We’re pleased to partner with Cooley LLP, Ernst & Young & BMO Capital Markets to put on this invitation-only conference.  Below is an agenda overview and speaker highlights.

If interested, please email clark [at] bsgtv.com.

WEDNESDAY, NOVEMBER 9, 2011 |  12:00 noon – 7:00 pm

Mandarin Oriental, Boston 776 Boylston Street  |  Boston, Massachusetts

Cooley LLP, Ernst & Young LLP and BMO Capital Markets invite you to an exclusive gathering of leading executives, investors, entrepreneurs and thought leaders in the medical device industry for the second annual Cooley Medical Device Growth Conference in Boston. This event will focus on the key drivers affecting the medical device industry and explore growth strategies for medical device companies.

KEYNOTE SPEAKER

Dr. Michael J. Cima – Professor of Materials Science and Engineering, Massachusetts Institute of Technology

TOPICS TO BE DISCUSSED [ view full agenda ]

• Pulse of the Industry: Medical Technology Report 2011 – Ernst & Young’s annual report on the medical device industry
• Developing and Implementing a Sales & Marketing Strategy -  Keys to achieving growth and ensuring regulatory compliance
• An Open Discussion with Thought Leaders – A fireside chat with CEOs at revenue stage medical device companies on the medtech industry, opportunities and challenges, lessons-learned, etc.
• What’s Getting Done? A discussion of trends in IPOs, M&A deals and strategic collaborations

REGISTRATION REQUIRED. This event is by invitation only. Registration is limited to representatives of medical device companies and investors, and is subject to approval.

PANELISTS AND MODERATORS INCLUDE

• Joseph Army – General Manager, Medtronic Advanced Energy (Formerly President and Chief Executive Officer, Salient Surgical Technologies)
• Michael Cima – Professor of Materials Science and Engineering, Massachusetts Institute of Technology
• Kevin Casey – Partner, Ernst & Young LLP
• Drew Gantt – Partner, Cooley LLP
• Ron Goldman – Chief Executive Officer, Accuvein
• Larry Knopf – Senior Vice President and General Counsel, HeartWare, Inc.
• Michael McGrail – Attorney, Cooley LLP
• Yiannis Monovoukas – Chairman, President and Chief Executive Officer, TEI Biosciences Inc.
• Michael Neuberger – Managing Director and Head of Healthcare Group, BMO Capital Markets
• Stu Randle – President and Chief Executive Officer, GI Dynamics
• Charles Sherwood – President and Chief Executive Officer, Anika Therapeutics, Inc.
• Mark Speers – Partner and Managing Director, Health Advances
• Peter Stebbins – Vice President, New Business Development, DePuy Mitek and Codman, J&J Family of Companies
• Kevin Seifert – Chief Executive Officer, Facet Technologies, Inc.
• Don Stern – Partner, Cooley LLP (Former US Attorney)
• Mark Weeks – Partner, Cooley LLP
• Robert White – President & Chief Executive Officer, TyRx, Inc.

The Company

Creating Privacy in the Workplace via Technology

Our client is a pioneer in sound masking, paging and music engineered systems. Their products  feature cutting-edge distributed audio technology for the workplace that combines extraordinary audio performance, low impact installation and affordability. Their systems are deployed in millions of square feet of workspace while supporting normal acoustical privacy in open plan spaces and confidential speech privacy in private offices.

The company is headquartered  in the Northeast United States.

The Position

As heir apparent and key member of the management team, the Chief Operating Officer will partner with the CEO on strategy, sales & marketing as well as all decision-making issues affecting the organization Key to the role is an ability to bring prior experience and success in building and growing multiple distribution channels, scaling teams and organizations from 25 to 50+, and expanding domestic and international partners and customers.

Ideal Candidate Profile

The diagram below illustrates a comprehensive intersection of competencies critical in the COO position:

The COO’s core responsibilities will include the following—

Strategy, & Product Marketing Direction:

Collaborating with the CEO to establish a short and long-term business direction that drives the company to become an industry leader and maximize the penetration of the markets served. The COO will bear primary responsibility for refining and carrying out The Company’s strategy. This will include such activities as monitoring The Company’s current markets and its standing within them; assessing current and potential competitive activity; and evaluating opportunities for growth (new but related products, entirely new initiatives which leverage the Company’s relationships, intellectual property and intellectual capital, possible acquisitions, etc.).

Marketing:

Ensuring close symbiotic relationship between product development and customer market needs, creating demonstrable competitive differentiation and performance benefits of CSM products vis-à-vis industry competitors.

Sales & Business Development Leadership:

Setting the approach to commercialization, including direct sales, distributor agreements, and independent representative networks. First and foremost, the COO will play a hands-on role in building The Company by acting as its most-senior business generator and evangelist. He or she must understand both The Company’s capabilities and the market’s needs, and combine those understandings to identify and pursue specific new opportunities.

Engineering, Manufacturing & Operations:

To a lesser extent the COO will share oversight of engineering, manufacturing and production teams responsible for product development, production, establishing build/buy/outsource decisions, quality control etc.

Staff— team building, development, mentorship:

The COO is responsible for human capital planning and hiring. As important, the position will actively be responsible for developing new and existing staff to help prepare them for company growth and increased leadership responsibilities at all levels. Finally, the new COO will serve as leader and mentor to the founding team and as a complement to their existing skills. He or she will do this through personal interactions with colleagues, as well as by maintaining management practices which reinforce a positive internal culture and help the company establish a reputation as a rewarding place to build a career. This individual will be expected to set high standards and hold people accountable, and to create an environment in which people work cooperatively and focus on building the long-term value of the enterprise. When management slots open up, the COO must be able to hire executives who can make significant contributions, not only as individuals but by building effective teams in their own areas of the business; he or she will also have to upgrade the organization when necessary by replacing underperformers with strong new recruits.

Investors/shareholders & board — milestone management, any follow-on fundraising, and liquidity strategy: Along with the CEO, the new COO is co-liaison to the board and will aggressively manage milestone deliverables, be a key leader at board meetings and to board/investor communications. The COO will be responsible for developing and managing against an annual operating plan and in addition to possible follow-on fundraising, will be accountable for optimizing the harvest for all shareholders. This includes continuous improvement of operational efficiency and effectiveness by assessing, upgrading or installing new operational systems, processes and methodologies. In addition, the COO will continually review activity reports and financial statements to determine progress and status in attaining objectives and revise tactics in accordance with current conditions. Combining these, the COO will execute and achieve annual growth targets while gaining increased leverage on costs and operating expenses.

STAGE:

Key background & successful experience with company growth stage includes—

• Board/investor communication and management

• VP level hiring across the organizational spectrum

• Growing sales from `$5M to >$50M

• Industry partner mapping for growth and harvest

• M&A negotiation experience

INTERNATIONAL:

Previous exposure to international business, in particular international dealer and distribution channels is beneficial. This includes the ability to work effectively in other parts of the world, and an appreciation for the ways in which cultures and business practices differ from country to country.

EDUCATION:

Undergraduate degree required, with preference for mechanical or electrical engineering, MBA or other advanced degree a plus.

GENERAL:

Finally, this individual should have as many as possible of the traits required to succeed in any CEO position:

• High levels of intelligence, analytical strength and conceptual ability.

• The ability, and willingness, to set and communicate demanding standards for professional staff and to hold people accountable for their performance; at the same time, sensitivity to, and insight into, individuals’ capabilities and development needs.

• Decisiveness when necessary, coupled with a willingness to seek input and build consensus as much as possible.

• Unquestioned honesty and integrity; also, loyalty to colleagues and to the organization, and the ability to inspire loyalty. This person should have the ability to identify and focus on The Company’s best interests, rather than the agenda of any individual or group within the Firm.

• A very high level of energy and commitment, combined with enthusiasm and a positive attitude.

• Excellent writing and speaking skills; this individual must be able to communicate complex ideas and information clearly and concisely.

• Outstanding planning and organization skills.

• Good strategic instincts and long-term vision; the ability to address both big-picture issues and detailed, day-to-day management concerns.

• In general, the business and personal skills, and the absolute commitment, required to make a major contribution to The Company during the coming years.

Team

Reporting to the CEO, the COO shares the responsibility for sales, marketing, operations, product and finance. Total employee base is approximately 25 and growing.

Financial Backing & Budget

The Company is profitable and growing at a 30%+ annual rate.  Seed and growth capital has been provided by one strategic partner in a joint-venture structure.  No other outside investment capital has been required.

Compensation

Compensation is competitive with the position’s requirements. In a performance-based environment, this will include base salary, incentive bonus structure based on both individual and company milestones, and a stakeholder position in the company.

BSG Team Ventures has been retained to bring aboard the new CEO for a break-through approach to wound closure.  The company has a patent portfolio and 4 products, two already with FDA approval, and a new Series B round of funding from passionate venture capital partners.

The addressable market is more than $5 Billion, and includes applications for plastic and reconstructive surgery, biopsy, military, perinatal, laproscopic, and other orthopedic surgical procedures.

The company is currently located in the San Francisco Bay area, California, having been founded in 2007.

Highlights of the new CEO’s track record and experience will include the following:

Strong commercialization stage leadership experience, with a focus on establishment of both direct and channel sales distribution

Experience with oversight of manufacturing and clinical trials for 510K regulatory approvals

Executive team-building, with particular emphasis on the sales, marketing, business development, manufacturing, and operations side

Corporate Development expertise in developing key strategic partnerships across the medical consumables/disposables ecosystem

Experience taking companies from pre-revenue to $50+M in revenues

For a more detailed outline of key success attributes, see the Venn diagram below.

For more information regarding this search, please email clark [at] bsgtv-dot-com.

 

Once or twice a year we as a firm gather CEOs from the Boston innovation ecosystem to share thoughts amongst themselves.  Often, the format is lubricated by a panel to kick things off.  Always, the format is lubricated by an open bar and dinner.

 This Fall’s CEO gathering in early November brought together 50 or so CEOs around the topic of planning for 2011, and what to expect as a CEO. 

Whether early-stage venture, or mid-stage growth, investors are adopting a different approach to what they are looking for, how much they are putting to work, and what they expect to see as an end result.  This is proving true not just in the tech sector, but cleantech, medical device, and biotech.

 If CEOs are looking for more investment, whether growth equity, seed capital, or something in between, what are the “new normals” to think about going into 2011.  And if CEOs aren’t looking for money, but looking for exits, what are the expectations of investors in 2011 and beyond? 

 We assembled a panel of venture capital investors who all had raised new funds in the last year or so.  These investors also represented a different flavor than traditional venture capital.

 On the panel? 

• Michael Balmuth, General Partner, Edison Venture Fund
• Alexis Borisy, Partner, Third Rock Ventures
• Rob Day, Partner, Black Coral Capital

 What were the “new normals” CEOs and VCs talked about?

 Here are a few that got some air time:

2011 is likely to be an economic “ground hog year.”  The current economic cycle of “flat is the new up” is here to stay for the medium term;  In taking a flash vote of the room, the overwhelming majority felt that the economic conditions in which companies are being created are not going to change for the better any time soon.  Simply turning the calendar over from 2010 to 2011 is not likely to yield a more fertile or forgiving economic climate in which to grow innovation-stage companies.  In our recent survey  of growth-stage CEOsfor Q4 2010, we noted in a prior blog post that the vast majority of CEOs had already shifted their strategies or were planning to in the near future as a direct result of an expectation that 2011 might look a lot more like the end of 2009 or 2010 than ‘07 [see CEO survey pie chart below]

 

Seed rounds are becoming pervasive compared to prior quarters.  And these aren’t for Web 2.0 companies only.  CB Insights in their Q3 2010 summary demonstrated that this is a trend that is occurring in cleantech / greentech as well as healthcare IT.  All 3 investors on the panel agreed that seed funding makes sense.  Alexis Borisy, Partner at Third Rock Ventures, talked about their approach to seeding, saying that they tend to help start the companies, not just fund them, often taking an interim role on the executive team to incubate to a point of value inflection.  Michael Balmuth mentioned that although Edison Ventures doesn’t do “seed stage investing” per se, he loves to see companies that get seed rounds, as it often is an effort to drive toward profitability faster.  At that point, Edison may be more interested in a seed-funded company that achieves an early positive cash flow position than a typical heavily syndicated, multi-series venture-backed portfolio company.  Black Coral’s Rob Day added that he felt that investing in capital-efficient companies, even in the cleantech sector, was something he has advocated for a long time.  [see CB Insights graph of growth in seed round funding over last 5 trailing quarters, 2009-2010]

• As an asset class, venture funds have lost money for a while now.  Limited partner investors in venture capital and even private equity believe that they still have to invest in this asset class because it does make money during economic or industry sector bubble periods, and to invest once a bubble has been established would mean missing the upside.  During other times, LPs try their best to pick the funds that outperform their peers.

 

• Using investment banks to raise equity capital  should be done selectively.  If the industry is a small one, and the network is well established (like biotech investing Alexis pointed out), using an i-bank at an early stage is not the best idea.  However, in the cleantech sector where there are more total number of investors, they are internationally distributed, the industry is younger and less well-networked, and there is an imbalance in demand-supply (more money chasing fewer good deals), the investment banking solution may be just the right one.  One CEO, Larry Letteney of Second Wind in the cleantech sector, shared just such a recent positive experience in going out for their next round. 

 

• Seek out funds that have real capital to invest, preferably “fresh.”  Each of the three funds represented on the panel had all raised funds in the last twelve months or so.  But there are a lot of funds that are at the end of their last fund.  Many are unlikely to raise another fund.  Many investors are taking meetings, but setting the bar exceedingly high because they have only an investment or two left, and they don’t want to get caught making a bad one given the challenge in delivering returns to LPs in the most recent investing vintages.  There was also a “beware” comment about funds who are making seed round investments at the end of their funds.  They are more likely to do so, as it is an easier story to message an investment mulligan to LPs if you can just say, “It was just a small seed investment, so no biggie.”  Caution was also expressed that an investor at the end of a fund making a seed investment will be less likely to have additional capital to invest even if the company is doing well.

We hope to post a video snippet of the the VC-CEO dialogue for a flavor of the evening’s conversation in the near future.

Survey of 50 of the Fortune 500 companies reveals how long executive searches take, the average number of candidates interviewed,  how many of them actually get completed, and what percentage of those candidates are female or minority.

As executive search consultants, we often get asked a series of questions by our client companies surrounding the executive search process.  Many of these questions are driven at gathering market intelligence around our executive recruiting.   The aim?  To create some third-party benchmarks to help companies understand whether a search has gone about average, better than average, or (gulp) “below the mean.”  Keep in mind, these could be internally run searches done in the “DIY” fashion.  Or searches executed by in-house recruiting departments or human resources staff.

Historically, there has been precious little data generated by third-party sources with enough statistical heft to garner much credibility.

One of the sources that at least aims to collect good data is created by David Lord, who heads the Executive Search Information Services organization.  David is a veteran observer and analyst of the executive recruiting industry, and has run a roundtable of senior talent executives from Fortune 500 companies for the last 20 years or so.  For further information, see www.davidlord.com.  Some of the data that ESIS collects is via an annual survey of those senior human resources executives who participate in these roundtables.

For our clients, we often reference ESIS data when made available.  At our request, below is a data table we created from some of the information ESIS kindly provided that shows some longitudinal data over the last 4  years, 2006, 2008, and 2009.

Trends worthy of note?

Search completion times have come down by almost a month from near 5 months down to 3.5 months.  Good news for all, the company, the candidates, and the search firm.   It will be interesting to see if this flattens out, or jumps back up for 2010 due to tightening talent pool on the supply side as the economy began to pick back up this year.

Number of candidates interviewed per hire dropped from 6.5 to ~5.  This could be an indication of a company’s increasing confidence in what they’re looking for, or an indication of sense of urgency around key hiring to help companies as they struggled through a very tough 2009.

Female and minority hiring at the executive level has improved, but not as much as many would have thought. Women executives were hired 29% of the time in 2009 versus 23% in 2006.  Compared to the workforce percentages of women to men, this is still inversely proportioned.  Minorities have seen a nominal increase of 1% more hired over  the last 5 years, which–when considering rounding errors– is effectively no increase at all.

Search completion rates have remained flat, with 4 out 5 searches engaged getting completed. Over the last 5 years,  search completion rates have hovered around 80%.  This is reported by corporations only, so subject to different numbers search firms might proffer.

For deeper data, please contact ESIS.

Additional footnotes worthy of note:

1) For some reason, executive search firms specializing in the financial services sectors and related areas often calculate their “days to complete” numbers counting only business days, excluding weekends and bank holidays.  This can often make comparing normative data a bit more troublesome

2) Days to completion numbers are calculated using the date of accepted offer of employment, not candidate start date/first day of work.  This is done because resignation periods vary widely and would undermine data integrity.

TOPIC: How & What Growth-stage CEOs Are Planning for 2011

Below is the hyperlink to take the Q4 CEO peers speed-survey, exclusively for growth-stage CEOs.  This survey focuses on “How & What Growth-stage CEOs are Planning for 2011″

This shouldn’t take more than 5 minutes of a busy CEO’s time–

We here at BSG Team Ventures periodically take the temperature of the markets we serve. The survey is no more than 15 questions, most simple multiple-choice.

These surveys are created and compiled by BSG Team Ventures as a courtesy to our executive ecosystem with the belief that knowledge is power.  Aggregated peer-provided knowledge is “actionable power.”

For the survey results from Q2 2010, titled “Impact of Economy & Renewed Growth Planning”, go to http://www.bostonsearchgroup.com/blog/ceo-survey-results-q2-2010-%E2%80%93-impact-of-economy-renewed-growth/

We make an effort to survey only those who fit the category (in this case, sitting CEOs or board member/founders of technology/science-driven growth-stage companies). [Note, if you don't fit the aforementioned description, please refrain from responding.]

Feel free to forward to the qualified CEOs in your sphere of influence. The more data generated, the more accurate the trend lines.

All responses are anonymous due to the web-based survey technology employed.

We will forward the survey results within the next two weeks to the email address on file. Please let us know if there is another email address you wish us to send the results to as well.

Registration is Now Open

4th Annual Benefit

VCs vs. Entrepreneurs – Davis Cup Challenge

Thursday, September 23, 2010
Longwood Grass Courts  /  2:00 – 7:30pm

Welcome Back!  BSG Team Ventures is proud to once again host the 4th Annual  Benefit: VC vs.  Entrepreneur Tennis Tournament – Davis Cup Challenge, and we are thrilled to have you join us.

The VC/Entrepreneur tennis community has been growing every year so please register now so we can build the teams early.

Entry is by donation of $175.00.  Please click here to register!

For questions, please email Cristina Vieira Abramson at cvieira@bsgtv.com or call 617.784.4987

Agenda Overview

VCs vs. Entrepreneurs - Thursday, September 23, 2010

Format - Round Robin, Doubles

Time - 2:00 – 7:30pm (includes tournament, finals, cocktails, dinner and networking)

Location – Longwood Cricket Club, Chestnut Hill, MA

REGISTER

The UK’s sustainable energy program is a public-private partnership at work.  And thus far, working well.

I recently had the opportunity to participate in what has become an annual “Cleantech Trade Mission” of Boston and New York cleantechers to the United Kingdom.    Our hosts?  The UK Trade & Investment team based here in the Northeast, part of the large mandate of the British Consulate  here in the U.S. to continue to put planks in the bridge between our two countries, especially when it comes to cleantech and sustainable energy solutions.

Although I joined midweek as was over there for a European-based executive search we were interviewing on, the group moved from North to South, starting on Monday up in Edinburgh, Scotland, then down through Newcastle, Cambridge, and ending with two days in London.

It was a comprehensive gathering of the UK cleantech ecosystem for an exchange of ideas and “show-and-tell” around the UK of their commitment to sustainability and cleantech thought leadership.   Our US band of cleantech brethren among others included investors from Rockport Capital and Kleiner Perkins.

There were  three notable differences between the UK and US surrounding renewable energy & cleantech:

1) Government superstructure like the Carbon Trust (keep in mind, the UK has cap-and-trade and the U.S. doesn’t) Cap & trade drives a true dynamic market in the UK while the US version is still mired in politics on Capitol Hill.  The UK succeeded in passing sweeping energy-related legislation in 2008 (http://www.carbontrust.co.uk/about-carbon-trust/pages/default.aspx ), and the result has been a fueling of the entrepreneurial engine in Britain to come up with new technologies, sciences, and Internet-driven efficiency and monitoring solutions to help drive adoption and integration of the new laws.

2) Landfills and methane is another interesting difference again brought about by the UK’s progressive legislation.  Britain is an island, and a small one at that compared to the U.S. (60+ million citizens, one fifth the size of the U.S.)   There is limited real estate for landfills, and one of the big offenders from landfill is methane gas.  A host of science-driven entrepreneurs have tackled what is referred to as anaerobic digesters (http://www.foe.co.uk/resource/briefings/anaerobic_digestion.pdf )

3) Massive investment in offshore wind generation capacity is the third area. It was truly remarkable the detail behind Britain’s likely ascendance to global leadership in offshore wind generation.   Historically, Scandinavia has held that claim.  However, with Britain’s aggressive 2020 goals, they’re going to no doubt lead in offshore wind expertise and GW installed base.

Some quick numbers related to the 2020 initiative:

* Capital expenditures:  £14 billion already spent in the last 5  years.

* £5.6 billion more in cap-ex planned for the next 5 years (keep in mind, this is a country with a population of ~ 62 million, about one fifth the size of the United States)

* Closure of 25% of traditional power stations (coal or other non-renewable sources)

* 25% of natural gas generated from UK sources

* Addition of 44GW of offshore wind power at distances up to 200km from shore, and in water depths down to 80m

Something like 40% of energy capacity is going to be wind, with a vast majority of that coming from offshore wind.  However, UK power generators like NationalGrid recognize that there needs to be a large redundancy due to the intermittent nature of wind as a resource.  NationalGrid is planning primary failover in the form of LNG and CCS capacity to power conventional generation, replacing virtually 100% of existing coal-fired plants with carbon-capture versions.  The best hope to reduce this reliance on traditional energy sources is to innovate a wind power storage solution that can be commercialized between now and the completion of the 2020 UK offshore wind initiative.

Britain is pioneering a number of other innovations, including a CO2 transportation network that transports CO2 for storage (think CO2 “pipeline”), taking a chunk of  the industrial complex’s CO2 emissions and capturing, storing and or repurposing it.

After all that cleantech knowledge transfer, what did the UK serve for dessert?  A cocktail party with London-based cleantech entrepreneurs and investors at Taylor Wessing’s offices on the top floor wrap-around patio on a gorgeous London summer evening (below was the mis en scene).

In addition, we had an opportunity to take a sneak peek from “The View, ”  an official viewing site of the 2012 Summer Olympic Park, at the top of an adjacent apartment building in East London that has impressively grown from a former area challenged by urban decay.   And the London Olympics stand to be the greenest one yet from what we were told, with prolific and cool sustainable innovation even built right into the very steps of the stadiums that use spectator energy expended in climbing up and down the stadium to power an LED lighting system.  One of their sustainability goals is to try to construct the Olympic venue with a net-zero carbon footprint.

Footnote:  Rob Dietel, Vice Consul, who heads the cleantech vertical for the British Consulate’s UK Trade & Investment New England office, is a terrific resource along with his colleague, Kevin McCarthy, also out of the Boston office.  Rebecca Lewis is  Rob’s New York-region counterpart. All three are bringing a select group of UK cleantech entrepreneurs to Boston and New York this Fall.  In addition, they’re planning on putting on a one-day “master class” of sorts showcasing UK offshore wind expertise here in the U.S.  Invitation-only, and for those who are lucky enough to get the invite, it should prove to be great content.  For more detail, Rob is at rob.dietel@fco.gov.uk.

Should you hire a veteran or wean & train when building a growth-stage company?

[originally written for Mass High Tech]

In our role as executive search consultants for growth-stage companies, one of the questions that seems to continually vex the CEO is how best to build out their team.   This question often narrows to a discussion around whether it would be better to hire a senior level person first in each of the key functional roles in the organization chart, or rather to hire a more junior level person and hire at a higher level once the company has built up some “traction.” For our purposes, traction can be defined as any or all of a number of indicators, including revenue, funding, or product development milestones.

Short answer, “It depends…”

When asked this question, the CEOs and venture capitalists we talked to universally responded, “It depends….” So then the question became, “On what?”  The answers came back and included the following key variables to balance when trying to decide on whether to hire high or low when you first fill a key position in your early-stage venture—

• • Funding—Money is certainly a gaiting factor for most early-stage companies, and often the largest line item on the P&L is salaries & wages.  Putting in a leadership team too early all at cash compensation that runs north of $150,000 can certainly create a net-cash-burn that would rival the bubble days.   However, “talented people hire talented people,” says Lou Volpe, Managing General Partner of Kodiak Venture Partners.   And talent doesn’t necessarily mean ‘experienced.’ Talent alone is usually less expensive.”
• • Composition of the Incumbent Team— You need to have a balanced team.  Companies are often referred to as “engineering culture,” or sales, or finance-driven.  This speaks to an inherent imbalance in the leadership team.  Kodiak’s Volpe emphasized that, “you need to think of the entire picture, the entire team.  You need to have it balanced.  If you have too much strength in one function, you’ll be out-of balance and the company will suffer accordingly.”
• • Stage of Company— If too early-stage a company, it may be difficult to attract the world-class talent you need.   This conflicts to some extent with the current thinking today popularized by Jim Collins in his book, Good to Great.  In one of the areas Collins explored with the “great” companies he studied, he and his team learned that these companies focused on “getting the right people on the bus,” then deciding where they were going to drive it.  David Power, a Partner at Fidelity Ventures, qualified Collins’ observations, saying, “If you’re a charismatic enough leader, you might be able to get everyone on the bus BEFORE you start to drive, but every company doesn’t have that privilege, especially when young, and often capital-constrained/higher-risk.  You need to be able to give talented executives that you are seeking to attract some general direction, to be able to explain to a ‘hire-high’ A-player why the company and role should have great appeal to the candidate.”
• • Which Function It Is — There are certain functions in an early-stage company where hiring the best is critical early on.  One such critical area is hiring into the leadership roles responsible for the product development in the company—engineering in the case of technology product, or science in the case of biotechnology/life sciences.  CEO Tuan Ha-Ngoc  said that it was critical for Genpath’s success to get the best Chief Science Officer they could find, and they did.   One of the VC’s commented however that the finance function is a perfect example of where hiring low is often the right thing to do—the company only needs a part time finance person at its earliest stages, then a controller later on, and then if the company is looking to go public, a world class CFO.
• • Speed of Anticipated Growth— If the company is anticipated to grow slowly, it is possible that a person can grow in parallel with the company.  However, given the often-cannibalistic nature of technology and sciences companies, “slow” is often not an option due to fears of product obsolescence, time limits on patents, or pure competitive pressures.    Globespan’s David Fachetti put it clearly, saying, “Hire higher for fast growth companies.  The opportunity will grow into the people, rather than the people grow into the opportunity.  Talented and experienced executives will bring up the level of the opportunity to meet their needs, and in so doing will accelerate the company’s growth.”
• • Price point of Product /Service— Enterprise software or very expensive hardware sold into the C-levels within the Global 2000 may put pressure on the upside of the high/low spectrum.  Kodiak’s Lou Volpe feels that if price-points are high, it is likely the company will need more senior/experienced talent to get it to market.

Universal Truths

All those interviewed agreed on a number of best practices.  The one that stood out most is the need to hire what was referred to as “quality.” There are two primary axes on candidate qualifications briefly mentioned earlier—the first is quality or “talent,” and the second is experience.  If you hire someone with both, this defines the “hire high” approach.  If you hire someone with only quality, but less experience, it points to the “hire low” approach.

Hire quality

Those we spoke with also included several other must-have characteristics further define “quality.”  Fidelity Ventures’ David Power ticked off the first four:

• • Motivation
• • Intelligence
• • Integrity
• • Ability to produce results

Joel Rosen, veteran CEO and former venture capitalist  at Charles River Ventures added two more:

• • Passion about the business
• • Cultural fit with the rest of the team

One other CEO punctuated the list:

• • Work ethic

Though no doubt there are many more, these rose to the top of the list when trying to describe what “quality” in a hire looks like.

Hire experience

The other half of our working definition of “hiring high” we’ve termed earlier as “experience.”  David Fachetti at Globespan Capital articulated four key areas he probes to determine whether candidates he interviews have what he defines as experience:

1. 1. Lifecycle experience: prior experience at a similar stage of company development
2. 2. Domain experience:  prior experience in the same industry sector as the current company
3. 3. Functional experience: prior experience playing a similar functional role (marketing, sales, technology, finance, etc.)
4. 4. Relationships experience:  has the individual worked with others on the team before?

Don’t skimp when it comes to Leadership experience

One more key experience criterion, especially when “hiring high,” is leadership experience.  One CEO emphasized that, “experience and skills aren’t a surrogate for leadership.  If you’re going to be growing a team, you’ll fail without it.”

Determine where you need your best gene pool

Another common refrain was that–in an early stage company–there are at least three key roles where you want to hire high, rather than low.  Dave Fachetti, Principal at Globespan Capital Partners, summed it up, saying, “For a company to have a solid foundation for growth, bench strength needs to exist at the highest functional levels in technology (VP Engineering/CTO), sales, and the senior P&L role of CEO.  Scott Griffith, Zipcar CEO emphasized that each company can differ, so “get the strategy right, and THEN hire high into the key stress points of that strategy.”

One qualifier made by Genpath CEO Tuan Ha-Ngoc was the impact of the differences between technology companies and life sciences companies.  In pure technology companies, there is an additional emphasis on the importance of hiring a high level of experience into the position where the technology meets the customer, someone who has the pulse and understanding of the market into which the technology will be selling.    In life sciences, the pain of disease is more often self-evident, where technology can sometimes mistakenly be developed for technology’s sake, a “build it and they will come” approach.

Make sure executives can “zoom out and zoom in”

The individual has to be able to both lead a function and do the function.  In other words, if the decision is made to hire a VP Sales, that VP Sales has to be able to “carry the bag” and actually do the selling, as well as hire, train, motivate, and manage a sales force when the time comes.    Similarly, an early-stage VP Engineering should be able to code as well as architect early on, until more hands can be hired.  Early on at Yahoo!, the company determined that one of the key hiring criteria for any employee was that they could “zoom in and zoom out.”   Every new hire had to be able to think strategically at the 50,000 foot level, but also be able to go back to ground-zero and execute the strategy.   Zipcar’s Griffith—a licensed airplane pilot—added, “You have to be a pilot, willing to get under the plane and check all the equipment yourself, take off, navigate, AND safely land in order to get successfully from point of origin to destination.”

Biases & Cautions

Not surprisingly there were biases that had formed from the individual operating experiences of each CEO or VC with whom we talked.   And interestingly, despite these biases, many gave examples of a hiring circumstance that ran counter to their bias that worked out particularly well, or a hire that fit their bias that failed.   Following are some of the biases and cautions that stood out.

If you’re the CEO, don’t hire low in an area just because it’s your functional strength

There was a great deal of alignment on this issue, and it’s a chronic mistake the venture capitalists we talked to saw in their portfolio companies.   David Power at Fidelity Ventures elaborated saying that “If a CEO hires a weaker player into a function where that CEO has expertise, say the marketing function, the CEO ends up still managing marketing instead of doing what the CEO should be doing—running the company.  You want to hire at equal levels across the functional spectrum.”  Joel Rosen at Charles River Ventures added, “younger companies don’t have a lot of training infrastructure.  The company is running too fast to have the leeway to train much.  Although this isn’t a law of nature, the biggest gaiting factor to growth is often bandwidth, particularly that of the CEO.”

Don’t hire talent too late

Genpath CEO Tuan Ha-Ngoc put it simply and elegantly—“It is rare that the company fails because you hired high-caliber talent too early.  It’s usually that the company hired too late.”

If you hire high, think about assigning multiple roles

One of the ways you can often get top talent in early-stage companies is to offer multiple roles that will allow the higher-level executive an opportunity to stretch their wings.  Lou Volpe at Kodiak added, “If hiring a senior engineering executive early-on, think about giving them QA, support, and/or manufacturing, even product management.”

The probability of a successful high/low hire is predicated on the clarity of the task

Put another way, the murkier the goals, strategies, and tactics of a particular functional area, the more you will bias your hiring toward the high side of the spectrum of experience.  Conversely, if the responsibilities of the position are well defined and clear, a lower-hire might be just the right fit.  As EquipNet CEO Roger Gallo put it, “Is the hire going to be focused on fulfilling known initiatives,

or rather creating and forging entirely new ones?”

Think about making a “high-low sandwich”

To this point, no mention has been made of the obvious question when talking about whether to hire high or hire low—what about “hiring in the middle”?  Kodiak’s Lou Volpe admits a bias to a combination approach of hiring a low with a high—“Hire high, and then do a step function, and hire low.  In sales for example, hire the VP, and then hire one or two lower-level individual contributors, one or more of which can be step-up candidates into the middle role of manager or director further down the company development cycle.”

What about hiring high/low when it comes to hiring the CEO?

This question is complex enough to support itself as a single topic of discussion with the venture capitalists and CEOs we consulted.  However, Fidelity Ventures’ David Power listed three circumstances where hiring a step-up/“low” candidate into the CEO position can work—

1. 1. When a particular functional area is important to the stage of company growth (hiring a VP Sales or VP Marketing into the CEO position when the company is just entering its revenue stage)
2. 2. When continual technological innovation/engineering is inherent to an industry sector (hiring a VP Engineering or CTO into the CEO position because of the pressures for recurring and sustainable technology innovation)
3. 3. When you can get someone who is traditionally “out of reach” (hiring a superstar VP level candidate into the CEO position because a step-up is the only way you can attract that particular talent)

With all of the above thoughts on best practices regarding hiring for early-stage companies, an image formed to sum up some of the wisdom of the CEOs and VCs we consulted.   Perhaps it’s not too different from how many parents buy clothes for their fast growing child—you pick the color and the style, and then have them walk up the rack trying on increasingly larger sizes until the piece of clothing actually falls right off.  You then step it back one size, and buy that one.   It’s just small enough that it can be worn now, but it leaves plenty of room for future growth.

I have it on good authority that  June has been declared New England Innovation Month, per Scott Kirsner who has been tireless tender of the innovation flame here in New England for years now (http://www.boston.com/innovation).  See the growing list of June events at http://neinnovation.com.

In honor, a few thoughts follow on Innovation in New England.  First, a pointer to a related concept, called National Entrepreneurs’ Day to recognize what entrepreneurs do for this country.  It’s an idea sparked by a fellow New Englander, David Hauser, founder & CEO of successful tech start-up Grasshopper.  The date being requested of the Obama administration happens to be the first day of spring each year.  [Coincidence that the French word for “start up” also references the spring season–“jeune pousse,” loosely translated as “young sprout” or seedling).

See the video clip below for serious entrepreneurial inspiration, and the other link to add your John Hancock (yes, yet another famous New England innovator) to the virtual petition.

* Killer link for entrepreneurial inspiration– http://grasshopper.com/idea

* Link to petition– http://www.entrepreneursday.org/dh

Now, back to June’s month-long celebration of innovation.   Indeed, New England  has a storied innovation past.  However,   what may begin as a strength in our region can at times turn to weakness, the metaphorical double-edged sword.   I’ve penned a wish list of five ideas for innovation here in New England along that thematic refrain, akin to “innovation on innovation”:

• #1 “Coopetition” in New England to foster national visibility
  New Englanders are known for their fierce independence and self-reliance.  We needed this when we came over as settlers 300+ years ago and put our MacGyver-esque skills to the test to survive (note, MacGyver was no doubt was an Irish immigrant from good New England pioneering stock).  It’s been said that unless you can trace your lineage to the Mayflower, you’re still considered an outsider.  New England has never been known for leaving fresh-baked pies for the neighbor who just moved in next door.  In fact, at times, neighbors live next to neighbors for years without getting to know each other, all in the name of “independence” and a desire to not meddle in others’ affairs.  However, New England could benefit a great deal if we pulled together and collaborated just a wee bit more.  Example, Peter Rothstein, recently named Director of the New England Clean Energy Council, has been driving for both State and Federal government resources (Department of Energy and other), to fund the concept of a “Regional Consortium” that would bring together all the components of the cleantech ecosystem in New England in a thoughtful, harnessed approach.    The only way New England can achieve this national recognition (and funding) is via collaboration.  OK, just to prove to hardy New England stock, we’ll call it “coopetition” just to retain a bit the independence streak that runs so deep up here.

• #2 Greater sense for openness for new ideas/ways of doing things
  New England also has a wonderful sense of tradition—Mayflower, Plymouth Rock, the Boston Marathon, Red Sox, clam chowder… we’ve pioneered our fair share of “we were first to….” And “we have the oldest of….”  I’d like to see us bring back a bit more of the revolution versus  evolution.  A bit more General George Washington and Lexington/Concord derring-do, rather than what has grown to be our reputation as conservative  in all things “blue sky”-oriented.  Wouldn’t it be great if we didn’t have to wait for the imprimatur from an MIT lab or a Harvard Business School professor before we tried something new?  New Englanders are possessed with pedigree.  And until something has been anointed with pedigree pixie dust, an innovation often languishes in ignominy.

• #3 Be more “what you know” versus “who you know”:
  As an outgrowth of #1 and #2 above, New Englanders often suffer from an acute case of “who you know.”  This to some extent is a derivative of the circular logic involving #2 above on pedigree.   Despite our reputation as the nexus of sophistication and erudition, New England seems to grow more and more insular in letting outsiders into board rooms as well as bar rooms.  New England, despite being the original crucible of diverse cultures, has homogenized. Amazing ideas and innovations come from equally surprising and diverse sources.  One of the best examples of “what you know” is exemplified in one of my favorite recent Malcolm Gladwell articles in the New Yorker Magazine (dare we say also a New England masthead), chronicling a Silicon Valley entrepreneur from India who heretofore knew nothing about the sport of basketball, who—when tasked with coaching his daughter’s middle school basketball team—innovated game strategy to turn a weakness into a strength and a last place team into a near division winner (see http://www.bostonsearchgroup.com/blog/type-leaders-required-to-outpace-competitors-in-recovering-economy/ )

• #4 “Hold” vs. “Fold” or “Sold”
  OK, so I’m not pioneering this idea, but if imitation is the highest form of flattery, I’m a big fan of this growing mantra in the innovation community here in New England that goes like this.  Massachusetts used to have an incredible set of tech & science crown jewels:  in biotech, Genzyme, Biogen & Millennium Pharma.   In tech, companies in hardware and systems like Data General, Digital, Wang, 3COM, and Banyan Systems.  In software & Internet the likes of Lotus & Lycos.  However, over the years, these companies have either been sold or forced to fold.  One of the few remaining companies embracing the “hold” mentality is EMC, preferring to buy others than sell themselves out.  However, just one EMC, or even a handful more doesn’t make for a robust, sustainable innovation ecosystem.  Innovation can metaphorically be cast in the same light as combustion– that combination of spark, oxygen and fuel that powers innovation and drives creativity.  Spark is the new idea, fuel is the money provided from investors in the idea.  And oxygen is the people who take the idea and the money, the business-saavy entrepreneurs who partner as the steel to the innovator’s flint to spark the novel idea, tech innovation, or scientific breakthrough.  I wish we were making more oxygen in New England.  This type of oxygen only comes from the talent that grows up and makes small companies into big companies.  These bigger companies serve as a training ground for the next generation of entrepreneurs to cut their teeth, get their training, build their network.  These larger companies offer entrepreneurial training wheels.  When we sell companies too early, they never get the chance to develop a critical mass of next generation talent who can apprentice at the knee of others and with greater security to make mistakes without having each decision be a bet-the company-one that risks putting the company in mortal peril.  When there is no larger company safety net, fewer young talents practice jumping into the uncertainty of innovation acrobatics, often key experiences required to be able to drive younger companies to success later in their innovation careers.

• #5 Create a “Celebrate the student Week”
  I’ve always been in awe of many of the Asian countries who celebrate things that we in the U.S. might find odd.  I believe they have a day that celebrates children.  And a day that celebrates the elderly wise ones in their communities and cultures.  There is likely no region in the U.S. that has more undergraduate and graduate students than New England.  And these students are the equivalent to our regional “innovation fountain of youth.”  Undergrads, Masters students, PhDs, Post-docs, Fellows.    I wish we could celebrate them.  What better time to do it than during New England Innovation Month.  Make them feel welcome.  Give them social stature to counterbalance the grumblings around U-Haul vans that descend like locusts in late August, or parties that get a bit too raucous.   New England students should be lauded.  Perhaps a regional “student innovation awards” as capstone to this celebration.   OK, at minimum, a free scoop from yet another New England innovation legend, Ben & Jerry’s.  A  scoop of a new flavor in their honor, “College Cram Crunch.”