Biotechnology had taken off first in California’s Silicon Valley but there were now half a dozen biotech start-ups in the Boston area. Nobody had a reasonable business model yet. Thanks to Bain’s incredible network around Boston I landed interviews with three promising start-ups. Henri, the newly arrived President of Genzyme, offered for me to become their Chief Financial Officer. It paid less than half of what Bain paid. In fact Loretta pointed out that I was making more money working part time as an independent consultant. But if Genzyme succeeded it would more than make up for the difference in stock options. It would require more stressful 80 to 90 hour weeks. Making short work of my role as a family centered householder. But luckily Bain had taught me how to work that kind of schedule. I would start on February 13, 1984.
The week before starting Henri called me at home to confirm my starting on Monday. He asked me to fly to London that Sunday evening and join “Sam”, Genzyme’s Chairman of the Board, at an important meeting with the company’s banker. It seems Genzyme was out of cash, in default on a $1.3 million bank line of credit, and Sam disdained English bankers, or any other business protocols. I flew overnight, rented a car, and picked up our Chairman. Sam was a serial entrepreneur, having become a multi-millionaire and then bankrupt twice before founding Genzyme. He knew how to spot opportunities, and buy them with other people’s resources, but not really how to manage them.
Sam was dressed in blue jeans and a bomber jacket. I nearly got us both killed by momentarily driving on the wrong side of the road exiting our first English roundabout. Talk about a terrifying beginning to a new job. But without further mishap I drove us to Maidstone in Kent where Genzyme’s angry bank manager was awaiting our 10 am appointment. We were ushered into his presence and over coffee and cookies he asked how we would repay the overdrawn bank line. Sam said we wouldn’t and in fact we needed to draw even more to avoid bankruptcy that week. My spirit sank.
The bank manager grew very still and pale. I asked Sam to wait in the outer office and threw myself on the bank manager’s mercy. Told him this was my first day on the job. Gave him references for European CEO’s who could vouch for my abilities. Asked for 90 days leeway to pay the credit line in full. I had no idea how to do so but trusted we could find a way. He agreed on condition that we paid the loan in full, that he never needed to deal with Sam again, and preferably never even heard the name Genzyme ever again.
I flew back to Boston that same day, arriving late evening, and went to my office the next morning, after a sleepless night, to begin to imagine how we could emerge from this crisis. During the previous two years Sam had completed two acquisitions in England, one an enzyme manufacturing plant in Maidstone financed by this credit line, the other a bankrupt specialty chemistry manufacturer financed by our first round of venture capital, neither of which had been fully vetted and approved by the board in advance.
Genzyme had a small Boston headquarters office and a ten person enzyme research lab. We were very financially leveraged. Sam had leap frogged the competition, growing from 21 employees to 150 employees, but had put the company on the verge of bankruptcy in doing so. The Board hired Henri to clean up the mess, and Henri had hired me for the same purpose, making my introduction to biotechnology a trial by fire. The stress hives erupting under my scalp had me frequently scratching my head.
The venture capitalists on the board were willing to invest $2.5 million more to support our R&D but not if it was used to pay down the bank line. This situation required risk arbitrage. A loan officer at the Bank of Boston, who graduated HBS two years behind me, was attempting to lend to the biotech industry. The venture capitalists agreed to invest another $2.5 million to fund our research on the condition that Bank of Boston gave us a $2.5 million line of credit to fund our working capital. Simultaneous closings on the equity and debt investments would lessen the risks all around. He decided that with this infusion of venture capital this was a deal he could do, especially when I added a sweetener of warrants on our common stock.
Genzyme survived its first cash crisis, and would continue to grow rapidly, though unable to raise more than about 18 months of forward cash, it meant we were growing from crisis to crisis.