PALO ALTO, Calif.--Filling a CEO vacancy in a bioinformatics company today isn't easy, but some searches are harder than others. BioInform recently went behind the scenes with Gary Morgenthaler, a partner at Morgenthaler Ventures who led the frustration-filled year-long effort to find a CEO for Molecular Applications Group (MAG), a bioinformatics software company backed by his firm. Morgenthaler also sits on MAG's Board of Directors. His odyssey ended April 21 with the hiring of former pharmaceutical company executive Myra Williams (see interview, this issue).
"Bioinformatics combines disciplines--computer science and biology--that, for most people, have represented two distinct career paths. Not only should a bioinformatics CEO have in-depth knowledge of both, but that person should have considerable general management experience," he observed.
Morgenthaler estimated he has been involved in 15-20 CEO searches as a venture capitalist and 40-50 executive-level searches while running Ingres Corp., a company that developed and sold a relational database management program. He emphasized that it was worth the effort to find the right person, even while it played havoc with his initial timetable for MAG.
"The single position that affects the likelihood of success of a startup most is the CEO," he reiterated. "Locating the right people is a job we take very seriously in this business." He explained that the venture capitalist role involves more than just making an investment; there is also the "matter of locating key personnel for startups that you've invested in and also of strategy and corporate oversight."
Regarding the latter, he noted, "the single most important thing that we do is find executives." Active investors must maintain an unwavering commitment to finding top-quality leaders for their start-up investments, Morgenthaler emphasized.
Nevertheless, the MAG experience was especially trying, he conceded. "I certainly hope that we never have to go through this again," he told BioInform.
The Power of the Counteroffer
MAG's board started the search for a new CEO in early April 1996. At the time MAG, organized in 1993, had strong financial backing, significant database expertise, and some notable science based on the work of Stanford University structural biologist Michael Levitt. This work had already led to a product called Look, a widely used workbench software package that integrated structural display and analysis, sequence analysis, and molecular modeling. MAG's strategy was to combine its strengths in structural biology with data mining and develop an enterprise-wide bioinformatics system. To do that, the company would need a CEO who would understand end users as well as broader issues that might be raised by corporate partners.
By late June of last year it seemed that the search for a CEO was on track. MAG had located its first candidate and the board was eager to evaluate him. With a new software launch planned for mid-1997, there was an "urgency to get going," Morgenthaler recalled. The candidate met the board's criteria, with extensive experience in technical and group management at his position as a general manager with Varian Corp. MAG made an offer, which was accepted in August.
However, on what was supposed to be the new CEO's first day on the job, he didn't show up. The board soon discovered that Varian had made a counteroffer with a better salary and stock options, but the would-be CEO had neglected to inform MAG of his decision to remain. "I have never before or since experienced such inexplicably bad behavior," Morgenthaler commented, speculating that the candidate had avoided contacting MAG out of his dislike for conflict. "Not even a phone call!"
The $1 Million Bonus
The board started over again. Several dozen more prospective candidates were interviewed, and a number of them met the entire MAG board. The process led to the identification of MAG's second candidate for CEO, a divisional general manager of a large pharmaceutical company that had $400 million in sales of biopharmaceutical drugs. The candidate wasn't certain that the timing of such a move was right, but he was becoming increasingly convinced that the entrepreneurial culture of a startup could be appealing. MAG spent the better part of last October wooing candidate number two, and finally made an offer.
However, as the time to make the move approached, the candidate--whose prior experience was almost entirely with wet labs--seemed more uncertain about heading a software company. At the same time, he received an offer to be CEO of a biotech startup. Upon learning that the offer included a $1 million signing bonus, Morgenthaler chose not to compete.
Now seven months into the search, the board seemed to be back where it started. "It was time to regroup," said Morgenthaler. Other priorities kept him away from the CEO dilemma until after the first of the year.
In January, however, Linda Kirsch, MAG's recently hired vice-president of sales and marketing, put forth the name of Myra Williams. In a previous job Kirsch had encountered Williams across a negotiations table, and was "very impressed, maybe even a little bit awestruck," she recalled, remembering "a tough negotiator, demanding but not unreasonable."
At the time, Williams had recently left the position of vice-president and worldwide director of R&D information resources at Glaxo Wellcome to reevaluate her career path in the face of the merger of Glaxo and Wellcome. She had enjoyed a reputation for "aggressively managing goals" and "running a tightly focused ship." Morgenthaler said MAG was extremely impressed with Williams' depth of knowledge in science and informatics. She has a Ph.D. in molecular biophysics from Yale and had performed research in rational drug design, had developed a new data management approach in a previous job at Merck, and had served as chief information officer at Glaxo before the merger.
"I knew almost as soon as I met her that she was the CEO we had been looking for," Morgenthaler says today.
The board made Williams an offer, but the battle still wasn't over. Another bioinformatics venture simultaneously began courting Williams to be its CEO. The competition lasted several weeks and ended on a melodramatic note when company founder Levitt flew on a few hours notice from his home in Tel Aviv to Williams' home in Princeton, N.J., to finally persuade her to accept MAG's offer.
"What prevailed ultimately with Myra was the depth of our science," Morgenthaler contended.
Morgenthaler released a sigh of relief upon completing the tale. When asked to comment on the general difficulty of locating technology executives in a tight market, he quipped, "I hope that the door has closed and that other companies will have at least as difficult a search as we had!" The lesson here, he added, is that, "If you want to be competitive in attracting someone from a small population of CEO's, you have to have interesting science."