The value of a Non-Exec Director for Life-science SME’s
The remit and expectations of a Non-Executive Director have significantly broadened over the last 30 years, owing primarily to the 1992 Cadbury Report and latterly the Higgs report of 2003, not to mention the learnings from the financial crisis in the late 2000s, this Insight is dedicated to the benefits that a great non-Executive can provide to privately owned SME’s or early-stage VC backed businesses.
The first thing to remember is that a non-Executive must first and foremost add value, and careful time must be taken to ensure that the “brief” for your non-Executive is clear and well thought out.
WHY?
Companies in the early stages of existence may require a strong non-Executive to assist with fundraising activities, or to provide wise counsel in business direction. It is not uncommon for a Founder/CEO to have made the quantum leap from the lab-bench to the boardroom and an effective non-Executive can bridge the gap and provide mentoring as well as share their insight on complex subjects such as Board governance. A good non-Executive is likely to have built up significant experience across all business functions and would have been through the challenges of growth themselves. They also add huge value if they are well networked, both in terms of onward investors and/or potentially strategic customers.
WHO?
I would advise companies to have a relatively open mind when considering the background and experience required for your non-Executive Director. Rather than focussing solely on the “market sector” or even industry experience, pay more attention to the journeys they have been on with other companies; how do you see that aligning with your objectives and aspirations, and most importantly, get the cultural fit correct. Many early-stage company CEO’s seek guidance and mentoring, ensure that the person coming on board shares that approach and is willing to offer such support.
It’s important to consider what is right for your business, rather than being drawn to certain individuals just because they happen to sit on two or three other boards so “they must be good”. I can think of three campaigns that RMG have ran at different times in the last couple of years, one for a family office group of companies who were seeking an Exec Chair, two others from University spin outs / Pre revenue organisations. Across all three campaigns, whilst the person would be carrying out similar duties, there were totally different briefs on the person required, the experience gained and the style of operation.
Please also note, the right non-Executive won’t try to sell themselves to you. They are looking for the right fit for them and will want to feel they can work with you, otherwise they won’t be able to support you as needed. The good NED’s out there will be honest and tell you they aren’t right if that’s how they feel, and the even better ones will then refer you onto a contact / ex colleague who may be a better fit.
WHEN?
In terms of advising “when to hire”, I would say as soon as you can afford, do it! It reflects well on your company externally and it can open up doors for you sooner than you think, whether your goal is an IPO, trade sale, acquisition, or expansion into new markets. This may sound controversial but avoid people you know. At present, around 40% of non-Exec appointments are made through a formal process. Whilst the easy option may seem to appoint an individual in your network, the downside is that you limit your exposure. Take a view of the whole market and engage a provider who can offer that full market access.
YOU?
Thinking of your own portfolio – Perhaps you’re reading this and have enjoyed successful exits of businesses in the life science space and would like to offer this expertise to the market in the form of a portfolio of non-Executive appointments. There is a high demand for individuals of this skill set and experience so feel free to contact RMG for a confidential discussion.
