Monday, December 19, 2011

Lamarck’s Legacy

A few years ago, I wrote an article that was published in Mass High Tech (yeah, yeah, I know. It’s a lousy picture…), the working title of which was “Cleantech Recapitulates Biotech.” Not surprisingly, that’s not the title it ended up with. I was making a reference to embryological parallelism, a disproven evolutionary hypothesis typically stated as "ontogeny recapitulates phylogeny," which suggested that embryological development (ontogeny) is a microcosm of the phylogenetic tree – different species' embryos pass through stages of “lower” organisms their evolutionary history as they develop into offspring (e.g., a human passes through the stages of chimp, ape, etc. on its way to becoming a human baby).

The MHT article highlights one of the key similarities between biotech and cleantech – the need to look to other industries for key executive management as the nascent industries are taking shape. It was originally written with another theme which was removed to shorten it for the magazine. The other point of similarity between the industries is the financing structure – the need for an early slug of venture cash, then long development timelines and hence the need for a much more substantial slug somewhere down the line, with no guarantee of success for many years. For those of us with some grey hair, it’s an old song. When the biotech industry was getting started, and every VC wanted to be in on the next Genentech, they were chasing biotech entrepreneurs with their checkbooks, with an eye on an IPO in a few years and a quick 5X ROI. As biotech has matured, and much of the low hanging fruit has been picked, similarly-motivated investors’ attention has turned to the sexier cleantech space.

Last week I attended a packed NECEC event at Choate on doing cleantech financing deals with large strategic partners. A great discussion with a number of industry luminaries like Bill Brady, Dennis Costello and Eric Emmons, and expertly moderated by Peter Rothstein. As I listened to the discussion, I was struck how this same discussion could have taken place (and probably did) 20 years ago in the context of biotech investment. The titles of the participants would have been the same; just the company names would have been different.

Well, there’s nothing like a good straight man. Just as I was about to make the observation (What? You thought I would attend a panel without asking a question?), Doug Zingale saved me the effort. Andrew Lackner, with GE Capital, made the comment that the difference is that cleantech is much more diverse. It includes everything from biofuels to smart grid to wind to solar, and all things in between. I would argue that the comparison is flawed. The correct one is between cleantech and life sciences (which I consider to include everything from biotech to diagnostics to med device to health care IT). If we compare just biotech against biofuels, for example, the comparison is effectively the same. However, there are two key differences.

First, a lot has changed in the last 20 years. In those days, pre-clinical companies went public; now you need Ph IIb data to do an A round. When those early biotech investors realized that Mother Nature would be the final arbiter of success, not market size and penetration and reimbursement, and that it would be 10 – 15 years before the answer was known, many became disillusioned and started looking for investments with shorter horizons. It didn’t help the life sciences industries that all the Internet opportunities came along. Some of that corporate memory has been carried into cleantech investing, and is why many more businesses look like project finance than company formation.

Second, at the end of the road with a biotech investment, you end up with a product that someone will pay you thousands of dollars a year to inject in their veins. At the end of the road with a cleantech investment you end up with a commodity. If you miss your numbers by $0.02 a gallon or KW, you’re screwed.

After the panel I spoke with Doug for a minute, who made the interesting observation that yes, it’s a commodity, but it’s worth trillions of dollars. We didn’t have time to finish the conversation (but we plan to), but I would counter that prior to the patent running out, Lipitor® was good for almost $11B of revenue for Pfizer. That’s one company with billions in revenue from one product. Trillions, yes, but it will be spread over hundreds of companies, since it’s clear that no single company will own the market for production and distribution of all cleantech products.

Still, the problem is that regardless of the similarities and differences between the industries, it’s mighty tough to get investors’ attention on a multi-year, hundreds of millions of dollars investment when they can fund the next Angry Birds, which will be profitable in about 15 minutes and will cost a lot less to get to market. What we need is to get some of the “venture” back into venture investing.

Wednesday, November 23, 2011

"Where’s the Beef?" You Mean: “Where’s the Fat?”

First, an apology. I know it’s been a long time, but to borrow a line from the Talking Heads: When I have nothing to say, my lips are sealed. And now, on with the show.

Yesterday I was chatting with some friends and one of them mentioned something that I jumped on making the point that it was yet another example of the negative impact of our constant quest to cut fat out of society and the economy. But, you say, “Cutting fat is a good thing, right?” Well yes, but only up to a point.

Some of you may know that I’m an amateur chef. As any chef will tell you, the flavor is in the fat. While the texture of a fillet mignon is unmatched in any other cut, there’s way more flavor in a New York strip. Why? There’s more fat in the strip steak. Nobody’s asking you to eat it, but let’s not forget what it adds to the meal. (As an aside, I’m both excited and nervous about being featured as “guest chef” next month alongside my good friend, fellow snowboard instructor and Executive Chef at The Hunt Club, Chris Fratkin!)

My home is in a neighborhood association that was started around the turn of the century (…the century, not the current one). There are several common areas, and between many of the houses, pathways linking them. When it was being built, they added a small stone house on association property where a full time caretaker kept tools to maintain the common areas. I can easily imagine the “old days” when that person was on the grounds all day, knew every neighbor and their cars, and perhaps most importantly, knew when something was wrong in the neighborhood. That person made a decent living and put his kids through school. To have someone in that role today, with OSHA, SSS, disability insurance… it would be over $100k all in, and no neighborhood could afford it (which is a whole other story, and don’t get me going…). Now, the common areas are badly overgrown and houses are being broken into. In the effort to be “capital efficient,” we keep taking fat out, but we’re losing flavor, too.

Last week I attended Acceleration 2011 at Nutter, and co-sponsored by Halloran. The event was quite well done. Well organized, good facility and excellent panelists. The first panel was “How Lean is Too Lean?” Great discussion, and Bruce Booth of Atlas made some great points. One was the distinction between lean and virtual, and the ensuing distinction in the discussion of what is too lean versus too virtual. I agree that there’s a difference, but as I’ve previously noted, there is a point where companies lose the flavor if they’re too lean or too virtualized.

In a tech company, and certainly in any life sciences company, popping into someone’s office and saying, “Did you see the article in Nature last week on chromosomal rearrangements?” is invaluable. I agree that it’s easier to conduct business remotely these days, and young people are far more accustomed to it than the old guard, but let’s not minimize the value (and flavor) of human interaction. There may indeed be a cost associated with it, but it pays dividends.

On a related note, one of the panelists relayed the story of how he filled a key C-level position in the company using LinkedIn, and was happy with the result. Don’t get me wrong, we use LinkedIn, and unlike many of my colleagues who see it as a threat, we embrace social media, but as a tool. I would argue that he got very lucky. Again, I’m a big fan of efficiency, but don’t overlook the value of having a pro do the research, vet candidates and benchmark them against a known database. I know it sounds self serving, but again, it’s about the flavor.

Wish me luck in Vermont!

Saturday, June 18, 2011

Settle Down, Beavis


My friends at Xconomy hosted another great event on Thursday – XSITE 2011. They did a really clever thing at the event – they invited several people to rant for one minute about what makes them angry about Boston’s entrepreneurship ecosystem. I was pleased to share my rant with the audience, and it got me thinking about a bunch of other things that get under my skin. With graduation season in full swing (two of my own and about a million friends and family), and a string of networking events with appealing titles, it’s been busy, personally and professionally. I’ll try to keep it civil, but I have a few things to get off my chest.

Let’s start with my son’s college graduation. I attended the baccalaureate service, replete with an address by an alumnus who was to receive an honorary PhD the following day. Now with all due respect (the speaker was an accomplished diplomat and theologian), I was irritated when he completed his speech for two unrelated reasons. First, the speech itself was preachy and condescending. Why must graduation speakers use the occasion to speak to the audience and not to the graduates? Indeed, I think it’s safe to say that all the speakers at all the graduations I’ve attended in the last few weeks (they all kinda blend together, frankly) took the same approach. One was introduced as “the most humble person I’ve ever met,” and went on for about 15 minutes about herself. I thought the point of being invited to speak at commencement was to provide some pearl(s) of wisdom to the graduates based on the speaker’s experiences and accomplishments. Second, the audience rose to give the speaker a standing ovation. I did not. I’ve reached my limit. Standing ovations recognize something truly exceptional. Two years ago, my other son’s lacrosse team did not win a single game. At the awards ceremony, the coach gave the most inspirational speech the audience had ever heard, and it was for a losing team. It brought many to tears. That deserved, and got, a standing ovation. You would think the baccalaureate speaker had delivered the first workable plan for Mideast peace. It was an ordinary speech, and I’ve finally dug in my heels.

On Monday I was invited to an event where the speaker was Joseph Ternullo, JD, MPH, Director of International Corporate Relations for Partners HealthCare and Associate Director of Partners’ Center for Connected Health. Instead of thoughtful comments on connected health (using technology to monitor and provide healthcare remotely), I was disappointed that he simply read the draft of an article he was preparing for publication. His halting speaking style made it difficult to listen to (by his own admission he “could talk a dog off a meat wagon”), and I felt as though his statement that he intentionally had no slides was an attempt to distract the audience from the fact that he was just going to read the draft. In addition, there were several content issues I took issue with. First, he said that the “market” was estimated between $17 and $35B. Market for what? The cost of the tools? The cost of implementation? Second, assuming there is some kind of market, who’s going to pay for it? Third, Connected healthcare and EMR (Electronic Medical Records) are similar in the sense that they’re limited by “politics.” Hospital systems and payors want to “own lives.” It is not in their interest to implement technology that makes it easier to transfer information about a person to a competing system or payor. Fourth, this is the Beta/VHS problem to the 8th power. Every hospital system has its own IT system, making “standardization” for EMR or connected healthcare virtually impossible. The only solution I’ve seen with a chance is one that “sits on top” of all the systems and allows them to talk to each other. Finally, Mr. Ternullo raised the point that nobody wants to carry around a health monitoring device because it singles one out. While I take the point, I also believe that it would work over time; my own children grew up wearing bicycle and ski helmets, and now wear them instinctively. Things like that do take time, but eventually, society absorbs them.

Rant over.

Tuesday was a T3 capital markets update hosted by Foley Hoag, which was quite nicely done. The most important comment was made by Ben Nye, Managing Director, Bain Capital Ventures, who, in closing, made a cogent argument for why the overall economy is in a very fragile state. I wouldn’t do it justice if I tried to summarize it, but it was a bit of an eye opener.

Interestingly, in my Breakfast Club meeting on Wednesday, I did my best McLaughlin Report imitation and asked everyone at the end: “Business up or down?” To a person, business is up. When I asked: “Double dip – yes or no?” about half the group said “no,” but the other half didn’t say “yes,” they said “flat.” I think we’re all beginning to grasp the reality that flat is the new up, but maybe it’s not such a bad thing. Slow growth is way better than a bubble, and I wish that message could sink in.

Thursday was a panel hosted by my friends at Goodwin Procter, and hosted by NECEC President, Peter Rothstein. Panelists included ├╝ber-blogger, Rob Day, Goodwin’s own, RJ Lyman, and Kim Stevenson, Manager, New Technologies, Connecticut Clean Energy Fund. Very lively debate about a wide range of financing issues. What struck me was the point that I’ve been making for some time – in terms of financing, cleantech bears a lot of similarities to biotech. Look at biofuels. Biofuels and biotech both have long commercial development timelines, require boatloads of cash (clinical trials vs. pilot plants), and both will get started by VCs and require some kind of major infusion. The panelists all provided some interesting perspectives, but at the end of the day, my belief is that cleantech investors can learn a lot from all the mistakes that have been made by their life sciences colleagues.

Oh, and my Xconomy rant? Let’s get the Venture back in Venture Capital. For 30 years I’ve been listening to entrepreneurs say they can’t get any funding and VCs say there’s no deal flow. Private equity looks like i-banking these days, VC looks like PE, and angels look like VCs. Angels are a bunch of orthodontists with checkbooks, not organizations with a receptionist and an investment committee. What the hell is the difference between a superangel and a VC?! My theory was recently corroborated when Ampersand Ventures changed their name in April to Ampersand Capital Partners, recognizing their focus on middle market PE. Back in the day, biotech companies went public on pre-clinical data; today, VCs want PhII data for an A round. What we need is someone to take some risk again.

And I still managed to get some work done over the last two weeks…

Sunday, May 29, 2011

A Billion Here, A Billion There, Pretty Soon You’re Talking Real Money

Last week I attended a Finance Committee Meeting at MassBio: “’The Billion Dollar Molecule’ Revisited.” Not surprisingly, it was a sellout, given the panel of Josh Boger, Rich Aldrich and Roger Tung. The purpose was to take a look back at where Vertex has come over the 17 years since the book first came out. Timing is everything. The panel followed closely on the heels of the approval of INCIVEK™ (telaprevir) for Hepatitis C two days prior.

It was a modified “fireside chat” format, which I normally don’t like, but worked extremely well. My good friend, John Hallinan, moderated with aplomb, and in this very informal setting, the conversation flowed effortlessly. There were some very interesting insights and stories, and, since the place was crawling with Vertex employees and alumni, some inside jokes. Before the event, as I thanked John for inviting me, he exhorted me to participate. Me? Not ask a question? Guess he doesn’t know me as well as I thought.

Well, there’s nothing like a good straight man. Rich made the point early in the discussion that of all the elements contributing to Vertex’s success, the team was the most important. (Music to my ears.) Later, when the discussion had turned to innovation, Roger proposed that part of the Vertex success story was due to the small team in the early days, and that big organizations don’t innovate well. Josh later pushed back on that statement, citing Google and Apple as two of the most innovative companies in the world, with clearly big teams. The answer, as with most things, probably lies somewhere in the middle. I am occasionally asked to join boards of directors of various organizations. While flattering, my standard response is to find out how big the board is. More than about 6 or 7 is, in my mind, a recipe for inaction and interminable meetings. On the other hand, I agree with Roger that a lot can be accomplished in a small sub-committee. My guess is that Apple and Google are not innovating by soliciting the opinions of the entirety of their respective employee bases, and that innovation is taking place in small, matrixed, cross functional teams.

When it was finally my turn, I asked the group what their advice would be to the current incarnation of Vertex at about 1,700 employees, particularly with respect to innovation. They did not offer any particular instructions, but Josh offered an observation on what I thought was a brilliant policy at Vertex. Of the many creative and innovative aspects of the culture at Vertex, Josh said that every one, every one, of the 250-person sales force were interviewed by someone in the research organization before they were hired, and once hired, were assigned a “research buddy.”

As I’ve blogged before, all roles in a technology company are technology roles. OK, there may be a few exceptions, but think about it. If you’re in HR and don’t recognize the unique nature of the research staff and work to create a culture that supports it, or if you’re a finance person who’s never heard the term “third party payor,” or a marketing person who doesn’t understand how to say nice things about the product within the regulatory limits imposed on the industry, you’re going to have a problem.

Recognizing and acting on the importance of everyone in a technology organization being on board is ingenious. It is imperative that your sales people know enough about the technology to be able to sell it to sophisticated medical professionals. They don’t need to be experts, but do need to know enough to speak intelligently. Equally importantly, they need to know when they are out of their depth, and have a resource they can count on to get them back to safe waters.

As perhaps the most sports illiterate person on the planet, I’ve never been good at sports analogies. I understand that a baseball team in Boston beat one from New York in the World Series a few years ago, and apparently it was quite the big deal. OK, it’s not quite that bad… One sports writer at the time made the observation that after practice or a game, each of the players on the Yankees got into their cars and left the stadium. At Fenway, many team members went together, in the same car, to go have a beer or otherwise spend time together. That’s what is meant by a team, and was attributed, in no small measure, to the Red Sox’ win that year. So don’t underestimate the value of putting the right team together, and, particularly for technology companies, filling the ranks with team members who understand the underpinnings of the product.

Oh, and as for the one sport that I do follow, go Bruins!

Monday, May 16, 2011

Thank God for the Government

Those of you who know me well, or if you’ve read some of the posts here, know that I’m fairly conservative politically. I’ve also tried to keep this column apolitical, although I don’t suppose that such a thing is ever really possible. So you may be surprised by the title of this entry. While I’m not a fan of big government, or of government intervention, I do support a fair balance between individual liberty and reasonable oversight. Big Brother has given us some essential protections that, while one may argue around the edges, we are all far better off having than being without.

Government agencies are not in the most enviable of positions. When things are going well, everyone wants to make cuts, because clearly, they have done their job and why should we continue paying for bloated infrastructure? When problems happen, someone gets dragged in front of Congress, and heads typically roll. Knowing that the tenure of many leadership positions in government agencies are subject to the election cycle, why would anyone in their right mind want to work there? Nonetheless, and again, taken with a grain of salt, I’m far happier that we have a USDA and an FAA and an FCC and an FDA than I would be if we didn’t. The problem, in my mind, occurs when government agencies start to wade into paternalism, where the commercial marketplace is a far better arbiter of value.

Where is all this going? Last Tuesday I was once again privileged to be included in a reception hosted by Health Advances. An excellent panel on Reg Affairs: The Regulatory Minefield: Implications for Global Go-to-Market Strategies. Moderated by Marie Schiller, panelists were:

  • Richard Francis, Vice President, Global Commercial Strategy, Biogen Idec
  • Ross A. Jaffe, MD, Managing Director, Versant Ventures
  • William Pignato, Global Head, Regulatory Affairs, Novartis Molecular Diagnostics
  • Patricia B. Shrader, Vice President, Corporate Regulatory Affairs, Medtronic

While a panel on regulatory affairs may seem like a bit of life sciences industry arcana, it was a timely, lively and valuable discussion at a time when FDA is still on the hot seat (think Vioxx), and has made significant changes to an important aspect of medical device regulation (the 510(k) approval process) and is proposing more, and is also proposing to exercise the authority it has heretofore chosen not to in the regulation of “home brew” or laboratory developed tests (LDTs). (It didn’t hurt that the discussion was facilitated by the excellent appetizers and drinks provided by our gracious hosts!) Home brews or LDTs are diagnostic tests that are developed and validated by a particular lab and performed only in that lab. LDTs are regulated by CLIA, a division of CMS, and the current regulatory hurdle for CLIA approval is to demonstrate that the test is testing the analytes you say it is – it has nothing to do with whether or not the test is of any clinical relevance. In contrast, the FDA regulates tests that are developed to be sold in kit form or for use at the point of care, and can prohibit you from marketing it if they feel it is not a clinically valid test.

I asked the group if they thought that when FDA finally regulates home brew (I’m not holding my breath – they’ve been talking about it for as long as I’ve been in the industry, and I’m not about to tell you how long that is…), they would use CLIA as the model, or the paternalistic FDA approach. In fairness, part of FDA’s mandate is to assess risk; however, there are numerous cases, for example within the AIDS and cancer communities, where affected persons are willing to take the risks associated with a new drug, particularly when it represents the only alternative to death.

There are some industry groups, notably the American Clinical Laboratory Association (ACLA) that (predictably) oppose the new level of regulation. Are you sitting down? I’m in favor of it. When I was a motorhead kid, Congress mandated pollution controls on cars, and increases in fuel efficiency. At the time, I had a 1973 Chevy Nova with a 350 engine that got 8 mpg when it was new – worse than my father’s Cadillac with a 472! Classic. Engines with the government-imposed controls did, in fact, produce cleaner emissions, but ended up using so much more fuel getting from A to B, that they created more pollution (after some serious wrench turning and installation of new components, my car averaged 21 mpg and got rubber in three gears). Car makers vehemently opposed the new regulations, saying that the mileage mandates were impossible to achieve. Where are we now? Car companies routinely compete based on mileage, and my diesel averages over 40 mpg.

I’m not surprised that the ACLA opposes the proposed changes. Will it result in delay and ultimately cost the consumer (which, as we continue to move toward a single payor health insurance system, is you and me) more money? Yes. Ultimately, though, it will also keep the “riff raff” out of the business (the mom and pop labs where the lunch is stored next to patient samples in the fridge), and will provide some uniformity by which clinicians can help determine clinical utility. I just hope that it will be done with prudence and follow the European or CLIA model which does not evaluate clinical utility – up to a point. As I said in my earlier post, the commercial marketplace does not always screen out all the products that it should, so some level of government oversight is a really good thing.

Don’t worry – there’s still quite a long way to go before I turn into a complete socialist.

Monday, April 11, 2011

Apologies to Galileo

Luke Timmerman just posted another great Xconomy article about Sage Bionetworks and Open Source Biology. Last year, I blogged about the topic as it relates to intellectual property protections in an age known for open source endeavors such as Napster, Firefox and Linux. I dubbed the generation “Gen-O” (O for “Open”) and ruminated about the implications of that mindset. Luke relays Sage president and co-founder, Steve Friend’s, vision that since the sea of genomic data is effectively impossible to comprehend in any case, and made even more intractable given the maze of intellectual property rights to be navigated, the greater access of a non-profit, open source model will allow a globally diverse pool of great thinkers to parallel process the data, which will result in development of novel therapeutics.

Hold on, because this pendulum is swinging. For a long time, I made my living negotiating rights to intellectual property, and even testified on the importance of protecting those rights. But I’m not one to tilt at windmills. I think a lot of good things really do result from open sharing of information. My concern is that in order to be effective, everyone has to play by the same rules, and that seldom happens. Remember all the rhetoric when the economic markets were about to reopen following the September 11 attacks? Everyone preened about how they were going to do the right thing and exhibit forbearance. What happened when they did finally reopen six days later? The Dow lost a record-setting 7% in one day. Worldwide markets saw billions of dollars evaporate. It’s human nature. Everyone wants everyone else to play nice in the sandbox, but only when it’s not their own dump truck that’s getting smashed by a rock.

And from my experience on both sides of the academia/industry continuum, who are the worst at this game? The academics. While they rail on about crass commercialism and how patents are the bane of their existence, they go to great lengths to obfuscate or be coy about the latest new discovery in their lab because they don’t want to be scooped on the publication by an academic competitor (Remember: to get a publication in the leading journals, the report has to be novel and significant. No top journal wants to publish the confirmatory report. Publications in leading journals lead to tenure and an increased likelihood of grant funding. A well-funded, tenured professorship is the most stable job known to man.) The vast majority of genome data are being generated and disseminated in an open fashion by academic consortia like the Human Genome and HapMap Projects. I can pretty much guarantee you that not all the most recent data are represented there.

There’s an adjunct. Government regulation, which is impossible to implement when the “regulees” are not a handful of companies, but hundreds of thousands of individuals. The age of regulation has been slowly coming to an end – the transportation and communications industries were two of the first – and the movement is working its way towards everything else, including healthcare. My observation is that the whole idea of “Open Source” goes hand in hand with deregulation and personalization – they’re all different species of the same genus. The mindset is that “we’re smart enough to figure this stuff out on our own, thank you very much big government, and we don’t need you interfering and slowing things down.” In general, I agree. I’ve often cited the example of pumping gas. It wasn’t that long ago that if you needed your tank filled, a skilled, specially trained technician had to do it for you. Now, God help you if you want someone to pump your gas. Why? Because we, as a society (especially in the US), are incredibly good at absorbing new technologies. We don’t need paternalistic government agencies telling us what we are or aren’t capable of understanding (now if we could just get the tort lawyers on board…). It’s why I generally oppose government meddling in direct-to-consumer genetic testing. I fully acknowledge that genetic tests to predict balding are likely based on shaky science and are of little value. Some level of government regulation is necessary, but 1) there will always be snake oil salesman, 2) market forces will drive out worthless products and services, and 3) many government agencies, with all due respect, don’t have the most stellar performance records.

Just as I believe that personalized medicine will drive us back to individualized drug compounding at the local pharmacy and that the concern du jour in 100 years will be global cooling, this pendulum will reach its apogee and swing back as well. There will be some thalidomide disaster that will shock everyone into realizing that (at least in the case of healthcare where peoples' lives are at stake) open source without some level of oversight is not such a great thing. Two things need to happen here. First, someone has to develop a viable business model for investing in the development of new therapeutics that rewards innovators and prevents copycats from undermining the effort before the risk-taker has recouped its investment, and second, government oversight needs to get out of the business of being a hindrance to the development of new products and respond to a new climate of groups of motivated individuals with novel approaches taking matters somewhat in their own hands to develop the next generation of new drug products.

Thursday, April 7, 2011

Readin' and Writin'

April 7, 2011

Editor
Worcester Telegram and Gazette
20 Franklin Street
PO Box 15012
Worcester, MA 01615-0012


To the Editor:

In response to today’s column by Jackie Reis “Public schools adjusting to enrollment shift” in which my daughter and I were both quoted, I would like to provide some additional comments that could not be made within the confines of the article.

There has been, and always will be in this country, an emotional debate on the relative benefits of independent versus public education. Part of the debate centers around the level of academic rigor in the two types of educational environments. While measuring “academic rigor” is an exceedingly difficult proposition, I do believe that, generally speaking, independent schools provide more academic opportunities than the public system. However, and very importantly, public schools provide many benefits that are not well represented in independent schools. For example, this past year we organized a cooperative program where two Bancroft Seniors benefited from the expertise of the faculty at the Worcester “Voke” to learn about internal combustion engines in a very hands-on fashion, while working with a Senior at WPI to understand the mechanical engineering theory underlying these practical applications. Practical skills, such as Shop and Home Economics have largely been eliminated from many independent (and public) school curricula, and this is an area where we need to reinvest.

The concern I expressed in the article was that society continues to foist upon the public school system many responsibilities that have no business in the schools. Schools are primarily about education, and all school programs should address that goal (even athletic programs should focus more on teaching young people about teamwork and leadership and less on winning). I recognize that some of our young people face difficult social issues, but the proposed solutions for them should not be administered by the schools; doing so invariably results in distractions from their educational mission, which is unfair to the vast majority of students.

Virtually all industrialized countries on the planet are examining their educational systems (which is way overdue in this country: in an increasingly worldwide community we continue to de-emphasize foreign language instruction; in an increasingly technical world, we are falling behind in math and science education; doctors haven’t compounded drugs in 50 years, yet we continue to require organic chemistry for medical students). Our county’s historic success is, in great measure, due to a culture of an educated public that fosters innovation and creativity. The public educational system (itself an innovation when first conceived) is a key pillar of that success, but needs to be more responsive to the changing demands of society.

We are a society, and successful societies depend on the varied contributions of all of its individuals. We should recognize the strengths of all the educational opportunities available to us, and equally, recognize (and celebrate!) that individual students will excel in different environments. We were very fortunate to have found that Bancroft provided the right solution for all of our children, but we are equally happy that our tax dollars support a system that provides the right one for many students.

Thank goodness there’s chocolate and vanilla ice cream.

Chris Palatucci
Worcester, MA

Thursday, March 17, 2011

Decisions, decisions

Coming to you live from a lounge chair in Jamaica. I just finished “How We Decide,” a great read by Jonah Lehrer. I have a few criticisms, (we’ll get to that later) but what I loved about it was Lehrer’s comprehensive assessment of a wide range of scholarly work straddling neuroscience and psychology and his ability to present it in a very approachable style. (Go figure. My PhD is in Neuroscience, but was done in a Psychology department.) Lehrer makes a compelling argument, based on numerous citations of scientific experiments, for why we need to reexamine our preoccupation with the view set forth by early philosophers that the “rational mind” should guide our decisions, and that our emotions just get in the way of an otherwise detached, data-based, dispassionate process. In fact, it’s quite the opposite.

Lehrer details how the data show that the “rational centers” of the brain are easily overwhelmed in making decisions based on complex datasets because they can only process a limited set of distinct datapoints at a time, whereas the “emotional centers” are massively parallel and can process lots of competing data simultaneously. Consequently, the argument is that when making complex decisions, our emotions guide better choices than our rationality, but we typically try to overrule emotional decisions with logic. I won't restate the entire argument here, but if you don't believe me, read the book.

It got me thinking about executive search. Choosing a new team member is like choosing a spouse. There are simply too many variables to process at once. If you agree with Lehrer’s assessment of the current research on decision making (and it’s kinda hard not to), these are decisions that shouldn’t be made purely rationally. Sure, all the candidates have to check off all the boxes of the core requirements for the position, but after that, it gets down to deciding who will be the best fit with the existing team, or who will bring to the team the missing elements that one seeks. These are largely “gut” decisions. Too often, though, I see clients almost embarrassed to admit that one candidate “just feels right” – they think that the decision should be made logically, rationally, dispassionately. This is where I want all my clients to read the book, and be convinced that sometimes they just need to trust their instincts. It’s also (in a completely self-serving comment) why you should always use a professional to help you work through these tough decisions and point out where you may be literally overthinking the decision.

As for my complaints about the book? One big one and one tiny one. Lehrer talks about the different “centers” or nuclei of the brain as if they are independently functioning units. It borders on a homunculus argument (“This is just what the prefrontal cortex does when faced with a decision.” p. 111). Back in Donald Stein’s lab at Clark University some 20 years ago, we were leading the charge against a reductionistic approach to brain science. The prevailing wisdom was that these anatomical structures defined discrete functional brain systems. There are, in fact, some brain areas that, for all intents and purposes, are “centers” of one or another function. (The occipital cortex is virtually exclusively devoted to vision.) However, in experimentally induced or naturally occurring damage to these “centers,” we can see the remarkable plasticity and adaptability of this infinitely complex organ. The brain is an incomprehensible network of networks, feedback and feed-forward loops, parallel processes and pathways that is in a constant state of flux. I completely understand that for a lay audience it’s much easier to attribute to these structures a certain amount of autonomy, but I wish Lehrer had made some kind of disclaimer that he was doing so only for convenience. I fear that the book will contribute to the popularity of a conceptual framework that, at this point, seems (and is) outdated.

The second is a pet peeve. Sorry for being such a grammar Nazi, but it’s “data are,” not “data is.”

Thursday, February 10, 2011

IBM, AMS and CCC


Tuesday morning I attended “Connecting Companies with Capital,” one of a series of events at IBM’s Innovation Center in Waltham designed to, well… connect companies with capital. This one was co-hosted with AMS and was focused on life sciences. The morning session consisted of networking (to which I was an hour late, thanks to the inability of New England drivers to remember from one week to the next how to drive in a little snow, and that a Statie giving out a ticket on the Pike is not cause to stop and rubberneck) and two great panels. The stage was set by IBMer Karen Parrish who provided an overview of their interest and commitment to life sciences, and provided some staggering statistics about waste and inefficiency in the “system,” which of course, represents tremendous opportunity. (They also gave a plug to their centennial celebration which you can get a flavor of from this YouTube video.)

The first panel on funding for all stages was moderated by my good friend and colleague, Dan Davis at AMS:


and the second, on how to build your company, was moderated by my other good friend and colleague (yes, I have more than one), Lauren Celano, CEO of Propel Careers:


So here are some of my takeaways.

Karen spoke about the importance of standards for a collaborative community. I immediately thought of the VHS/Beta battle, the CDMA/GSM debate and many others. I agree with her entirely – they’re necessary for collaborative interactions. But when there’s a profit motive involved, all bets are off. The biggest impediment to a true EMR system in my mind? the reluctance of hospital systems to relinquish patient data to another hospital system. What’s in it for them?

Michael spoke about the increase of Pharma deals as an exit for startup biotechs. A million years ago at Feinstein Partners, we used to sit around and speculate that Pharma would swoop in and pick up struggling biotechs every time the IPO window closed, which, in those days, was measured in months, not years. It never happened, but I agree with Michael and believe that as Pharma continues to shed their bloated and underperforming R&D, they will increasingly (finally) look to biotech for pipeline.

Bernadette talked about the increase in tranched deals. My thought was “why wouldn’t you?!” Every time we have an economic downturn, the screws get turned a little tighter, and become the new standard. We’re running a much tighter ship than we used to, and we’ll continue to get better. It’s the silver lining of a recession. Rob made a similar point about a prospect he went to visit but never did after discovering on arrival that they had valet parking. Although, having said that, if I hear one more person talk about capital efficiency, I’m going to hurl.

She also spoke about the need for a short path to a strategic deal, and speculated that Venture is returning to truly “venture” investing. I certainly hope so, because God knows we need someone to take some risk around here…

I asked the second panel about building teams after their endorsement of virtualized companies. Mike took me to task a bit, and I guess we’ll just have to disagree on this one. I’m all for unbloating companies, but in a startup particularly, I believe there’s immeasurable value in having a team that can have hallway conversations and work together in the same space and share an occasional beer after work. I agree that it’s different if the team has worked well together before, and may not need to be in the same physical location, but it can be very risky. Rob, at least, agreed, and shared his story of an investment that failed because it took a year to discover that, despite the overseas R&D team’s insistence that the prototype worked as intended, it was, in fact, trash.

Finally, we heard from Ron Newbower, CTO and Strategic Director of CIMIT after lunch. In a very approachable and entertaining style, he made some great comments about the overall state of healthcare, but I won’t elaborate except to point out my main takeaway. The reason the word “system” is in quotes at the end of the first paragraph above is that as Ron correctly points out, the healthcare system is not a system. He gave Air Traffic Control as an example of a system. It’s a great point. If left to individuals, there would be a lot more plane crashes. Maybe what we need is a similar approach in healthcare – a patient advocate role? Or primary care physician? Oh, wait. We tried that. Didn’t work because of profit and turf battles. Silly me.

Friday, January 28, 2011

Enough about me. What do you think about me?

This installment is a summary of a number of recent events, many of which, for the purposes of full disclosure, I had something to do with. Sorry for the self-serving plug, but I just had to – the events were really good! In chronological order:

Biotech Breakfast Club Annual Holiday Party

As many of you know, I run a small breakfast club of professionals in the life sciences industry. We meet every other month to discuss emerging trends or current hot topics in the industry. Every year, instead of our December breakfast meeting, we host a holiday party for leading executives in the Boston area. The event is “free” to the extent that we don’t charge anything to get in, but we do suggest a donation to a local charity. This year we raised over $1,500 for the Worcester County Food Bank. Interestingly, it was a bit lighter than last year’s raise, but part of that may have been because we were frankly not as well organized about collecting donations this year.

What was most interesting to me was that this year fell on the same night as another important seminar right down the road – one that I wish I could have attended. Just as the speaker would have been taking the stage, I noticed a swarm of people coming into our party. I asked someone about it and they admitted that a group of them left the seminar early to come to the party. I like to think it was because of the rarefied atmosphere at our soiree, but maybe it was just for the free beer…

Totally self serving, but it was really a great event.


Our “Grand” Genome

The next night (no, I wasn’t drinking when this scheduling was decided) The Bioscience Network, where I serve as a founding member of the Board of Directors, hosted a panel discussion with George Church, Phil Reilly and Kevin Davies centered on the topic of Kevin’s latest book, The $1,000 Genome. As I said to the audience when I introduced the panel, if you don’t know who these folks are, you’re probably in the wrong room (or reading the wrong blog). This one was really a winner. Kevin set the stage brilliantly (and the book is a great read, btw), and he, George and Phil followed with a very interesting and, at times, provocative, discussion. I confess that I had some difficulty getting one audience member off a particular topic, but other than that it was a lively discussion with lots of audience participation.

I took the moderator’s privilege and asked the panel if they agreed with my notion that since all the action will ultimately end up with proteomics, is whole genome sequencing the fax machine of molecular medicine (I made the analogous argument in my blog on biofuels). They didn’t necessarily disagree, but didn’t really agree either. Leave it to a bunch of PhDs to waffle on a question…


Pre- JP Morgan

Prior to The JP Morgan Healthcare Conference in San Francisco, the Super Bowl of life sciences conferences, there’s a skiing boondoggle at Squaw that I managed to get invited to this year. It was great fun to see so many young professionals out of context. For you snow fans, one of the days was the best snowboarding I’ve had in two years, which includes trips to Banff and Kitzbuhel. The background of my Blackberry is now a visual reminder of this epic morning with the clouds hanging gingerly over Lake Tahoe, perfectly groomed slopes and the sun rising above the mountaintops. Sorry to rub it in.

Not that I didn’t suspect so prior to the trip, but it was nonetheless noteworthy how a relaxed atmosphere can completely change the tenor of a meeting. Without going into too much detail, I had a particularly great interaction with a person who had been particularly prickly prior to the trip. Riding with a bunch of Type As is a trip in itself, but when you have the opportunity to laugh and relax, the business end of the networking just kinda falls off the bone.


JP Morgan

There are certainly lots of ways to measure how JP Morgan stacks up on any given year, but I tend to prefer a back-of-the-envelope method. Since 2009, which was a funeral, the mood has grown successively more upbeat. This year’s events were energized, with lines (!) to get into some of them. The Cooley event appeared to be the hottest ticket in town, but plenty of other events were buzzing, and the volume level at “the clock” was as high as it’s ever been. Despite the worst travel experience I’ve ever had trying to get back to the east coast during the blizzard of ’11 (which included a charming experience at a sketchy hotel near the Philadelphia airport), it was a fantastic trip with lots of new leads.

For a more concrete measure, my good friend and colleague, Doug MacDougall of MacDougall Biomedical Communications, reported very encouraging news. As a courtesy to their clients, they rent a couple of floors at a hotel near the St. Francis for the clients to meet with investors, bankers or other financial types. The same number of clients availed themselves of the service this year as last, but they experienced a 30% increase in the number of meetings. Perhaps the money is starting to flow after all.


Startup Downhill

Last one.


On January 26, the first annual Startup Downhill took place at Wachusett Mountain. This one was knocked out of the park if I do say so myself. At the risk of totally blowing the lid off what is an exclusive event, my fellow organizers (Doug Macdougall and Jon Eddy of Silicon Valley Bank) and I worked tirelessly to get this off the ground. (Thanks also to our other sponsors: Chris Denn at Goodwin Procter, Michael Barron at DLA Piper and the Crowleys at Wachusett.) I wish I could take full credit for the idea, but I shamelessly borrowed from others, and had the expert counsel of Doug and Jon, and we managed to pull off a great day of networking, and more importantly, deal making. As with the trip to Squaw, the relaxed atmosphere greatly facilitated interactions and constructive outcomes.


The weather cooperated well, but the coming storm scared off a few folks (they should have listened to me and not the weatherman). Still, we ended up with about 40 entrepreneurs and investors sharing ideas and making connections on the slopes at Wachusett. We’ve received nothing but positive feedback from participants, and are already planning next year’s event. If you need your life sciences company funded in New England, this was the place to be. Leading VCs, good food, a perfect venue, and some fun on the slopes. The non-skiers even had a productive and fun day.


Sorry to ramble on about how great I am. Maybe you can comment how great I am…