life sciences edition executive compensation...non-founder total target cash compensation was up...

Executive Compensation: Insights from the 2013 CompStudy Survey

TECHNOLOGY EDITION

Life Sciences Edition

www.compstudy.com | 2

Today’s moderator

Bryan Pearce Partner, Americas Director, EY

Entrepreneur of the Year, EY

Presented by Park Square, WilmerHale and EY


Today’s presenters

Aaron Lapat Park Square Managing Partner

David Gammell WilmerHale Partner

Kimberly Wethly WilmerHale Partner

John Kim H.I.G. Growth Partners Managing Director


Jeffrey D. Grabow EY Director

Noam Wasserman Harvard Business School Associate Professor, Tukman Faculty Fellow


Today’s agenda

• CompStudy overview

• Current Founder’s Dilemmas research

• 2013 survey – company profiles

• Summary compensation data

• CEO compensation review

• Hot topics and current trends



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 2013:

New options for filtering the data, including company valuation, profitability, CEO experience, and more

Enhanced Board of Directors reporting

Additional printable summary- level charts

CompStudy Overview



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

CompStudy Overview


Life Sciences Survey

2002 2013

168 cos. 256 cos.

Technology Survey

2000 2013

211 cos. 550 cos.


Today’s agenda








Founding

When to Found

Building the Team

Beyond the Team

Exit Dilemmas

New-Venture Hiring

CORE DILEMMAS

Y

Y

Y

Y

Y

CORE FOUNDER

CO-FOUNDERS

INVESTORS, PARTNERS

ALL OF THE ABOVE

HIRES

16,000 founders

THE RESEARCH

6,300 startups

31,000 executives

Kaplan-Meier survival estimate95%, pointwise confidence band shown

l i ti0 50 100

0.00

0.25

0.50

0.75

1.00

.

111223318

7916525335 14 23

6323 4 4

45

3

2

# of months

http://techcrunch.com/2011/03/03/jack-dorsey-twitter-punched-stomach/

It was like being punched in the stomach. ” “

“RICH VS. KING”

RICH

KING

Flop

Rich & King

Small Player

Big Player

Low High FINANCIAL GAINS

CON

TRO

L

Value

Control

N=3,775 IT and LS startups, 2005-2012

6% 15% 17%

14% 15% 15%

12% 4% 3%

Value

Control

N=3,775 IT and LS startups, 2005-2012

For my part, I had rather be the first man among these [lesser] fellows, than the second man in Rome. ”

“

05

101520253035

POST-SUCCESSION EXECUTIVE ROLES

05

101520253035

Source: Wasserman (2008), “Replacing the Founder,” 212 ventures .

• Detailed table of contents • Chapter 1 • Self-assessment survey • “When to Leap” video • Other awesome stuff

NoamWasserman.com


Audience Poll

What is your company’s outlook on the economy over the next 12-18 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. 38% B. 50% C. 13%



Today’s agenda









2013 Survey – Company Profiles

Number of full time employees

Headcount Institutional rounds raised

Number of rounds

Respondent companies were slightly later stage in this year’s survey, with more having raised five or more rounds.

% respondents in this range % respondents in this range

Companies cut by headcount are distributed approximately the same as they were in the 2012 survey.



2013 Survey – Company Profiles


Business Segments

Geography % respondents in this range

Revenue % respondents in this range


2013 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 2012



Audience Poll

What change do you anticipate for base salaries next year?

A. Decrease

B. No change

C. Increase up to 5%

D. Increase between 5% and 10%

E. Increase more than 10%

Webinar poll results: A. 0% B. 25% C. 65% D. 10% E. 0%



Today’s agenda









Compensation data

Founder CEOs received a more substantial raise than their non-founder peers: 2.5% vs 0.8%


Founder cash compensation *Not all positions shown due to lack of founders in certain roles*


Compensation data


Founder current equity holdings, as % of fully diluted shares *Not all positions shown due to lack of founders in certain roles*

On the average, founders of technology companies hold significantly more equity than their life science peers – largely due to the less capital-intensive nature of most technology start-ups.


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



Compensation data Cash compensation – non-founders, 2012 and 2013


Non-founder total target cash compensation was up 1.6% in 2013, down markedly from the 4.8% rate of increase between 2011 and 2012. Many positions saw lower target bonuses in 2013, highlighted by a 4.4% decrease in the target for non-founder CEOs


Compensation data Bonus as a percentage of base salaries – non-founders


% of base salary

On average in 2012, non-founder executives received 65.5% of their target bonuses, up from 60.3% in 2011.


Audience Poll

What percentage of your full time employees have received some form of equity grant?

A. Less than 25%

B. 26-50%

C. 51% – 75%

D. 76% – 99%

E. 100%




Compensation data Equity holdings – non-founder executives


Equity at hire - % of fully diluted shares

% equity owned, fully diluted

Current equity - % of fully diluted shares


Audience Poll

What percentage of the equity in your company is reserved for management, directors and employees?

A. Less than 10%

B. 11 – 15%

C. 16 – 20%

D. 21 – 25%

E. More than 25%




Compensation data

Equity holdings – type of equity vehicles used % of equity grants given by vehicle type



Compensation data Percentage of non-founder executives eligible for severance 63.5% of non-founder CEOs surveyed had some sort of severance package, right around the survey’s historical average of 60%.


% eligible for severance


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



Today’s agenda









CEO compensation review

By number of financing rounds raised By number of full time employees

Non-founder CEO base (1,000s USD) For non-founder CEOs, the number of Full Time Employees a company has is a better predictor of base salary than is the number of financing rounds raised, particularly for smaller companies.



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 rounds raised. More filters can be applied at CompStudy.com

By number of financing rounds raised By number of full time employees



Today’s agenda









Hot topics and current

trends

• Recruiting and retaining top talent in an increasingly competitive market - Founder transitions - Recruiting dynamics - Retention issues

• Compensation differences between earlier and later stage companies

• Alternatives to dilutive equity issuances

• 409A Valuations



Recap • 1-minute recap from each panelist


life sciences edition executive compensation...non-founder total target cash compensation was up...

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