Dividing the Equity Pie: Biotech Startup Realities with Dr. Jahanara Ali

When you start a biotech company, equity isn't just a line on a spreadsheet. It can literally determine who gets to keep pursuing their dream and who has to step aside. In this episode, we're digging into equity distribution, an aspect of launching a startup that's easy to overlook but critically important. It shapes whose ideas ultimately make it from the lab bench to the real world.

My guest today is Dr. Jahanara Ali, founder of Longitude Ventures Consulting. Dr. Ali has spent years working with universities, biotech startups, and investors, helping them transform research into successful businesses. Her recent three-part series, "Dividing the Equity Pie," explores how equity was distributed among founders and investors in biotech companies that went public from 2021 to 2023, and her insights reveal some fascinating trends.

We'll unpack those insights, explore the differences between companies launched by investors versus those started by founders, and talk honestly about the persistent gender gaps in equity stakes. Whether you're a researcher wondering how equity works, a tech transfer specialist representing inventors, or an entrepreneur setting up your own startup, you'll leave this conversation with practical tips and a clearer understanding of how to manage equity fairly and effectively.

In This Episode:

[02:08] We learn about how Dr Ali ended up in biotech and venture consulting. She was a scientist but she knew she wanted to move into the business side.

[03:14] She began working in Tech Transfer and joined an early stage biotech startup to learn about the business side.

[04:02] Through her various experiences she became an expert in equity, licensing, and early stage development.

[05:30] She dove deeper and deeper into how to divide equity for biotech companies.

[06:02] She discovered that equity was all over the place for academic founders.

[07:34] Academic founders usually do better with their equity shares if they negotiate for themselves.

[08:52] She discovered that founders who developed foundational IP or an inventor who took an operational role usually end up with more equity than inventors who stay in academia.

[09:27] It's important to educate faculty members and licensing offices on this data.

[11:12] Advice for academic inventors includes to partner with tech licensing offices but negotiate the equity component separately.

[12:05] Key differences between investor-launched and entrepreneur-launched biotech companies.

[13:43] Founding investors retained about 30% of equity at IPL. Founding entrepreneurs retained about 14% of equity.

[15:13] Companies launched by VCs raised over $100 million. This was a lot more than the entrepreneur launched companies.

[16:08] Lessons include understanding how difficult it is to succeed. Have experienced people around you who have done it before.

[17:18] Out of 243 founders, only about 51% were on the cap table at IPO. The other 50% just drops off for whatever reason.

[18:47] If you're going to raise money, dilution will happen.

[19:50] Gender disparities among founders. 

[20:15] About 85% of the founders were male. Women were 10%. Investors started 5% of the companies.

[21:51] Young women should include male mentors in their professional network. 

[23:19] There are Angel networks that do invest in women entrepreneurs.

[24:18] There is an opportunity to standardize academic equity.

[25:03] Key insights for academic inventors.

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