Loren Busby is a venture partner to fund managers as well as a business advisor to portfolio companies. She has over two decades of experience in Venture Capital and was “one of the 6%,” referring to the exclusive group of female investment professionals. She currently works with several technology businesses operating at the intersection of artificial intelligence and healthcare as well as life science tools companies.
Holley Edyvane: You are an experienced Biotech / Healthcare investor and board member. What qualities do you think make a good board member?
Loren Busby: When I was a Principal at a VC firm, one of my co-investors on a deal said to me, “The board has one role and one role only – hire or fire the CEO.” Now, he was a statesman and our views were typically aligned, but in that particular deal, he contributed to the problem, in keeping an underperforming CEO at the helm for too long. With a bit more experience now, I see the board role differently. There are a variety of skills that board members can contribute, and they have to make their contributions in a consultative, non-threatening manner outside of the board room. These consultative roles align with integral functions such as R&D, finance/accounting/fundraising, business development, human resources, governance, etc. If the board member’s skills and experience support the CEO’s agenda, then you should be having conversations more often than once every 6-12 weeks. But, you first have to earn the respect of the CEO and other members of the C-suite team. A board member can only add value if management gives them the opportunity to add value. If management is insular and views the board as a nuisance, then the “hire or fire the CEO” mandate applies.
We hear a lot of companies now striving for better diversity across their Board and Executive teams. Why is it important to have diversity in the boardroom?
Diversity of thought is important because it allows for and benefits from divergent thinking in product development and problem-solving. It also impacts what happens downstream in terms of the workforce and customers served. If you have different points of view, you are likely to identify opportunities that lead to enhanced innovation and growth for the company.
The recent Deerfield report has drawn attention to the clear lack of diversity – particularly female representation – in Biotech boardrooms. 48.5% of the 140 VC-backed companies analysed by Deerfield had no female board members at all. Why is this the case in 2021?
There is no single variable that answers this question. Several factors have contributed to the low number of female board members.
First, if we are talking about private companies, and in particular venture-backed companies, we know that there are fewer female investment professionals at VC firms, so fewer females are leading biotech deals. The result is, in a typical 5-seat board at inception (2 investors, 2 founders, 1 independent), the investor seats are more likely filled by men. Male investor directors will recruit from their existing networks, and their existing networks lack female candidates, so the problem takes root at inception. Furthermore, independent board seats in these early deals are typically filled by (1) current or former CEOs, who serve the CEO coach role; (2) current or former CFOs, who contribute to finance, audit and governance; or (3) industry experts with BigCo pedigree, who add standing to the pitch deck, hold customer relationships and understand how to balance the needs of management and investors. Due to the lack of women in C-suite roles in general, this seat is also usually filled by a man. A 2019 CrunchBase study found that, when women are placed on boards, they are more often placed as independent directors than as management or investor representatives.
So, really, when you look at the makeup of a Biotech boardroom, there are multiple layers of gender inequality in place. How do we tackle that?
In recent years, different service models have been used to train women as early-stage board members, but these women are first-timers and, therefore, less likely to be chosen for the well-funded, VC-backed deals. It is my understanding that many women have been through these programs, but the placement rates are not very high because the opportunity set remains small. Also, I think placement on the well-funded companies requires a lot of time in marketing yourself to VCs and start-up influencers. You have to commit to it, and you have to network your way into the opportunities. For women who have demanding full-time jobs, they may not have time to spend doggedly pursuing a new board position.
We have to think about how we recruit women scientists to be interested in becoming board members. This is also a challenge because most are struggling to fill many roles at work and home, so we have the off-ramp/on-ramp problem at certain stages of life. We have not yet de-stigmatized a woman’s decision to take time for family obligations and then return to the workforce.
Now – an interesting statistic – 50% of Ph.D. and MDs at WCM are women. We just read an article that the similar statistics hold true at Boston universities. Also, almost 50% of faculty at WCM are female, so why is it that these women are not clamouring for some of these board seats? Well, surprisingly, these scientists and clinicians are not invited to be founders in companies; they are not invited to the meetings about starting companies. The conditioning is different, and that’s not taking into consideration any personal or cultural influences. We need more women to take a founding role in startups so that they can gain operating experience, which will help them to be more attractive and better board members.
But, certain things are changing:
As referenced in the recent Deerfield report, among the Russell 3000 index, the share of women directors in 2020 was 18.5% having grown by 4.2% since 2016(1)
The late David Swensen asked the money managers associated with Yale’s endowment to take “a more systematic approach to the problem of the lack of women and minorities in the asset management industry”
Goldman Sachs-run IPOs are required to have diverse board members
California’s law mandating at least one woman on public company boards
There are some promising changes being made, but recent reports show that we still have a long way to go! What more can be done?
Some people are against the mandate because they compare it to affirmative action, which they say doesn’t work. They believe it destroys the idea of meritocracy and diminishes the true accomplishments of the target identity. I think we have to work on a variety of fronts, and the law is just one tool. For many years we focused on training women to be better, do better, accomplish more. Well, we’re here; we’re ready, willing, and able. Now, the universe needs to provide the opportunities, and those doors have not been readily opened simply by relying on market forces. So, the laws will help, but the levers of those in control of fast amounts of capital, like David Swensen and other institutional investors, need to recognize their roles and commit to change. We also need to educate the masses, including the young people, because these up-and-comers are very flexible thinkers and they need to start building their networks and skill sets with certain goals in mind.
1 Livoti, Christine and Hensaw, Leslie, “Gender Disparity Among Venture – Backed Healthcare Companies and Their Investor Base” 2021.