executive compensation & team composition · ey . | 26 . chief financial officer . cfo ....

Executive Compensation & Team Composition: Attracting and Retaining the Best and Brightest to Your Team

LIFE SCIENCES EDITION

www.compstudy.com | 2

Today’s Moderator

Bryan Pearce Global Leader EY Entrepreneur Of The Year™ and Venture Capital

Presented by Park Square, WilmerHale and EY


Today’s Presenters

Timothy Noyes Proteon Therapeutics President & Chief Executive Officer

Martha Cook EY Americas Human Capital IPO & Southeast Human Capital Practice Leader


Noam Wasserman Harvard Business School Associate Professor U of Southern California Visiting Professor

Bruce Rychlik Park Square Managing Partner

Josh Fox WilmerHale Partner


Today’s Agenda

Intro/CompStudy Overview

Current Founder’s Dilemmas Research

Team Composition

Key Roles

• Chief Executive Officer • Chief Scientific Officer • Chief Business Officer • Chief Financial Officer • Outside Director & Advisors

Attraction & Retention Tools



Each year, CompStudy collects and reports data on equity and salary compensation for Technology and Life Sciences executives at private, venture-backed companies. Participants in the annual survey receive free, year-long access to the reports.

CompStudy Overview



Data collected in every survey includes:


CompStudy Overview

Cash compensation & equity

Founding team

Financing history

Company size

Products/revenue

Equity programs

Executive backgrounds

Board of directors

2015 900 1,800

Technology Survey Annual Responses

2002 500 700

Life Sciences Survey Annual Responses

10,000+ executives

25,000+ executives

All Time Responses

All Time Responses


2015 Survey – Company Profiles

Respondent companies were slightly later stage this year. 30%+ have raised more than 4 rounds vs. <25% last year

Companies cut by headcount are distributed approximately the same as they were in the 2014 survey.


Geography

Headcount Institutional Rounds Raised

Revenue

Business Segments

% respondents in this range % respondents in this range

% respondents in this range % respondents in this range

% respondents in this range

Founding

Preparing Yourself

Building the Team Accelerating Exiting

New-Venture Hiring

CORE DILEMMAS

Y

Y

Y

Y

Y

CORE FOUNDER

CO-FOUNDERS

INVESTORS, SUCCESSORS

ALL OF THE ABOVE

HIRES

0%

10%

20%

30%

40%

50%

60%

Chair CEO CFO CTO COO VP Other

Formal Titles at Time of Founding

Idea people Non-idea people

The Founder’s Dilemmas, Figure 5.2

2-founder teams 3-founder teams

Early: Top-heavy Management Teams

Top-heavy Even Pyramid


0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

After A-round After B-round After C-round After D-round After E-round

2.5

4.3

6.0

7.6

9.0

Getting Much More Pyramidal: Employees per Executive


41.7%

52.7% 53.9% 56.3%

60.9%

Pre-funding After A-round After B-round After C-round After D-round

Hires with Gray Hair (% of C-level Hires with Prior Senior Experience in Role)


Compensation Differentiation by Function (bonus/salary for nonfounders)

CEO COO CTO CFO VP-Sales VP-Eng. VP-BD VP-Mktg.

37%

29%

22% 23%

49%

19%

29%

23%


Powerful C-Level Equity Incentives

0

1

2

3

4

5

6

7

CEO COO CTO CFO VP-Sales VP-Eng. VP-BD VP-Mktg.

Cash comp vs. VP-Mktg. Equity stake vs. VP-Mktg.


Quality of Work

Formalization

Burn Rate

HIRING TRADEOFFS

Kaplan-Meier survival estimate95%, pointwise confidence band shown

l i ti0 50 100

0.00

0.25

0.50

0.75

1.00

.

111223318

7916525335 14 23

6323 4 4

45

3

2

0%

10%

20%

30%

40%

50%

60%

70%

80%

Post-Succession Role of Replaced Founder-CEO

0%

10%

20%

30%

40%

50%

60%

70%

80%

CTO

COO / Pres.

Other C-level

VP or below

Left immediately Stayed as executive

The Founder’s Dilemmas, Chapter 10


Key Roles


Chief Executive Officer CEO

CFO DIR

Chief Scientific Officer

Chief Business Officer

Chief Financial Officer

Outside Director & Advisors

CSO CBO

www.compstudy.com | 20 Presented by Park Square, WilmerHale and EY

Chief Executive Officer

CEO Primary charter of the CEO role is to be responsible for all strategic and tactical aspects of the management of the company

• Founder transition

• When to hire

• Board decision

• How does role evolve as company matures

• First timer vs. experienced


Chief Executive Officer

CEO Non-Founder CEO Pay – by Headcount

Non-Founder CEO Pay – by Rounds Raised



Primary charter of the CSO role is to be in charge of basic scientific platform or discovery efforts

• When to hire

• Founder transition

• Developing underlying science vs. applying underlying science

• When to hire Chief Medical Officer

CSO



CSO Non-Founder CSO Pay – by Headcount

Non-Founder CSO Pay – by Rounds Raised



Primary charter of the CBO role is to be in charge of the BD strategy, partnering, in- and out-licensing, collaboration agreements, non-dilutive financing, and sometimes corporate development/M&A

• When to hire

• First timer vs. documented track record

• Why are you hiring: in-license/out-license/discovery partnerships/etc.

CBO



CBO Non-Founder CBO Pay – by Headcount

Non-Founder CBO Pay – by Rounds Raised



CFO Primary charter of the CFO role is to provide fund-raising support, financial leadership, administrative, and operational discipline and structure for the company in support of scaling operations

• When to hire

• First time vs. experienced

• Functional strength in accounting vs. transactional vs. operational

• Public company/IPO experience



CFO Non-Founder CFO Pay – by Headcount

Non-Founder CFO Pay – by Rounds Raised


Outside Directors

DIR • When to bring in outsiders

• Transition from private to public

• Domain expertise vs. functional expertise vs. industry contacts

• Profiles: financial, clinical, commercial

• Sitting executive vs. professional board member

• How to pay (equity vs. cash)


Outside Directors

DIR Equity granted to outside directors to join board

% respondents in this range

Equity ranges


CompStudy Overview


Percentage growth in year-over-year non-founder total target cash compensation


Building a Winning Team


Sources of Talent:

• Putting the band together

• Team referrals/board referrals

• Strangers Key Considerations:

• What are the top 4 senior roles on your team; how does that list evolve over time

• Domain expertise vs. general purpose, best athlete

• First time vs. been in role before

• Small vs. large company experience


BASE SALARY

Non- Financial

Career Factors

Focus


Equity, Bonus,

Severance


• Equity vehicles used

• Vesting (time based vs. performance)

• Accelerated vesting/change of control

• Dilution

• Annual equity grants

• Offsetting existing equity holdings at time of hire

• Liquidating equity



Equity


• When, if, and how to pay

• How to structure

• Guaranteed?

• Individual vs. company performance

• Annual increases

• Sign-on bonus



Bonus

Considerations



Severance

Severance Grant (Months)

% Eligible for Severance


Recap • 1-minute recap from each panelist


executive compensation & team composition · ey . | 26 . chief financial officer . cfo ....

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