Derek Hennecke - Kincell Bio - Part 2

Intro - 00:00:01: Welcome to the Biotech Startups Podcast by Excedr. Join us as we speak with first-time founders, serial entrepreneurs, and experienced investors about the challenges and triumphs of running a biotech startup from pre-seed to IPO with your host, Jon Chee. In our last episode, we spoke with Derek Hennecke about his childhood in Germany and his early interest in history and science. We also touched on his academic journey in microbiology at the University of Alberta, where he shifted from chemistry to biology and his eventual move into sales. Lastly, we discussed his MBA experience in the Netherlands and his current outlook on the degree. If you missed it, be sure to go back and give part one a listen. In part two, we continue our conversation with Derek. Covering the early challenges and financial hurdles he faced after moving to Europe for his MBA and his first role in business development. We'll also touch on his transition to managing, learning the ropes of leadership and his joint venture experience in Mexico. Lastly, we'll discuss the intricacies of managing a matrix organization and his experience as a product manager.

Derek - 00:01:22: Yeah, so we arrived and it was always our desire to stay in Europe for a little bit and take the experience and continue. We didn't really have a plan, specific plan. And again, we thought it would be very easy. We thought we'd just arrive and the world would open up to us. It was much harder than we thought. We had savings from our jobs, bonuses from sales and my wife's savings. We went through that pretty quickly. The exchange rate between the Canadian dollar and the Dutch guilder flipped and we needed then to get extra income. And I went and got a job with in. After the first year of a two-year MBA program. And another very 1950s style of networking, getting a job. I called up some alumni from the RSM and invited him to our house for dinner. We served him a nice dinner. And then he said, oh, it was very nice. What do you want to do in your future, Derek? And so I'd like to work for you, sir.

 Jon - 00:02:16: And it worked.

Derek - 00:02:18: So I don't know what that would now, but that's what would work for me. And I really got in. It was great.

 Jon - 00:02:26: I count it. A count of win, win is a win. So now that you've got your job lined up, I believe this role was a business development role. Correct me if I'm wrong.

Derek - 00:02:38: Yeah, so the business development was like new business development at the very beginning before I moved into area management. And the company Hispocatis was a big fermentation company and was looking to develop other drugs through fermentation. And so my job was to have maybe one customer or one prospect that was wanting to use our facilities to develop the drug. We had a couple of successes, but they never got as big as the penicillins. And then I moved very quickly into managing North America for the penicillin franchise. As an area sales manager, area business development manager.

 Jon - 00:03:15: And just the level set for the listeners out there. And particularly for those scientists who want to break into BD. What is your definition of BD? And kind of what are your tips for those who want to get into it?

Derek - 00:03:32: Yeah, it is. Every company is different. Every company is different on the definition of business development. Maybe every industry is as well. But it is sometimes a highfalutin word or a synonym for sales management. And especially in the CDMO world, it is a sales manager. There are two types. There's account managers, and then there's true business development managers or hunters. So the area of the account managers will take an existing account, and that's maybe something more of a senior role that is looking to strengthen the ties that the service provider has with the company. And then BD is more of a... Cold calling, hunting approach. In Fisbrocatus, the business development role was more of an analytical, research-based, approaching one particular prospect, developing the program, working internally with the stakeholders to develop the science and the math that would be used in the fermenters and a little bit of engineering. So it was less outward facing and more internal facing to develop that product for that particular customer. So that's also business development. If you're working for a very small company with a particular technology, that could also be business development.

 Jon - 00:04:46: It sounds like you had to wear multiple hats, it sounds like. It was kind of like an evolution of your sales experience previously. And now you're kind of finding, you have to find various stakeholders and making sure. That the ultimate end user is finding success in the product.

Derek - 00:05:07: But it still is a, you know, almost still a kind of a first job after the MBA. The risk is very low. If you're not successful, it's your own career that hurts, not the company. So when you're an account manager, your failure or success is critical for the company. So it has many hats, but it's a good trial job, you know, to see how you do. But the downside for the company is very limited. Just that one product doesn't get developed with that one customer. So it's not going to move the needle and it's not going to make or break the company.

 Jon - 00:05:40: Absolutely. And you mentioned that you, as you started to progress in this role, you were starting to cover North America, very, very large. And you started managing a team. Can you talk about that experience into, and I'm going to imagine this is probably your first time starting to manage become a manager. Can you talk about that experience?

Derek - 00:05:58: Yeah, that was, again, no training, no nothing. I was very lucky to have a very experienced team working for me. And I think that's what made it work. If it was the reverse where... We're all new. I think I would have. Not been very successful. Basically, I would be the one doing all the travel. So living in Amsterdam, I'd go to North America for a week, visit the customers, and then come back and then download to my team. And then they would do the work, and then I would do it again the next week and come back and forth. The team reported to me, but it was them doing the work and having to do the work without my watching them do it. So they were very experienced, you know, coordinating with the factories, the logistics, the specs. They were very good on the detail, which helped so that I didn't have to do as much on the detail as they did. Very lucky. Irma Tomei and Monique van der Velde, I still keep in touch with them in the Netherlands. And they, they, they really helped a lot.

Jon - 00:07:04: Honestly, like that, that's something I think about too. Just like when I think about like team building, it's just like. Having that rock star like element where. We talked about trust too where it's like i trust that you guys got this, I'm gonna go do my thing what I'm good at. And then when I come back you cover my back, I got yours and also, another thing that I you know that stood out to me, is that I thought you'd be spending extended periods of time in North America and not having to go all the way back.

 Derek - 00:07:35: Every week.

 Jon - 00:07:36: Oh.

Derek - 00:07:37: Every week. Every week. There's an expression, Flying Dutchman. I think it's the motto for KLM. And it's true. The pay is very low in the Netherlands, but they'll fly you in a second overnight to the other side of the world. They're very trained. It's like 16th century golden age. So I think even now that hasn't changed. They really believe in face-to-face.

Jon - 00:08:01: And we were just talking before we jumped on the podcast. You're like... You've been traveling like your whole career. This is like, that is like, you know, incredible. Like the. And I totally agree. Like the face to face is. There's... This remote world you know you can start to forget the importance of human interaction And however, and we are a remote first company. So that was kind of our DNA has been on the internet. But as we started to get larger and larger and our operations were getting bigger. We started to do more of the in-person and there's not, there's nothing replacing it. Like you, you really can't, especially when, you know, for our product too, it's like, it's we're working with folks through very important flexion points of a company's growth. And, just being able to sit down with your client or prospect and really break bread and come to an understanding is so critically important.

Derek - 00:09:03: Imagine it's really a show of respect if you're going to visit the person. You say like... I'm really going to look after your project because I'm already spending time with you now before you've even spent a dollar with me. I'm spending time visiting you, trying to understand your issues. This is not the last you're going to see of me. I'll be with you through the rest of the program. Even when I had my own company, I think it was really critical for the founder CEO to be involved with their customers. And I think you are too, Jon. It's like you'll have a team working for you, but I know if things go bad, I can give you a call and you're going to fix it. The buck stops with you. And that's what makes the difference between a small company and a large company where it scales so much that you can't call the CEO of a multi-multimillion dollar company.

 Jon - 00:09:48: Absolutely. And that is something that I think about. As businesses get larger, you start to... Kind of, you know, there's a, like all these big companies, they kind of have a kind of a distance to them and trying to figure out how to. The intimacy with it is, it's a challenge it's not easy, but never losing that, I think, because as soon as you do youm kind of lose the secret sauce. And you know you become a faceless corporation, and that's never where we want to be but, um, it really resonates with me what you're saying.

Derek - 00:10:24: Yeah, there is a point where it's hard to reproduce that or scale that rather, but as long as you can. And why not? If you're a small company, take the advantages while you can.

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Jon - 00:10:34: Yep, absolutely. And so now you're covering North America and, you know, you're. You're doing a lot of traveling. I know, eventually, you, you started running a joint venture in Mexico. Can you talk a little bit about that experience? That sounds like a new one.

Derek - 00:10:52: Well, that was funny. It was at a time when our managing director, the equivalent of a CEO for the division, he had the vision and understanding that the business was moving out of Europe and moving more to India and China. And as a result, we had to, he went on a buying spree and started buying a bunch of companies around the world. And the, again, blue ocean, the opportunities were there. We, I remember one meeting and people said, you basically said, who wants to move to Mexico or something? And I put up my hand. And then I took the, oh, let me talk to my wife about it and stuff. And then that was my job. I got the job. So, you know, taking risks, as you said, taking chances, going, you know, putting yourself out there. Looking for the right opportunity, they'll come and then, you know, just, just jumping. So That was very strange because we all hardly knew the Mexican company. I was the only headquarters guy that was going to go over there. Later, they brought a finance director as well to bring in. But my job was... Kind of representing the Dutch 50% in Mexico. I had a Mexican boss and a Dutch boss, and I got on very well with both. I had a huge amount of support from my Dutch boss, Lucas Hendrickson. He was very supportive of me. And I remember as soon as I arrived in Mexico, Mexican peso devalued 50%. And we were selling all of our stuff in U.S. Dollars, all our penicillins in U.S. Dollars, and the market just crashed. And my Mexican boss said, well, what are you going to do about it? And I knew none of the customers. I knew none of the customers. So the only customer I really had was my Dutch boss. And I called Lucas and said, can you buy, can you take off a quarter of our production? He came back right away and said, yeah, okay, well, let's do it. So I became a hero to the Dutch, to the Mexican boss at that point. He said, wow, you really, you know. Maybe it is good to have you here.

Jon - 00:12:52: Yeah, yeah, yeah, yeah. Oh, okay. Like you're providing value immediately. I like this. Yeah, I like this.

Derek - 00:12:58: I'm a spy.

Jon - 00:12:59: Yeah, yeah, yeah. And there's so many directions that I kind of want to go with this. But first is like what kind of stood out to me is like you just raising your hand and being willing. To make that jump. And I think... After having conversations with leaders like yourself, that just seems to be a common denominator or thread that connects these stories, for me at least, is that it's just the willingness to do new things. And because that just opens doors for you. And sometimes it's not glamorous stuff. Like oftentimes it's like raising your hand when it's something, that the rest of the team does not want to do. And, you know, You went from North America to the Netherlands and now you're now back into North America. So, you know, that's a lot of like moving around. And were you permanent like during that time? Were you in Mexico for just like move there, proper move there?

Derek - 00:13:59: Yeah, we was like, you've got to be there. We had to sell our house in Amsterdam. We bought a house on the canal in Amsterdam. My wife and I were having a wonderful life. No kids. Right by the in the Jordan, really trendy, fun, fun place. We had to sell it within a month, move to Mexico. Terrible, terrible story. So they they have the. No, I'm flying back and forth, trying to set up, still do my old job, set up a new job in Mexico. My wife is selling the place, organizing the move and everything. I get to Mexico and then I play a practical joke on her that, don't do this. She's close to tears. And I have my friend, my Dutch friend, meet her at the airport and say, Derek's busy. Couldn't meet you. He's with a customer. I'm going to take you to the airport. I'm going to take you from the airport to the hotel. And she's ready to turn around.

 Jon - 00:14:57: Yeah, you're just like, what?

Derek - 00:15:00: I waited outside in the airport with a mariachi band. 

Jon - 00:15:03: Yeah, yeah. Yeah yeah, like appreciate the thought but the execution.

Derek - 00:15:11: Okay, can you do this not flowers next time it'll be fine.

Jon - 00:15:15: Yeah, flowers would have been fine that's so funny. And, I guess the other part that you know stood out to me. How many language do you speak? Were you-

Derek - 00:15:23: Yeah, you lose them and anybody listening to this, is gonna say, oh, he doesn't speak Spanish, he doesn't speak Dutch, he doesn't speak German, French. Because they're, they are native speakers but I was very comfortable in Spanish, Dutch, German, French. And picked up a little bit of Arabic. But I think, you get rusty in it, I'm very good at understanding them, I'm very good at you know reading them, the grammar and all those languages are tricky, so you stumble.

 Jon - 00:15:48: That's incredible, and you're exactly right, it's a use it or lose it type situation. It's uh, and so now you're in Mexico and you are, you know. Fully immersed in the joint venture. Can you talk about what are, I guess, the key considerations on... Leading a joint venture and maybe some common pitfalls to avoid? Because, you know, even though it's a 50-50, I think there's probably a lot of balancing act that you need to do. And how do you make it effective?

Derek - 00:16:18: Yeah, definitely 50-50 is probably the hardest venture completely because nobody is truly able to make the decision, right? So everything is compromise. And the Dutch are very good at compromise. There's an expression that every day the boss has to prove why he's the boss. It's really about a meritocracy. There's no hierarchy. So they are good at consensus. Mexico is more hierarchical, as we know. But I think that communication is really important. Again, luckily, the Dutch encourage travel. So every two months I was back in the Netherlands just checking with my stakeholders there that they weren't hearing rumors or they weren't upset with the deliveries or the specifications of quality, the product introductions, what approaches we were taking. You'd hear crazy rumors, right? It's like the Mexican joint venture is offloading material in another person's territory. Well, that's not the case. What happened was… An agent did it and then we found out. So communication was critical there. The main thing that happened, I think, was we underestimated how good the Dutch technology was in improving the production strain in Mexico. So our production went up very high, very quickly. And all of a sudden, my job came to finding new customers. So I had to visit every single Latin American country and set up sales offices to offload the material. And that was a struggle. Sometimes we'd win, and times we didn't win. I'd have to explain why. But one thing I wish I had done more was have a more entrepreneurial attitude. Penicillin produces a lot of mycelium. And mycelium is used as a feedstock. The penicillin is removed and it's used as a nutrient source for animals. And what I could have done was found a solution for that in Mexico. Instead, one of my Dutch stakeholders said, Derek, why didn't you pick this up? You know, why didn't you, you know, you're the commercial guy. Why didn't you pick it up? And I think from that I learned is that your job is more than just, a product you're producing, it's the add-on effects. The mycelium from the fermentation was something I didn't think was my job. When That's certainly. Problem for the business, and I should have taken that on. So that's a good learning lesson.

 Jon - 00:18:31: Absolutely. And I, I think the I think the term for it is like entrepreneurship. It's

Derek - 00:18:37: Yeah, entrepreneurship.

 Jon - 00:18:39: It's like, you know... And sometimes folks are like, you know, entrepreneurship's only for the founders out there. And like, I honestly disagree. Like, I think in any organization, it's things like that, like where you can find kind of like these entrepreneurial initiatives, even within larger orgs. And that's, you know. I can imagine you can those lessons are not, I guess, mutually exclusive to, to founders and then, you know, folks who are on the team. And something else that really stood out to me that, you know, I think is incredibly important, but probably not. Talked about is the importance of communication. Like, again, it's kind of it feels wishy washy and like not that quantitative, but it is so critically important to make sure that there isn't a miscommunication where a rumor they said this, they said that, because then you start losing that trust. And when you lose that trust, one, it's like very hard to rebuild trust. It's way better to just maintain like solid communication. And but when there's if, you know, if you hadn't done what you had done and made sure the stakeholders are apprised and the trust starts to slip, you kind of the whole company just like starts to. Cave in and just like become totally dysfunctional and no one knows what to do. And every decision takes, who knows, months. If not the decision doesn't actually happen. So it's like, I think, and this would apply to small companies and big companies. It's just like making sure that everyone's aligned and communicating and, you know, I just, it just really stood out to me.

Derek - 00:20:21: An analogy, I think there was a book called Fill the Bucket. The bucket is full of water, and that's how much trust you have. And there's a hole in the bucket that things drip out. It's just human nature. We think, well, why'd they do that? And so the trust continues to drip out, and you got to keep filling the bucket and know that there's a hole in the bottom. And you can't, you can say, well, let's just patch the hole. That'd be the best solution. But human nature means that we are skeptical, maybe checking over our shoulders. So just once it's empty, it's too late, or gets too low. It takes a lot of time to fill the bucket up again.

 Jon - 00:20:55: Absolutely.

Derek - 00:20:57: That was key. And, you know, other things that build trust is, as we said, learn the language, respect the culture you're with. You know, don't flaunt the wealth. You're going to be an expat. You're coming into a region. You know, understand that there's a honeymoon period. We'd be coming in and say, wow, this is fantastic. I've got a new job, all these new responsibilities. I'm having a great time. But then it'll turn into homesickness and that falls off. Realize that's part of the process of being an expat.

 Jon - 00:21:24: Absolutely. And I think, the another point that really stood out to me is like respecting the culture. And this play is like include that this is not just exclusive to companies that have different like a base in different countries. But it's also like when you do like M&A. It's like respecting and knowing the culture that is, that are going to join together. And sometimes, you know, the honeymoon period is like, we're going to get a deal done. And like, you know, yeah, like, yeah, this is going to be perfect. Yeah. Yeah. Hooray. And then you can sometimes like kind of, you know, maybe any of the, the yellow flags culturally might be, you know, you might ignore it because you're in this period where we're going to get this big deal done. And then after that, after, you know, the deal is done, you're like, Oh my God, this is, what did I do? No.

Derek - 00:22:14: He didn't tell me this. And he said, well, we did tell you it, or it's not that important to don't overreact. And then you think, you mean you don't overreact. Why are you making it such a small issue? And, yeah.

 Jon - 00:22:25: Yeah. Exactly. It's kind of like... Going in. And just being aware and being sensitive to those things, I think, are critically important. And so you mentioned also that you're now expanding to broader Lat-Am. Can you, and also I guess, what, you know, the product, what you said was funny to me. It was like, the product was too good. It was, what a great problem. We were just like, oh my God, it's like flying off the shelf. 

Derek - 00:22:52: I wish it was flying off the shelf. But it was often going in and telling your agents and your salespeople. So look, that was good. But next month we got to do more. This stuff is piling up in the warehouse. We have to sell it. And then just setting the expectation higher and higher. It was a wild success that we didn't expect. It was really the first time we had done fermentation outside of the Netherlands as a new venture. So we were unaware or unprepared for the increase in volume. So I went to everything. I went to Honduras and Guatemala and El Salvador, trying to find Dominican Republic, Uruguay, Paraguay, trying to find outlets for penicillin.

Jon - 00:23:32: Holy moly.

Derek - 00:23:33: Yeah.

 Jon - 00:23:33: That is crazy. So as you're expanding, and I guess, you know, just on that, it's like, how did you... What was your I guess what was your strategy when it came to expanding in all of these countries?

Derek - 00:23:50: But there was a couple. The best decision was to set up a sales office in Argentina, and the natural choice would have been Brazil. But I think a key decision was I found a really good salesperson, Alec Delany, based in Argentina, who I trusted and was a long-termer, who would stay with US for a long time. And Argentina was a smaller country than Brazil, but much more understandable than dealing with the tender system in Brazil. I think that was a really good decision. And having that set up, and then later on, we could set up an operation in Brazil was key. So that, and then we did a merger. We bought a sterile penicillin factory in Mexico City. That helped with some outlets as well, so that our penicillin went into through that outlet, and then trying to get US sales from Mexico. Just continuing, hitting the street. Luckily, our competition was more European, so we were closer. So several visits with the customers. Every country, of course, is going to be different. It's not one region. Chileans work differently than Argentina or Peru or Colombia.

Jon - 00:24:56: Interesting, it's not it really sounds like blocking and tackling, just like,

Derek - 00:24:59: No.

 Jon - 00:24:59: Like you gotta and and you know this is like perhaps we don't try and boil the ocean of Brazil, like let's.

Derek - 00:25:08: Yeah.

Jon - 00:25:08: Let's let's try it like you know start baby steps, crawl, walk, run. And as you know, you're now expanding LatAm and I know you ended up transitioning to a product manager role. And can you talk a little bit about that? Like what is, you know, in your opinion or, you know, definition of product management within this scope and how do you have any tips for anyone who's trying to break into it?

Derek - 00:25:31: Yeah. So I have to say, I kind of stumbled into it because I was flying off a high of managing the joint venture in Mexico. The bosses back in the Netherlands said, okay, now do the same thing in India. And my wife and I went and we traveled to India and looked at it, but it was not a joint venture with the same strategic alignment as what we had with Mexico. And so the joint venture failed very quickly. And so very quickly, I said, well, what am I going to do? And Lucas Casey Young, the big boss, found a role for me as a product manager. So it was kind of a creative role out of all these other products that they'd bought through all these acquisitions. And product manager is like a... A strategist to understand those different products around the entire world, work very well in a matrix organization. And maybe we'll come back to what a matrix is and how challenging that can be. And then develop the product, hence the title, to be able to increase the business performance. Spend some money on research. So you have a research team to develop the strain improvement or the specifications of the product. Kill some products, add more capacity for others. So there's many hats, but you're like an entrepreneur for every single one of those products. And yet you have nobody working for you. Everybody's in a matrix. You have to convince others of your strategy and then get people to buy into your process. And sometimes that works. But I think in general, we were very successful. We had a whole bag of different products with different challenges. Happy with that period.

Jon - 00:27:09: I mean, from what I'm hearing, it almost sounds like a CEO role. You're kind of like...

Derek - 00:27:18: But you have nobody working for you. 

 Jon - 00:27:19: Yeah, and is that because of the Matrix organization? So I guess since we're on the topic, what is the Matrix organization? I think I might have learned about it in another company, but that was the first time I was hearing it. So in your experience, what is the Matrix organization and how does that pan out?

Derek - 00:27:40: Well, it was a huge culture shock from going from managing 50 people in Mexico to managing nobody in the Netherlands. And there you, the Matrix basically means is that there's people who have true responsibility for that site, that production, or that research outcome. And you form a grid where you're the guy officially at the top making the decision for that product through all these disciplines, R&D, sales, production, logistics would maybe be the four main ones. And you're the boss with counterpoints in all four of those areas. You meet with that team of four very often, at least once a week, to try to align their activities with what would be best for the product. And as long as you have good communication, they will follow you and a good plan and a good strategy. And you don't have to check with your boss too much. So they have other things to worry about. So you're working on these smaller products through the matrix. And you're trying to influence them. Again, they're motivated people. They're professionals. They're high at their levels. And they're usually more senior than you in experience in their discipline. So they're mature. They don't see you as a threat. And a... They see the logic of what you're doing and what your strategy is. So I didn't have any problems with anybody misbehaving or disagreeing with that approach. Does it kind of help? It does.

 Jon - 00:29:06: I guess my question is, would you recommend that for organizations now? Or is it a kind of a situational thing where... Matrix work in some orgs, some don't.

Derek - 00:29:19: Usually matrices don't work.

 Jon - 00:29:20: Okay, okay, okay, okay.

Derek - 00:29:23: They usually don't work. I mean, I think many companies complain about them. People complain about them. They become a sense of bureaucracy that that person has to check with me as a boss and also with him as a boss. So it leads to a lot of double checking. Depends on the people and depends on the situation. Back then, this activity, I don't think... We could have done it any other way. We couldn't have had, you know. A separate business unit for these relatively small products. That was perfect. That was perfect. But luckily, I had good people. And luckily, the strategy and the process to develop the approach went well. Not all the products were successful. We came to conclusions after a year or two that we would have to kill a couple of products. But that outcome was very obvious. And that was also a success to stop things that were no longer going to be productive.

Jon - 00:30:15: And I don't know.

Derek - 00:30:16: Matrix is on. It's hard to defend Matrixes.

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Jon - 00:30:18: Yeah, yeah, yeah. You know, I was thinking I was like, sounds hard. Like it sounds very hard. Lots of stakeholders like and kind of like constantly having to kind of like it almost sounds like. You have to kind of... You have to like pitch these, you have to like win them over to your side of like each of these, like four year you're describing. And then, but they don't report to you. So it's kind of like, where do we stand with this? Like very interesting.

Outro - 00:30:50: That's all for this episode of the Biotech Startups Podcast. We hope you enjoyed our conversation with Derek Hennecke. Tune into part three of our conversation to learn more about his journey. If you enjoyed this episode, please subscribe, leave us a review and share it with your friends. Thanks for listening and we look forward to having you join us again on the Biotech Startups podcast for part three of Derek's story. The Biotech Startups Podcast is produced by Excedr. Don't want to miss an episode? Search for the Biotech Startups Podcast wherever you get your podcasts and click subscribe. Excedr provides research labs with equipment leases on founder-friendly terms to support paths to exceptional outcomes. To learn more, visit our website, www.excedr.com. On behalf of the team here at Excedr, thanks for listening. The Biotech Startups podcast provides general insights into the life science sector through the experiences of its guests. The use of information on this podcast or materials linked from the podcast is at the user's own risk. The views expressed by the participants are their own and are not the views of Excedr or sponsors. No reference to any product, service or company in the podcast is an endorsement by Excedr or its guests.