Sandy Paige - Seabright Ventures Fund - Part 3

Intro - 00:00:00: Welcome to The Biotech Startups Podcast by Excedr. Join us as we speak with first-time founders, experienced scientists, serial entrepreneurs, and biotech investors about the challenges and triumphs of running a biotech startup. Gain actionable insight into navigating the life sciences industry in each episode as we explore the business of science from pre-seed to IPO with your host, Jon Chee.

Recap - 00:00:32: In our last episode, Sandy Paige talked with us about putting his MBA to use, his general manager experience, and his transition to the Jackson Laboratory. If you missed it, be sure to go back and give part 2 a listen. We continue our conversation in part 3, discussing Sandy's time scaling international distribution at the Jackson Laboratory, how a family medical issue made his work deeply personal, his thoughts on learning business development, and how he left to run a search fund.

Jon - 00:01:01: And so now you set up this new site in Sacramento. You expanded, you've stabilized the West Coast Operations. I know you then opened the aperture and started to manage international distribution for Jackson Laboratory. What was your experience going international and doing business development overseas? And I believe you also still were overseeing the West Coast.

Sandy - 00:01:23: A little bit of all of that. Some of that was out of my control. There were organizational changes and new opportunities created for other people. And so I shifted around and kind of did the best I could with the organizational needs, didn't want to go back to headquarters, which was one of the options that came up a couple of times and headquarters being in Maine really wanted to stay out West. And so the opportunities that were most available to me, if I was staying there was basically to get in a plane and fly. And so I became a road warrior, did business development, did international distribution, and just so people understand what this means, genetically engineered mice are used in research to develop everywhere from basic research all the way up through testing new drugs or anything that any of your listeners have ever put in their body from a pharmaceutical standpoint, that wasn't first run through a mouse. And that's needless to say, I think that's good. It's you want to use as few animals as you can in research and you want to treat them as humanely as science can possibly allow. But it is still a very important part of the drug development cycle to run animal research studies. And they are shipped all over the world. I mean, there's specialized animal models that do very narrowly defined things and have very special intellectual property in them. And so we would put mice and I'm sure it still happens into shipping containers, mount special shipping containers, put them on planes and they would end up in India and in Singapore and in Israel and in Australia. And sometimes they would be re-bred there, other times they would be used directly in studies. And so I spent time traveling around the world and went around the world twice, I think completely around the world, a couple of times visiting customers. I think I went from San Francisco to Singapore to Mumbai. To tell them leave to San Francisco on one trip. Those are long, you don't do that in a week, that's a two and a half week trip. It's fascinating. What's not to love about that if you can do it? If you love your work and you feel like you're making a difference and doing cool things, that was just a gift for me to have that opportunity. It was an organization I loved. I think it's maybe worthwhile pausing for a moment to say what the Jackson Laboratory started doing was making and there were a few Nobel Prizes won there and its impact on cancer research and discovering the genetic basis for disease. Cancer touches all of us. Obviously, I've written anybody listening who doesn't have an impactful story there. In my case, all the career you've heard me talk about up through right about to this point that we've touched on, was with my first, my late wife, Anne who passed away from breast cancer, about this time that we're talking about. Towards the end of my time with Jackson Laboratory. And so it was a deeply personal place for me to be. If your wife is getting chemotherapy and you're working at the place where chemotherapy was first developed, or some of the first medicines that made a real dent in cancer came out of basic research from your employer, That's a form of equity that's worth more than anything you could imagine. And while it was a nonprofit, and while the value, a pretty significant value, I participated in creating, it didn't accrue to me, it's doing really good work right now for a whole bunch of other people. That story and the decade I spent there was very tied together by a personal story of a spouse who was suffering from cancer over a 10-year period as we were raising our kids and ultimately ending up losing their battle. Everybody who's listened to this has a version of this at some level, either maybe as personally or as closely as this, but maybe it's just not just, but a mom or dad or friend or cousin or whatever. Those are important decisions to get right, not to walk away from meaningful work that relates to the things that are important to you kind of at your core. And those things aligned really nicely for me at that stage of my life for sure.

Jon - 00:05:37: Absolutely. Something that drives me for being in the life sciences, exactly that. It's what kind of alluded to, it's like it's more than the equity. It's just like the broader good that the life sciences delivers for all of us, you know, and how it touches on all of us is every day getting out of the bed just gets me fired up to get to work and ready to do this. And I wouldn't trade it for anything.

Sandy - 00:06:02: Agree that there are some other ways to deliver good, but that's a really good one.

Jon - 00:06:06: Yeah, totally. As you flying around the world and realize you're meeting clients, you're meeting strategic accounts and everything like that. Were there other aspects of your now, I guess, like new role that Jackson Laboratory tasked you with besides meeting your international clientele? Or was that your main?

Sandy - 00:06:25: That was the main, I mean, there was enough to be done there. And I was also in charge of a very large distribution agreement that we had that allowed. One of the large CROs to breed our mice in Europe and in Japan. And so managing that contract was substantial and a challenge as well. So I went from managing a local manufacturing facility to managing, first, I guess I built a US business development function. I hired a couple of people there, and then I did the same thing internationally. But I didn't manage the local sales teams directly, but I was deeply involved in all of that. A colleague was with the people who did. 

Jon - 00:07:05: Got it. And you mentioned kind of building like business development functions in order within the Jackson Laboratory. Do you have any advice? And I, you know, having, I just came back from the Nucleate Summit, meeting folks who are MBAs, folks who are wrapping up their PhDs or post-docs. And a lot of the interest they've asked is like, how do I get into business development, especially particularly from the realm of being a scientist or maybe an MBA? How do you go about doing that? And maybe just a level set for you, what would you define as business development? And then maybe go from there.

Sandy - 00:07:39: Yeah. I think it's a good question. I think there's often confusion. Business development and sales, I view as different things. I view sales as answering the phone, following the playbook that is provided typically, managing current accounts, chasing a few new ones. Business development is, Not that, it's developing new business. It's going and creating opportunities where none existed. Typically there are larger opportunities. Also distinct from strategic accounts, which is managing the largest sales accounts. BD is a little bit more creative. I do think it's important that you have the basic tools of sales and strategic account management in order to do BD well. But BD, you've gotta be able to walk a line between talking a bigger game and talking to higher level people. And in my case, I always had to be very careful because clearly not a scientist and clearly representing a very scientific, highly reputable scientific organization. So I always had to walk a line between those things. And I had to be careful to make sure that people knew in the first conversation that I wasn't a PhD. I wasn't any of that. And so it was an important part of the conversation where I just had to make sure I didn't get into a conversation where people were assuming I was gonna have an answer that. That it wasn't. And if I did, that was fine. I just be very clear and I can answer that. I'll get you the answer. So what is BD? I mean, I think it's listening to your patterns, is looking for pattern recognition. It's typically listening to the most senior people in your organization who usually will know where the opportunities are and where they want the sales organization to go and generating opportunities and triggering conversations. It all starts with creating conversations and building relationships and getting people to trust you enough to tell you what they need or what's wrong with your current offering or what new offerings could be provided or how your current ones could be improved. How to get into that. I think there's nothing wrong with starting in a sales function. And if you have PhD level friends asking you how to get into BD, the answer is there's a whole bunch of people who would love to hire them for sales organizations right now and go take a sales job. Just take one. There's 10 of It may not be perfect. It will not be perfect. Right.

Jon - 00:10:04: Yeah.

Sandy - 00:10:05: You will be frustrated coming out of the lab and having to hit a number. But I dare you to do it for a year or two and tell me I'm not right, that it wasn't a really good experience for you and that's not a good path to getting into BD or strategic account management.

Jon - 00:10:20: Fantastic. Yeah, I think sometimes felt very nebulous, like, and it kind of like almost the Venn diagram almost will appear to be clearly overlapped, but I think it's less overlapped than what is. Traditionally told from my experience too, as much as that I am, I would say this, I didn't love sales. I didn't love sales, but I learned how to do it and did it for a very, very long time. When I look back on kind of like business development activity that I'm doing to this day, I would not trade the sales, the hard sales chops that you have to learn because that, you know, at the end of the day and, and sales is just like effective communication, alignment of expectations and custom like this and being very, very customer focused. And those things you can read as much as you want about it in a book on the internet, but there's nothing like just doing it. And I almost think people who want to get into BD might get too academic about it. And not just get their hands dirty because that's the best.

Sandy - 00:11:26: That's the best. I think you and I would also agree. It's often said about the BD guys by everybody else, what the hell are they doing all day?

Jon - 00:11:35: Yeah.

‍Sandy - 00:11:36: Because it seems like they fly to all the conferences. They're always wherever they want to be. They might play a little more golf than I do. They don't really leave the meetings with any responsibilities as far as I can tell. And they probably make more money than I do. Like what is BD all about? So I think BD can also become a problem and it's probably the first place to get cut to when sales organizations get too fat. So I think you got to be careful. You got to be careful with definitions of what BD looks like as well.

Jon - 00:12:03: Absolutely.

Sandy - 00:12:03: Or we didn't have anybody in BD. I defined it as everybody's job. And that was the only way we could get it done because there was just not enough expertise in our field for people to become effective salespeople. We were the five people who knew the most about it. So guess what? The CFO was BD as well. That's the way we managed it. In addition to having a really, really world-class salesperson who ran our whole organization, she was great at BD and sales and strategic accounting management. So we did all.

Jon - 00:12:35: That's awesome. Thinking about Excedr and it's like, yeah, it's definitely a similar vibe where everyone has a beady cap that they wear from time to time. It definitely works for us. 

Sandy - 00:12:45: It's a good reminder, I think, for everybody. So it's also not. Again, it's situational. If you're trying to grow at 40% a year, which we were growing at Explora, you can't possibly hire enough people to do that work. It's gotta be everybody's job. And I don't know what your growth rate is, but I'm guessing it's pretty stout and it sort of has to be everybody's job. And I think that there are some cultural messages that you send to your team about that too. It's not below anybody. This is what we're about. We're about taking this product and making it available to the universe. So pick up that phone or get on that plane and get there. And if somebody else can't be there, you can go do it. That worked pretty well. I'm not sure it's scalable. Sometimes you do unscalable things for a period of time to get from here to there.

Jon - 00:13:31: You learn from it too. If you're like, maybe that effort was not exactly what we were looking for. You don't have to do it again. So it's like, I know you spent nearly a decade at the Jackson Laboratory. When did you know it was, it was time to leave and when did you know what your next opportunity was going to be?

Sandy - 00:13:48: So it got to a point where I had said no to going back to headquarters twice. We don't get asked three times. And I generally knew, I mean, I knew I wasn't going to ascend to run the whole organization. It was becoming a place where when I arrived, I was the first outsider who had an MBA who was hired in. That was a new thing. By the time I left, it was almost like you had to have an MBA PhD to be in the senior team. I wasn't going to fit there. I wasn't going to grow there. My time was up. I don't think I felt it necessarily from leadership, but I felt it in my heart. There were other things I wanted to do. I wanted to do a search fund. My new wife at that time, Meg, was just fantastic in recognizing, again, pattern recognition as a CEO. Pattern recognition as a wife, she was tired of hearing me talking about search funds. She's a CEO and an MBA as well. She told the story a few times where she said, it's time for you to stop talking about this and either go do it or stop talking about it. She used a slightly more colorful language in the net, but it worked out. Our deal was, our agreement, husband to wife, was go try to raise a search fund. Don't quit your job until you're 65% raised. And that took me, you know, since I was working full-time, took me seven or eight months to get there. And then as I got there, right about this time of year in 2017, I guess it would have been at that time, I left or gave my notice at Jack's and started finishing the raise of the search fund. So I don't know how much your guests know about search funds, but it's a, the first thing you do is raise a small pool of capital to support a two-year search for a business of a certain kind. And that's what I mean by raising that capital. So as soon as I had raised that capital, I said about going to acquire, find, and then perhaps acquire a business using the capital provided by the investors.

Jon - 00:15:53: And thank you for setting the table there because I think in the life sciences, most people are much more familiar with the venture fund. And even from our perspective, and we don't have a fund, but they're like credit, what's credit? It's very much, they're very, very familiar with venture VC. So thank you for kind of explaining what a search fund is. I'm thinking back on when you were talking about. Exploring the search fund space and learning about search funds. It sounds like you've been in the know in the search fund world for some time. How did you learn about a search fund and how did you learn how to do it? And when was that?

Sandy - 00:16:29: First heard the phrase between my first and second year of business school when I had an internship as many people do and the venture capital. Private equity guy who I was working for suggested you should go do a search fund. And this would have been 2001 or so. And he described it. So he said, basically you raise a small pool of capital and then you go find a business, you buy it and then you have to run it. I'm like, wait a minute, I'm gonna raise capital. A, I've never managed a P&L, I've never managed people. I've never really done anything other than get an MBA and I'm gonna go buy a business from somebody? Sell it to me? So, and he's like, yeah, that's pretty much the way it works. I said, I don't have the cojones to do that. I think that sounds like hubris and arrogance. And so I'm going to go do something else and get some management experience. But I liked the idea. I'm going to come back and I came back to it a couple of times, came back to it once and did what we call a self-funded search that went sort of predictably terribly, and I came back and was going to do a search, proper traditional search fund five or so years later. And my wife had her second bout of cancer at that point. Maybe it was her first, and then there was a third return to it after she was well and cancer returned. So I had a number of times where I, I sort of approached it, got ready to go and do it and then something held me back. So it really wasn't until I was, unfortunately, until I was into a new marriage and my second sort of family, when the time and the dominoes lined up in a way that I could take a shot at. It didn't come out of the blue. It was something that was on my list and I knew time was running out. As it was at 48 when I raised a search fund, I was the oldest person to have raised a search fund. And I barely succeeded in raising just the search capital because I was so old. I had four kids in high school. I was doing what we call a geographic search, which meant I wasn't just gonna go anywhere in the country wherever I found the business. I was gonna do a Northern California, kind of a California search. And that ruled out an awful lot of people who are professional investors in this space. Understandably, fortunately. I bamboozled enough people in and. A cap table of the only people who said yes, as I like to say it, ended up working out really well for them. So those people are all very much on my forever Christmas card list.

Jon - 00:18:48: Yep, totally. And as you solidified the fund and you embarked on the actual search, the search part of the search fund, how did you find, Explora Biolabs and what made them stand out to you where you're like, okay, this is the one.

Sandy - 00:19:05: Yeah, I wish it was that deliberate. In fact, I think in my investment documents, I specifically said I wouldn't be investing in biotech because biotech is full of venture fund money. It's not full of profitable small companies. And the search fund world only acquires profitable small companies that you can grow without a lot of capital expenditures and without a lot of working capital. And so there's a certain profile of a business you can acquire with a search fund, which rules out an awful lot of the GDP of a country like the US, leaves a lot of the GDP available too. And it turns out there is a sector of support. Biotech is big enough now, biotech and pharma services is big enough that there's a sector of the industry that I really didn't, I wasn't aware that existed. That is doing things like facility support and supply chain support and services, B2B services to the biotech and sort of venture driven pharmaceutical development pipeline. And those can be very good businesses. And while I wasn't looking for one, I did one of the first things you do when you start a search fund is you call kind of everybody you know, and you shake all the trees. And I called a former customer and we started chatting. And I realized that he had a business that I, it was a little bit more and a little bit more interesting than what I had thought it was. And it led to a whole series of conversations and we rather quickly got to terms. And that turned out to be exactly the right business for me to run. And my investors, even though I had said no biotech, these are professionals, they knew the fit between me and that business was perfect. And I was super excited about it. I had a very clear thesis about what we ought to do and how we would make it work. And so, we didn't have any gap in our cap table. We were oversubscribed. Everybody wanted to invest. And that part of it was generally pretty, pretty easy. The equity side of the story was pretty easy. Debt side was harder, but that's another story. 

Jon - 00:21:08: As debt tends to be sometimes.

‍Sandy - 00:21:11: You know a little bit about that, don't you?

Jon - 00:21:15: Difficult for different reasons. I will, I don't know, maybe similar. I think sometimes debt can be very fickle or volatile. It's very sensitive to macro. But maybe that's just me speaking on my experience.

Sandy - 00:21:28: Well, and especially right now.

Jon - 00:21:29: Yeah. Right now is especially the case. And, you know, with the advent of, it wasn't even a year ago, like a two quarters ago of SVB and so on and so forth. It's, you know, the conversations that we're having is like, people are still, you know, the dust has not settled yet. Absolutely not.

Sandy - 00:21:47: No, especially in biotech and venture. 

Jon - 00:21:49: Yeah. 

Special Outro - 00:21:51: That's all for this episode of The Biotech Startups Podcast. We hope you enjoyed our conversation with Sandy Paige to learn more about his journey. Tune into part four of our conversation, where we cover his time at Explora BioLabs, the importance of CEO's relationships with their board, the acquisition by Charles River and the qualities of which he attributes his success. If you enjoyed this episode, please subscribe, leave us a review and share it with your friends. Thank you for listening. And we look forward to having you join us again on The Biotech Startups Podcast for part four of Sandy story.

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