Cinco de LinkedIn

Yesterday was the 10^th anniversary of the founding of LinkedIn. It’s a trending topic on Twitter, and LinkedIn founder, Reid Hoffman, about whom I’ve commented before, blogged about it as well. A while back, Luke Timmerman wrote about how the website has changed biotech and pharma, particularly through the eyes of Third Rock Partner, Mark Levin. It has been very interesting for me to watch the growth and development of the site, particularly after I started in the search biz. I was tempted to comment on Luke’s excellent piece, but now I’m glad I waited.

When noobs ask me about LinkedIn, I tell them it’s Facebook for professionals. They get that immediately, but it often still requires some explanation about why it’s a good idea to join. Many people comment on how great LinkedIn is, and how it has changed recruiting. Couldn’t agree more. It’s a fantastic site, and a great tool, which we fully embrace. However (did you think there wasn’t going to be a “but”?), I view it as just that – a tool. It’s not a replacement for executive search. I’ve been deferential about this point in the past, but I’m going to be very clear here. If you’re relying on LinkedIn to fill your senior executive roles, you’re making a big mistake. Even Mark Levin, who admits to being obsessive about LinkedIn, and about whom Luke wrote that “…LinkedIn temporarily shut down his account, until he called the company and assured them he’s a real person using the site for business.”, said “We don’t know everybody.”

I readily admit: neither do we. I personally know a lot of people in the industry, and there are thousands of others in our database, but come on – there are over a billion people on Facebook and let’s call it 200 million on LinkedIn. NOBODY can claim to even come close to having that kind of database. And that’s why it’s a great tool for us. It helps us identify potential candidates. But remember: 1) the only profiles on LinkedIn are those that are put on there by the member him/herself, 2) no networking site will have the kind of detailed knowledge that a recruiting firm will have on many individuals – full resumes, interview notes, references from prior searches, etc., and 3) The most senior executives don’t typically understand the value of maintaining (and it does require maintenance) a LinkedIn profile, or don’t have the time. These are the folks to whom I have to explain what “Facebook for professionals” means. They typically either don't have profiles, or if they do, they aren't up to date.

Mark admits to spending half an hour a day trolling for connections on LinkedIn because “Our biggest challenge is to find great people.” I would argue that it’s not a good use of his time. A random walk through 200 million people, even with LinkedIn’s suggested connections, is a bit less focused than our approach. Additionally, we utilize additional resources to identify “passive” candidates – folks who intentionally maintain a low profile, and don’t realize that the opportunity I want to present to them is their next great move. I guess if your outlook is “well, I’ll look in this one pool of active candidates and be happy with whatever I find,” then LinkedIn is your answer. And don’t bother calling me, because you won’t appreciate the value of our high touch, exhaustive approach. If, however, you want to scour the market and find the best fit for the position, retained executive search is your answer. We certainly won’t be the right solution for everyone, but I’ll be the first to tell you if we’re not.

One last point. I’m a founding board member of The Bioscience Network. A service provider myself, I championed the idea of limiting the number of service providers allowed to attend our events, and to charge them more than industry professionals. I get it. Nobody wants to go to an event and be overrun with service providers trying to shove business cards in your hand. Now look at the stats from the LinkedIn Q1 13 earnings report. More than half (57%) of the company’s revenue comes from people like me. That may not translate directly to membership, but the site’s membership clearly includes tons of executive recruiters, talent acquisition folks, HR staff, contingency recruiters, etc., so don’t get fooled by total membership numbers. I admit this may be a minor correction to the total. The real issue is network. And the network of a decent recruiting house delivers way more bang for the buck. We have access to LinkedIn, too, so you’re getting the value of that pool of candidates, plus ours, many of whom you simply won’t find on your own.

Sorry for this infomercial, but I’m kinda tired of hearing people say that they can do what we do using LinkedIn. It’s a great site and a great tool, but you just can’t use it as a substitute for a focused search. Would you use LegalZoom to incorporate your life sciences startup?

Beaten to the Punch

Last week, Luke Timmerman’s interview with Noubar Afeyan was published, and I had some immediate comments, but was tied up at BIO (as was Luke). How discourteous of Luke to write a story when everyone was at the meeting! I thought to myself: I’ll write a blog about that when I get home. Well, Katrine Bosley beat me to the punch, with many of the same thoughts I had. If you didn’t read the original article, I’ll recap.

Noubar made the argument that biotech could be much more orderly if people would just go to pharma, see what they needed, and develop those products. He made the analogy to the auto industry, which has an orderly supply chain. Using the example of brake pads, he points out that no supplier would spend years developing a novel brake pad, and proposing to sell it to auto manufacturers at thousands of dollars per year to balance the losses incurred in the development of the new pad. That’s essentially what biotech (and pharma, for that matter) do. The production cost for a $10K/yr therapeutic is orders of magnitude less than that, but the end user price includes the cost of development, since most of the products in the pipelines of biotechs and pharmacos fail.

In her article, Katrine argues that i) there is a wide spectrum of what constitutes a biotech company, so Noubar’s argument may not apply, and ii) it encourages “teaching to the test.” That is, developing products that are of interest to pharma solely because they fit a box that the pharma is trying to fill.

Katrine disclaims that she’s known Noubar for a long time, and that he was an investor in her prior companies. I’m in the same boat, having had Noubar as a client in his PerSeptive days, and I concur with her that he sees a longer horizon than most. In this case however, I couldn’t agree with Katrine more. I’ll cite two examples to support her argument.

In grad school, we were quaintly known as “the rat lab,” being the only animal facility in the department. When the lab manager left, a new person was hired who promised to bring some order into the lab. With a military background, he set schedules, developed reagent supply/replenishment programs, etc. The lab was certainly much more organized, but in addition to the operational structure he provided, he tried to set timelines for completion of experiments without providing for the inevitable detours or unexpected results. He lasted a few months. What he failed to realize was that you can’t mandate innovation by putting it on a Gantt chart.

Years later at Athena Diagnostics, I established monthly update meetings for all the senior managers. I had gotten wind that people thought I wasn’t doing anything in Business Development. Importantly, I reviewed all the projects – most importantly, the ones that I had passed on. They failed to realize that running BD means saying “no” a lot. There were tons of things I’d look at that just didn’t make sense. They would say “Why don’t you bring us a decent diagnostic test for Alzheimer’s?” My response? Well, since we don’t have our own discovery effort at the company, and since nobody has developed a decent test (there still isn’t one 15 years later), what would you like me to do? Sometimes, you can’t mandate BD either.

If a car manufacturer goes to a supplier and says “we need a brake pad that will fit into this caliper, and that can sustain temperatures of 800°,” the suppliers toddle off and try to develop one. Yes, sometimes that requires innovation, but there’s almost always an engineering solution or workaround to mechanical problems. Mother Nature isn’t nearly as accommodating.

Supremely Irritating

This blog has been pretty dull lately, but as I’ve said before, I try to keep my mouth shut if I have nothing to say. This one has me pretty riled up.

The Supreme Court heard arguments yesterday on the patentability of genes.  There is a sense of jubilation coming from the academic camp, as evidenced by Eric Lander’s and Bob Cook-Deegan’s high five following the hearing. I’m not convinced that their jubilation is justified. If you’re having trouble sleeping, you can read the whole transcript, but from my reading, the Court didn’t sound like it’s ready to clamp down on gene patents.

What got me really riled up was, in the aftermath of the events at the Boston Marathon, on the advice of a tweet, I turned to PBS to watch what was promised to be unvarnished coverage. I happened on a piece about the SCOTUS hearings on gene patents. On the “academic” side of the argument was Ellen Matloff, a genetic counselor at Yale. She, characteristically of many academics, completely confused the issue, bringing arguments about the reduced cost of whole genome sequencing, insurance companies denying reimbursement, etc. None of which have anything to do with what’s at issue.

She claims that “Myriad invented nothing.” Really? Through linkage analysis, the BRCA1 gene was localized to one arm of one chromosome by the team led by Mary-Claire King, announced at an ASHG meeting in 1990. Four years later, the gene’s sequence was identified by, in part, Myriad scientists. Turning it into a commercially reliable clinical diagnostic test was done by one company: Myriad.

She also claims that Yale had been conducting diagnostic testing, which was subsequently shut down by Myriad. Correct. That’s how patents work. But it’s independent of whether or not the gene itself can be patented. What she’s really complaining about is that she can’t perform the testing in her lab (read: can’t make money from offering the test). That’s what gets under the skin of most academics. I’m not aware that Myriad, or any other patent holder, prevents others from doing true, basic, academic research. It’s not in their interest to do so. Think of it this way: a company discovers a bunch of mutations responsible for a disease. An unrelated researcher identifies a new mutation. Would they propose not licensing that mutation to the dominant provider and offering testing for that single mutation? How does that benefit anyone – the company, the researcher, or most importantly, patients?

I’m not a lawyer, and certainly not qualified to argue before the Supreme Court, but it all seems pretty simple to me. If you identify a method to diagnose a patient with a disease, assuming that it’s scientifically and clinically justified, it is novel, non-obvious, and reduced to practice, and therefore, should be patentable. Why does it matter if the method uses DNA as the substrate as opposed to, say, serum?

Nobody is patenting a person’s DNA. Never have; never will. Nobody with any knowledge of the matter believes that such a thing would be patentable. However, utilizing the chemical nature of something found in nature to identify a person with a disease meets the criteria of patent eligibility. What’s so difficult about that?

Don’t Play That Song Again

I hesitated posting this because it sounds very self-serving, and because I’ve made the point before. And before that. But I think it’s worth noting, and the validation of the point is noteworthy.

I recently attended the Xconomy Forum: New England’s Emerging Biotech Stars. It was an interesting juxtaposition of panels and company presentations. The point that stood out for me, that was made by both Joe Yanchik, CEO of Aileron and by George Scangos, CEO of Biogen Idec, was how important “team” is for biotech companies. The point was made in two very different ways, reflecting the vast differences in the two companies.

In his presentation, Yanchik repeatedly pointed out how impressed he was with his team, and how much of an impact a small group of people has been able to make. It’s a cool technology, and they’ve attracted a great syndicate of investors. If you look at the company’s history, they operated with a very small team until they had validated some key scientific findings before hiring a bunch of people. Great. I totally support that plan. There’s no need to hire me to find a bunch of senior executives when they’re not really needed. This point was echoed by Mike Webb in another forum a couple of weeks later. Mike reminded the group about the days when a young entrepreneur would found a company, walk across Kendall Square, pick up a big check from a VC, hire a complete staff of VPs, and start burning cash. His analogy was to a fire station. With all due respect to firefighters, we’re all very happy they’re there when there is a fire, but most of their time is spent not fighting fires. The senior executives in startup biotech companies back in the day spent a lot of time sitting in their offices reading Nature Biotech.

But once a company reaches critical technology mass, it’s important to have the right group of seasoned executives to carry the technology to market. That’s when you call me. And it’s important to do so, because that’s when there’s tremendous value in being able to walk down the hall to someone’s office and talk about the article you just read (last night at home) in Nature Biotech.

Scangos made the same point in a different way. One of the first things he did after coming on board in 2010 was to initiate plans to bring the entire organization back under one roof. Well, ok, not precisely one roof, but at least all within walking distance of each other. Interlocking his fingers, he underscored the importance of having R&D, Sales, Marketing, Finance, etc. all working together and able to interact. It’s what humans do. The move back from Weston is expected to be complete by the end of next year, and will cost millions. He’s a smart guy, and recognizes that it’s worth it. (Do you think he’d get BoD approval if it weren’t?)

Just to add icing to the cake, at a WPI Venture Forum event last year, Kevin Bitterman was asked to rate the relative importance of technology and management team when Polaris evaluates an investment opportunity. His answer? “Management team, management team, management team, management team and technology.”

The point was furthered by Mark Levin of Third Rock. In a free-wheeling interview by Tuan Ha-Ngoc, CEO of Aveo, Levin commented that the fastest way to be shown the door at Third Rock is to come in with a slide deck articulating a plan for a quick flip. They’re interested in building companies. Maybe not the next Amgen or Genzyme, but a company. And companies consist of teams. And teams get things done, not CROs that are 8 time zones away.

Well, as I said, it may sound self serving, coming from a recruiter’s perspective, but I think it’s an important point. And it’s nice to know that I’m not the only one who feels that the expense incurred in building top executive teams is worth it. There are some people putting real dough against it. I just can’t countenance plans to build “companies” with 3 FTEs and a host of outsourced support.

Getting From A to B

I had coffee with a biotech CEO the other day, and as is often the case, the conversation turned to building top tier executive management teams. We spoke about a need in the company’s Board of Directors, and how some of the other BoD members were seeking a very high profile candidate. They wanted an “A team” director. Through their own personal networks, they had identified three very high profile people, all of whom I knew. We both danced around it for a while, but it ultimately came out – none of them would have been good for the company’s board.

What I knew, and what the CEO suspected, was that all three had been very fortunate in their careers. Not that they lacked any talent, but in large measure, they happened to be in the right place at the right time. They had had some early successes in their respective careers, but had all been drinking their own Kool-Aid for too long. One in particular, perhaps the most high-profile of the group, was on the board of a company that I knew and had personal knowledge of his participation there – or should I say lack of participation. He was known to come to board meetings never having read the board book, completely unprepared, believing that the mere aura of his presence in the room justified his compensation.

I said to the CEO: “That’s why I always cringe a little inside when people tell me they want an A team candidate.” It depends on what you mean by the A team. If you’re looking for “marquee value,” then yes, perhaps the heavyweight who doesn’t do anything is appropriate. However, I’d argue that what you really want is someone from the B team. Now before you all jump on that, let me explain.

If any of you have college-aged kids, you know how impossible it is to get even the brightest, most qualified students into the “top” schools. The competition is unfathomable, and is orders of magnitude more so than when I was applying. My advice to college bound kids? There is a small club of the very top schools – the Ivys and the “Ivy rejects.” There’s also a tier at the very bottom with shaky credentials. But in the middle, there is an enormous range of perfectly good schools that will provide you with tremendous opportunity, where you will get a world class education, and with faculty and facilities that can compete with any Ivy. Many of the students at the schools in that middle range could easily have been at a “top” school, but there simply isn’t room for everyone. Any arguments so far?

So when we’re looking for top talent, I’m far more impressed with what someone has done, than I am with their pedigree. A resume with top schools and “Academy” companies is nice, but when I’m building a team, I’d rather stock the pond with eager, energetic, roll-up-the-sleeves types, not the folks who are riding on past successes and have great resumes, but are secretly relying on the hard work of subordinates to get things done. That’s what I mean by the B team. They’re the executives who, by sheer chance, were the ones who were not selected for the position at the top company at some point in their careers. Maybe they were the number two or three candidate, and the HR person didn’t like their shoes. Maybe the chemistry between the CEO and the successful candidate was just better. It doesn’t mean the B teamer isn’t capable or couldn’t meld well in a different culture.

Of course, none of this is to say that there aren’t great, accomplished, hard working, skilled executives (with nice shoes) who are at the top tier companies. It’s just a caveat – don’t get taken in by the brand names, when there are “generics” that are “bioequivalent.”

The Impossible Dream

It’s been a long while, but I have a reasonably legit excuse. It’s been crazy busy, including a sellout for the second annual Startup Downhill. I have several topics started, but this one trumps them.

This morning I attended the Mass High Tech BioForum. The topic was quite broad – how to get your life sciences product to market. As you can imagine, the discussion was similarly wide-ranging, though nicely kept apace by the co-chair of Foley Hoag’s life sciences practice, Jeff Quillen.

When it was announced that another Foley Hoag attorney was going to give the keynote, I didn’t have high hopes, since my experience is that in this type of setting, lawyers get way too deep into technical details, and lose sight of the objective. I was pleasantly surprised when Paul Kim gave a great overview, with particular focus on the FDA and some of the challenges of commercializing products in this highly regulated context.

There wasn’t time for my question, but as you know by now, I sure had one. It was intended mostly for Paul, and here’s the issue:

Years ago, my kids were watching some DVDs in the back of the car while I was driving, so I was only half paying attention. There was a scene with what must have been an ad on TV for a drug. One character says to the other, “Wow, all those nasty side effects.” The other says, “Oh, they just say all that. Those side effects never happen.” “Well, then why do they put them on the ad?” Pause. “In case they happen.” I was secretly chuckling to myself, because it is precisely true.

So my question for Paul was, “Is it possible to have an agency that works?” On one hand, the public wants absolute safety. The role of the FDA is to ensure that drugs and devices that make it to market are safe. We don’t want to think of ourselves as Guinea Pigs. On the other hand, patient advocacy groups and others exert constant pressure to get drugs to market rapidly, and criticize the agency for unnecessary delays. So what’s it gonna be? Safety or access? I would argue that you can’t have both. If someone from the agency is going to get dragged in front of a Congressional Sub-Committee every time someone has an adverse reaction (or death) from a drug product, who at the agency would ever take any risk? There was a time, in the memory of some of us, where the mood at FDA was to evaluate products based on safety and efficacy. The feeling was that it was not their job to determine whether or not the market needed another me-too product. That pendulum has swung completely in the other direction to a far more paternalistic attitude, where me-too products now need to show a clinical benefit that exceeds that of existing approved products. (Which begs the question, is it ethical to do a placebo controlled trial when there are approved products for the condition?)

I’m not a huge fan of the FDA in general, but agree with panelist Bruce Booth that they do shine in certain areas of regulation. In their defense, I don’t see how a government agency can effectively navigate the balance between protecting the public and facilitating rapid deployment, within a political climate where a single misstep is grounds for dismissal.

Once again, no solution, just framing the problem.

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.