CompStudy Highlights: “Live Tweets” from the Webcast

Earlier this month, we had our annual webcasts to launch the 2009 CompStudy Reports for Technology and Life Sciences ventures. During the webcasts, I live-tweeted (via my @noamwass Twitter account) about interesting data tidbits and comments from the panelists. Below is a synthesis of those raw tweets. If any strike you as particularly interesting or surprising, please comment about it!

Notes:

  • Before each tweet, I indicate whether it came during the “TECH” webcast or the “LS” (Life Sciences) one.
  • Because of Twitter’s 140-character limit, some of them are a little more cryptic than I would want.
  • “Flash polls” are real-time polls of the webcast audience.
  • To access the archived webcasts, you can go here for the Tech webcast and here for the Life Sciences webcast.

Founders

  • [LS] % of CEOs who are founders: 70% in LS ventures that raised 0-1 rds, plummets to 45% when 2-3 rds; research: http://bit.ly/8Tc5MP
  • [TECH] The 2 positions with more founders than non-founders: CEO (62% founders), CTO (59%); all others below 50%
  • [TECH] Positions with lowest % of founders: CFO (11% founders), Head of HR (2%)
  • [LS] Within executive positions in Life Sciences ventures, 53% of CEOs are still founders, 61% of CTOs; all other positions below 50%
  • [LS] Exec positions in Life Sciences ventures, LOWEST % of founders: 6% VP-HR, 6% VP-Manuf/Opns, 7% VP-Sales, 8% head of Clin. Res.

Sources of Hires

  • [TECH] How ventures found their CEOs: In 2008, 23% came from investors (3rd highest source); In 2009, 45% from investors (highest source)
  • [LS] % of non-founding CEOs found by investors in LS ventures: 18% in 2008 (#4 source of CEOs) -> 42% in 2009 (#1 source)
  • [TECH] Advice from panel (Aaron): As upturn starts, have to start pulling triggers a little quicker for both sides of hiring (co, hire)
  • [LS] Sources of hires in LS ventures: For all non-CEO/non-CFO positions, CEO-as-source-of-hire has increased in 2009 by at least 14%
  • Online comment from John Otroba, about upturn: “Challenge will be that most cos. have gotten into very bad hiring practices & selection criteria.”

Cash Compensation

Salary

  • [TECH] Average private-co. Tech CEO salary for 2009: $231K; potential bonus: $93K
  • [TECH] First time in last decade that cash comp is flat within private Tech exec teams (even worse than in dot-com bust)
  • [TECH] Diff’c in non-founder CEO comp between ventures with 1 or fewer rounds raised ($204K salary) & CEOs w/ 4+ rounds ($250K): +$46K
  • [LS] Difference in non-founding CEO comp: In ventures w/ 0-1 rounds raised, $267K avg salary; w/ 4+ rounds raised, $303K ($36K higher)
  • [LS] Life Sciences non-founder CEO comp: $273K salary in 2008 -> $285K in 2009
  • [LS] 2nd-highest salary in Life Sciences ventures: General Counsel ($238K in 2009)
  • [LS] Flash poll: 48% expect salaries to be flat in 2010, 30% expect increase up to 5%
  • [LS] Comparison to other public-co study (200 multi-nationals): 75% expect to keep pay flat, 15% small increase, 10% expect decline
  • [LS] Jonathan Fortescue: Surprised LS execs got the raises they did; “obvious that LS cos. march to a diff drummer than the IT cos.”

Bonus data

  • [TECH] 2009 is the first time that bonus as % of total comp has decreased (a little); did so across all positions except HR
  • [TECH] After Head of Sales, next highest % for bonus: CEO potential bonus is 38% of base salary, Head of BizDev is 37% of base salary
  • [TECH] Head of Sales: 2009 potential bonus is 61% of base salary; 2008: bonus received was 39% of salary, unachieved bonus was 26%
  • [LS] Diff’c in non-founding CEO bonuses in LS ventures: 0-1 rounds raised = $75K avg bonus; 4+ rounds raised = $96K ($21K higher)

Bonus approaches

  • [TECH] Aaron Lapat: Early-stage clients holding off instituting bonus systems until after they’ve reduced uncertainty sufficiently
  • [TECH] “Discretion by the board” re: bonuses can introduce morale problems (esp in downturn) if employees perceive it as very subjective
  • [TECH] However, in downturn, having that discretion is even more critical
  • [LS] Panelist: As co. matures, bonus as % of base pay increases; we’ll hopefully be able to delve into that more deeply next year
  • [LS] Flash Poll about structure of bonus plans: 37% balanced scorecard, 22% purely discretionary, 12% milestones/non-financial metrics
  • [LS] Panelist: “When you have a lot of variation in predictability, you see more discretion being applied with bonuses”
  • [LS] Panelist: Pay programs should have positive motivational effect; can wreck that by having bad/no communications about the program

General compensation

  • [TECH] Comparison to recent public-co. survey: Private ventures more optimistic abt comp increases for FY2010 than are public companies
  • [LS] Panelist: TOTAL comp in LS ventures is down, given companies going away and existing ones reducing staff
  • RT @compstudy Steve Hatfield of E&Y “Comp figures might be up, but total comp still down when accounting for decreased headcount”
  • [LS] Audience Q: Will substantial layoffs in Big Pharma put dnwd pressure on small-co comp? A: Will have bigger effect on mid-tier cos

Equity Holdings

Individual equity stakes

  • [TECH] Non-founding CEO equity holdings in 2009: median of 5.1%, mean of 5.9%
  • [LS] Non-founding CEOs in LS ventures: own median of 4.5% of equity, mean of 5.8%
  • [LS] After CEO, next highest equity holdings: COO (median 1.5%), CTO (1.1%), R&D/CSO (1.0%)

Team equity stakes

  • [TECH] “The top 10 positions surveyed in this report hold on average 18.2% of the company, up from 15.7% in our 2008 edition”
  • [LS] “The top 13 exec positions surveyed in this report hold on avg 17.6% of the co., down slightly from 18.16% in our 2008 edition”

Equity pool

  • [TECH] Poll of webcast viewers: At 45% of their ventures, 25% is reserved
  • [LS] Flash poll, about size of current option pools: 42% of webcast audience have pool of 20%
  • [TECH] RT @compstudy Laura Sachar: “Pressure to increase option pools as poor economy pushes liquidity events onto the horizon”
  • [TECH] Laura Sachar: Challenges for founders, non-founding execs, existing investors & new investors to agree how to refresh option pool

Mix of equity vehicles

  • [LS] In LS, mix of equity vehicles has changed very little between 2008 and 2009 (a little more change in IT ventures)
  • [TECH] Emphasis on using incentive stock options (45% of all equity vehicles used): Driven by tax efficiency of acquiring the option

Golden Handcuffs: Severance and Vesting

Months of severance

  • [TECH] 59% of non-founding CEOs have severance packages; Laura Sachar: surprised it’s not even higher
  • [TECH] All other positions are
  • [TECH] Duration of severance packages: for CEOs, median of 6 mos (mean of 6.8); similar for COOs; all other posns have median of 3 mos.
  • [LS] Mos of severance in LS ventures (almost all posns: median 6 mos) are signif higher than in IT ventures (almost all: median 3 mos)
  • [LS] Mos. of severance in LS ventures: CEO median 10.5 mos (9.2 avg); Head-ClinRes 6 mos (7.4 avg); Head-R&D 6 mos (7.3 avg)

% of executives with severance packages

  • [LS] % of execs in LS ventures with severance pkgs is consistently higher than % of execs in IT ventures with them
  • [LS] % of non-founding execs with severance pkgs in LS ventures: 71% CEOs, 76% COOs, 57% General Counsels
  • [TECH] RT @compstudy Perception of executive severance as “pay for failure” getting more scrutiny at public companies

Vesting

  • [TECH] Panelists: Increase in performance-based vesting rather than time-based; dominantly for CEOs, but good idea for VP-Sales, too?
  • [LS] Panelist: With downturn, execs negotiating harder for themselves re: change-in-control terms
  • [LS] Is a shift toward performance-based vesting rather than time-based, except in earliest-stage cos that find it hard to implement
  • [LS] Panelist advice about vesting: Evolve it as company does based on future milestones, or to manage retention (cascade the terms)
  • [TECH] Audience question about vesting; for my past analyses of vesting terms, see http://bit.ly/8QAQf4, http://bit.ly/865RAo

Downturn

  • [TECH] Flash poll abt plans: 37% hiring freeze, 26% shift comp pkgs to pay 4 perf’c, 21% RIF, 10% comp reductions, 7% more offshoring
  • [LS] Flash poll abt plans in LS: 42% hiring freeze, 22% RIF, 19% shift comp pkgs to pay-4-perf’c, 10% cut comp, 8% more offshoring
  • [TECH] Flash poll abt 2010 plans for capital-efficiency measures: “None planned” 22%, 44% plan mult’l measrs; cut admn expnse only (16%)
  • [LS] Flash poll abt plans for “upgrading positions” this yr in LS ventures: 5% CEO, 12% CFO, 17% Biz-dev, 13% Sales, 37% no upgrading
  • [TECH] Audience Q about severance: Shouldn’t it continue to go up in 2010, as more people take jobs and demand it?
  • [TECH] Panelists: In downturn, having severance program helps execs stay focused on building venture rather than looking for a diff job

Parting Shot

  • [TECH] Advice from panel (Bryan): “Don’t underestimate the power of psychic compensation”
3 Comments
  1. “Challenge will be that most cos. have gotten into very bad hiring practices & selection criteria.”

    Noam, I think this is absolutely critical, and critical for far more than start-ups (it applies to quarterbacks in the NFL, as we well know), and it points directly at the critical need for the emerging science of determining future value of people. I'm a structuralist when it comes to people, and I'm curious if that becomes an analytical path as the science progresses.

  2. Tweeting is one thing that I have never been able to get into. It seems to be a great way to release information though. I should start, if only for business promotional reasons.

  3. This is quite a compendium of tweets!

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