Nat Turner was nervous.
Turner is a cofounder and the CEO at Flatiron Health, a New York-based healthcare-technology company that collects clinical data from cancer patients, such as what medications they’ve taken and how they have responded. It was 2018, and he had just sold the company for $1.9 billion to the Swiss pharma giant Roche.
This wasn’t the first time he’d sold a company. In 2010, Turner and his Flatiron cofounder, Zach Weinberg, sold their former company to Google in a $70 million deal. After the deal closed, Turner recalled what the integration was like with Google.
“It was like a chop shop,” Turner told Business Insider. Engineers were sent to report to one floor while sales employees were sent to another. Still, he said it was the right thing to do for the company.
With Flatiron, on the other hand, the goal was to stay independent as much as possible. So Turner consulted with the founders at other companies that had been acquired by Roche. They reassured him that he’d stay independent.
One year in, it’s so far so good.
“The day-to-day hasn’t changed much, which is crazy to say,” Turner said.
Turning down term sheets in favor of an acquisition
Roche has a number of different businesses, including diagnostics and cancer-drug development. Roche’s Genentech arm had been one of Flatiron’s early clients in 2013, Turner said. Then, toward the end of 2015, Roche led the company’s $175 million series C investment round.
Around September 2017, Flatiron began considering raising another funding round to take advantage of money that’s been pouring into healthcare, while at the same time having the chance to do some acquisitions and otherwise grow the company. The company even received a few term sheets.
But then Flatiron started having more conversations with Dan O’Day, who was then the CEO of Roche Pharmaceuticals and a member of Flatiron’s board. In the end, Flatiron decided to go through with an acquisition rather than raise additional capital.
“It’s a unique model because although it’s full ownership, as you know, we will keep them quite autonomous,” O’Day told Business Insider in 2018. “That’s important for a number of reasons. They’re different companies than Roche — different environments, different cultures, very entrepreneurial. We want to keep and respect that.”
It does mean that Turner now has a boss, which hasn’t been too much of an adjustment.
“If it’s like this, it’s not that bad,” Turner said.
O’Day left Roche to join Gilead Sciences in March. O’Day’s departure caught Turner by surprise.
“I was surprised that he left so soon,” Turner said. “If you think about it, it’s hard to find people as talented as him, and Roche was stocked to the gills with really talented senior people. It just made sense.”
Now the Flatiron team reports directly to Roche CEO Severin Schwan. The switch has been smooth.
“We’re so independent, it could’ve been anyone above us, and it wasn’t going to change our day-to-day,” Turner said.
Advice to founders
Often, when a company gets acquired, the founders of the company will head on to other ventures. But for Turner, sticking around after the acquisition was a given.
From where he sat, the deal was a strategic move to help his company keep growing.
“Our work wasn’t done, and therefore we’re still here,” Turner said.
Turner said there are a few things founders looking to stick around after getting acquired should keep in mind when going through the deal process:
- Ask for what’s important to you before you sell the company and be clear about expectations. For Turner and Weinberg, that meant independence to make strategic decisions. “We have a budget, but once that’s set, it’s up to Zach and I and the team to allocate and prioritize and do whatever we think is best strategically,” Turner said.
- Have a succession plan in place. Even if the CEO is sticking around, it’s important to make sure other executives do, too. “Make sure you build retention strategies not just for yourselves but for the people who are frankly closer to the day to day,” Turner said.
- Constantly check in with the company that bought you. Flatiron has quarterly business reviews with Roche to make sure the company’s management is on the same page with Flatiron.
- Make sure you sync with how decisions are made. Flatiron’s longer-term approach worked well with Roche, which is majority-owned by family shareholders. That might not be the case if you’re a founder working on a longer term project and your acquirer has more short term goals. “If you’re used to making long-term decisions, and you get acquired by someone who makes really short-term, earnings-oriented decisions, that’ll create a lot of friction.”
For instance, one of Flatiron’s businesses is electronic health-record software for community oncology practices.
“It loses a ton of money if you look at it as a standalone,” Turner said. But it’s an important part of Flatiron’s business. “If anybody else acquired us I can totally see them coming in here and being like ‘how does that make sense?'”
Flatiron went through the acquisition process at a pivotal point in the company’s development, around the time the company hit 500 employees. At that stage, Flatiron didn’t exactly have the startup feel it once did.
Carol Jensen, Flatiron’s chief people officer, said there was a fair number of people who left the company when their Flatiron stock paid out after the acquisition.
Turner said that the attrition was higher than what Flatiron was used to.
“We probably got up to what most companies are used to, but for us that was relatively uncomfortable for a couple months following the acquisition,” Turner said.
Joining Roche and getting bigger meant the company had to change its compensation packages. Getting to a bigger size also meant formalizing more of how the company gets its work done.
“We have to change our processes because we’ve gotten so much bigger, you can’t assume you’ll run into someone in the hallway and tell them something,” Jensen said.
As of April 2019, Flatiron has a little more than 700 employees, with plans to reach about 1,000 employees by the end of 2019.
Becoming part of a drugmaker also meant Flatiron had to change its pitch to potential customers in the pharmaceutical industry. Clients have had questions about Flatiron’s relationship with Genentech, the arm of Roche that’s Flatiron’s biggest customer these days.
Here’s how Turner lays it out: “We’re one of 200 companies in the Roche group. Genentech’s a customer of ours. We report up to the global CEO. They’re not privvy to any customer information. We hold ourselves accountable to that.”
from Viral Newses http://bit.ly/2VFIUZN