Gm Brazeryens. Dracarys.š„š„š„
[Welcome to Issue Number 15 ofĀ The House Brazeryen, where we break down the latestĀ Brazen Bio,Ā Brazen Capital, and bio-startup-related news for you fortnightly, in roughly 5 minutes.]
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RE: Launch House and Launch Houses
by Shawn Carbonell, MD, PhD ā By now, youāve likely heard about the disturbing allegations surrounding Launch Houseās early days in the recent Vox article by Rebecca Jennings. Investigations are underway, Twitter threads are spicy, events are being canceled... your basic PR nightmare for this a16z-funded startup.
I will refrain from contributing [further] to this media moshpit other than to highlight this TikTok I posted on the one time I visited Launch House in the spring. What I would like to discuss instead is the clickbait title of the piece:
Two dozen tech founders living in a mansion. What could go wrong?
IMHO, itāll prove to be misguided. Not as misguided as those refrains in the 1990s on why the internet will fail, but stillā¦ on the wrong side of history.
In 2019, when I burned out of my startup and moved across the country to recover, I was fortunate to land in a brand new wellness-themed coliving space in prime Venice Beach. In the macro, I lived with over 90 (NINETY!!!) other people in eight brand new adjacent buildings just a few blocks from the Pacific Ocean. In the micro, I shared a bedroom and one bathroom with 7 other dudes. What I lacked in personal space, was made up for by the amazing community spaces including roof-top decks, a coworking room, a home theater, a gym, and outdoor fire pits. But even more was the community of my āhousematesāā¦ many of whom I am still in touch with (in fact, we had a coliving reunion BBQ this weekend) and a handful who will be lifelong friends. Downsizing from a penthouse apartment to a twin bed in a box was exactly the lesson in humility and perspective I needed. I may have lived in a box, but I was happy again.
Coliving changed my life.
It is surely not for everyone. However, it inspired me to build Brazen House last springāa place for biotech founders to co-live and co-work while launching their early stage biotech startups. I was not aware of Launch House at that time, but it is eerie how similar our initial visions were (e.g., we were also considering an internet reality show formatā¦ but thankfully the reality was already hard enough!).
BRAZEN BREAKDOWN
We learned A TON last year during the first cohort of the Brazen Fellowship (BRZN01). We learned it is a viable way to accelerate a biotech startup. We learned it is a viable way to build IRL community. We also learned doing it right is operationally intense and fucking hard.
Largely for that latter reasonāas we are still a teensy startup ourselvesāwe decided earlier this year not to continue with the program but instead focus our efforts on building brand/content and making direct investments through Brazen Capital.
Based on my overwhelmingly net positive experiences in coliving and with BRZN01, I do believe the launch house concept for startups is viable. What is criticalājust like any other startup ideaāis execution. I mean, a launch house is just a container. Itās also a two-sided market and thus is only as good as the leadership and the selected participants placed in the container.
Don't worry, Brazen House is still very much a thing. Itās a great place to cowork and it will continue to be an anchor venue for the local biotech ecosystem. Speaking ofā¦
#LATechWeek: Brazen Mixer 001 recap
#LATechWeek brought thousands of founders and VCs to town to attend hundreds of events. On Friday, August 19 we hosted the first Brazen Mixer [BrMx001] at Brazen House for health tech and biotech nerds. Initially, it was supposed to be at Launch House, but [ahem] that fell through.
BRAZEN BREAKDOWN
This was a great opportunity to broaden the audience for the BrazenVerse and we would like to thank our partners at LA Tech Week (especially Katia Ameri), our cohost Anja Health (YC W22), and our primary sponsor First Republic Bankāthe official bank of Brazen Capital!
FREE Lab Bench in Los Angeles for a Year
Apply now for the Amgen Golden Ticket! The winning startup gets a FREE, no-strings laboratory bench at BioLabs LA at the Lundquist Institute for an entire year! This is the very same facility Brazen Bio and Brazen Capital call home. We love the people here and we highly recommend it!
Past winners include our friends at Karma Biotechnologies (Andrew Gray, PhD) and Diadem Biotherapeutics (Mickey Pentecost).
BRAZEN BREAKDOWN
Applications are now being accepted online through November 4. Five finalists will pitch virtually in December and one will be awarded the Golden Ticket! LFGGGG!!!
VC CORNER: To Debt or Not to Debt
Contributed by Scott Alpizar, PhD ā Iāve been bringing you through what Iāve seen as the three main types of startup funding for early-stage biotech companies. Last time, I broke down equity financing in more detail. Today weāre tackling debt, or loans that may have some specific terms attached to them.
First things first, letās get this out of the wayādebt is NOT necessarily a bad thing. Most people think of their credit cards or student debt, but debt for startups can be much different if used properly. It can be a replacement or complement to equity financing to make progress to better position a company for later rounds of funding.
Debt is often the funding mechanism deployed by angel investors. These are high net worth individuals that typically invest at the early stages and are okay with some risk. However, the amount of funding they typically provide is limitedātheir investments can range from tens of thousands to one, maybe two, million dollars. You will also potentially see accelerators, incubators, or university venture funds using debt instruments to provide funding (although SAFEs are common here tooāagain something slightly different that Iāll cover soon!).
Tens of thousands of dollars may not seem like it will go very far for your biotech startup, which again is a capital-intensive endeavor. But a small amount may be all you need to reach the next level. If it does make sense for your company to take on some debt, you can usually expect one of two types. Breakdown incoming!
BRAZEN BREAKDOWN
Non-Convertible Loan. Exactly what it sounds like, a straight loan. This will typically contain all the terms associated with a loan: principal amount, interest rate, maturity date, etc.
Convertible Notes. These are loans that convert into equity under certain circumstances. This equity is typically valued at a price per share to be determined by the future valuation of the companyāsomething set by the investors at the next round of financing. While these may also have basic loan terms, they also come with some conversion-specific terms:
A Valuation Cap or Discount. These limit what the investorās price per share will be. For a valuation cap, the valuation used to calculate the price per share is capped. A discount shaves off a certain amount from the price per share (usually 15-25%). Both enable the investor to obtain more bang for their buck, a reward for taking an early risk.
Qualified Financing. Most notes define the triggering event that actually allows the conversion to take place. In most cases, this event is a priced round of funding (usually Series A) where stock/equity is given out. If one does not occur, the note may remain as debt.
The dilutive impact is different between these two types of debt. Loans have no dilutive impact since theyāre paid back with money. Convertible debt will be dilutive, but the impact is delayed until the next financing. You also donāt need to set a formal valuation at the time of the investment, which can be beneficial for future investment rounds. Just be careful of valuation caps in your convertible notes ā these may create an implied valuation and may limit the valuation that future investors will give.
There are downsides too! Thereās always the potential for default, the dilution can work out to be more consequential than anticipated, or it may be an impediment for future VCs who donāt want to deal with it. However, as long as everyone wants whatās best for the company, Iāve never seen it be an issue.
In the end, debt is still debt, and your company is either on the hook to pay it back one way or another. Donāt take it if you donāt need it! But if you do need a small amount of funding to get to the next level, itās a viable and common option.
š Brazen Snax
š© Not even your workplace poop is safe from these scientist-sleuths
š¦ COVID evolution in an individual chronically infected for 471 days!!!
š” Nowhere to hide: Radio waves used to monitor disease progression
š° Biden to bolster bioeconomy via biomanufacturing with 2 billion bux
š¤Æ Women biotech CEOs still outnumbered 9-to-1 by men. WTF bro?
š¤³š½ OK, but also #SciComm: they wonāt be it if they donāt see it
š Morbidly compiling biotech industry layoffs since January 2022
ā° TikTokCrak: Do blue lobsters taste like blueberries?
šŖ Carveout
āBuildā is a book by the man who led the teams behind the iPhone and iPad, Tony Fadell. It is indeed essentially āA mentor in a boxā. Required founder reading. 10/10.
šš½ A Dose of Gratitude
We are grateful for the support of our wine sponsor, Vermillion Wine: THE OFFICIAL WINE OF BRAZEN BIO. Beautifully crafted everyday red table wine (RhƓne blend) made by the world-famous 100-point winemaker, Helen Keplinger. The 2018 vintage is sold out, but 2019 is now available for delivery (to most states) through their website.
š Brazen Meme
āļø Feedback
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