Gm, NOT from BIO Boston (thank God)!
[Welcome to Issue Number 32 ofĀ The House Brazeryen, where we break down the latestĀ #startup, #biotech, and #ScientistCEO-related news for you fortnightly, in roughly 5 minutes. Brought to you by Brazen Bio, Brazen Capital, and brainsurgerydropout.]
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RE: VC Chip on my Shoulder
by Shawn Carbonell, MD, PhD ā Iāve mentioned the VC chip on our (Monicaās and mine) shoulders many times.
So, you may have asked yourself: āWho hurt them?ā
I wonāt speak for Monica, but of course Iām happy to dish (purely for entertainment purposes). There are three main categories:
CLASS I: The bio-challenged VCs
The most commonly occurring of the annoyances were the many bioscience VCs (typically of smallerāeight-figureāfunds) who made it very clear that they didnāt know much science. How are yāall even functioning in your jobs? One particularly clueless partner-level VC we pitched interrupted me TWICE to ask what was the difference between GLP and GMP. Iām sorry, but if you focus on IND-stage bio deals and you donāt know your GXPs, you need to spend like five minutes on Google.
Just five.
CLASS II: The bandwagon VCs with no conviction
We flew 3,000 miles to pitch a pair of former physicians playing VC. From the discussion after reviewing the deck, it was clear they had never heard of the class of molecules related to our target before (we were developing a first-in-class antibody for cancer). This is totally fine, but then one of them said snarkily, āIf this is such a great target then why isnāt anyone else going after it.ā I smiled and calmly reviewed the science with them.
What I really wanted to do is immediately stand up, look around the room puzzled with my hands up, and ask, āIām sorry guysā¦ Are you actually VCs or are you two just FUCKING with me?!?!!?!ā
CLASS III: The checked out millennial VC
The one pitch I will never forget happened in person on hallowed grounds: Sand Hill Road. This makes it worse because indeed it was a ātop tierā bio VC fund. Four years earlier we had pitched the partnership but it was before we had our tox data and they were worried about safety. Dogmatic, but fair. Those partners left a few years later.
Fast forward to 2018 andāwith squeaky clean tox data now in handāit was exciting when a new Associate from the fund reached out to me cold via e-mail. We already had closed the round we needed to grow our team and file our IND, but we figured we could lay the groundwork for a much larger round to get us to Phase Ib. We set up an initial meeting at their offices, but then had to move it up in order for one of the Partners to also attend.
When we arrived (it was 2:30pm on a Thursday) the place was EMPTYā¦ no partners in their offices, no one at the front desk to greet us. It was silent and eery. We stood in the foyer like idiots for several minutes until the Associate came out and put us in a conference room to set up. We shrugged it off.
When the Associate finally came in (late) they said the Partner couldnāt make it after all and in fact they werenāt even in town. That sucks, we moved the meeting for them. We shrugged it off.
I went into pitch mode and was really in a flow state after a couple slides when I turned from the screen to look directly in front of me at the Associate: they were slouched in their chairā¦ full-on scrolling on their phone. I paused, then continued talking while staring at them to try to catch their gaze, but their bored eyes didnāt even notice and never looked up. [Some say that Associate is still sitting in that chair scrolling on their phone to this dayā¦]
Iām sorry, but YOU ALL hit up MY ass for this meeting and you wonāt give us the courtesy of your basic attention? Itās clear that Associate was just going through the motions and we left shaking our heads. We shrugged it off.
[I was absolutely floored when I later learned they made Partner just two years later. Iāll never send a founder their way.]
BRAZEN BREAKDOWN
As many of you know, Iām writing a tell-all book/screenplay about my tumultuous founder journey. Iām using this column to workshop ideas and this is but an amuse-bouche. Stay tunedā¦ Signing off.
XOXO. Gossip Guy.
VC CORNER: Ya Gotta Have Options
by Scott Alpizar, PhD ā When I set the stage to highlight the impact of non-dilution protection last time, I mentioned that your Series A investor wanted you to implement an option pool as part of the transaction. I gave no further explanation, but realized not everyone may know what that is! And when weāre talking about ~10% of your company, you probably want to knowā¦
An option pool is a group of shares that are reserved so that you can issue equity in the future. This can be used for employees, advisors, consultants, etc. Pre-allocating these shares saves you the trouble of going through the process (and being diluted) for every single employee. Most companies donāt have one set up right from the start but implement it when they raise moneyāoften at the request of their investor. But why? Breakdown incoming!
BRAZEN BREAKDOWN
WHY have an option pool?
Because your investor wants one, duh! Iām kidding. And I donāt mean to make it seem like investors are forcing companies into having option pools. Itās fairly standardāand you should want one too! It provides you some benefits that will come in handy, even if not until later down the line:
Incentivized Employees. If they perform well, they can own a part of the company. And if they own a part of the company, theyāll work harder to ensure that it is successful in the long term.
Attracting Talent. And doing it without burning as much cash, which is critical early on. By providing equity, you can potentially bring on someone experienced without needing to pony up a major salary.
HOW do you set one up?
You probably want to first decide on the size (most likely with your investor). Iād say 10-15% is typical*, but there can be a lot that goes into deciding. Carta does a great job explaining what to think about and also provides some possible approaches. To actually get it set up and ready to go, thereās a lot of legal mumbo jumbo youāll need to work through. Iāll spare you the details and point you to another Carta resource that explains how it works.
One last noteābe ready to re-up your option pool in each fundraising round if youāve given some away. Your next investor may require it to be brought back to its original size. This is for all of the same reasons your initial investor wanted oneāthey want to know that the company has the flexibility to hire/reward people so it can find success and get them the biggest returns. Smells like more dilution, right? You nailed it! There are ways to potentially negotiate a more favorable situation for yourself though. But you guessed itāthatās for another issue!
[*consider negotiating much less if you donāt plan on significant FTE hiring this round āed.]
š BRAZEN SNAX
šš½ On the eve of potentially the first FDA DMD gene therapy approval?
š¦ Ignoring the one month anniversary of the end of the COVID-19 pandemic
š§¬ Air-pollution monitoring stations may accidentally trap your DNA??!??!?
š Teensy biosensor the size of a grain of sand
š Preventing future coronavirus infections with banana lectins
š½ Dietary restriction for enhanced anti-cancer immunity?
š§š¼āāļø We donāt know what the fuck a āvampire einsteinā tile is (and neither do you)
š„ Innovation is a spectrum and disruption is just one extreme
ā° TikTokCrak: Pouring a can of Coke in Antarctica (ā57 degrees)
šŖ CARVEOUT
Serotonin alert: Grimace took over the McDonaldās Twitter account.
šš½ A DOSE OF GRATITUDE
We are grateful for our friend Alok Tayi, PhDāCEO of Vibe Bioāan ally in our patient-focused mission to advance medicine.
š BRAZEN MEME
āļø FEEDBACK
Feel free to tweet all thoughts, questions, and insults to us. Bring it. No, really. COMEšš½ATšš½USšš½BRUHšš½
And letās continue the conversation on LinkedIn: @brazencapital and @brazenbio.