Our good friend Raman Minhas at ATPBio has a really good post today on the critical factors for a medtech company to be successful using a virtual organizational model.
Raman’s critical factors, with our comments, are:
The Team – In Raman’s case study, he notes that the founders had a tremendous network to tap into. This network doesn’t evolve overnight. Rather, it’s the fruit of being in the industry for years. By having the grey hairs, it’s easier for the founders to tap into investors, consultants, accountants, attorneys, domain experts, etc., etc.
Experience – Raman is absolutely right in that a virtual team needs to be populated with people who are highly experienced within their domains of expertise. Virtual teams are no place for folks with shiny new diplomas, irrespective of where these diplomas came from.
Project Management – I would place PM as the number 1 operational requirement of a virtual team. It’s critical that a virtual team feel very comfortable with, for example, sharing documents live with Google Docs, Skype calls, etc., for internal management & communication. But for managing contractors, it’s especially critical that the internal team be on the same page when communicating with external contractors. Why? Because the team is virtual, it’s not always possible to “grab Bob from the office next door to join in on the call.”
Niche Focus – Could a virtual team tackle a large market, such as breast cancer or rheumatoid arthritis or Crohn’s Disease? It’s an interesting question. I don’t see why not.
Cluster Effect – This is a very interesting point that Raman raises. Could the leadership of a virtual company be as effective if they were located outside the biotech clusters of Boston, San Francisco, Cambridge, etc.? Raman views this as a positive. Indeed, tapping into the local community for domain experts and investors and Board members might make things a bit easier. But how would the rest of the team feel if they are not also based within the same cluster?
What is the geographic definition of virtual? Can a virtual company function if the managers were, say, hundreds of miles apart? Would a team that is located within 30 minutes of each other be more successful, simply because of a greater opportunity for more internal face time? What if the co-located team were outside an established biotech cluster?
I suppose that an experienced team that feels comfortable working with each other and who knows that it’s doing can be successful irrespective of their geographic location. But I would hazard that as soon as investors start getting involved, especially traditional Series A-C venture capitalists, then location becomes increasingly important.
Face Time – We agree with Raman that regular internal face time is very important, as per our comments above. I would think that experienced teams who have worked together in the past may be less dependent on frequent internal face time. But that’s admittedly a weak argument.
So is virtual a “good” model? As with most things, it depends. Clearly it is an intriguing way to save operating expenses. Another benefit is that it liberates entrepreneurs from their current geographies. In other words, if a Founding CEO in New York wants to hire his former colleague who is based in Boston, then the virtual model makes this possible (preferable, even).
However, the intrusion of traditional Series A-C investors may have a different perspective. They may want to look the team in the eyes on a frequent basis. Some may even “force” a virtual company to establish a corporate presence nearby (In fact, we witnessed this quite recently, with an investor making re-location to their office building a part of the investment agreement with a virtual biotech.)
Regardless, we’re big fans of the virtual model. We think they can be very successful, especially for single-asset legal entities who are completely dedicated to the development of a single asset to a critical value-inflection point.