LIFE SCIENCES SECTOR TREND REPORT

Transcription

1 We are pleased to present the 2014 VC Executive Compensation Survey Trend Report for Life Sciences Companies. The 2014 VC Executive Compensation Survey was sponsored by the following Venture Firms: Accel Partners Delphi Ventures Kleiner Perkins Caufield & Byers Sequoia Capital Andreessen Horowitz Draper Fisher Jurvetson Lightspeed Venture Partners Shasta Ventures August Capital Emergence Capital Partners Mayfield Fund Sigma Partners Azure Capital Partners Fontinalis Partners Menlo Ventures Stripes Group LLC Balderton Capital Foundation Capital Morado Ventures Third Rock Ventures Battery Ventures Foundry Group Morgenthaler Ventures Thomvest Ventures Bay Partners Greylock Partners New Enterprise Associates Trident Capital Bessemer Venture Partners Highland Capital Partners Norwest Venture Partners Trinity Ventures Braemar Energy Ventures Hummer Winblad Notion Capital True Ventures Canaan Partners Ignition Partners OpenView Venture Partners US Venture Partners Carmel Ventures Index Ventures Opus Capital Partners VantagePoint Capital Partners Charles River Ventures InterWest Partners Polaris Partners Venrock Costanoa Venture Capital Jafco Ventures Redpoint Ventures Versant Ventures Crosslink Capital Khosla Ventures Scale Venture Partners Through the efforts of sponsoring venture firms and Advanced-HR, Inc., survey data was collected from 177 private, venture backed life sciences companies between mid-august 2014 and mid-september Survey participation in 2014 increased +14.9% from the 154 companies in the 2013 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 2013 to We wish to thank those whose efforts went into producing the 2014 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 2014 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 mid-august 2014 and mid-september The survey was completed by 177 companies that submitted company metrics and compensation information for 888 executives globally, a decrease of -2.1% in surveyed executives compared with The 2014 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 2014 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 2014 survey and the graph shows a comparative distribution between 2014 and Region Breakdown Count % United States SF Bay Area % North East % So. California % Central/Midwest % South East 8 4.5% Mid-Atlantic 7 4.0% South West 5 2.8% Pacific NW 2 1.1% Mountain 2 1.1% No Calif. (Not SF Bay Area) 1 0.6% Outside the US 6 3.4% The map below shows the states comprising each geographic US area in the 2014 survey. Page 1

3 Industries The distribution of companies by industry shifted slightly in 2014 as compared to 2013 when looking at industry as a percentage of the survey population. The table below shows industry distribution for the 2014 survey and the graph shows a comparative distribution between 2014 and The largest change was a decrease of -8.2 % in the Medical Device and Diagnostic companies with the corresponding increase of +8.7% in the Healthcare Information Technology companies Industry Breakdown Count % Med. Device & Diagnostic % Biotech & Pharmaceutical % Healthcare Services % Healthcare Info Tech % Other Life Science 2 1.1% Stage of Development The distribution of companies by stage of development for the 2014 survey shifted slightly from The table below shows developmental distribution for the 2014 survey and the graph shows a comparative distribution between 2014 and Stage of Development Breakdown % Count Early/Product Definition % Product Development % Clinical Trials % Product in Beta 5 2.8% Shipping Product % Profitable % In 2014 there was a large shift in the amount of data coming from the Early/Product Definition stage due to 19 companies versus five companies in Funding The survey distribution of companies by Funding Round in 2014 showed an overall increase of funding to earlier stage companies. In 2014 there was an increase of +55% in data submitted by Seed Funding Only through Post Series B companies when compared to the 2013 survey population. The 2014 distribution of companies by Cumulative Capital Raised also shifted to show a general decrease in amount raised by surveyed companies. There was an average increase of +53% in companies raising capital of >$0 - $10M and >$10M - $25M with a corresponding drop in the companies with capital raised of between >$75M - $100M and >$100M. Page 2

4 The tables below show funding round and capital raised distribution for the 2014 survey and graphs on the following page show comparative distribution between 2014 and Funding Round Count % 2014 Capital Raised ($M) Count % Seed Funding Only % >$0-$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 8 4.5% Revenue and Employees Survey distribution for revenue in 2014 saw an increase of 25% in Pre-Revenue companies. Similarly, the distribution for headcount groupings shifted with an increase of 93% in companies with < 10 employees. The tables below show revenue and headcount distribution for the 2014 survey and graphs show comparative distribution between 2014 and Revenue 2014 Headcount Count % Count % Pre-Revenue % < % >$0-$10M % % >$10M-$25M % % >$25M-$50M % % >$50M-$100M 5 2.8% % >$100M 5 2.8% > % Page 3

5 Employee Ownership The table below shows 2014 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 Technology Industries Both Founding and Non-Founding CEOs #Cos Median # Employees % Cos w/ Founding CEO's or No CEO Median % Founder Median % Investor Median % Employee* Pre-Revenue Companies Post Series A % 1.3% 78.5% 14.3% Post Series B % 5.1% 78.7% 15.4% Post Series c, D, 5+ Rounds % 1.9% 82.0% 15.9% Companies with Revenue Shipping Product % 5.3% 76.3% 16.3% Profitable % 7.9% 72.0% 20.6% * Employee ownership includes unissued options In 2014, total employee ownership as a % of company fully diluted shares was comparable to 2013 as shown on the graph Employee Ownership by Stage in all but Profitable companies. In the Profitable stage, companies reported an increase of +3.4% of the Fully Diluted Shares in employee ownership. However, as shown in the second graph, Founding CEOs on Staff by Stage, there was a -19% decrease in founding CEOs for the Profitable companies. As such, the increase in total employee ownership would be expected as a result of the increase in non-founding CEOs. The only other grouping showing a change in the founder status from 2013 was a decrease of -11% in the Post Series B Companies. However, a corresponding increase in the employee ownership as a % of the fully diluted shares is not evident. Page 4

6 Compensation Trends Survey Population A subset of the more common survey positions was reviewed for changes in the 2014 survey population as compared to the 2013 survey population. The 2014 survey data was comprised of 85% non-founders, representing a decrease of -2% in the total non-founder population compared to the 2013 survey data. The table below shows the total count and percent of non-founding positions for the 2014 survey and the graph shows a comparative distribution between 2014 and Select Non-Founder Jobs as a Percent of Count Count % Non-Founder Chief Executive Officer % Chief Operations Officer 39 82% VP Operations 33 88% Chief Med Officer/Med Director 55 96% VP Clinical/Regulatory 56 93% Chief Scientific Officer 28 61% VP Research 61 90% Chief Financial Officer 68 97% VP Finance 22 95% Chief Marketing Officer 11 73% VP Marketing % Chief Revenue Officer 9 100% VP Sales 55 96% In 2014, the population of non-founder positions was fairly comparable to 2013 with the noted exception of a decrease of -27% in the Chief Marketing Officer position and an increase of +14% in the Chief Medical Officer/Medical Director position. Page 5

7 Cash Compensation Non-Founders When comparing 2014 to 2013 data for the subset of most common non-founding executives, both overall base salary and overall total target pay (defined as base salary + target incentive pay) were relatively unchanged. The table below shows median (50 th percentile) cash compensation for select non-founder positions in the 2014 survey and the graph shows comparative data between 2014 and All currency was converted to USD for analysis purposes. Select Non-Founder Jobs 2014 Median Cash Compensation Base Salary Target Pay Chief Executive Officer $350,000 $455,000 Chief Operations Officer $256,950 $319,938 VP Operations $205,000 $244,000 Chief Med Officer/Med Dir $300,000 $354,234 VP Clinical/Regulatory $243,794 $275,313 Chief Scientific Officer $277,875 $343,918 VP Research $240,000 $275,000 Chief Financial Officer $250,000 $302,000 VP Finance $197,600 $249,200 Chief Marketing Officer $250,000 $309,375 VP Marketing $215,500 $251,500 Chief Revenue Officer $275,000 $410,160 VP Sales $215,000 $290,500 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 2014 showed no change in base salary and a decrease of -0.3% in total target pay compared to 2013 data. A detailed analysis of 2014 cash compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2014 and Analysis showed the largest change occurred in the Profitable category where there was a decrease of 13% in total target pay. Non-Founder CEO 2014 Median Cash Compensation By Stage of Development # Base Target CEOs Salary Pay Companies in Analysis 110 $350,000 $455,000 Pre-Revenue: All Companies 49 $350,000 $442,000 Post Series A, No Revenue 13 $340,000 $439,400 Post Series B, No Revenue 18 $353,240 $437,500 Revenue: All Companies 61 $350,950 $464,197 Shipping Product 34 $334,411 $420,340 Profitable 13 $350,000 $500,500 Page 6

8 Founders When comparing 2014 to 2013 data for the subset of the most common founding executives, overall cash compensation increased by an average of +11% with a wide variance by position. This may be attributed to different companies comprising the data set in the 2014 survey as compared to the 2013 survey. The table below shows median (50 th percentile) cash compensation for select founder positions in the 2014 survey and the graph shows comparative data between 2014 and All currency was converted to USD for analysis purposes. Select Founder Jobs 2014 Median Cash Compensation Base Salary Target Pay Chief Executive Officer $250,000 $300,000 Chief Operations Officer $255,000 $375,000 Chief Med Officer/Med Director $275,000 $305,000 Chief Scientific Officer $286,000 $345,560 VP Research $190,000 $205,000 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 2014 showed a decrease of -20.1% change in base salary and a decrease of -19.6% in total target pay compared to 2013 data. A detailed analysis of 2014 cash compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2014 and Analysis showed the largest change in cash compensation occurred in Pre-Revenue, Post Series A companies with an increase of +4.2% in base salary and +35.8% in total target pay. Although there was a large reduction in cash compensation for the Pre-Revenue, Post Series B companies, there were only 2 companies in the data set. For companies in the Shipping Product stage, there was a decrease of -16.7% in the base salary and a decrease of -8.8% in total target pay. Profitable companies showed an increase of +4.9% in base salary and an increase of +27.7% in total target pay. Founder CEO 2014 Median Cash Compensation By Stage of Development # Base Target CEOs Salary Pay Companies in Analysis 53 $250,000 $300,000 Pre-Revenue: All Companies 26 $250,000 $250,000 Post Series A, No Revenue 10 $312,500 $407,500 Post Series B, No Revenue 2 $280,000 $382,500 Revenue: All Companies 27 $250,000 $317,000 Shipping Product 17 $250,000 $300,000 Profitable 3 $343,583 $560,000 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 2014 survey and the graph shows comparative data between 2014 and Select Non-Founder Jobs 2014 Median Equity Compensation (% of Fully Diluted Shares) Equity Held Chief Executive Officer 4.91% Chief Operations Officer 1.24% VP Operations 0.55% Chief Medical Officer 0.96% VP Clinical 0.60% Chief Scientific Officer 1.29% VP Research 0.69% Chief Financial Officer 0.81% VP Finance 0.36% Chief Marketing Officer 0.91% VP Marketing 0.64% Chief Revenue Officer 1.30% VP Sales 0.71% 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 2014 showed an increase of +6.5% (representing +0.30% of fully diluted shares) compared to 2013 data. A detailed analysis of 2014 equity compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2014 and Analysis showed an increase in all development grouping with the exception of the Pre-Revenue Post A companies with a decrease of -6% (representing -0.27% of fully diluted shares) Profitable companies showed an increase of +7.3 in the amount of equity held (representing +0.34% of fully diluted shares). Non-Founder CEO 2014 Median Equity Compensation By Stage of Development (% Fully Diluted Shares) # Equity CEOs Held Companies in Analysis % Pre-Revenue: All Companies % Post Series A, No Revenue % Post Series B, No Revenue % Revenue: All Companies % Shipping Product % Profitable % Page 8

10 Founders Equity held by select founder positions showed an increase from 2014 to 2013 with increased of percent total equity held increases for all positions reviewed in this report. The table below shows median (50 th percentile) equity compensation as a percentage of fully diluted shares for select founder positions in the 2014 survey and the graph shows comparative data between 2014 and Select Founder Jobs 2014 Median Equity Compensation (% of Fully Diluted Shares) Equity Held Chief Executive Officer 10.56% Chief Operations Officer 6.22% Chief Med Officer/Med Director 10.92% Chief Scientific Officer 4.10% VP Research 2.53% 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 2014 showed an increase of +71.2% (representing +4.39% of fully diluted shares) compared to 2013 data. A detailed analysis of 2014 equity compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2014 and With an overall increase in equity as a % of the fully diluted shares, Founding CEOs were generally more successful in maintaining their equity positions in 2014 compared to Analysis showed the largest increased occurred in companies that were Shipping Product Companies with +67.4% in the amount of equity held (representing +3.5% of fully diluted shares). Profitable companies showed a decrease of -44% in the amount of equity held (representing -9.7% of fully diluted shares). Founder CEO 2014 Median Equity Compensation By Stage of Development (% Fully Diluted Shares) # Equity CEOs Held Companies in Analysis % Pre-Revenue: All Companies % Post Series A, No Revenue % Post Series B, No Revenue % Revenue: All Companies % 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 2014, performance stock was utilized by roughly 6% of the companies surveyed, which is a significant reduction from the 8% of companies who reported using performance stock in The 50 th percentile of performance stock as shown below is approximately equivalent to 15% - 25% of the total equity held by the executive level. Companies Using Performance Stock Performance Stock Held (% of Fully Diluted Shares) Level % Jobs with Performance Stock 25th Percentile 50th Percentile 75th Percentile CEO 4.9% 0.29% 1.00% 1.61% C Level 4.1% 0.09% 0.34% 0.43% VP Level 5.9% 0.03% 0.11% 0.18% Page 10