LIFE SCIENCES SECTOR TREND REPORT

Transcription

1 We are pleased to present the 2013 VC Executive Compensation Survey Trend Report for Life Sciences Companies. The 2013 VC Executive Compensation Survey was sponsored by the following Venture Firms: Accel Partners Element Six Ventures Lightspeed Venture Partners Shasta Ventures Andreessen Horowitz Emergence Capital Partners Matrix Partners Sigma Partners August Capital Fontinalis Partners Mayfield Fund Stripes Group LLC Balderton Capital Foundation Capital Menlo Ventures Third Rock Ventures Battery Ventures Foundry Group Morado Ventures Trident Capital Bay Partners Greylock Partners Morgenthaler Ventures Trinity Ventures Canaan Partners Hearst Ventures New Enterprise Associates True Ventures Carmel Ventures Highland Capital Partners Norwest Venture Partners Union Square Ventures Charles River Ventures Hummer Winblad Venture Partners OpenView Venture Partners US Venture Partners Costanoa Venture Capital Index Ventures Opus Capital Partners VantagePoint Capital Partners Crosslink Capital InterWest Partners Polaris Partners Venrock Delphi Ventures Jafco Ventures Redpoint Ventures Versant Ventures Draper Fisher Jurvetson Khosla Ventures Scale Venture Partners 212 Ltd. Earlybird Venture Capital Kleiner Perkins Caufield & Byers Sequoia Capital Through the efforts of sponsoring venture firms and Advanced-HR, Inc., survey data was collected from 154 private, venture backed life sciences companies between early August 2013 and mid-september Survey participation in 2013 decreased -3% from the 159 companies in the 2012 life sciences sector survey. This trend report was a collaborative undertaking between Advanced-HR, Inc. and PwC. It is intended to provide an overview of company metrics, company practices and changes in executive compensation from 2012 to We wish to thank those whose efforts went into producing the 2013 VC Executive Compensation Survey Trend Report by providing data analysis, trend evaluation, and assessment of company practices. This report utilizes data from Advanced-HR s Option Impact system. The information contained in this report may not be distributed, either in part or in whole, to any company or person not involved with efforts undertaken through the 2013 sponsoring venture firms or their participating portfolio companies. All data contained in this report is subject to copyright and may not be distributed to unauthorized users without written consent from Advanced-HR, Inc. or PwC.

2 Survey Demographics The survey of executive compensation in private, venture backed life sciences companies recorded data in effect at the time of reporting between early August 2013 and mid-september The survey was completed by 154 companies that submitted company metrics and compensation information for 907 executives globally, an increase of +4.6% in surveyed executives compared with The 2013 report provides compensation data for executives based on their founding status with categorization included for company, industry, region, stage, capital raised, funding round, revenue and number of employees. In addition, companies provided information about their total employee ownership as a percentage of the fully diluted shares. Regions The 2013 regional breakdown for the United States shifted only slightly as a percentage of the survey population compared to The table below shows the regional distribution for the 2013 survey and the graph shows a comparative distribution between 2013 and Region Breakdown REGION: % of Survey Population Count % Total SF Bay Area % North East % So. California % Central/Midwest % Mid-Atlantic % South East 7 4.5% Pacific NW 2 1.3% South West 6 3.9% No. California (Not SFBA) 1 0.6% Mountain 2 1.3% Outside the US 4 2.6% The map below shows the states comprising each geographic US area in the 2013 survey. Page 1

3 Industries The distribution of companies by industry shifted slightly in 2013 as compared to 2012 when looking at industry as a percentage of the survey population. The table below shows industry distribution for the 2013 survey and the graph shows a comparative distribution between 2013 and The largest change was a decrease of -6.9% in the Biotech & Pharmaceutical companies with the corresponding increases being fairly evenly distributed across the other industries Industry Breakdown INDUSTRY: % of Survey Population Count % Total Med. Device & Diagnostic % Biotech & Pharmaceutical % Healthcare Services % Healthcare Info Tech % Other Life Science 4 2.6% Stage of Development The distribution of companies by stage of development for the 2013 survey shifted slightly from The table below shows developmental distribution for the 2013 survey and the graph shows a comparative distribution between 2013 and Stage of Development Breakdown STAGE OF DEVELOPMENT: % of Survey Population Count % Total Early/Product Definition 5 3.2% Product Development % Product in Beta 2 1.3% Clinical Trials % Shipping Product % Profitable % In 2013 there was a decrease of -5.0% in the Early/Product Definition stage with a corresponding increase of +4.8% in the Shipping Product stage when compared with 2012 Stage of Development. Funding The distribution of companies by Funding Round shifted to later stage funding in 2013 as compared to There was a decrease of -7.0% in Post Series B companies and a corresponding increase of +8.2% in companies with 5+ Rounds of Funding. The distribution of companies by Cumulative Capital Raised in 2013 shifted to show a general increase in amount raised when compared to 2012 data. In the 2013 data distribution, there was an increase of 12.7% in companies raising capital of >$75M - $100M and increase of +0.4% in companies raising capital of >$100M. There was a corresponding drop of -14.7% in survey distribution for companies raising capital of >$25M - $50M. Page 2

4 The tables below show funding round and capital raised distribution for the 2013 survey and graphs on the following page show comparative distribution between 2013 and Funding Round Count % Total 2013 Capital Raised ($M) Count % Total Seed Funding 1 0.6% >$0M - $10M % Post Series A % >$10M - $25M % Post Series B % >$25M - $50M % Post Series C % >$50M - $75M % Post Series D % >$75M - $100M % 5+ Rounds of Funding % >$100M % Growth Capital Only 5 3.2% FUNDING ROUND: % of Survey Population $M CAPITAL RAISED: % of Survey Population Revenue and Employees Survey distribution for revenue in 2013 saw a decrease of -5.7% in Pre-Revenue companies to a somewhat evenly spread distribution in categories for companies generating >$10M. Similarly, the distribution for headcount groupings shifted slightly with a decrease of -10.1% in companies with 50 or less employees and a corresponding increase that was somewhat evenly distributed in companies with 51 or more employees. The tables below show revenue and headcount distribution for the 2013 survey and graphs show comparative distribution between 2013 and Revenue ($M) Count % Total 2013 Headcount Count % Total Pre-Revenue % < % >$0M - $10M % % >$10M - $25M % % >$25M - $50M % % >$50M - $100M 9 5.8% % >$100M 2 1.3% > % $M REVENUE: % of Survey Population EMPLOYEES: % of Survey Population Page 3

5 Employee Ownership The table below shows 2013 median (50 th percentile) ownership as a percentage of company fully diluted shares by founder, investor and employee groups for five developmental cuts of survey data. OWNERSHIP All Life Sciences Industries Both Founding and Non-founding CEOs # Cos Median # Employees % Cos w/ Founding CEOs or No CEO Median % Founder Median % Investor Median % Employee* Pre-Revenue Companies Post Series A % 9.6% 74.0% 15.8% Post Series B % 2.1% 79.7% 15.1% Post Series C, D, % 2.3% 80.3% 15.8% Companies with Revenue Shipping Product % 3.8% 78.6% 16.3% Profitable % 9.3% 70.7% 17.2% * Employee ownership includes unissued options In 2013, overall employee ownership as a % of company fully diluted shares was comparable to 2012 as shown on the graph Employee Ownership by Stage in all but Profitable companies. In the Profitable stage, companies reported an increase of +4.78% in employee ownership. EMPLOYEE OWNERSHIP BY STAGE % Fully Diluted Shares As shown in the second graph, Founding CEOs on Staff by Stage, there was an overall decrease of -6.0% in founding CEOs for the Post Series A and Post Series C Pre-Revenue companies. Companies in the Post Series B, Pre-Revenue category and the Shipping Product category were mainly unchanged while companies in the Profitable category had an increase of +4.8% founding CEOs. FOUNDING CEOs ON STAFF BY STAGE A new trend is emerging where employee ownership in later stage companies is beginning to operate independently of founder status. Page 4

6 Compensation Trends Survey Population A subset of the more common survey positions was reviewed for changes in the 2013 survey population as compared to the 2012 survey population. In 2013, the Chief Product/Strategy position was added to the survey and this position was combined with the VP of Product/Strategy for trend purposes in comparing to 2012 data. The 2013 survey data was comprised of 87% non-founders and 13% founders, representing an increase of +3.0% in the total non-founder population compared to the 2012 survey data. The table below shows the total count and percent of non-founding positions for the 2013 survey and the graph shows a comparative distribution between 2013 and Select Non-Founder Jobs as a Percent of Total Count SELECT NON-FOUNDER POSITIONS: % of Survey Population Survey Title Total Count % NF Chief Executive Officer % Chief Operations Officer 23 74% VP Operations 35 97% Chief Medical Officer 39 85% VP Clinical 62 97% Chief Scientific Officer 41 68% VP Research 71 92% Chief Financial Officer 73 99% VP Finance % Chief Marketing Officer 8 100% VP Marketing 39 97% Chief Revenue Officer 7 100% VP Sales 54 98% In 2013, the population of non-founder positions was fairly comparable to 2012 with the noted exception of an increase of +60% in the Chief Marketing Officer position (n=8 in 2013 versus n=5 in 2012). SELECT NON-FOUNDER POSITIONS AS A % OF SURVEY POPULATION: Page 5

7 Cash Compensation Non-Founders When comparing 2013 to 2012 data for the subset of most common non-founding executives, overall base salary was unchanged while total target pay (defined as base salary + target incentive pay) increased about +2.8% overall. The table below shows median (50 th percentile) cash compensation for select non-founder positions in the 2013 survey and the graph shows comparative data between 2013 and All currency was converted to USD for analysis purposes. Select Non-Founder Positions 2013 Median Cash Compensation NON-FOUNDER POSITIONS: MEDIAN CASH COMPENSATION ($K) Base Salary Total Target Pay Chief Executive Officer $350,000 $456,235 Chief Operations Officer $250,000 $330,000 VP Operations $206,800 $245,050 Chief Medical Officer $300,000 $378,750 VP Clinical $235,000 $274,215 Chief Scientific Officer $272,500 $347,375 VP Research $230,000 $267,600 Chief Financial Officer $244,935 $301,787 VP Finance $206,000 $246,086 Chief Marketing Officer $250,000 $308,750 VP Marketing $221,069 $255,715 Chief Revenue Officer $270,990 $400,000 VP Sales $210,000 $290,000 Data is combined for all stages of development and does not necessarily reflect a trend of increasing or decreasing compensation. The aggregate non-founding CEO median (50 th percentile) for cash compensation in 2013 showed relatively little change with an increase of +1.1% in base salary and an increase of +0.9% in total target pay compared to 2012 data. A detailed analysis of 2013 cash compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2013 and Analysis showed the largest change occurred in the Revenue categories where there was an average increase of 4.8% in base salary and +4.0% in total target pay. Non-Founder CEO 2013 Median Cash Compensation By Stage of Development NON-FOUNDER CEO: MEDIAN CASH COMPENSATION ($K) VARIANCE BY STAGE FROM 2012 TO 2013 # CEOs Base Salary Total Target Pay All Companies in Analysis 104 $350,000 $456,235 No Revenue - All 62 $350,000 $448,125 Post Series A, no revenue 15 $340,000 $422,500 Post Series B, no revenue 15 $343,628 $462,000 Revenue - All 42 $350,950 $467,951 Shipping Product 32 $350,000 $456,235 Profitable 10 $364,500 $577,500 Page 6

8 Founders When comparing 2013 to 2012 data for the subset of the most common founding executives, overall cash compensation decreased by -18.0% with a wide variance by position. This may be attributed to different companies comprising the data set in the 2013 survey as compared to the 2012 survey. The table below shows median (50 th percentile) cash compensation for select founder positions in the 2013 survey and the graph shows comparative data between 2013 and All currency was converted to USD for analysis purposes. Select Founder Positions 2013 Median Cash Compensation FOUNDER POSITIONS: MEDIAN CASH COMPENSATION ($K) Base Salary Total Target Pay Chief Executive Officer $313,000 $373,200 Chief Operations Officer $240,000 $322,000 Chief Medical Officer $217,500 $267,500 Chief Scientific Officer $200,000 $212,800 VP Research $186,400 $224,863 Data is combined for all stages of development and does not necessarily reflect a trend of increasing or decreasing compensation. The aggregate founding CEO median (50 th percentile) for cash compensation in 2013 showed a slight decrease of 0.7% change in base salary and a decrease of -3.7% in total target pay compared to 2012 data. A detailed analysis of 2013 cash compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2013 and Analysis showed the largest change in cash compensation occurred in Pre-Revenue companies with an increase of +2.2% in base salary and +18.4% in total target pay. For companies with revenue, there was an overall increase of +3.7% in base salary and an increase of +1.8% in total target pay. Founder CEO 2013 Median Cash Compensation By Stage of Development FOUNDER CEO: MEDIAN CASH COMPENSATION ($K) VARIANCE BY STAGE FROM 2012 TO 2013 Base Total # CEOs Salary Target Pay All Companies in Analysis 44 $313,000 $373,200 No Revenue - All 21 $340,000 $459,000 Post Series A, no revenue 11 $300,000 $300,000 Post Series B, no revenue 2 $338,546 $463,037 Revenue - All 23 $311,000 $356,400 Shipping Product 17 $300,000 $328,953 Profitable 6 $327,500 $438,500 Page 7

9 Equity Compensation Non-Founders Equity compensation for non-founding executives remained relatively consistent and a much smaller variance is typically seen from year to year. When looking at the entire population of executives instead of data by stage of development, data is neutralized and blended equity benchmarks are a reflection of overall survey demographics. The table below shows median (50 th percentile) equity compensation as a percentage of fully diluted shares for select non-founder positions in the 2013 survey and the graph shows comparative data between 2013 and Select Non-Founder Positions 2013 Median Equity Compensation (% Fully Diluted Shares) Total Equity Held Chief Executive Officer 4.61% Chief Operations Officer 1.10% VP Operations 0.51% Chief Medical Officer 0.93% VP Clinical 0.65% Chief Scientific Officer 1.20% VP Research 0.68% Chief Financial Officer 0.96% VP Finance 0.40% Chief Marketing Officer 0.52% VP Marketing 0.59% Chief Revenue Officer 1.01% VP Sales 0.58% NON-FOUNDER POSITIONS: MEDIAN EQUITY COMPENSATION Total Equity Held as a % Fully diluted Shares Data is combined for all stages of development and does not necessarily reflect a trend of increasing or decreasing compensation. The aggregate non-founding CEO median (50 th percentile) for total equity compensation in 2013 showed a slight decrease of -2.4% (about -0.12% of fully diluted shares) compared to 2012 data. A detailed analysis of 2013 equity compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2013 and Analysis showed the largest change occurred in Pre-Revenue companies where there was a decrease of -6.0% in the amount of equity held (about 0.29% of fully diluted shares). Profitable companies showed an increase of +17.3% in the amount of equity held (about +0.68% of fully diluted shares) presumably from an increase in Refresh grant practices. Non-Founder CEO 2013 Median Equity Compensation By Stage of Development (% Fully Diluted Shares) Total Equity # CEOs Held All Companies in Analysis % No Revenue - All % Post Series A, no revenue % Post Series B, no revenue % Revenue - All % Shipping Product % Profitable % NON-FOUNDER CEO: MEDIAN EQUITY COMPENSATION Total Equity Held as a % Fully diluted Shares Page 8

10 Founders Equity held by select founder positions overall generally showed an increase of +0.5% of the fully diluted shares from 2012 to 2013 when looking across positions. The table below shows median (50 th percentile) equity compensation as a percentage of fully diluted shares for select founder positions in the 2013 survey and the graph shows comparative data between 2013 and Select Founder Positions 2013 Median Equity Compensation (% Fully Diluted Shares) FOUNDER POSITIONS: MEDIAN EQUITY COMPENSATION Total Equity Held as a % Fully diluted Shares Total Equity Held Chief Executive Officer 6.17% Chief Operations Officer 4.82% Chief Medical Officer 7.93% Chief Scientific Officer 3.71% VP Research 1.35% Data is combined for all stages of development and does not necessarily reflect a trend of increasing or decreasing compensation. The aggregate founding CEO median (50 th percentile) for total equity compensation in 2013 showed an increase of +11.0% (about +0.9% of fully diluted shares) compared to 2012 data. A detailed analysis of 2013 equity compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2013 and Based on the trends shown, founding CEOs were generally more successful in maintaining their equity positions in 2013 compared to Analysis showed the largest change occurred in Post Series B, No Revenue Companies where there was an overall increase of +89.5% in the amount of equity held (about +5.3% of fully diluted shares). Profitable companies showed an increase of +22.1% in the amount of equity held (about 4.0% of fully diluted shares), presumably from an increase in Refresh or Follow-On grant practices. Founder CEO 2013 Median Equity Compensation By Stage of Development (% Fully Diluted Shares) FOUNDER CEO: MEDIAN EQUITY COMPENSATION Total Equity Held as a % Fully diluted Shares # CEOs Total Equity Held All % No Revenue - All % Post Series A, no revenue % Post Series B, no revenue % Revenue - All % Shipping Product % Profitable % Page 9

11 Performance Stock Performance stock represents the shares or options granted or promised that will be either earned or vested in the future based upon either company or individual performance. It is a subset of the total shares and options held by the executive. The use of performance stock continues its minimal occurrence as a form of incentive compensation for the Life Sciences sector. In 2013, performance stock was utilized by roughly 8.1% of the companies surveyed, which is a significant reduction from the 17.5% of companies who reported using performance stock in The 50 th percentile of performance stock as shown below is approximately equivalent to 15% - 20% of the total equity held by the executive level. Performance Stock Held % of Fully Diluted Shares 2013 Companies Using Performance Stock % Jobs with Performance Stock 25th Percentile 50th Percentile 75th Percentile CEO 8.1% 0.28% 0.52% 1.02% VP Level 4.5% 0.09% 0.19% 0.43% Page 10