As expected, BCM announced last night that President Traber is stepping down. I‘ve already commented on Traber’s tenure at BCM. What I’d like to do here is make two comments on a positive development in the Rice-BCM negotiations that I’m excited about.
Bob McNair and Jim Hackett will be heading up a team to focus on the Rice-BCM relationship. This is good news for two reasons:
1. Both McNair and Hackett have close ties to both institutions. While both are trustees at BCM, McNair is a Trustee Emeritus at Rice (and a major donor), and Hackett is an adjunct professor in the business school at Rice. I’m confident that they’ll propose a plan that benefits both institutions.
2. Hackett* was my professor for mergers & acquisitions when I got my MBA. He’s an expert in this area having orchestrated Anadarko’s $23.3 billion purchase of both Kerr-McGee and Western Gas simultaneously. I expect that Hackett’s focus will be on the strategic benefit of the merger for both institutions, smooth integration, and keeping employees informed.
So I’m excited about these developments and confident that whatever results from these efforts will be the right thing for both institutions.
*As an aside, Hackett’s got one of those resumes that makes me feel like a slacker. He’s CEO of a Fortune 500 company, Chairman of the Federal Reserve Bank of Dallas, teaching M&A this semester at Rice, and now masterminding a merger between two institutions of higher education. How many hours are in his day?
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The Houston Chronicle reported yesterday that Dr. Peter Traber is expected to leave his role as President of Baylor College of Medicine. The article says that Dr. William Butler, a former President of BCM, will be announced Wednesday as Traber’s interim replacement.
This is good news for BCM. I don’t think Traber ever understood that BCM’s competitive advantage derives from it’s location within the world’s largest medical center. Prior to the Traber era, the Texas Medical Center grew by taking advantage of a network of mutually beneficial relationships between the participating institutions. BCM supplied world-class faculty and trainees, who benefited from the breadth of experience and opportunities offered by the other top-ranked institutions in the TMC. Each institution was thus freed to focus on what it did best to the benefit of all, and BCM’s fate has always been inexorably linked to the success of the other TMC institutions.
These mutually beneficial relationships worked because BCM did not compete economically with the other institutions. Traber challenged these relationships by choosing to build a hospital for BCM. Following such a plan might have produced financial benefits, but jeopardized BCM’s best resource for creating educational and research value. As a result of the broken ties, BCM lost many of its star faculty to the other TMC institutions.
Ironically, Traber’s financially-motivated strategy has put BCM in greater financial difficulty. According to the Chronicle article, the college has been operating in the red for the last two years, and the endowment has shrunk by 30% or $400 million.
Today’s Houston Chronicle has an article and an editorial on the proposed merger between Baylor College of Medicine and Rice University based on an interview with Rice President David Leebron.
The key take-aways are:
- Leebron expects to have a decision one way or another by the end of the academic year.
- There is enormous positive support for the merger among faculty, alumni, and the community.
- A BCM spokesperson gives an 80% chance of the merger happening, but Leebron isn’t that eager.
- The biggest hangup is the financial footing of BCM and its new hospital.
On a selfish note, I’m disappointed it’s not moving forward more quickly (although I understand why it can’t). I defend my dissertation tomorrow and it would be so nice to participate in another Rice graduation this spring. Rice has much cooler PhD regalia and diplomas.
Over the last couple of weeks, I’ve had the chance to see and critique a lot of early-stage company presentations. One criticism that comes up again and again is that scientist-entrepreneurs waste too much time talking about the details of their discovery and not enough time on the business opportunity.
When you’re pitching to investors, don’t spend more than a quarter of the time describing the science.
In one presentation I saw, the title slide was something like, “Inhibition of Protein X by blah blah blah.” I groaned. I knew what was coming. In a ten minute talk, the presenter spent 13 minutes discussing the details of his technology and 2 minutes on the market potential. The scientist felt that it was important for his audience to understand his technology and to convince them that it works.
Scientists, pay attention. Raising money from investors isn’t like raising grant money. When raising grant money, the quality of the science is the whole game. You have to convince the reviewers that your methods are sound and your findings are correct. Reviewers care about the details of your protocols and your publication history. But the reason things work this way is because the only return granting organizations are looking for is more high quality science.
Investors are interested in a different kind of return. They’re interested in economic returns. Thus, in your initial conversations with investors, you’ll find that they’re willing to assume that the science works, in order to dive in on questions of market size, IP protection, and management. As one of the VCs at last week’s Texas Life Science Conference put it, “I’ll spot you the science, now how am I going to make money?”
That’s not to say that investors don’t care at all if the science works or not. They’re just filtering out opportunities in a different order. Due diligence on the technology comes after considering the market potential and the talent of team.
Look, I know that the science is the interesting part. I understand that it’s your life’s work and the most important thing in the world to you. But nobody is going to invest in your idea if you don’t tell them how it’s valuable to them.
Merger talks between Rice University and Baylor College of Medicine (BCM) is terrific news. It has long been my opinion that the two should merge. BCM’s lack of brand is a huge obstacle to its future success. Save for fielding a nationally-ranked football team, BCM will never expand its reputation beyond biomedicine. Merging with Rice, however, would instantly give BCM a brand with worldwide recognition.
BCM has also become increasingly reliant on Rice to supplement its curriculum over the years as biomedical research has become more integrated with the other sciences. The combined curriculums of both schools would truly enable BCM to educate biomedical scientists for the 21st century. In turn, over the next fifty years, it is crucial that Rice be relevant in both nanotechnology and biotechnology. Rice is already producing world-class nanotechnology research. Merging with BCM would make Rice a world-class leader in biotechnology as well. And if Rice wants to be considered the “Harvard of the South,” acquiring a top ten medical school would certainly boost that reputation. Hence, the merger would simultaneously raise the prestige of both institutions.
Financially, combining BCM’s billion dollar endowment with Rice’s would rank the schools in the top ten of all university endowments giving the schools the financial resources to compete with the biggest institutions.
The big downside is that Rice would be saddled with a hospital that I think was ill-conceived to begin with. It’ll be interesting to see how that is resolved.
So that’s my opinion. What does everybody else think?
