The BioCentury Show: VC Stampacchia on convergent crises’ impact on biotech
Omega Fund head discusses disengagement with Russia, IPOs in a down-market, and concerns about salary and title inflation
By C. Simone Fishburn, Editor in Chief
March 10, 2022 1:02 PM UTC
BioCentury
The Ukraine crisis will change how VCs think about building their investor base, Otello Stampacchia said on the latest episode of The BioCentury Show, adding that venture investors will need to be the ones who steward their own LPs.
In a discussion that focused on the concurrent crises of Ukraine and the capital markets collapse as well as the rising race for talent, Stampacchia also expanded on why he’s advising most of his portfolio companies not to focus on going public, how changing workforce dynamics are playing out with the incoming class of company leaders, and whether these changes, some brought on by the pandemic, will affect the growth of biotech ecosystems in Boston, the Bay Area and elsewhere.
Stampacchia, founder and managing director of Omega Funds, told The BioCentury Show that it’s hard to know how large a footprint Russian money has in biotech, and that given that LPs will likely push back on calls for greater transparency, it’s up to managers of funds to serve as gatekeepers. “Know your clients’ procedures,” he said.
He noted that it’s hard to extricate some investors from funds, but the spotlight the Ukraine war has shed on the issue may influence whom VCs engage with as they raise their next funds.
“Going forward, I think the community will pay a lot more attention to making sure these categories of individuals, companies and so on are not represented in our funds,” said Stampacchia. His fund has no Russian backers.
With the uncertainty brought by the fall in capital markets, Stampacchia said he has told his portfolio companies to focus on delivering value rather than raising money. Before the downturn, he advised his companies to have two or three years of cash, including private companies, and said they need to “make sure something meaningful and momentous happens within those two or three years, ideally with clinical news.”
In the current environment, for most companies pursuing an IPO is a “colossal management distraction,” he said. His advice to young biotechs is that going public is a funding event to help them function.
Stampacchia also said that talent recruitment has always been the bottleneck in biotech, and the workforce changes brought on by the pandemic may amplify the challenges. “We’re in a fundamental transformation of how we operate.”
While he doesn’t see Boston losing its perch as the key hub in biotech, with the San Francisco Bay Area also a big player, he acknowledges there is an “explosion” in aspects of compensation in the Boston area, calling salary a “very painful topic.” The issue, he said, is not only rampant expectations of cash compensation, options and shares, but because of the scarcity of talent there is also a “title inflation” that sees individuals appointed to positions where they don’t appear qualified.
That could lead to “meaningful execution failures,” said Stampacchia, but he hopes the proximity to high levels of talent in the ecosystem may provide enough good leaders to mitigate that concern.
The BioCentury Show is sponsored by Sofinnova Investments. Sponsorship and underwriting packages are available for BioCentury’s webinars, podcasts and surveys. For more information, please contact Sarah Shoaff at sarah.shoaff@biocentury.com.
