This post continues a conversation on ageism in biotech introduced in an earlier article, but interestingly parallels a similar reality for externally-funded junior research group leaders in academia. ‘CEO’ and ‘Principal Investigator’ can be used interchangeably in this article:
The common narrative that is often advanced (without data) is that younger CEOs, like junior faculty, lack experience in leadership that introduces management risk to an already risky venture. More experienced Directors are therefore “likely to be better at R&D risk identification/mitigation strategies and appropriate resource allocation; further, they will typically bring value-added broader networks, built over their careers, into Pharma decision-makers and the capital markets to leverage for downstream liquidity”
– Bruce Booth (Gray Hair in the C-Suite: Experience, Age and IPOs in Biotech).
From day 1, I knew my position was not permanent and my whole existence at Cambridge relied on me bringing in external funding (my salary, research expenses, and employee salaries all come from external grants).
– Dave Kent (I started my lab 3 years ago and I’m moving already)
As always, context matters. First-time CEOs (founders and non-founders alike) like new academic faculty in the first years of their company/lab are risky investments because they have not previously demonstrated their ability to successfully lead a research group. Prior job experience does not prepare you for this role; and while certain professional backgrounds such as “assistant professor (or research group leader in the U.K.)” are closer to what the “CEO” role is than others, there is nevertheless a huge learning curve all new CEOs undergo in their first few years.
Current performance in this role is arguably a better indicator of future success than age. The reality is that no one is born a CEO, and only acquires the skills and experience of being a CEO by assuming the role and learning the role on the job. What young CEOs lack in experience they appear to make up for in risk tolerance and ability to facilitate development and growth, particularly in high-technology fields (Does Age Matter? Empirical Evidence of CEO and Firm Match). Indeed ~70 percent of CEOs based on IPOs from 2012-2017 at Atlas Ventures (a well-regarded early-stage venture capital firm that invests in life sciences startup companies in the U.S.) were first time CEOs.
The metric of “first-time CEO in the first years of their company” should NOT be applied to CEOs (first time or experienced) in years four-plus of the company. At this stage there is sufficient historical data regarding their ability to set a strong and cohesive vision for the company, attract and retain a great team, establish clear milestones and execute them on time and on budget, recover from failures (S-happens) and leverage successes (even when lucky) to recover and create further value, represent the company, and ultimately show return on investment. Failure should not be reinforced, and poor leaders that are not checking the boxes should be replaced (independent of age or experience). However, when these boxes are being checked investors should be having the conversation on how to double down on success. Replacing the leadership when everything is working is a recipe for disaster (regardless of age or experience). This is a salient point because young companies, like new labs, are more likely to face financial constraints and higher costs when accessing capital that need to be factored into future company growth.
Solving for experience
A great CEO must be able to recognize gaps in their company and fill them in a way that will most improve the odds of the company being successful. “Perception of future success” is not the same thing as “odds of future success” and a common pitfall for both CEOs and investors alike (independent of age or experience) is the impulse to solve for optics vs. substance, not recognizing that one is NOT a proxy for the other. When these gaps present themselves in technical or organizational areas of the company, a CEO will recruit a full-time employee or consultant to fill this role.
Solving for fundraising experience is no different. Among the most valuable characteristics of more experienced CEOs is their (often) broad network of investors, decision makers, and capital markets that can be leveraged to enable the company to execute on its milestones and generate targeted downstream liquidity. However, what is important to recognize is that this is a technical gap younger CEOs will encounter at various stages in their company’s growth, and should be solved as all other gaps would be. The CEO is rarely (if ever) the most senior, most experienced, most charismatic or most technically capable person in all aspects of the company, nor should they be. CEOs by necessity become generalists, and the reason why companies are built on teams. Where seniority, experience, and networks are recognized gaps, as is typically the case with younger directors; investors, the company, and its board should strive to solve this problem. The alternative threatens to introduce further risk to the venture, destabilizing the investment rather than accomplishing the intended goals of improving a company’s chances of success.
In my following posts I will discuss ways in which this can be accomplished and tie these challenges back to those facing young faculty in academia wherein many of these issues are also being addressed. Your comments are, as always, very welcome.