles pre-clinical research, the CMO steps in when it’s time to plan clinical trials. Most CMOs are medical doctors; they meet procedural, regulatory, and ethical needs in addition to their scientific expertise. There is some value to having a CMO on board early, as they can contribute to strategic discussions around how to develop scientific assets. Their real value, however, comes much later, often years after a company is founded, when initial phases of development are complete, and the team is ready to take on clinical trials. Typically, you’ll want the CMO in place 6-12 months before you enter the clinic. Because the search process itself can take another 6 months, you should start looking for a CMO at least one year before you need clinical trials to be fully underway.

Given that timeline, most firms should initially focus on other placements. And that makes CMOs a perfect application for interim hires. As and when pressing medical and ethical questions are blocking progress, bring in a temporary CMO to navigate that hurdle, then get back to developing the product. This strategy can also resolve a conflict created by the changing role of CMOs in the industry, with the position expanding to include full Research and Development portfolios—especially with top candidates holding MD-PhDs.

Chief Business Officers

CBOs offer a helpful counter-example, because they’re on the other end of the spectrum: right now, it probably is a good idea to hire early. When the market is booming, most companies can wait to hire a CBO, relying instead on traditional funding rounds to keep things moving. Now, however, with less VC cash in the startup ecosystem, companies are looking for innovative, creative avenues to support continued development. That will often mean a complex strategic partnership between multiple stakeholders operating on different scales—exactly the kind of deal CBOs exist to facilitate.

External market conditions are especially challenging right now for companies further from clinical trials. The CBO’s role is to develop the commercial potential of the product, and the huge range of possibilities for that development can only really be exploited with the knowledge and strategic vision of an experienced executive. They’ll coach R&D teams to explore commercial applications, build relationships and develop pitches with potential M&A partners, and ensure advantageous deal structures that can support the company long-term.

More than this, any qualified CBO will have an active network of relevant professional contacts. They’ll be able to leverage that network to identify and/or create useful business development opportunities. In a competitive market, those connections can be essential to getting your foot in the right doors.

The Venture Perspective

One of the most interesting trends we’re seeing right now is that VC firms themselves are looking into CMO and CSO hires. The intention is explicitly to develop a reserve of top-shelf talent available to the fund’s clients as a pool of potential interim hires. Even in bull markets, a strong CSO is one of the earlier hires any firm needs to make, but finding strong candidates requires large investments of time and cash. Especially in the context of intense competition for experienced scientific leadership, having a ready supply of strong candidates through your VC partnerships can be a tremendous boon.

The general strategy is for a fund to bring in someone with strong expertise across multiple therapeutic areas. This gives them the broadest possible basis for strategy advice, but it also allows them to advise on pivots to other areas. Companies just beginning to explore a new idea, technology, or platform often find that it has unexpected applications—at which point they need someone who can help them move into the new space.

There’s also a second advantage to VC-hosted scientific talent. Even if the executives aren’t employed on a temporary basis by client companies, they can still offer technical advice on specific issues through the venture firm itself. In either case—answering specific questions or working as interim CSOs—these talent pools can save young companies from having to hire outside expert consultants for investment analysis and due diligence.

This is a developing trend. We’ll be watching as it develops, and we look forward to discussing the advantages with you here, in person, and at this year’s Q4 conferences. For now, reach out to me with any questions using the link you can find below.

To discuss this topic further, we invite you to contact Andy Cronin. Watch for an upcoming podcast series that further dives into this topic with various perspectives, hosted by Andy Cronin.

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