Bioscience industry stakeholder collaboration key to addressing inequality
When a global pandemic hit, the bioscience industry answered the call for vaccines and therapies in record time, which will save millions of lives. This response was possible because of a sustained investment of risk-capital by the venture capital industry in life sciences companies, peaking in 2020. Great scientists, visionary leadership and high-quality investors that backed new science and bold entrepreneurs led to the innovative technologies of BioNTech and Moderna that contributed to the initial Covid-19 vaccines.
As the sector rightly basks in the glow of this year’s accomplishments, there is a concurrent reality to confront. Covid-19 has further exposed the inequities in society, disproportionately impacting women and minorities. This imbalance is also evident in the bioscience community, provoking many leaders to act on inequality.
Venture capitalists finding reasons to change
The venture capital industry, not only within life sciences, has well-documented challenges with diversity, equity and inclusion. Only 2.6% of total VC funding in 2020 has gone to Black and Latinx founders, and funding for female founders has sunk to levels not seen since 2017. Despite that, I perceive a growing appetite for change. The question is – How?
In VC firms, the low attrition of investment partners and the limited expansion of firms limits career opportunities for the many talented Associates and Principals that represent the future. With no visible route to partner, these employees seek opportunity elsewhere, outside venture capital. The loss of such talent reduces the chance to introduce more diversity among a venture firm’s partner ranks.
A lack of diversity among VCs greatly influences investment decisions and capital allocation. For example, research shows how interactions with investors differ between men and women entrepreneurs (We Ask Men to Win and Women Not to Lose: Closing the Gender Gap in Startup Funding. Kanze, Huang, Conley and Higgins). The questions directed at men explore the size and magnitude of the opportunity. In contrast, women are more likely to be questioned about prevention factors and down-side risk.
Creating a new company in life sciences, and growing it, invariably relies on venture finance. VC firms have a strong influence over the company building process, including the composition of boards and senior management, as well as the talent and culture. Insufficient diversity among venture investors can limit a portfolio company’s competitiveness in the talent market because diverse candidates select employers where they see themselves represented and successful. Just 3% of VC investing partners are racial or ethnic minorities and around 11% are women. This leads to an existing bias among VCs towards historical success patterns, which has been to the detriment of minorities and women.
Private companies react to public market requirements
The recent Nasdaq proposals to the SEC on board diversity and disclosure, alongside new state laws and regulations, are forcing many public companies to become more diverse. Meanwhile, private companies in the bioscience sector remain strongly influenced by venture investors who many perceive as passive regarding diversity and inclusion.
The interplay between venture investors and portfolio companies is a source of great opportunity to advance DE&I in the sector. Increasing diversity will create value for all stakeholders, and reduce the friction points as companies transition from private venture ownership to the public markets. Changing the composition of the board and the management team takes time and energy and can cause a company to lose vital momentum. Culture is often seeded early in a company’s life and positively addressing culture from the get-go reduces the need for cultural corrections as a company matures.
The power of the collective
For small companies, without the expertise and human capital, the intent to implement DE&I practices, tools and policies often fails. Practices borrowed from large international companies are not routinely effective either.
The range and complexity of DE&I issues companies need to tackle, make the task daunting and complicated. Instead of organizations individually piecing together a DE&I strategy, constituents have an opportunity to work collaboratively and pre-competitively to develop DE&I solutions that are designed for the operational requirements of venture capital firms and venture-backed private companies. The Bioscience & Investor Inclusion Group (BIIG) is one such opportunity (www.bioinclusion.org).
Bioscience & Investor Inclusion Group channels collective community action; something the bioscience sector does well. BIIG enables companies and individuals to contribute their perspective or experience to structured working groups initially prioritizing Investor Interactions; Hiring and Onboarding, and People Growth and Retention. The DE&I solutions BIIG develops will be freely accessible to help advance and accelerate DE&I in the industry.
When investors and entrepreneurs link arms in the face of challenging problems, they are capable of remarkable achievements. This unity and the open and collaborative spirit of the bioscience community can tackle another big problem the sector must confront — inequality.
Karl Simpson is the CEO of Liftstream and a founder of The Bioscience & Investor Inclusion Group.
Biotech Voices is a contributed column from select Endpoints News readers. Read more here.