Changing the world – Sirtris Pharmaceuticals

The other day, I saw this 60 Minutes piece on the potentially world-changing work of Sirtris Pharmaceuticals.  Sirtris is developing compounds that attempt to prevent and even possibly treat various diseases of aging, including diabetes, Alzheimer’s, and cancer.  There were acquired by Glaxo Smith Kline in 2008 for $720 mm.  I was fortunate to have played a very small role at this company during the early days, and I wanted to write a bit about it, because it is such a great example of entrepreneurial success.

When I was in my first year in business school at MIT (2004), I was introduced by a friend to Christoph Westphal, who was then working at a venture capital firm.  His reputation as an entrepreneur was impeccable; he already had co-founded and acted as startup CEO for several successful biotech firms including Alnylam (ALNY) and Momenta (MNTA). I asked him if I could work with him for free on any project that he thought might be relevant.  He told me that he was just starting a new biotechnology company that might be an interesting learning opportunity.  That company was called Sirtris Pharmaceuticals.

Christoph started the company with David Sinclair, a professor of Pathology at Harvard Medical School.  David was one of the first scientists to focus on studying the Sirtuin enzymes and is credited with connecting Sirtuin pathway activation to metabolic disorders.  Not only is he working on some of the most amazing science in the world today, he is one of the most charismatic scientists around.  David is someone who will probably win the Nobel Prize someday.  Christoph and David formed the most amazing startup team that I have ever seen firsthand. 

They recruited an world-renowned group of advisors, hired very passionate people to help build out the company, and followed a very focused strategy to essentially become the dominant researcher of the Sirtuin enzymes.

As an intern/consultant, I spent a lot of time shadowing Christoph, David and the leadership team, and I tried to observe and take it all in.  I think that I learned a few key lessons from watching this team in action.

1) Dream Big – Sirtris was formed to attack some of the biggest problems in biotech: longevity, obesity, diabetes, and other metabolic diseases.  They are literally trying to save lives with all that they do.  These target areas also happen to potentially be some of the biggest commerical markets for novel therapeutics. 

2) Envision Going Big – It is critical to have a unifying vision and a CEO capable of rallying support around that vision. Christoph + David = the all-star team, and Christoph is one of the most amazing entrepreneurial CEOs I have ever seen.  I would say Christoph is clearly a Visionary Entrepreneur.

3) Validate – Having some validation that Going Big in your market is possible/plausible really helps Build the Onion. The existence of the French Paradox and the effects of Calorie Restriction, which were pre-existing phenomena, supported the cutting edge research conducted in David’s lab and in the labs of other researchers around the globe.

4) Make sure you have the team and advisory team that can enable you to Go Big: Sirtris recruited to their advisory team such luminaries as Dr. Phil Sharp, Dr. Bob Langer, and many others.

5) Make sure you have the funding and resources you need to Go Big: Sirtris raised a lot of money from leading venture investors and then went public only 3 years after being founded.  They were acquired by GSK, which provides them an even bigger platform to support their efforts to Go Big.

6) Create differentiation: Among other things that they did that made them an incredibly unique and valuable firm, Sirtris devised and executed an incredible IP strategy that made them the clear leader in an emerging field that could Change the World.

With such an amazing success, there were so many things that they did right.  I just tried to highlight a few lessons that I took from the experience.

In all my life, I may never again witness such a passionate group of people working in such harmony toward a goal as great or as big as what Sirtris focuses on.  I feel blessed to have been a junior passenger on the rocket ship, and I am glad that I tried to learn as much as I could from the examples that they set.

Eyes Wide Open: The relationship between venture capitalist and entrepreneur

As I was thinking of writing this post, I was sitting in my hotel room at the Nantucket Conference, a gathering of a small group of entrepreneurs, venture capitalists, and industry professionals, all united by the process of value creation.  Of course it took me a couple extra days to actually get these thoughts down, but here goes.

One of the observations that struck me during my time at this conference is the unique vibe between entrepreneurs and their oft-sought-after investors, the venture capitalists.  For example, there were a few panels that got a little heated when the topic of “common share holder value preservation” came up. 

As with any relationship between groups of people, each is unique.  But at its most general, the dynamic between entrepreneurs and venture capitals can be described in my opinion by one word: imbalance.

What do I mean by “imbalance”?

In general, the relationship going in isn’t equally weighted.  Why?

1) Venture capitalists go into to deals with their Eyes Wide Open.  They have likely studied the space and other companies in the space.  They’ve backed companies before.  Venture capitalists look at more deals in a month than a typical entrepreneur will work on in a lifetime. 

2) It can take an experienced venture capitalist a few minutes to do a first-pass evaluation of a deal (based on team, market, idea, timing, overall opportunity) and get a sense for next steps, but it takes an entrepreneurial team years to build products, hire and shape a company, devise a strategy, and create real sustainable value. 

3) Venture capitalists become EXPERT at evaluating deals.  Few entrepreneurs are “expert” at raising money.

4) Venture capitalists are experts at negotiating venture financing deals.  They’ve seen many different types of deal structures and have experience with what works and what doesn’t work.  Entrepreneurs have some experience and if they are lucky they have a sense of what they’d like to see happen.

5) Deals typically have “down-side risk protection” built in to protect the investors’ downside in case things don’t go well.  Entrepreneurs’ only downside protection is the fact that it’s usually not all their money at risk 🙂

6) The venture capitalist will likely join your board.  The board’s main responsibility will be to fire/hire the CEO.  If this position is currently held by you, recognize what you are getting yourself into.

So what can you as an entrepreneur do to get the relationship to point where there is more balance?

1) Go in with the proper expectations.  You are asking someone else to put up the money for you to pursue your dream.  That money isn’t free and it’s not an obligation that you take it; it’s a privilege (as long as you choose the right partner).

2) Build the onion.  Get the best advisors to advise you and help you figure things out.

3) Get initial support and be in a strong position to demonstrate progress.  Early angel investors can be great for giving you some headroom while you are prototyping or getting initial customer traction.  More traction = more leverage = more interest in your deal = more competition for your deal (even in this environment, some deals are getting done) = better deal for your company.

4) Realize that if things go well, everyone will (hopefully) be happy, but if things go badly, everyone will lose out.

5) Understand venture capital deal terms and focus on the totality of the deal, not just the valuation (preference, participation, drag along, board voting, board composition, option pool, etc).

6) Have a great lawyer + advisors who can review all your term sheets and deal terms.

7) If possible, be personal friends with a venture capitalist (who you will never pitch for money) so you can ask for inside tips on the process and on deals etc.

8) Consider yourself fortunate to be in the position you’re in, and know that the VC’s who back you will be lucky to have backed you!

9) Be high-integrity and sincere always.  Depending on which type of entrepreneur you are, you’ll likely be seeing these folks again and again. You’ll probably have multiple chances at bat.  Entrepreneurs everywhere will be rooting for you!

Not sure if this is helpful, but the imbalance in the relationship between entrepreneur and VC is real.  If you can go in with your Eyes (not) Wide Shut, you’ll have a better shot at having a good outcome.

– brian