Episode 82: Building and Managing Biotech Startup Boards that Drive Success

The right advisory board or board of directors can shape your strategy, but the wrong one can sink your company. Stay tuned for more insights on startup leadership. You're listening to BIO From the Bayou, empowering biotech leaders with the tools, assets, and expertise to improve healthcare outcomes.

Each episode provides insights and information to expand your network, advance your product line, and help your company thrive.

Serving the entire Gulf South, but recorded in the heart of New Orleans. Hey guys, and welcome back to Bio from the Bayou. I'm your host, Dr. Elaine Hamm, Executive in Residence at Tulane University School of Medicine, and I have, of course, the co-host.

Yeah, James Zanewicz, Chief Strategy Officer at Tulane School of Medicine. And today I get to interrogate Elaine. I love this.

Interview.

Same difference. Same difference. I mean, you say potato, I say potato. You're in Oklahoma right now. I'm in New Orleans. It's all fine.

Oh, I know, but interrogate just has a different tone.

Well, I'm gonna ask you polite but insightful questions. How is that? Is that better today?

Okay, I like that. All right. I like that.

And our topic—

I hope they're insightful.

Our topic is gonna be boards.

So we hope we don't bore you. Nope.

Oh my God.

That was my one joke.

Mom joke? No, ma'am. Ian's dying over here. He's, he's like, I can't. I'm dying, I'm gone. I'm dead.

Oh my gosh.

Yes.

Yeah.

Sorry guys. That was our one joke and it wasn't a good one, but yes, we're gonna talk about boards. But no joke.

No joke is scientific advisory boards. I want to start with that. And Elaine, you've formed a lot of these. So can you tell us—

A lot of these.

What is a SAB, or a scientific advisory board? Is it a SAB or a SOB? What do you call it?

I say S-A-B. That's just me. There you go. I didn't mean to rhyme. When we think about startups, there's sort of 2 different boards. One is a scientific advisory board, and one is a board of directors. So let's start with the scientific advisory board, which is honestly the fun board. It really focuses—

For a scientist.

For a scientist. Yeah, that's true. Fair. It's the nerdy board.

It feels like you're a little biased there.

Yeah, it's true though, but it's, it is a lot of fun. It really focuses on technology research and where you're taking your product. And it's a little bit different from the board of directors too, which that more focuses on like governance and fiduciary duties. This is really focused on science and technical strategy.

So how do you start one and when do you start one?

Well, it's a number of different things. Really, you have to figure out first What do I need? You know, you have to take an inventory of what skill sets you have on your team currently, and also think a little bit of like, what scares you? What do you not know? And then think about who are the types of people that could fill that role and help advise you, because that, you know, advisory is really important. You want to have the right advisors on it. And I have found members of our scientific advisory board from conferences, from papers. Sometimes I do a little competitive analysis and look at the scientific advisory boards of competitors and see who they have.

Yeah. And you look for their nemesis and you hire their nemesis?

Exactly. Absolutely. I'm like, who's their main competition? And I go, I go poach them. But really, I can also just go look on clinical trials. Who are the PIs on these clinical trials and who's giving the keynotes at scientific conferences and heading up scientific research groups? And those are the people I target. And it's a little bit of a mix, to be honest, because I'll have people that can really advise me and then You can also look to bring in people that can bring validity to your company. You can bring in the rock stars and the big names in science, and that really helps boost the sort of marketing value of your company as well.

And so you form your scientific advisory board. What's the usual commitment for that? How often do they meet? What is like the obligation when you're on one, just for curiosity's sake?

So that's honestly the first question your scientific advisory board members should ask you. If I mean, how— what is my commitment to this? I try to host, you know, probably quarterly meetings. I want to make, you know, the most of our members' time and not take up too much of their time. And I try to make it, you know, maybe an hour. And I have very clear goals for them. So when we first have our very first SAB meeting, we lay out to them their obligation of like, here's what we're doing over the next year. Here's where we think that your input is going to be really valuable and what we're asking of you. We have a mix of clinical, academic, and business people and people that really understand the intense science, the drug development pathway, and people that are actually engaging in a patient's journey. And sometimes you don't need all of that at once, and you can bring people in slowly on your SAB over time.

And so we've talked a lot about the SAB, but you mentioned board of directors earlier, which honestly sounded way more interesting to me. But I might be biased, you know, as somebody—

I'm so biased.

—on more of the business law side, even though I do have a science degree. and was a chemist and made paint and washed it dry, which is why I'm no longer a scientist.

Literally.

Literally, that was my job. It was a year. It was super fun. But boards of directors, which is something that I'm much more interested in— not that scientific advisory boards aren't amazing, but I'm more interested in being on a board of directors. What can you tell us about that?

The board of directors, I think that some people sort of dread them, but I find them incredibly valuable and helpful to really help you execute the goals of your company and provide you— I mean, they can really serve as a resource for you. So board of directors, directors are the ones that, that provide you information about, you know, fundraising and, and how you're, you're managing your budget and helping you think through the things that are coming ahead for your company's strategy on a 3 to 5 year basis. Board of directors also are the governance of your company. So you want to be very, very thoughtful about how you bring on board members and who serves on it.

And so same question as before, When should you be thinking about starting your board of directors, and who should be on it?

So board of directors is a little bit different. I like bringing in the SAB first, and then I start thinking about a board of directors. And I really don't create a board of directors until I'm doing financing. And, and the financing piece really, to me, is the trigger of, of a board of directors. Not everyone agrees with that, but that's typically— I don't think about it until I'm looking to raise funding. When you're starting early on, you're usually going to have a, you know, a 3-person board. And that, that board is usually going to be someone from the management team, one of the founders, usually the CEO. You're going to have probably an investor that is going to come into, you know, your early financing that will serve as a board member. And then you want to have an independent board member, someone who's separate from, from you, the company, and separate from the investor, somebody that really has been in your industry that can provide you with strategic advice. And so starting out with that very small board is really important at the very, very early stages. And really, the goal is to help you step back from the day-to-day execution that you're mired in and help you think strategically. And in those early days, you really want to have the founder control to keep the vision. And then when you start to raise more money, you're gonna have to start making that board a little bit bigger. And that's why it's always important. You can listen back on our Collaborator podcast where we talk about, you know, having the right collaborator, it isn't just about the check. It's about what they can bring to the table. And so you don't want to just take a check with someone that, that is going to boss you around and potentially kick you out. So you want to be very thoughtful about who you bring onto your board.

Because a networker, a super connector, may be of more value than someone who just has the cash, potentially, if they can get you to people with cash or connections or pieces you need.

100%. And, you know, you may have a rockstar person that you want to have on your board of directors, but they may be a rockstar and maybe not have enough time for you. So having their name not help you all that much because you really actually need their advice and it can be hard to pin them down. So you want to choose that person wisely.

Well, you mentioned the number 3 earlier, so I want to go all Sesame Street and go, 3! And I want to throw 3 back at you. Ian's dying today. I'm on fire. I'm ready to go, but I haven't sung yet. But I'm like the Count right now.

He's done with us.

Elaine, I, I want you to be the Count and I want you to give me 3 of your key top tips for navigating your startup board and picking the right members. So, give you a second to think about it. 3, 2, 1, go!

Uh, yeah, a second, seriously.

Uh, that was like 2 seconds. Come on.

Match the right board composition to your stage. So, you do not want to, like, the moment that you start your company, have 7 bosses. That is an absolute nightmare. You want to start really small. And then grow as your company grows. The other tip I would say is to balance that sort of— it can be complicated. You want quality over capital sometimes. I mean, just putting someone on your board because they gave you a big old check isn't always the right strategy. So, so you want to think about that. And then this is after you form the board, really. The next step is, is you want to be transparent and really cultivate ongoing trust because your board is there to help you. And if you're hiding things or you're not talking to them enough, That could be an indication of a potential problem. So those are sort of my top 3. So make the right match to your size, to your stage, quality over money, and then trust and transparency. So yeah, those are my 3.

I want to go to board observers, that word now. I mean, it's something I hear all the time. What is a board observer, and what does it mean, other than you made a face, so I feel like it's a headache?

Yes. It can be complicated. I've had really fantastic board observers who have sometimes been even more valuable than the ones that have voting rights, and then some that just really take up air. I don't know, for lack of a better word. Well, what they are is that they're non-voting representatives of, of investors, or not only just investors, they can also, if you've licensed a technology from a university, for example, you might have a university representative where they're a board observer, but they're not voting. But they attend meetings, they see board materials, and they provide input, but they don't formally vote.

Interesting. Are there any risks with them?

Yes, always. I mean, the more people you invite to the company can provide strategy, but there's always sort of things that can also go wrong. They do provide a lot of value. I've had incredible board members that share insights, share their network, which is also really, really important. Sometimes they can even represent you to the voting members to make sure that you're being thought of as well. But I really try to think of them as extra eyes. for us and an extra value to us. But sometimes you can have observers that, that can dominate meetings or really end up pushing investor agendas versus the agenda for the company. So you have to be pretty clear on boundaries. I mean, I've been a board observer and I knew my place. I had to go in and realize that, you know, I don't get to vote. I need to make sure that I give advice when necessary and try not to dominate the meeting because you don't want to disrupt the board flow.

And boards are a business. We all know that. Companies are there, A, to get things to market, but B, they have investors. They're there to be a business. And so obviously, the people who are helping you do that expect to be compensated. So for your SABs and your BODs, how do you compensate them?

I mean, I love to give free advice, but at some point, you're going to exhaust people, and you don't want to do that. And you also want them to have some skin in the game. You want them to be invested and make sure the company is successful. So as it relates to an SAB, I have done a combination between— an hourly rate, and I have done equity. If you're looking at SAB members that are in academia, sometimes they're not allowed to take compensation, or they're only allowed to take hourly compensation versus equity. So it kind of depends. And there's a great resource out there. Osage University Partners has some incredible presentations on how to break up equity in your company, not just SAB and board of directors, but also scientific founders and inventors. But they have some great sort of industry standards of what, what's used. For equity of an SAB, I mean, Anywhere from 0.1% to 0.5% I've seen. But if you have a really big name, it can go all the way up to 1%. So that, that's what I think about for SAB. Board of directors, it's typically equity. Eventually when you get, you know, to be a big girl company, you'll, you'll start to give them, you know, stipends and you, you'll, you might pay them. But typically in the very early stages, it's equity.

How much do they usually get?

Again, it's, it depends on the stage.

You're being a lawyer right now. You're taking my role.

I am. I am. I mean, I'm being a little bit of a negotiator, but that's again, It's true though. Osage University Partners has a really great suggestion of like, how do you compensate board members? And again, you're, this is specifically for like the independent board member, the investor, you know, that's on your board has already gotten their pay, their compensation, and they're just protecting their investment. But the independent board member is the one that you kind of have to, to compensate.

Yeah. And shout out to Kirsten Leutha from Osage University Partners. People should find her on LinkedIn, connect with her. She's one of my favorite folks in the world. She'll probably shoot me for this, but she's an amazing access point for them. If you're, especially if you're in academia, she's their university relations And, you know, they do a lot of really great stuff. And it occurs to me, we should have her on a podcast. Ian, we should take that down and invite Elaine and Kirsten to sit down together and talk.

Yeah, definitely.

I think they're into this.

And I also want to say, if you want to hear Kirsten on the podcast, there was one on the Equalize program a little while ago. So check that out as well.

Oh, that's right. Yeah, she was fantastic. Yeah, she was fantastic.

We have so many podcasts. We have like 75 now. I can't remember them all. It's the thing.

So many, we can't remember. Oh my gosh.

But definitely, let's bring her on again. She was great.

Yeah.

Does that mean we're big time now if we don't even remember all the podcasts?

Apparently, if you get over 30, you're big time because most fail below 30, Elaine. Like, we're like becoming has-beens at, you know, approaching 80 or whatever we're at now.

I mean, we were never going to fail if it's just, you know, quantity because you and I can talk about anything all the time. So.

Well, speaking of things, there are things that you and I like to avoid. What do you like to avoid when you're looking at your SAB or your BOD? Do you like that transition? Wasn't that good? I got us back on track. Oh, that was good. Yeah. That was really good.

I'm like, what do I like to avoid? People in general. Just kidding, but not really. Okay, good question. SAB members. So I have avoided doing, you know, pulling in people that I have active research projects with because they can participate at those meetings. But really, I need objectivity and I want other scientific voices around the table that can push back on, on what we're trying to do. So sometimes you're talking about someone's baby and you might tell them that their baby is ugly.

They don't want to hear it.

They don't want to hear it, and they get very grumpy. But you also don't want that bias to come into play because sometimes you just may have to kill the project. And if they're on the board, that makes it complicated. So that would be my one tip around SABs. And the SAB members can grow and evolve too. So don't grow them too quickly. Bring in people as, as you need them. So if you're not ready for clinical stuff, maybe don't bring the, you know, a ton of clinicians in and really grow it slowly and not just throw a whole bunch of people in. And then you're like, oh gosh, I— this is the wrong mix, or I have too many. Board of directors, that's actually pretty easy. You don't want your besties and a whole bunch of yes-men that come in and just agree with you. That's not the point of a board. That you want people that can push back and to make sure that you're doing what's best for the company. As it relates to independence, you want to make sure that they're not just an extension of the investors and that they're going to be pushing the investor agenda. You want them truly, truly independent.

Mm-hmm.

And then, I don't know, micromanagers suck. I don't know what this is. I'm trying to like— I would hate to have— I mean, I love an engaged board. That's amazing. I don't want someone that really just wants to become CEO and without the risk. The micromanagers, the ego, you want people that are willing to put in the work but also trust you to do the work as well. And then I think— and I think I mentioned this earlier— big names that have no value.

Right.

I mean, pulling in a big name that that's— and they're on everybody's board, that means they're not going to have time for you. So I would avoid besties, people that really have just an extension of an investor, micromanagers, and names with no value.

Yeah, and that was— I can't remember what conference it was earlier. It may have been you that said this, and apologies if so, but somebody talked about how the board's loyalty has to be to the company and not to the CEO, because the CEO may need to change for the company to succeed, and you have to bring people on who are aligned in supporting you. But understand that their loyalty is to the company and moving the company forward, not to the personnel of the company.

I mean, I've been a part of those board meetings where the CEO and the, some of the other founders were kicked off and it was a really, it was a really, really hard time, but the goal was the company and making sure the company moved forward. And I'm not just saying that because I was the last woman standing and then they brought me in.

Congratulations. All right.

It was painful. Yeah, it was painful. But you got to think what's, what's best for the company. So.

Absolutely. And I think that's a perfect note to end on, right?

I love it. Yeah. So takeaways, let's see. Match your board to your company's stage. Quality over money. Talking to your board often and making sure that you're communicating with them so that when you, when you're getting ready to fail, that they can help you. And if you're getting ready to fail, they can help you wind it down potentially.

And they're not surprised because you never want your board to be surprised.

And they're not surprised. I think people just don't want to have those hard conversations, but that's what the board is there for. Like a really good board, and I mean, a lot of people hate boards, but I think that, and because they're, they're your boss, right? Like the CEO has a boss and it's the board. And if you have a good one and you've thought about it and you've done it strategically, they can be a great way to help you navigate your ship through really troubling times, as it were. So, That's why you don't want friends that are just going to tell you what you want to hear. You want people that can really provide that strategy for you.

The hard truth. I think that's it.

That's all I got. Anything else you wanted to learn? Did I bore you with my bored talk?

Oh my God. Oh. Brought it back around.

Are you going to bring in sound effects or go, wah, wah, wah? Damn it. Oh, uh-oh, I cursed. Are you going to bleep that out? That's awesome. Is that our first bleep?

I don't think so.

James has said plenty of stuff.

He usually edits it out, but I think that one can stay. Who knows?

I think more cursing. Let's bring in cursing. All right. Well, there you have it.

All right, let's take it home. Now, where are we going to have all this information, Elaine?

Of course, it's going to be in our show notes. Take a look at those if you want to find out more about how to distribute equity in your company, including SAB members, but also scientific founders. Go check out Osage University Partners. They have an incredible resource That is very helpful for startups and, and people that are wanting to be on your board. You can be like, hey, I'm not going to pay you this much because here's industry standard.

But if you want to meet Dr. Elaine Hamm or myself in person and talk more about boards, or if you're interested in approaching us about being on your board, we're always both open to conversations. We'll see where that goes. We're going to be at BIO in June in Boston. And I know this will be out before then. So we're safe there. But you can find us there in the partnering system, or potentially at the bullpen. And then Bio on the Bayou, October 28th and 29th in New Orleans. www.bioonthebayou.com. That's B-I-O-O-N-T-H-E B-A-Y-O-U, for those of you non-New Orleanians, .com. And hotel room blocks are now open. We'll have registration up in the next couple weeks, but you can book your room now.

Oh, love it. And you can also find us on LinkedIn. Reach out to us. We're happy to have more conversation. If you want to be bored even further, come have a conversation with us. Find us on LinkedIn. I'll stop. I'll stop. All right. Will you? Never ever, actually. All right, guys. Thanks again for joining us and join us next time on Bio from the Bayou.

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