Executive Compensation: Insights from the 2014 CompStudy Survey of Venture-Backed Companies

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1 Life Sciences Edition Executive Compensation: Insights from the 2014 CompStudy Survey of Venture-Backed Companies LIFE SCIENCES EDITION

2 Today s moderator Bryan Pearce Global Leader EY Entrepreneur Of The Year and Venture Capital 2

3 Today s presenters Tom Flynn SV Life Sciences Managing Partner Erik R. Lundh Park Square Managing Partner William P. Murphy Ernst & Young Principal Rosemary Reilly WilmerHale Partner Noam Wasserman Harvard Business School Associate Professor, Tukman Faculty Fellow Kimberly Wethly WilmerHale Partner 3

4 Today s agenda CompStudy overview Current Founder s Dilemmas research 2014 survey company profiles Summary compensation data CEO compensation review Hot topics and current trends 4

Access is also available for purchase New features for 2014: Ability to filter Board of Directors data

5 CompStudy Overview CompStudy.com All reporting now done on our online, fully interactive platform, located at CompStudy.com. Participants in the annual survey receive free, year-long access to the reports. Access is also available for purchase New features for 2014: Ability to filter Board of Directors data by company type and size More granular industry categorizations Enhanced company Scorecards 5

6 CompStudy Overview Technology Survey cos. 534 cos. Life Sciences Survey cos. 222 cos. The CompStudy.com Survey Data collected in every survey includes: Cash compensation and equity Founding team Financing history Company size Products/revenue Equity programs Executive backgrounds Board of directors 6

7 Today s agenda CompStudy overview Current Founder s Dilemmas research 2014 survey company profiles Summary compensation data CEO compensation review Hot topics and current trends 7

9 Most companies fail. It s an unsettling fact for bright-eyed entrepreneurs, but old news to start-up veterans - New Venture Labs

10 CAUSES OF FAILURE IN VC-BACKED VENTURES

11 Product devt. Functional mgmt. Market probs. 35% 65% PROBLEMS

12 CORE DILEMMAS Founding Preparing Yourself Building the Team New-Venture Hiring Beyond the Team Exit Dilemmas Y Y Y Y Y CORE FOUNDER CO- FOUNDERS HIRES INVESTORS, SUCCESSORS ALL OF THE ABOVE

13 THE RESEARCH 6,300 startups 16,000 founders 31,000 executives

15 Kaplan-Meier survival estimate 95%, pointwise confidence band shown # of months l i ti

17 Younger companies Older companies No founder control Full founder control

18 Company value

19 Detailed table of contents Chapter 1 Self-assessment survey When to Leap video Other awesome stuff NoamWasserman.com

20 Audience Poll What is your company s outlook on the economy over the next months: A. Things are good and getting better B. Still receiving mixed signals from the market C. Growing increasingly concerned about a downturn Webinar poll results: A. 52% B. 41% C. 7% 20

21 Today s agenda CompStudy overview Current Founder s Dilemmas research 2014 survey company profiles Summary compensation data CEO compensation review Hot topics and current trends 21

were more companies with 1-20 FTEs this year; 70.6% vs 61.

22 2014 Survey Company Profiles Institutional rounds raised This is the first year companies with no institutional money raised have comprised more than 10% of the study cohort Headcount There were more companies with 1-20 FTEs this year; 70.6% vs 61.6% last year % respondents in this range % respondents in this range Number of rounds Number of full time employees 22

23 2014 Survey Company Profiles Geography % respondents in this range Revenue % respondents in this range Business Segments 23

24 2014 Survey Company Profiles Founder status - % of role held by founders vs. non-founders Participants had essentially the same founder/non-founder split by position profile as in

25 Audience Poll What change do you anticipate for base salaries next year? A. Decrease greater than 5% B. Decrease up to 5% C. No change D. Increase up to 5% E. Increase over 5% Webinar poll results: A. 0% B. 0% C. 13% D. 78% E. 9% 25

26 Today s agenda CompStudy overview Current Founder s Dilemmas research 2014 survey company profiles Summary compensation data CEO compensation review Hot topics and current trends 26

27 Compensation data Founder cash compensation *Fewer positions shown due to lack of founders in certain roles Founder CEO salaries were up 3.5%, in line with the 3.3% increase for their non-founder peers 27

28 CompStudy Overview Percentage growth in year-over-year non-founder total target cash compensation 28

2% in 2014, up from the 3% increase between 2012 and 2013.

29 Compensation data Cash compensation non-founders, 2013 and 2014 Non-founder total target cash compensation was up 4.2% in 2014, up from the 3% increase between 2012 and It also beat out non-founder CEOs at technology companies, whose cash compensation increased 3% in

69.7% of their target bonuses, up slightly from 67.

30 Compensation data Bonus as a percentage of base salaries non-founders On average in 2013, non-founder executives received 69.7% of their target bonuses, up slightly from 67.8% in 2012, and above the historical average of 66%. % of base salary 30

31 Compensation data Equity holdings non-founder executives Current equity - % of fully diluted shares Equity at hire - % of fully diluted shares 31

32 Audience Poll What percentage of the equity in your company is reserved for management, directors and employees? A. Less than 10% B % C % D % E. More than 25% Webinar poll results: A. 28% B. 38% C. 28% D. 0% E. 7% 32

33 Compensation data Equity holdings type of equity vehicles used % of equity grants given by vehicle type 33

5% of non-founder CEOs surveyed had some sort of severance package, down

34 Compensation data Percentage of non-founder executives eligible for severance 67.5% of non-founder CEOs surveyed had some sort of severance package, down from the survey s historical average of 73%. No other position exceeded 50% participation. % eligible for severance 34

35 Compensation data Length of severance packages granted (months) As the median numbers suggest, the length of nearly every severance package granted is a multiple of three months 35

36 Compensation data Boards of directors average composition % of total board seats Directors Chairpersons 36

37 Compensation data External board members current equity % in this range 37

38 Today s agenda CompStudy overview Current Founder s Dilemmas research 2014 survey company profiles Summary compensation data CEO compensation review Hot topics and current trends 38

39 CEO compensation review Non-founder CEO base (1,000s USD) CEO salaries are most highly correlated with the number of rounds raised and headcount for the median CEO. At the top end, company size and maturity appear to have little effect on cash comp. By number of financing rounds raised By number of full time employees 39

40 CEO compensation review Non-founder CEO current equity (% of fully diluted shares) Headcount is a slightly better predictor of non-founder CEO equity; there is a lot of variability in the data when sliced by financing status. This is partly attributable to difference between therapeutics companies and all others in the survey; more filters can be applied at CompStudy.com By number of financing rounds raised By number of full time employees 40

41 Today s agenda CompStudy overview Current Founder s Dilemmas research 2014 survey company profiles Summary compensation data CEO compensation review Hot topics and current trends 41

42 Hot topics and current trends Recruiting and retaining top talent in an increasingly competitive market - Founder transitions - Recruiting dynamics - Retention issues The impact of a hot IPO market on team dynamics and compensation Trends in equity vehicles being used, and the impact on compensation at exit 42

43 Recap 1-minute recap from each panelist For more information, please visit

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