Executive Compensation: Insights from the 2013 CompStudy Survey

LIFE SCIENCES & HEALTHCARE EDITION

Life Sciences Edition

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Today’s moderator

Bryan Pearce Partner, Americas Director, EY

Entrepreneur of the Year, EY

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Today’s presenters

Erik R. Lundh Park Square Managing Partner

Rosemary Reilly WilmerHale Partner

Kimberly Wethly WilmerHale Partner

Bruce Booth Atlas Ventures Partner

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Glen Giovannetti EY Global Life Sciences Sector Leader

Noam Wasserman Harvard Business School Associate Professor, Tukman Faculty Fellow

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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

Presented by Park Square, WilmerHale and EY

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CompStudy Overview

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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

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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

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Life Sciences Survey

2002 2013

168 cos. 256 cos.

Technology Survey

2000 2013

211 cos. 550 cos.

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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

Presented by Park Square, WilmerHale and EY

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

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Audience Poll

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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. 44% B. 47% C. 9%

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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

Presented by Park Square, WilmerHale and EY

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2013 Survey – Company Profiles

Number of full time employees

Headcount Institutional rounds raised

Number of rounds

Later stage companies are better-represented in this year’s survey; 82% of the companies surveyed have raised 2+ rounds of financing, compared to 78% in 2012.

% respondents in this range % respondents in this range

Respondent company headcounts were slightly larger than in 2012, though the distribution is fairly close.

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2013 Survey – Company Profiles

Business Segments

Geography % respondents in this range

% respondents in this range

Revenue

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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

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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. 1% B. 17% C. 70% D. 9% E. 3%

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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

Presented by Park Square, WilmerHale and EY

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Compensation data Founder cash compensation

Founder CEO salaries were up slightly less than their non-founder peers: 0.9% vs 1.42%

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*Fewer positions shown due to lack of founders in certain roles

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Compensation data

Founder current equity holdings, as % of fully diluted shares

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

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% equity owned, fully diluted

*Fewer positions shown due to lack of founders in certain roles

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

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Compensation data Cash compensation – non-founders, 2012 and 2013 Non-founder total target cash compensation was up 3% in 2013, down slightly from the 3.5% rate of increase between 2011 and 2012.

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Compensation data Bonus as a percentage of base salaries – non-founders On average in 2012, non-founder executives received 67.8% of their target bonuses, up slightly from 65.5% in 2011.

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% of base salary

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Compensation data

Current equity - % of fully diluted shares

Equity at hire - % of fully diluted shares

Equity holdings – non-founder executives

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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%

Webinar poll results: A. 29% B. 36% C. 20% D. 5% E. 9%

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Compensation data

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

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Compensation data Percentage of non-founder executives eligible for severance 67.3% 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.

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% eligible for severance

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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

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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

Presented by Park Square, WilmerHale and EY

www.compstudy.com | 37

CEO compensation review

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

Non-founder CEO base (1,000s USD) CEO salaries are more highly correlated with company headcount, as evidenced in the chart above by the large gap in pay between CEOs at 1-20 FTE companies and CEOs at 21-40 FTE companies

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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

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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

Presented by Park Square, WilmerHale and EY

www.compstudy.com | 40

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

• Compensation in a holding company model

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Recap • 1-minute recap from each panelist

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