Intro - 00:00:06: Welcome to The Biotech Startups Podcast by Excedr. Join us as we speak with first-time founders, serial entrepreneurs, and experienced investors about the challenges and triumphs of running a biotech startup from pre-seed to IPO with your host, Jon Chee. In part three, Philip made the leap into private equity, learned to love control and profitable businesses over the venture power law, and live through a founder crisis that turned into the best outcome of his career. If you missed it, check out part three. In part four, Philip becomes an operator. He explains why he bought LabShares, what he means by don't build your own cathedral, and how a company can be more valuable to founders by helping them stay capital efficient than by selling them square footage they'll never use. It's the clearest articulation yet of why staying alive is the most underrated skill in biotech.
Jon Chee - 00:01:11: People forget, like, post '08 was freaking brutal. Like, I, like, was freaking brutal, and I was, like, just getting my start. I was like, you guys investing in CapEx? I'm like, no. We're not.
Philip Borden - 00:01:25: I remember at that time, my wife and I had just purchased a house beginning of '08, and then the bottom kind of fell out that summer. And we purchased a lot of house relative to meager income. My wife was in grad school. And so, relative to our meager income, it was more leverage than was a bit comfortable. And we had our lender who said, hey, we want to come over and like look at your house and make sure that this loan is still good because we're doing this with all of our literally our entire portfolio of loans. And so it was such a brutal time in the economy. I think people forget what that was like.
Jon Chee - 00:01:58: Yeah. Absolutely. And so as you're, like, coming out post '08 kind of crash, after you brought it out of the endow purely on the endowments, like, which LPs did you guys gravitate to?
Philip Borden - 00:02:10: Yeah. It was really all over the place, to be honest. It's a bit of a matter of, like, beggars can't be choosers at this time. So, like, it was some fund of funds. We had a couple of big fund of funds that came in, which had a broad base of investors. We had a couple of pension funds, a couple of banks. Many of the endowments continued on. So, again, we went from this super concentrated, gosh, I don't know, 70% plus foundations and no. Probably more than that. Probably 80% plus to more like a 35 and then a broader base of overall investors, but no particular asset allocator that was a hot percentage.
Jon Chee - 00:02:40: Interesting. And I think you spent, like, about a decade at Riverside?
Philip Borden - 00:02:44: Yeah. I was there for gosh. I was there for thirteen, fourteen years. So it's a good period of time at Riverside. I ended up departing and going to a firm called Galen Healthcare where I was one of the three partners with the idea of, hey, we'd build that firm up and that was a cool opportunity. That all kind of happened in 2017, 2018. We were out fundraising it. We raised some capital and then COVID hit. And so, we're sitting there and like anyone else, we didn't know what was going to happen. We'd made a few investments. But at that time, when COVID hit, as you remember, there were certain things that there was a deep downturn in the markets, but then there were certain sectors that just went absolutely ballistic. Healthcare IT was one of them and my partners had had a good fortune of an earlier investment before I was there. That was one of the companies that did extraordinarily well and they were in a different position in their lives.
So ultimately, because of those differences, COVID hit and I'm thinking, what do I really wanna do with the rest of my career? And so I started thinking about if we're not kind of building the firm in the way that I wanted to, should I just kind of go out looking for my own deals and kind of doing it on a one-off basis? And I sort of thought I'd be an investor and do that and kind of apply my own thesis to this and raise smaller pools of capital.
And at that time, this is now 2022, '23, I'd come across a good friend of mine named Jeff Behrens who had started this company called LabShares. And I thought of it first as, oh, let me learn about this. Let me catch up with Jeff. He was a poker buddy of mine going back, like, twenty years. You know? So he and I, we'd met when I was a venture capitalist. He was a serial biotech entrepreneur, and I thought he was mostly spending his time on his biotech company. But being the true entrepreneur that Jeff is, on the side, he'd started this shared lab business because he took on way more lab space than he needed. And he said, well, I'm going to bring my buddies in and we'll all share equipment and it'll be a lot more efficient to do it this way. And the business just kind of grew from there. And again, I give Jeff a ton of credit. And I remember even he told me this idea. I was like, Jeff, just focus on your biotech. Why are you doing this?
And I still thought it was a small business and then Jeff and I caught up in 2022 and, like, hey, it turns out he built this really nice business of shared lab space in the Greater Boston area that was focused on emerging companies. And the more I got to talking with him and learning about what LabShares does, the more excited I got because, again, being an investor, I saw firsthand all the pain that companies go through setting up their labs. And I mean, Jon, you know this as well as anybody. It is so painful to get up and running permitting and regulatory stuff. You've got to buy a bunch of equipment. It may not be the right decision, but you need a bunch of equipment. You need to hire all of these things that in many ways are necessities, but not core to what your fundamental job is, which is hitting your milestones.
And so when I saw what LabShares was doing, like the whole model just like it just clicked. Like, it just resonated with me because I saw how painful it was and how many bad decisions that biotechs and life science companies had made on their lab infrastructure. And so, I felt like, hey, this is a critical service to these guys. If we do this right, we can really create something that is a sticky service with our customers that they love us for. They'll stay for a long period of time and we can really redefine how these emerging companies create their lab infrastructure and make them a lot more capital efficient. And so that whole model, like, I loved it and ended up buying the company from Jeff. I partnered with a private equity firm to provide a little bit of the cap you know, some of the capital for it. I put in a bunch myself and ended up acquiring the business in 2023. So yeah. So that's kinda how it all came about.
Jon Chee - 00:06:29: That's really cool. Two observations. Have you watched the show The Bear? I have a little bit. It's stressful.
Philip Borden - 00:06:35: It's stressful. I feel like I've got enough stress in my day-to-day life.
Jon Chee - 00:06:38: It's stressful. Great television, but very stressful. Growing up in Berkeley, a lot of my closest friends are in the food industry, and I just kinda saw it, and I'm still very close friends with all of them. But there's something that stood out to me in The Bear is, like, when you see Carmy, the main character, he's like a killer chef, but he's, like, trying to, like, balance the books, trying to, like, do supply chain management. You're just like, dude, can we just let him get back to cooking? Same thing with, like, science. It's like, can we let the scientists get back to science rather than trying to figure out the lab infrastructure? That's not part it should not be part of the job description if it doesn't have to be.
Philip Borden - 00:07:17: We had a customer that ended up coming to LabShares, and we talked to them afterwards. And we're like, tell us about your decision. This is the CEO talking. He said, look, how much time do I really want my CSO thinking about managing medical waste? And that's literally what they would have had to be setting up vendor relationships and dealing with the stupid Wi-Fi, all this stuff that your scientists aren't good at, typically. I mean, again, they're super talented people and yes, can they do it? Of course, they can. But like, let them cook. Let the scientists focus on what they're uniquely great at and let somebody else handle the minutiae that you wanna deal with? Similarly, if the alarm goes off in the freezer at three in the morning, like, who do you wanna deal with that? Do you want LabShares to deal with it, or do you want your scientists who should be focusing on their next experiment?
Jon Chee - 00:08:03: Yeah. It's funny because, like, that was, like, my job. When I was in the lab, I get phoned in over the weekend. They're like, oh, gotta do, like, cell line maintenance and just, like, get this stuff going to infrastructure in the lab. I was like, this is brutal. And also, like, that's another reason why, like, we're kind of weird at Excedr. Like, we cover repairs and maintenance with the equipment because it was my job to try and fix the equipment. And I was like, I'm not a mechanical engineer. Like, I don't know how to do this. Like, I just spent a whole day, like, troubleshooting this thing. Let's just make this thing work.
Philip Borden - 00:08:37: It's exactly right. We survey our customers on an every six-month basis. And one of the bigger things that we hear back is like, oh my God, you helped us solve this problem that we were having with this particular piece of equipment and it saved us weeks of time. And like that's a really big deal when someone's trying to generate the data for that next board meeting. That's the thing that folks remember. Our team will come in on the weekend and they've got enough expertise and frankly, in many ways, enough pull with the manufacturers of the equipment to like really drive them to help with the support that any individual company would just frankly never get. So those are the things that I think make a difference when folks are here, but, you know, it's sort of an intangible you don't think about when you're making your lab.
Jon Chee - 00:09:19: Yeah. What I found too is if it's your first rodeo, you just don't know. It's kind of a thing where you say you don't know what you don't know. I think before we hit record, I was just, like, reflecting on all of the clients that we've worked with over the years. And the first time founders will oftentimes, like, say, is similar, like, taking the highest valuation term sheet, like, the lowest rate loan you can. Right? Ignore everything else. But then it comes back to bite you. You just don't know. You don't know how it will bite you in the future.
Philip Borden - 00:09:45: We see that a lot in our world. The equivalent of that is things like we call it the dollars per square foot fallacy, which is we've got, you know, there are first-time founders and sometimes, frankly, inexperienced finance people who will say, well, geez, I can get 10,000 square feet at this what seems like this really cheap rate because the landlord is quoting me whatever, $65 a foot or something really low and your rate is higher than that, but you're not taking into account taxes, utilities, and CAM fees off the bat and then say nothing of like the equipment, purchasing all the equipment, maintaining the equipment, and then like it's really the back-end services. Those are the things like dealing with the problems that come up, fixing the HVAC system, making sure if there's a problem with the humidity somewhere, like we're the ones who are handling that. And if you add up just the total cost of ownership and not just the dollars per square foot, like, we're way more capital efficient. We think we can save companies, again, depends on your workflows, I don't know, like between 30 to 60% depending on what it looks like. So you just have to add up all of those costs though, which are hard to visualize when you're kind of first starting out.
Jon Chee - 00:10:53: For sure. Like, it's like you never wanna carry around an umbrella until it starts raining, and that's when you kind of just beat yourself up. Because we have a long-time client of ours in Seattle, actually. And Seattle's lab space infrastructure, there's, like, definitely a gap. You have your UW CoMotion. You will quickly outgrow that. So they had to sign up a big lease, and, oh, the pain. As they started to grow, managing it all, I was like, you guys are basically turning into, like, a property manager. They had to do retrofitting and, like because if you're doing a certain type of science, you need to have certain kind of, like, setups, obviously. And it was just like, oh, you have to do that all on your own? That's awful.
Philip Borden - 00:11:31: It's interesting you talk about CoMotion and incubators and leases. I mean, that's the gap we sort of fit between. Here in Boston, we've got LabCentral is this awesome incubator resource for companies and we think the world of those guys, they're fantastic. But as you said, like you can quickly outgrow those kinds of things and they're a nonprofit. They've got their own limitations in terms of how long you can actually stay with them before you kind of get booted out. Once you raise a certain threshold of capital, that's a trigger for you to, you know and the historic model was you go from incubator to big lab space. And man, that is a rough transition because, okay, how much lab space do you actually need? And a lot of them will take, well, in four years, I'm gonna have 150 people and therefore I need 50,000 square feet of space. Well, I don't know if our two careers are any indication, the world ain't always straight line up to the right, and biotech is notorious for being cyclical. Like so having to make those decisions about what your needs are four or five years from now and trying to back in like, that's a damn near impossible calculation to do.
And so our proposition is we try to be that space that once you've graduated from an incubator I mean, you can start here, but like once you graduated from an incubator, we've got a scalable space, scale up, you can scale down, but, like, you still don't have to worry about managing all those things. And so we should have this chart of, like, hey, incubators are here at the beginning of your journey and leases are here. And a lot of companies might never go into a leased space and frankly should never go into a leased space. Seeing that you're increasingly seeing that, that's the gap we're trying to occupy right now.
Jon Chee - 00:13:04: No. I love that. And I always look at other industries, and some of them are just, like, so so capitally efficient. But then I, like, look inwards at our own industry. I'm like, we just throw money into a furnace. We do that for a living. But one, it's just like, oh my goodness. That's my first reaction. But two, it's just like, it also gets me excited because there's so much work to be done to improve this thing. We're not at, like, terminal velocity. We're like, there is so much we can just make better here, and a lot of it is also not rocket science. Like, you scientists are solving way harder things than what we're trying to make more efficient here.
Philip Borden - 00:13:43: And we started talking because there's some similarities in your business and ours. And, like, what you guys do of, like, creating efficient equipment lease structures that allow companies to save a lot of their capital. That's an awesome angle into it, but you're totally right. There's like 15 other ways in which these emerging companies really can be more capital efficient. And when you think about the existential angst that the entire biotech industry is having over China right now, one of them is like we do pay our people a lot more here, but the speed with which we move and the amount of capital that is necessary, we've got to become more efficient. It's no longer like, well, we can afford to have companies that take that 50,000 square foot lease and only need 4,000 square feet of it. That is a nightmare for a company that's paying for that over the course of the next eight year, seven year lease, or whatever it might be. And chipping away at how do we build these biotechs in a better, more capital efficient way, that's really kinda what makes me get up in the morning. And what we're trying to do here at LabShares is to convince them, and you guys do a great job with that too.
Jon Chee - 00:14:47: Yeah. And there's so many angles in which we can exactly you said. Like, we're each kinda, like, playing our own piece in this, and I think this comes probably from the private equity, like, because my cofounder's in private equity. It's just like efficiency. It's just like, let's bring some, like, a level of efficiency. This is not to say that, like, you don't have to cut to the bone. Right? It's just like, let's make sure that this thing is more, like, optimal. Let's try and be optimal here and not wasteful. It's basically and and I think the hard part about it is and I always, like, ask myself, why is it, like again, before we hit record, I was like, I hope everyone remembers the importance of being efficient, and let's not forget this. Let's not forget this because what I was trying to figure out is why do we forget it? Why does the industry forget it? Right? And I know there's, like, the boom bust. You get caught up in these hype cycles. You don't get headlines in endpoints by being like, we're really efficient. No one is writing about that. People wanna just, like, raise the biggest round and get it into endpoints. Right? And it's not glamorous, but it's important. Like, but is crazy important for the longevity of this industry. Right? It's just, like, we gotta be less wasteful.
Philip Borden - 00:15:56: Well, not just for the industry though, but, like, for each individual company because it this is a boom-bust industry. I think you and I have been around long enough to see multiple different waves and cycles of this, and, like, we've just gone through what has been an incredibly painful bust cycle. I think we're now coming I think we both agree we're now coming out of it, thank God, but like what are the companies that are making it through? Well, it's the companies that were able to conserve their cash. It's the ones that were able to survive. And so, yeah, it doesn't make headlines in endpoints or STAT or whatever, but if you want your company and in particular, that drug that's gonna be treating these patients to continue to make it through, like, it's actually critical in light of this inevitable boom-bust cycle to make sure you are making the right capital decisions.
But, yeah, I wish the industry overall did have a longer memory and did have those lessons. So one of the things we're talking a lot about right now is what we call the cathedral problem, which is like all of the giant labs that have been built that are now kind of empty. And we're sort of making the argument for emerging companies. Don't build your own cathedral. Don't go into take on that boat anchor of a lease because here let me show you the 28 companies that I can cite that, like, because of the infrastructure decisions that they made aren't in existence anymore. And those drugs aren't gonna see are unlikely to see any patients now. And, like, how do we make sure those lessons do get translated over the cycles that we have?
Jon Chee - 00:17:18: Yep. Absolutely. And I think we see it in software out here. I think it was Paul Graham who said this, but, like, being default alive, like, I think a lot of biotech companies, they don't optimize for that. It's kind of like, let's burn it at both ends. It's like, no. You've got to stay alive. We don't know when something's gonna turn. Like, even right now, even, like, as we're feeling things, like, it feels like nature is healing. What happens if AI doesn't work out? That will take biotech right back into the trenches. Like, all the capital is gonna go out.
Philip Borden - 00:17:49: Yeah. To say nothing of, like, RFK wakes up on the wrong side of the bed. There's just all sorts of reasons why, yeah, we're in a nascent recovery, but, like, it's not inevitable we're going into boom times. I think making sure this is not something that we know capital's gonna be flowing like crazy, and feel free to spend on that 80,000 square foot lab or buy that mass spec on your own for cash because you're gonna be able to raise that next round because things are gonna be just fine.
Jon Chee - 00:18:14: Yeah. And that specific spend it when you got it kind of mentality, I was, like, trying to figure out where that came from. And I was, like, I think this is my theory. It's just, like, because we're in life sciences, it's a scientific endeavor. Most people who are in the lab have PhDs, MDs, postdocs, they all come from academia. Academia does not abide by economic gravity, right? It's a very different system there. So when you're training in the lab for ten plus years, you don't know any of this? Yeah. I got a grant. I'm spending it.
Philip Borden - 00:18:48: I gotta spend it. By definition, I gotta spend the money and I'm obligated to and like it is a totally different mindset. Yeah.
Jon Chee - 00:18:54: And so, like, this is one of the big reasons why I, like, try my best to, like, talk to postdocs, PhDs as much as I can is to instill this. It's like these are you're not learning this while you're in grad school, unless you're getting an MBA simultaneously, but very unlikely. I talked to the folks who are just, like, just coming out, like, tech transfer. I'm like, those habits that you built over there, don't bring them here. Like, you cannot do that. And then so, like, hopefully, we can just, like, continue beating the drum of, like, capital efficiency such that, like, we just don't repeat these mistakes because, like, there is a massive list of companies that raise headline like, this eyebrow-raising amounts of money that just disappeared in, like, twelve, eighteen months.
Philip Borden - 00:19:37: LabShares we're growing right now, and we're building out a new facility. But one of the things we did was we went out and looked at, like, all of the available lab real estate, and God knows there was a lot of it that was out there and available. So we looked at 26 different places that we could have grown and I remember really distinctively, we walked in and this was a lab that had been built out by a company called Squeeze. And so they'd raised just a boatload of capital. They'd gone public and I walked into this facility that was abandoned, now available. They had a 48-foot sculpture in the front lobby of their lab. I've never seen anything quite like this. And I mean, look, it was gorgeous space. I mean, really lovely. Didn't happen to work for our needs, but like you can kind of see these monuments that companies built in boom times and again, turns around and becomes a boat anchor. And we saw, like, tangible evidence of that with some of the places that we looked at.
Jon Chee - 00:20:28: That's brutal. That's actually brutal. Yeah. And, like, I think capital efficiency is not sexy. I get it. I get it. But what is sexy is staying alive. That's freaking cool.
Philip Borden - 00:20:41: One of the things we were really proud of is we've had some companies that, like, here at LabShares are our members that have made it through and they're now kind of raising capital. We've got a company that, you know, had to go down to a literally from a nice sized private suite to, like, a couple of lab benches while they were raising capital. And we worked with them. We allowed them to do that and they are just on the cusp of raising a really big new round and they're going to be expanding again and they're focused on women's health, endometriosis, preeclampsia, you know, like huge unmet need, like thinking you feel like really great about backing and so psyched that they're going to be moving into our new facility and like it's a great kinda feel-good story. And you're right. They're not gonna get a single headline in endpoints, but you know what? If they end up developing something for treatment of endometriosis, like, nothing's sexier than that.
Jon Chee - 00:21:27: Nothing's better than that. This goes back to, like, the top of our conversation about, like, the relationships matter. Like, the ability to flex for a customer of yours in a time of need. Right? That's critical. And for us, we're doing a lease. And, like, I love my bank partners. Love my bank friends. Banks serve a very important role in the financial system and the ecosystem, but they have their own rules and regulations that they have to abide by. They generally cannot be flexible. They're very cheap, very not flexible. Makes sense. Right? Like, I get it.
Philip Borden - 00:22:00: I am familiar with that phenotype. Yes.
Jon Chee - 00:22:02: Yeah. Yeah. Yeah. Yeah. And I get it. Banks use deposit, like, if my money in my savings account just vaporized and disappeared, like, that's a big problem. And that would be a big problem for everybody. So I get it that bankers can't be flexible, but they're very cheap, and that's awesome. And so, like, kind of in a similar vein to we only serve scientists and scientific enterprises and folks who have the lab, and we know it's a like you said, it's a cyclical business. So we know in between rounds or before a readout, things can get tight. And first-time folks, sometimes it will be like, we're just gonna go over the cheapest option. Don't really care about, like, this whole, like, relationship flexibility thing that you guys are talking about. We won't need it.
And I've seen the horror stories of what happens when they go that route, and we have clients who communicate to us, like, hey, like, we're in between right now. Like, we're in between. Can we do something here to help us get through to this next patch? We figure it out. We kind of, like, ease it, and then boom, exactly you said, they reaccelerate. Like, it gave them, like, the breathing room. And I think that type of stuff is qualitative. You're like, look, it's not in the numbers. I'm telling you, you wanna be default alive here. You wanna make sure that Wells Fargo is not gonna foreclose on you. You don't want that. So let's try to get to this next inflection point, and it's kind of like you so you can dial it, like you just, like, dial on and off. So I think it's really important to think about that. All these qualitative aspects of running a business are critical. You can't just boil it down to the cheapest thing because, again, you get what you pay for.
Philip Borden - 00:23:31: The way we think about that, Jon, it might be similar in your business too, but we at LabShares, we don't wanna be in a position where we have to start being, like, super strict with our customers so that we've got zero flexibility. As the owner of the business, I can sometimes make those calls, and, obviously, I can't do that with everybody. Unfortunately, things just don't work out sometimes, and you gotta understand that too. But we definitely work with our customers in a way that allows for greater flexibility. We also try to structure the contracts that we have with our members. It's a year, two years at most, so like we tend to have good visibility on their fundraising, on what that looks like. And so, if we get to the end of the year and things are taking a little bit longer, the contract is up. We can then flex at that point, and it's easier for everybody as opposed to we sign people up for a just like I mean, a lease was gonna be a five plus year commitment. Like, yeah. Good luck having your friendly landlord who's not gonna be as friendly in that kind of a situation, whereas the way we structure with our customers allows for that flexibility, and we've had to show some of that sometimes and oftentimes have been really well rewarded for some of that patience.
Jon Chee - 00:24:36: Yep. Exactly. And, again, I encourage any entrepreneurs, like, it's also about active communication. Like, you wanna be ahead of it always, like, always to all your vendors and to all your investors. And when I talk to entrepreneurs, it's not just your investors who are, like, betting on you. It's your vendors too.
Philip Borden - 00:24:54: Very much so. Very much so.
Jon Chee - 00:24:56: Your vendors are also betting on you.
Philip Borden - 00:24:58: The groups that we are most patient with, they're the groups that communicate with us early, are very transparent with us, and, like, those are where the decisions are really made. It's on that. The groups that we just can't be flexible with are the ones that show up one day and say, we're out of cash. And, again, that shouldn't ever happen because we're talking with them regularly, but, like, has it ever happened before? Sure. For us, the decision criteria is, is this a partner that is trustworthy, that is gonna respect us, is transparent with the good, the bad, and the ugly? And if they are, and there's a plausible reason to think that they're gonna be able to make this through, hey, we're gonna go through anything we can, you know, to try to make this work again within the the confines that that we do. So it's the relationship, but for entrepreneurs, like, we know not everything is a straight up to the right mind. If you let us know, you're gonna maximize your chance of staying alive through what's been a challenging period.
Jon Chee - 00:25:49: Yeah. I think just, like, getting ahead of it and, like, running to like, I think that is, like, a entrepreneurial lesson that's, like, critically important. It's, like, running towards that, like, conflict and problem. It's painful. It's scary. Like, I get it. But, damn, like, the times when you don't do that and the problem compounds, it just gets worse and it festers. It's like, just get ahead of it. Just rip this Band-Aid off and have the hard conversation. Like, really, please. Like, you'd be surprised.
Philip Borden - 00:26:15: Yeah. Look. The group that's focused on women's health and is expanding, I mean, founder comes out of Purdue University, really great guy, been an entrepreneur for the last, oh, gosh, eight or ten years or so. He's been just incredibly communicative with us and a good guy to boot. And, like, we want to continue to support that focus and the science that he's trying to advance and he's been a good partner to us. That long history buys him a lot of, frankly, a lot of equity with us. I mean like we are willing to do things with him because of the history, because of the communication patterns that just I can't do with someone who isn't as open with us. That makes the decision much, much harder.
Jon Chee - 00:26:50: Absolutely. Vendor selection. That's, like, critically important. Well, this is awesome. I mean, like, the LabShares journey sounds awesome and, like, the mission and, like, everything that you guys are doing is, like, freaking exciting. I got a quick question. Like, with the acquisition of LabShares, it's not like a a search. It's not like a search because it was your friend. It was, like, a colleague of yours. Did you have, like, a search fund that you had and then you're like, look.
Philip Borden - 00:27:13: So, no, I did not. So my equity partner is a group called Pacific Lake Partners, and they are a traditional search fund in many ways. So but I am a super non-traditional searcher in that, like, I came to them with obviously, I've got, whatever, twenty some you know, twenty-three years of investing experience. I'd found this opportunity with my buddy. I'd kind of structured the deal already. I had a 70-page slide deck of, like, here's all the diligence that I've done. Hey, Pacific Lake, who I'd gotten to know in my investing career, at least one of the partners. I'm looking for a partner to invest. Here's the capital that I need. Here's the investment thesis. Here's the good, the bad, and the ugly that I found in diligence. Is this something you're interested in backing me with?
So, yeah, I'm a pretty non-traditional searcher, but it was through a firm that does more traditional searches, but I didn't take a salary during a traditional search. I've always was looking for new investment opportunities and this is the one that I happen to like the best and felt like there was a great opportunity for. And look, I mean, sometimes the stars align. I mean, it's a business that's it's fifteen minutes from my house. It's an industry that I know really well. Again, not that I know everything, but like I felt like I had a good background for it.
Now, look, things with LabShares hasn't gone in a straight line either. So I closed the deal in August 2023. We closed the deal on a Friday. Monday was day one. And so I walk in day one and sit down at 08:30 with the entire team who I'd gotten to know a little bit, but introduce myself. We have a good hour, hour and a half meeting, talk about the future, how I'm so excited. I get out of that meeting and within an hour of that, our second largest customer announced that they were leaving.
Jon Chee - 00:28:50: So, like, you know
Philip Borden - 00:28:52: And he talked with them beforehand. And what had happened was there was an they brought in a new outsourced CFO who decided, hey. I could save some money going to a a cheap lab somewhere else. Their contract was coming up in another three or four months until we had some time, but I had just sunk a lot of cap my own capital in a private equity firm. And I get to have that phone call, you know, an email with my board saying, guess what happened? So I mean, one of the lessons for me was at that time, like, I think if that happened now, I'd have the kind of vocabulary, you know, around the overall value proposition that we have. But I would say day one, the company didn't and I didn't. And we really struggle with talking about what's the value that we provide and comparing that to their other options and why it's not just the dollars per square foot. It's all the other things that we're providing in the back-end support and all those things. And so it wasn't a fun experience to go through, but a good lesson in like, boy, we had to get better at this. We had to get better at articulating our value proposition even to again, the company, the scientists loved us, but like there was this outside guy that had just gotten hired to look at things and he'd sort of made this decision. Again, I obviously hadn't met the guy before. I was three hours into my tenure, but, like, you know, stuff happens. So that was an uncomfortable conversation with my board, but they were supportive. We've obviously recovered wonderfully since then, but not everything is straightforward.
Jon Chee - 00:30:13: It reminds you of your Riverside experience. Like, Peter's, like, air dropped in. You're gonna have to make a decision. You're like, oh my god.
Philip Borden - 00:30:21: What? Yeah. You think about that situation. Yeah. Painful to lose a large customer. Really painful. I think the team though responded really beautifully. And I think we all talked about how we needed to get better at articulating this value proposition. We made some changes, not because of this particular situation, but, like, we had to make some changes in our sales marketing and frankly, some pretty big changes. And so we were fortunate to find a really talented person who was already here, you know, on our team, Emma Orfanos, who transitioned from an ops role into a sales and marketing role and, like, she's just thrived since then. We brought in another person, Eric Sargas. So, like our whole articulation of our value proposition, our refinement of our customer profile, all of those things is just really different now. And I think where we've always been strong in delivering that to our customers, we can now talk about it in a much better way.
And again, not in a sales-y way, but like in a way that like communicates that value and talks through and serves as like a trusted guide for companies as opposed to like some slick sales guy who's trying to sell people things. That's the position we wanna be in. I'm really proud of, like, how we've evolved over that time learning some painful lessons at the beginning, but we've gotten a lot better at that. And I think as we're looking to expand now, we're doubling our footprint right now. Phase one has opened up about eight weeks or so ago and phase two, which is much larger, will be in November. We're now positioned to be able to take that on and we're seeing really good demand now. So I think that's one of the out of a tough experience, we've had some people in the organization that have really risen to the occasion. We changed a bunch of processes and it's positioned us now for a lot of growth and let's hope the market continues to rebound. But I feel really good about the evolution of the company, not entirely due to that early test, but it certainly shaped how we do things around here. Those lessons, I think, were really taken to heart by the team. They embrace that, and, like, I'm really thankful for the team to come along with me on some of those transformations.
Jon Chee - 00:32:19: Love that. And we have a similar philosophy about it. And also to how that philosophy manifests in actual conversation with us is that if it's not a good fit, we're gonna tell you. Like, we're gonna say, love what you guys are doing. This really doesn't seem like a fit. And mostly, it's because, like, we don't wanna get in it's kinda like when you were, like, on the planet. Should I do this PhD? You don't wanna force your way through that. You don't wanna white knuckle through those types of things. And, like, the worst sales experiences are when someone tries to white knuckle the deal through. It's okay. Like, everything doesn't always have to align. If you'd find the misalignment, it's cool. We can stay friends. Like, we can just go different directions.
Philip Borden - 00:33:01: Let us help you find what's gonna be a better fit for you. Honestly, like, there's nothing wrong with that. We've gotten a lot better about that. I mean, I think it used to be, jeez, let's try to find a way to make it work. And, I mean, I'll tell you it's still a lesson we're learning. I mean, we've got a customer or two that's not quite a great fit, and over time, they're gonna be transitioning from us. That's okay. The focus though is, like, how do we find folks that fit right in the sweet spot where we create great value for them? They can be a nicely revenue-generating profitable business for us, where we're earning a fair profit, where we can support their science. There are certain kinds of science that just isn't a great fit for us, and we wanna let companies know that. I think we've done a much better job. I think our ops team in particular has been a real driver of pushing us to make sure, hey. Let's make sure we can really add the most value to the companies that are here.
Jon Chee - 00:33:47: Yep. That's exactly it. And I think that the whole art and, basically, science of communicating in sales is really just making sure everyone is in alignment and understands the value. And something you said that's really stood out to me too is, like, that first experience of losing the big customer because they wanted to optimize for cost. And I think the problem is and is it's prevalent in all industry is that it's easy to quantify those, like, short term savings. Super easy to quantify. Very easy to measure. Something you can report back. Right? How can you report back the qualitative savings and time savings into the future? It's hard. It's super hard. But just because it's not as easy to measure does not mean it is less import. It's just harder to measure.
Philip Borden - 00:34:35: Yeah. That's exactly right. We've gone so far as we've created a template of, like, here's all the things that you'll need to do on your own, and it's literally a a spreadsheet of let's plug in some variables around how many scientists do they have, what kind of space might they need, what's their rough equipment that they might need. And within about five minutes, we can spit out, okay, here's what we can offer you. Here's your total cost of ownership for a lab with LabShares. You know, single price, you know exactly what it is. Here's your total cost of ownership, everything included, including those equipment costs and the maintenance and the, you know, etcetera. And then here's a bunch of the soft costs we're not even including in here, you know, your scientists being awakened at three in the morning and the distraction and the amount of time that it might take. I mean, again, you can quantify a a few of those, but, like, we're trying to get better about that, but there's still some companies that won't get it, and that's okay. We'll move on to those that are more open to this kind of holistic view because we find the more experienced CEOs really get this. If you've been through down this road before or you've had a big lease that, like, became a problem, like, their alignment with us happens in about three seconds. And then we can start talking about, hey, how can we help you specifically? How do we make sure we advance your science? And those are the conversations we wanna have. How do we help you hit your milestones as quickly as you can?
Jon Chee - 00:35:50: Yep. And I think about it like the analogy I think about, it's like a car analogy. Some folks wanna just be the mechanic and fix up the car. Like, I have a buddy of mine who has, like, a '86, '87 Mustang. I drive a Toyota Prius. I just want this thing just yep, is nice and reliable. Yep. Nice and reliable. Like, I don't wanna have to think about it. Like, this Mustang, beautiful beautiful car, lives in the garage. He's fixing it all the time. Couldn't be me. And, like, that's a different way of life. That's okay. It's just a different game. And that's kind of at first, when I was, like, early days, I get like you said, like, try to make it work always. But sometimes it's like, look, they wanna, like, fix up the Mustang. They wanna do that, and that's okay if, like, they can fix up the Mustang.
Philip Borden - 00:36:29: If what brings you joy is fixing the cell sorter every day, okay. I mean, yeah, you can do that, and you're not gonna get the full benefit of the value that we provide because, hey, we're gonna do that stuff for you. But if your focus is how do we get our science to work and make sure we get the results coming out of the lab that we need for the next round, hey. That that's where I think we can add the most. So yeah.
Jon Chee - 00:36:49: Try and get a point a to point b. Hopefully, stress free too. Philip, this has been super fun. Learned a lot. I love the willingness to just jump straight into it and just learn by doing and just, like, also just, like, what a like, for everyone who's, like, embarking on these, like, journeys, it's like, look, shit happens.
Philip Borden - 00:37:07: Yeah. Very much so. Look, I'm really grateful because lot of things have worked out really well too. I'm in a really lucky position in terms of running my own company. I've got an awesome wife, a great family. There's a lot of things that I've got to be grateful for. But, yeah, I mean, stuff happens all the time and, like but I think everyone has that in their life, whether they're facing some health challenge or career setback. If I think about some of my closest friends from growing up or close friends from business school, like, they've all had some career setbacks and things that didn't go their way and, like, they're often better people for it. And I think as long as you take it in the kind of this growth mindset of, well, it doesn't mean I'm not going to be upset or sad or really bummed out. Like, you can't fake your way through this. Like, you got to give yourself that space, but like over time, like, brush yourself off, pick yourself back up. You're gonna find that next customer. You're gonna hopefully, you'll be able to work through that this health challenge and come out the other side, and some of those lessons make life really rewarding.
Jon Chee - 00:38:03: Yep. Absolutely. Well, that dovetails really nicely. We always like to close out the conversation with two traditional closing questions. First one, would you like to give any shout-outs to anyone who supported you along the way?
Philip Borden - 00:38:15: First and foremost, definitely to my wife, Catherine. So we've been together now twenty-two years, and what I would say is she's really good in the foxhole. So when things are not going well and trust me, there are times where the equanimity with which I'm talking about some of the challenges, like, she's seen the good, bad, the ugly. So I think she gets the first one by far. And then the other one would definitely be to the team here at LabShares. I didn't build this team myself. I brought some people in, but, like, this is a team that had been around that embraced me buying this business. They're amazing with customers. They're a hardworking group, but they also had this kind of culture of like I talked about Frazier early on being this great place where people had fun. There's a good vibe. That's them. Dave Baxley, my COO, Jackie Sarami, my chief of staff, there's just some really fantastic people that we have here that I'm really, really proud to work with.
Jon Chee - 00:39:02: Awesome. Yeah. I love that. Like, again, underscoring the fun. Don't forget to have fun while you're doing all this, especially while you're in the trenches. You can lose sight of it, but, like, sounds cliche, but in the moment, you gotta be present and having fun or why? Like, I wonder just why. Okay. Last question. What's the best piece of advice someone else has given you?
Philip Borden - 00:39:21: I think my best piece of advice probably came from my father who talked a lot about really trying to dream really big. I mean, again, came from this kind of small town in Indiana and I think he was a big influence in terms of trying to encourage me to do things, going to great school and sort of thinking about my career as one that I could do really cool interesting things. And so I think that's the best advice I've received.
Jon Chee - 00:39:46: I love that too because you just also just never know if you just set your sights for kind of, like, these broader dreams, like, where it'll eventually take you. It's kinda like the serendipitous thing too.
Philip Borden - 00:39:56: Yeah. We talked a little bit about that. Things may not work out exactly as you'd planned twenty years ago, but I
Jon Chee - 00:40:01: Don't think it ever does. I don't think it ever does.
Philip Borden - 00:40:03: Yeah. But you make those extra phone calls. Those things add up over time, and not everyone's gonna hit. But, like, over time, enough things will hit that, like, those serendipitous moments, you'll find some really great things. So I'm I feel lucky to have been able to do that in my career.
Jon Chee - 00:40:16: Absolutely. Well, Philip, this has been super fun.
Philip Borden - 00:40:19: Yeah. Thanks. Yeah. I totally agree. Very fun.
Jon Chee - 00:40:21: Yeah. Well, the next time I'm out east, I'm a give you a ring. I'd love to see the LabShares facility.
Philip Borden - 00:40:26: Beers are on me.
Jon Chee - 00:40:27: So awesome. Awesome. And, yeah, next time you're in San Francisco, give me a shout. We'd love to get a meal with you. And JPM is around the corner. So, um,
Philip Borden - 00:40:34: You know, scary as
Jon Chee - 00:40:35: That is. Get prepared. But, Philip, thanks again for your time.
Philip Borden - 00:40:38: Yeah. Thanks, Jon.
Outro - 00:40:41: Thanks for listening to our four-part series with Philip Borden from a farm town in Indiana through a cold-called start in venture, more than two decades investing across VC and private equity, and finally, buying and running LabShares. Philip's story is a case study in a single idea that the companies which win aren't always the ones that raise the most. They're the ones that spend wisely and stay in the game long enough to matter. If you enjoyed the series, please follow the show, leave a review, or share it with a friend.
Join us for our next series featuring On Almason, cofounder and CEO of Axlef, a biotech developing next generation RNA medicines for oncology and autoimmune disease built on AXL, a lipid nanoparticle delivery platform designed for precise potent delivery and validated in nonhuman primates. Before ax lift, Orn spent nearly three decades at the frontier of drug discovery and formulation science as head of delivery sciences at Moderna through its formative years, chief technology officer at Lindra Therapeutics, and senior roles at Alchemise, Transform Pharmaceuticals, and Merck. He holds a PhD in bio organic chemistry from UC Santa Barbara and did his post doc at MIT. Born's move from delivering some of the industry's most important medicines to founding his own RNA company makes this a conversation you won't want to miss.
The Biotech Startups Podcast is produced by Excedr. Don't want to miss an episode? Search for The Biotech Startups Podcast wherever you get your podcasts and click subscribe. Excedr provides research labs with equipment leases on founder-friendly terms to support paths to exceptional outcomes. To learn more, visit our website, www.excedr.com. On behalf of the team here at Excedr, thanks for listening. The Biotech Startups Podcast provides general insights into the life science sector through the experiences of its guests. The use of information on this podcast or materials linked from the podcast is at the user's own risk. The views expressed by the participants are their own and are not the views of Excedr or sponsors. No reference to any product, service, or company in the podcast is an endorsement by Excedr or its guests.
