Biotech Pioneer Steve Gillis on Life as a VC, How Today’s Entrepreneurs Can Make It, and Seattle’s Future in Life Sciences (Part 1)
Most Seattleites would probably list Bill Gates, Paul Allen, Howard Schultz, and Jeff Bezos when asked to name local entrepreneurs who built not just successful companies but entirely new industries. But they’d be forgetting Steve Gillis.
Gillis would have to be considered something like the Fifth Beatle in a group like that—you can walk into his office today without being babysat by PR handlers—but he is one of the pioneers of the biotechnology industry both in Seattle and nationally.
For those who don’t know, Gillis was a charismatic 28-year-old immunologist when he left a faculty post at the Fred Hutchinson Cancer Research Center to start Immunex in 1981. He and co-founder Christopher Henney rode the early wave of investor enthusiasm for genetically engineered drugs to an IPO, recruited top scientific talent from around the world to Seattle, and persevered through some dark days to create a breakthrough drug for autoimmune diseases that generates more than $7 billion a year in worldwide sales for biotech giants Amgen and Wyeth.
Talk to any scientist who worked at Immunex in the early days, and they’ll tell you they adored Gillis, the inspirational scientist with an irreverent brand of humor. Legend has it he used to dare scientists to dream big, and instead of bashing them for running a failed experiment, he’d honor goof-ups with the “Pons & Fleischmann award for achievement in dubious science,” named after the guys who once claimed to discover cold fusion.
Gillis didn’t have as much success in his second career act from 1994 to 2005, as the founder and CEO at Seattle-based Corixa. But when GlaxoSmithKline bought that company for a little more than $300 million, he took a new direction in his career, joining one of the most active life sciences venture firms in Seattle, Arch Venture Partners.
This role at Arch allows Gillis, now 56, to put his fingers in a lot more pots. He serves on the boards of six life sciences companies in Seattle: Accelerator, Trubion Pharmaceuticals (NASDAQ: TRBN), VLST, Theraclone Sciences, Qwell Pharmaceuticals, and VentiRx. He also serves on the board of two other Arch companies in Massachusetts—Brighton, MA-based Surface Logix and Cambridge, MA-based Variation Biotechnologies.
This new perspective as a venture capitalist provides Gillis an opportunity to be even more influential in the community, says one of his protégés from the Immunex days, ZymoGenetics CEO Doug Williams. “He can be enormously helpful to the local biotech scene at Arch, and in fact I think if you look at the companies he’s involved with locally, you’d have to conclude that he already is. Steve is one of those rare people with an equal dose of talent in science and the business of biotech. He’s pretty much done and seen it all, and for him to be able to convey that to many companies instead of just one is of great benefit to the local scene,” Williams says.
I sat down with Gillis a few days ago to talk about life as a venture capitalist, how the biotech investing model has changed, and Seattle’s strengths and weaknesses. Here are the highlights of the conversation.
Xconomy: Can you bring us back to your thought process when you came to Arch? It was the summer of 2005, you had a long run at Corixa, and could have done a lot of different things. Why did you decide to become a venture capitalist?
Steve Gillis: After whatever it was, 14 years at Immunex and 11 at Corixa, that was 25 years of being involved in operations of a public company. I didn’t want to jump back into doing that. I needed some sort of break. Because sometimes running public companies isn’t a lot of fun. A lot of what you do is mandated by others or regulations, and at least part of the time, doesn’t really create a hell of a lot of value for anybody.
So, I wanted to do something different. Bob Nelsen had been dogging me for several years to come to Arch. I thought if I came, at least that would stop [grins]. Bob convinced me, as did the other partners, that Arch still believed that the best science will create the best products and the best companies. There really wasn’t any substitute for that. It certainly struck a chord of agreement with me. I think a lot of VCs maybe haven’t abandoned science, but certainly haven’t placed science at the level that I think it needs to be. They are looking for quicker fixes. Starting companies around assets that are discarded by others. That’s not something I really enjoy. It’s also not something Arch does a lot of. We’re certainly open to in-licensing assets, but only when they fit with a particular platform.
I like platforms. When I say platforms, I don’t mean tools, but I mean a base technology from which multiple products could flow. Those are the types of companies Arch likes to fund, and the type of companies I like being involved in. So it made sense to come.
I initially started as a venture partner, and the goal was that I’d work something like four days a week and screw off the rest of the time. But I found myself liking it. So I wound up working five, six, seven days a week. Soon after that, I became a managing director.
I do still enjoy it. The thing that I enjoy the most is the variety. And the exposure that I have to lots of areas of science that I certainly didn’t have when I had day-to-day responsibilities of running a public company.
X: Do you think you’re more of a natural for venture capital, at least to the extent that it appeals to the scientist within you more than being a CEO?
SG: No, I don’t think so. For where I am in my career, it’s almost a logical extension. I serve as chairman of a number of companies, so that keeps me fairly close to operations. Helping companies with financing, helping with dealmaking, making introductions, thinking about acquisitions those companies might be involved in. Adding technologies. I get to keep my hand close to operations, without having to do some of the dirty work or some of the things I don’t enjoy doing, like writing performance evaluations or all the trappings you have to do when you’re CEO, because there’s no one else to do them. Now I don’t have to.
X: Is it sort of like being a grandparent, where you get to go visit the grandkids, but the parent has to wake up at 3 am?
SG: It is a little bit, but by the same token, we have our money in these companies. So it’s not like you can just shut the door and say, “Oh, well, never mind.” You have to mind. That’s your money and your limited partners’ money in the companies, so you want to make sure they do well.
X: How do you think you can make a difference from this chair here at Arch, versus being a CEO or anything else you could have done?
SG: To a great degree, the management of the companies where I represent Arch’s interest actually want my involvement. While they don’t listen to all my recommendations or follow them 100 percent down the line, I think they’re interested in what I have to say, and interested in drawing on my experience set so they can avoid mistakes I’ve made and do things better, quicker, cheaper, because that’s in everyone’s interest.
X: Not a lot of VCs have a 25-year operating track record, so how does that inform the way you advise an entrepreneur?
SG: I can attempt to tell them, “Look, I’ve been faced with this similar problem, and I’ve made this similar mistake.” Or, faced with this problem, you can bring up several ways to deal with it, and I’d recommend Door No. 1, because I used Door No. 1 myself once, and it worked.
But it’s becoming increasingly common that people with long track records in operations are now partners in venture capital companies. Traditional VCs find a benefit of having people around the table who have actually had operating jobs and have taken products into the clinic, and have gotten products out the other end.
Another case in point: somebody I work with a fair amount, Jeff Leiden at Clarus Ventures, was head of R&D at Abbott. It’s not as uncommon as it used to be.
X: You think you’ll ever go back to running a company?
SG: A long time ago, I learned to never say never. So I won’t say never. But for now, I really enjoy this. I have had a couple stints as acting CEO of portfolio companies. I was acting CEO of Ikaria for about nine months as that company went through its financing, which led to an acquisition of a major division of Lindy, the gas company. I was acting CEO of one of our portfolio companies in Boston when the CEO left and before we hired a new one.
Actually, I enjoy that. I enjoy it a lot more in Seattle than I do 3,000 miles away. But once again, it gives you an opportunity to get closer to reality and dealing one or two levels below what you might see at a board meeting. I still enjoy seeing primary data as opposed to just conclusions. It keeps your hand in the game.
The world is certainly different now than it was when I was involved with starting Immunex and Corixa. For one, there’s no public market anymore for development-stage companies. So you go in starting a company knowing that nine times out of 10, or maybe 19 times out of 20, your only route to liquidity is through acquisition. So that has to color your investment decision. If I was going to start another venture, everyone would have to be clear that that’s the outcome, and would know that’s the outcome from Day Zero. I wouldn’t want to delude investors or fellow entrepreneurs that we’re going to be the next Immunex, or the next Amgen.
X: I would imagine that’s a different mentality than the one you had when you were 28 years old and starting Immunex, probably thinking you’ll go public and build a great big company.
SG: Absolutely. Yeah, or at least, we’ll be a drug company. There’s a chance today, but the chance in today’s financial realities, is about as close to zero as it’s ever been.