Tuesday, December 22, 2009

I'll take "potpourri" for $200, Alex

This one is just a bunch of observations I’ve made over the last few weeks. No priority; no order.

  • I hate to say “I told you so,” but everyone is now setting to print what I said when this all started – we’re going to have an OK year in 2010. “Flat” seems to be the order of the day. Accounting Management Solutions just conducted a survey on the 2010 outlook. I’ll be very interested to see the results. They do have a Life Sciences practice headed up by Dan Davis, but the survey was more broadly based, so we’ll have to take that into account in interpreting what it means for Life Sciences.

  • On a related note, Jack Derby in his monthly newsletter for December (worth subscribing to) talks about the changes taking shape in sales. He says:

    “My personal belief is that a couple of years from now, the most successful sales organizations will look back at 2010 as that time when they made the transition from the old, traditional, relationship sale to and demonstrated to their customers that they were no longer the approved vendors, but they had become their trusted partners.”
    Jack grew up as a sales guy, so views the world through that lens, and his focus is not exclusively Life Sciences. However, an interesting article from FiercePharma paints a similar picture from the Life Sciences perspective, suggesting that the old Pharma sales organizational model is in for massive change. Docs and regulators continue to raise barriers to Pharma reps detailing in their offices, and it turns out the formularies are the more important decision makers anyway. Since there are far fewer of them than there are docs, it doesn’t require the same field force.

  • This week’s Mass High Tech (12/16/09) was the Life Sciences Issue and included the list of the region’s largest biotech employers. (I wish I could provide a link here, but they don’t appear to put “The List” on line – only in the print edition.) Genzyme tops the group at 11K total employees generating $4.6B. In second is BiogenIdec with a total of 4,700 employees, but generating $4.1B. That’s $418K/employee for Genzyme, $872K/employee for BiogenIdec. Seems to indicate that BiogenIdec is about twice as productive as Genzyme. Maybe that’s why Adam Feuerstein is calling for Henry Termeer’s resignation at TheStreet.com.

  • I had breakfast with an unnamed VC last week and the discussion turned to the popular topic of the state of the VC industry. I have posted about that before, so won’t rehash it now, but as many who are far more literate on the topic than I have said, there’s trouble in River City (with a capital “T” and that rhymes with “C” and that stands for Capital). We were comparing notes on our respective forays into alternative occupations peri-college. We agreed: there are lots of really smart folks out there who, through a cosmic alignment of the stars, are not executives at biotechs. These are smart folks; solid business people; they understand costs and revenues and drivers just like any other executive. They just happened to choose their parents rather poorly. My experience in executive recruiting is similar. There are lots of rock stars out there who, for myriad reasons, are slogging it out at some small cubicle instead of the shiny offices of Kendall Square. Of course, one needs to be careful what one wishes for…

Thursday, November 19, 2009

One Lump or Two?

Everyone now seems to be commenting on how everyone is commenting on the state of the economy. The latest craze is asking or being asked, “When do you think we’ll get out of this for good?” or, “Do you think the recession is over?” or, “Are the recent positive signs going to last?” For a while now, I’ve been fond of responding, “It depends on whose tea leaves you choose to read.”

About a month ago (ok, sorry - I’ve been busy), New York research firm, ChubbyBrain, produced a lengthy report, summarized in an Xconomy article, indicating that venture investing was turning a corner. They noted a 16% decrease in investment in Q3 from 08 to 09, but a 14% increase from 2Q09 to 3Q09. Sounds like a recovery in the making, right? Not so fast.

The next day, Dow Jones VentureSource reported a 6% decline from Q2 to Q3. So who to believe?

I find this quite amusing, particularly on the heels of a weekly newsletter from noted consultant, Alan Weiss. Ten days prior to these conflicting reports, Alan’s weekly “Monday Morning Memo” presciently anticipates it. Not the content, but the concept. I loved what he said there. To paraphrase, he notes that there are those who will profit from downturns in the economy, so it’s in their interest to propagate bad news. Most of us would rather see the pendulum swinging in the other direction.

Think it. Feel it. See it. Act it. So much of the ‘crisis’ is in our heads. I’ve said it here before – those of us with some grey hair have been through this and know we will not only come out of it, but we’ll be stronger! Don’t listen to those 28 year old CNN reporters who think the sky is falling. Think, feel, see and act on positive information. Find opportunities and capitalize on them. I’m having a pretty good year.

Sunday, October 25, 2009

The View from Winter St.

On Wednesday night I attended another Xconomy event at Willmer Hale. As I’ve posted before, the folks at Xconomy do a great job, and the events are worth the entry fee. We were treated to a fireside chat with two leaders of the local investment community – Terry McGuire and Peter Brooke (although Terry was self deprecating in correcting Bob Buderi’s introduction of the two legends: “there’s only one legend on this stage, and it’s Peter Brooke!”). I’m normally not a big fan of the “fireside chat” format, but this was the exception. Terry did a fabulous job of keeping the discussion moving on many topics of great interest to the audience. Peter was affable, relaxed, candid and engaging. He shared some stories and insights in just the right balance.

A few key takeaways for me –

I share Peter’s dismay that so much investment money is going into consumer product projects like video games and other forms of entertainment. On one hand, it’s comforting to know that we have the privilege and wherewithal to devote time and effort to fun, but it’s more evidence of what I’m always complaining about – we focus too much on potential returns than on solving the world’s problems. I know, I know. As an investor, that’s precisely what one should be focusing on. But again, I wonder if we have our priorities in order.

I was intrigued by Peter’s comments about protectionism. He seemed very willing to share our ‘secret sauce’ with others in terms of investing, but I’ll bet he would not be in favor of diminishing the strength of our intellectual property system. The SACGHS (Secretary’s Advisory Committee on Genomics, Health and Society) recently released a draft recommendation exempting healthcare providers from infringement claims on DNA-based patents, and that no such patents be awarded in the future. Having served on the rare disease sub-committee of the predecessor organization (SACGT), I was incredulous that such a recommendation could be made, and it has in fact, stirred considerable debate. (By the way, how they could single out DNA patents as distinct from other diagnostic methodologies is beyond me, and will perhaps be the topic of another blog posting.) Strong IP protection is at the core of the innovation economy (which Terry proclaimed is alive, well, and working just fine, thank you). Thus, Peter’s comments against protectionism were intriguing.

I had a chat with Terry about the related issue of no-compete agreements. Massachusetts has been criticized for its enforcement of these agreements, in sharp contrast to California, where it is virtually impossible to enforce a no-compete. The approach in California has often been cited as one of the key success factors of Silicon Valley. Without naming names, Terry indicated that there is not universal agreement among his VC industry colleagues. This will be an interesting debate.

Terry cited a few key factors on the horizon that have the potential to have a severe impact on the VC industry, including the popular debate about capital gains vs. ordinary income treatment of management fees. Peter mentioned the need for banking reform (intermingling of commercial banking and investment banking in the same organization, for example). Well, if you’re looking for me to take sides on the treatment of management fees, forget it. On the other hand, I’ve posted here my thoughts on banking, and I agree wholeheartedly with Peter, who has forgotten more about investing than I will ever hope to know. Still, it’s nice to know that he agrees with me ;-)

The next Xconomy event is November 4 on Pharma’s Bet on Boston Innovation. I’m looking forward to it!

Wednesday, September 9, 2009

Sustainable Sustainability

Last night at the WPI Venture Forum, Jim Matheson of Flagship Ventures gave a fantastic overview of the opportunities and challenges in the “greentech” or “cleantech” space. This emerging area is of tremendous importance to the future of our planet. Although I don’t believe that climate change is quite the doomsday that many believe it is, I do agree that it human activity has had a significant impact on the global environment, and it ain’t gonna get any better on its own. Many of these new technologies provide real promise for solving some of our short-term energy problems.

I long for those carefree days before seatbelts when gas was cheap, engines were big, and nuclear power was being promoted as a safe energy source that would produce electricity in such abundance, it wouldn’t pay to meter it. But those days are gone forever, so we better start looking for solutions to the problem of increased demand on diminishing resources.

As a VC, Jim’s mission is to look for venture returns on capital invested in technological solutions to societal problems. However, the concern for me is that we are all missing the point. I grew up as a biologist, so I tend to view the world through that lens. If you put some cells in a Petri dish with a nutrient, assuming they’re not cancerous cells, they will continue to grow and multiply until the nutrient becomes scarce, and then the real competition begins. We can observe plenty of these behaviors in our own back yards. Literally. Just watch what happens in a stand of trees over time.

But isn’t this the situation we humans are in? No matter how efficient we make our transportation and minimize our energy demands, our exponentially increasing numbers are all still making demands on resources with a natural limit. Jim predicted 10 billion people in our lifetimes. Ten billion! So isn’t the real issue how we limit our own growth? I’m not sure there’s a opportunity there with VC returns, but it seems to me that we’re not going to really solve any long-term sustainability problem with a more efficient automobile or air conditioner. The real focus should be on how we manage the population explosion that has been rising like a mushroom cloud since we first figured out mechanical advantage.

As usual, I don’t have the answers; only the questions. My mother told me they’d get me in trouble…

Thursday, August 20, 2009

You Don't Get What You Pay For

Michael Luo had a very interesting and timely article in Monday's issue of The New York Times on the 'value' of career coaches.

I feel for the folks who get swindled by charlatans like those described in the article. Nobody can get you a job. Yes, of course there are better and worse ways to go about it, and many folks could use some advice. But paying thousands of dollars to have someone blindly fax your resume to a million companies is one sure pathway to failure. I can guarantee that most HR folks on the receiving end of those faxes put the fax machine over the trash can so they don't have to get up out of their seat.

My advice to job seekers who are on the market is to read Hellman's Law. Follow the instructions carefully.

Monday, August 17, 2009

The Needle in the Haystack, v. 2K9

Recently, I’ve been hearing a lot of people saying “Oh, your job must be a lot easier these days with so many people out of work,” or “Gee, business must be slow – your clients must have lines out the door of prospective candidates.”

Not really.

Why do clients call upon the services of executive recruiters? It’s only when there’s a tough position to fill; otherwise, they’d just do it themselves through their own network. We work together with the client to develop a summary of the position that we will send out to prospective candidates – the “spec.” These are typically very narrowly defined descriptions of the perfect candidate. Again – if it were easy, they wouldn’t be calling us.

These days, there are a lot of people who think that it’s a lot easier to find the right people because so many people are out of work, many through no fault of their own. That last bit is important, and it’s true. There are a LOT of folks who are ‘on the beach’ because the company couldn’t raise its next round, or the division was shut down, or their major customer folded, or, or, or… The point is, these are very skilled, capable managers who happened to be in the wrong place. It’s the first bit that’s the issue. In fact, the situation is quite the opposite.

The reality is that we’re busy, and working harder than ever to service our clients. The problem is that the needle got smaller and the haystack got a lot bigger. There are two forces at work here, coming from opposite ends of the recruiting spectrum. On one hand, clients believe that now that there are so many good folks on the market, they can be extremely picky. The specs are tighter, and the barriers to entry are higher. “If this person isn’t the right candidate,” they believe, “we’ll just move on to the next one in the pipeline.” On the other hand, there really are a lot of folks on the market. That makes sorting through all the noise is a lot more difficult. Again, there are a lot of very highly qualified resumes to sort through. Thus, the ever-important characteristic of “fit” becomes even more central.

At the risk of sounding self-serving, I would say that now, more than ever, the services of a skilled executive search professional are required when seeking to fill critical roles in an organization – and one could easily argue that they’re all critical roles. This is particularly true in emerging industries such as cleantech, where it takes a skilled eye to discern the technical and personal characteristics in candidates that will make them compatible with a new industry.

Thursday, August 6, 2009

State of NE VC Industry

Once again, Xconomy editor Bob Buderi has provided us with some useful fodder for discussion. Yesterday, he posted a poll seeking reader opinion on the overall state of venture investing (or the lack thereof) in New England (don't bother voting, the results have already been tallied).

I was happy that my answers were mostly correct (readers had an average 29% correct rate), but not overly happy about the story the results told. Bob solicited commentary from Michael Greeley of Flybridge (and chairman of the NEVCA), who provided some valuable insights. The stated objective of the poll was to address the long-running debate about the purported difference between venture investing on the west and east coasts. While the questions addressed the state of NE VC investing, they provided less insight into the east/west debate. I’d like to see the data on the same questions directed to west coast VCs. I know it’s an informal survey, but I must confess that I share the popular opinion that Boston VCs are too risk averse, not willing to bet on CEOs who have had a failure (which is a virtual requirement if you’re looking for money from a west coast VC), don’t like early stage investing, etc. My guess is that for every anecdote about this debate, you could find an equally true countervailing story. Thus, I’d really like to see the data (guess I’ll just never get away from my data-driven scientific training).

At the end of the day, though, one really needs to ask if the traditional venture model is still viable, and could it just be that Boston VCs got that a lot sooner than their west coast colleagues. Personally, I don’t get it, in the case of biotech, anyway. (So lemme get this straight – you want me to invest a boatload of money, wait 5 years, invest another boatload of money, wait 5 years, invest another boatload of money, and then wait another 5 years to find out if the science holds up?) On the other hand, that’s why it’s called “venture” investing and not “fully collateralized” investing. Not every investment is going to pan out, and not every pitch opportunity is recognized (take a look at Bessemer’s “Anti-Portfolio” page). Is it time for a different model in biotech? I really like the innovation taking place at firms like Puretech. They take the approach of trying to grow the companies internally, and were the brains behind the unique industry partnership, Enlight Biosciences. I’m just not sure that the traditional model of making early stage investments in a bunch of companies, some of which you know are going to fail, and hoping that one makes it big, is the best way to commercialize promising new technologies. The battlefield is littered with plenty of corpses of companies that simply ran out of money. Nothing wrong with the team or the technology, they just couldn’t raise another round for one of a variety of reasons. Does that make sense? Wouldn’t it be better if we could find a way to mitigate risk a bit more and have a sustainable investment paradigm? I’ve got some ideas, but that will have to wait for another blog entry…

Wednesday, May 13, 2009

GM Total "Protection"

In the throes of (as we are constantly reminded by the media) "the worst economic crisis since the Great Depression," GM, a company itself teetering on the edge of a very steep precipice, announces its “Total Protection” program, designed to get you into a car and have you keep it if you lose your job.

Let me get this straight.

I don’t think it takes any Milton Friedman to acknowledge that the way we got into this mess in the first place is by providing financing vehicles to (sometimes unsuspecting) consumers which should have never been created in the first place. Negative amortization mortgages, effectively unsecured “NINJA” loans, pre-approved credit cards (with usurious rates) – all the effect of financial engineering run amok.

Now, a dangerously unstable organization, one that recently announced it will drop an entire brand (Pontiac which, by the way, gave us classics like the GTO and the Firebird), is proposing to instill confidence in them by offering a plan to sell you something you can’t afford. And just what will happen to GM’s balance sheet when people start defaulting on their car loans under the “Total Protection” program? They should call it the “Total Destruction” program

I strive to keep this column apolitical – easy for me, one of the least political people on the planet. However, it boggles my mind to think that the solution to our economic crisis is to encourage more spending of money we don’t have. How about we reconcile our accounts first? The new administration’s plan is to rescue ourselves by spending more? Don’t get me wrong, I know this is a big problem, and that people who know a lot more than me about macroeconomics and finance, and who know how to use words like “debenture” correctly are working on it. But isn’t there a fairly simple approach? What if we stop spending what we don’t have? Let’s get the government out of the business of business. I have no issue with taxes supporting legitimate expenses that we, as a society, agree should be covered. I do, however, have a major issue with emergency or temporary programs that become institutionalized, and with government handouts that reward stupidity.

Thursday, April 30, 2009

Let me get personal

Yesterday afternoon I attended another great Xconomy Forum on the future of biotech. (These guys do a great job, both in the newsletters, which I recommend highly, and in the forums they put on. They have unparalleled access to key thought leaders and industry executives, and their editorial commentary is always insightful and spot-on.) In the fireside discussion with Wally Gilbert and George Church, which was moderated by Jim Collins, the discussion migrated quickly to a focus on personalized medicine – a buzzword that, like pharmacogenomics, has been around for a while, stimulates much discussion, but has yet to be proven out as a commercial success. The notion that we can analyze a cheek swab and determine which therapeutic and at which dose is the appropriate one for your condition has an alluring appeal, but in my mind, it remains to be seen how to commercialize the concept.

Wally pointed out one of the problems with the concept that has been circling for some time – the presumed lack of interest of big pharma. The notion here is that a system to identify which patients will respond best to a particular drug would be anathema to an organization seeking to promote its product to the widest population possible.

When I was doing business development at Athena Diagnostics, we thought, back in the 90s before this dialogue had become as common as it now is, that we were very clever in thinking that big pharma might help us further monetize our enormous patent estate by recognizing the value we had in exclusive rights to disease markers. I am fond of saying that we were kicked out of every decent drug company in America. The problem is that when you go in to explain that you have rights to patents that can identify patients with disease, the clever drug company product managers lean over the table and say: “Let me get this straight. You have a way for me to reduce my market share?” We were quickly shown the door.

For some time, I’ve been saying that this creates an opportunity for enterprising biotech entrepreneurs. Let’s consider diseases with a clear hereditary component, but complex (non-Mendelian) inheritance, like diabetes or MS. I predict that we will find sub-populations, based on haplotypes or other genetic markers that are stratified into responder/non-responder and dosage classes. I further predict that each individual class will not be of interest to big pharma as a therapeutic development program since they need comparatively enormous revenue estimates to even get their attention. However, a $100M drug is a perfectly respectable target for a small biotech startup. Fast forward, and now there are ten small biotechs, each with a $100M product for a small subset of an enormous patient population, and together they cover 75% of the pie. Now you have the attention of big pharma. A single company that could acquire all of those technologies would own the market, and would be able to detail all ten products to their call points with a single sales force.

Personalization is one of those things like pornography. The Supreme Court effectively ruled that they couldn’t define what pornography was, but they knew it when they saw it. Similarly, everyone likes the idea that we will go to the doctor and he/she will (painlessly) analyze some aspect of our biology and prescribe a “cure” with no side effects. I like the idea too, but it’s going to be a while before ten startups figure out how to stratify the diabetes market and capitalize on their effort.

Friday, April 3, 2009

The Blues Brothers and Executive Management

In a couple of weeks it will be the 31st anniversary of the debut of the Blues Brothers Band on Saturday Night Live. How do I know this? Thank God for Wikipedia. In case you don’t remember, the band was started by Dan Aykroyd and John Belushi as a comedy skit. I’m not sure if they ever anticipated that it would take on a life of its own, but it did, and the band cut an album, was the subject of two movies, and was nominated for a Grammy. While I didn’t know the anniversary date before I looked it up, I frequently use the band to illustrate a point.

Perhaps the thing I most remember about the band is how bad the lead vocals were. Aykroyd and Belushi couldn’t carry a tune if their lives depended on it. However, look at the band. Over its life, many talented musicians did stints with the band. Notably, it included jazz luminaries like Steve Cropper and Donald Dunn, both formerly of Booker T. and the MGs, Willie Hall of the Bar-Kays and the Isaac Hayes band, and remarkably, the legendary Matt "Guitar" Murphy.

My point here is: know your strengths. And weaknesses. Aykroyd and Belushi were comedic geniuses. They just couldn’t sing. But they were smart enough to know that they could never have pulled off the concept for the band with a weak backup. They surrounded themselves with the best talent available, and nobody paid much attention to the “singing.”

As a senior executive, you didn’t get to where you are by being a lousy singer. You got there because of a certain set of skills; that doesn’t mean you are great at everything. If you came up on the finance side, maybe you’re not a marketing genius. You get the picture. Be honest with yourself and do a deep dive into your strengths and weaknesses, and get the best back-up band money can buy, with a particular focus on your area(s) of weakness. See it as an opportunity to improve your own skills in that area. One of your key responsibilities is to be an effective delegator. But you need to be able to count on your lieutenants, and that means that in addition to being trustworthy, they better be able to shore up the areas where you need support.

Thursday, March 19, 2009


OK, I know it's been a loooong while. It has been an interesting few months. To make a long story short, I've been preoccupied with my latest project – the launch of Palatucci Executive Search, LLC. I was in discussions with a (surprisingly large, given the economy) number of search firms, from small boutiques to the majors. It was all very flattering, but at the end of the day, I couldn’t get past the math of handing over 30 – 50 percent of what I earn to someone else for the privilege of putting their name on my business card.

So, with the encouragement of current clients, past clients and almost clients, I decided to go it alone. The early results are good – I’m working on two searches. That’s the good news. The bad news is that if you go to my company website, you’ll see a picture of a car (no joke). I’ve got my head down in execution on the searches, so the details like the website and announcement have taken a back seat.

I may be kinda scarce around here for the time being, but I should be able to say something comparatively meaningful in the relatively near term.

Wish me luck!