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[Welcome to Issue Number 45 of The House Brazeryen, where we break down the latest #startup, #biotech, and #ScientistCEO-related news for you fortnightly, in roughly 5 minutes. Brought to you by Brazen Capital and brainsurgerydropout.]
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RE: when you sell your startup for billions
by W. Shawn Carbonell, MD, PhD â Just to be clear, *I* did not sell my startup for billions (âŚyet). My fellow Scientist-CEO friend, Stig Hansen, PhD, did (see coverage from yesterday on Reuters, Fierce, etc. and the original press release on Newswire).
Our startups (Carmot and OncoSynergy) were neighbors in the Fibrogen incubator in Mission Bay, SF a decade ago. It was a storied time when you could rent a labânot just a single benchâfor $2,500/mo and your office would have a sweeping view of downtown SF and the Bay Bridge (now obstructed by the Chase Center).
We shared a fancy (for the era) LiCor imager. We were both in-between rounds so to save money we co-purchased it from another startup in the incubator that was unfortunately winding down after meh clinical trial results.
Additionally, we shared a true passion for wine. In fact, Stigâwho BTW is also an amazing winemaker at Whistler Vineyards (named after his wife)âwas instrumental in helping me start my own winery in 2016. But that is a story for another timeâŚ
30 under 30
Originally, I was going to write about the recent â30 under 30â winner announcements all over social media. Still am, but the Carmot news makes for perfect bookends.
Youâll seeâŚ
Anyway, as a social media creator myself, Iâm homies with few of the awardees this year and super stoked for them (e.g., Astro Alexandra and Franziska Trautmann).
We mustâof courseâstop briefly to chuckle at the 30 under 30 Hall of Shame including Sam Bankman-Fried (2021) and our own pharma bro Martin Shkreli (2013).
Still, this an amazing springboard for the awardees who arenât already Kendall Jenners or Jenna Ortegas. Look at Celine Halioua, named to the Under 30 Class of 2022. She leveraged the coverage to ~20x her Twitter following and gained tons of media for her longevity startup Loyal. Sheâs raised $38M and is technically, non-technical!
To some (Gen Z), itâs inspiring. However, Dr. Nicole LePera has a different perspective:
We are familiar with the negative aspects of social media in globally scaling mental health issues. I think 30 under 30âwhich has been around since 2011âis possibly the original sin⌠driving âage dysfunctionâ.
BRAZEN BREAKDOWN
Stig Hansen didnât finish his formal training (PhD/postdoc) until his mid-30s. He started Carmot Therapeutics in his 40s. Then, it took an additional 15 years of HARD FUCKING WERKâplus really fantastic timing relative to the emergence of GLP-1 obesity blockbustersâto eventually get acquired by Roche for $2.7B upfront, in cash (caveat the deal closes in 2024). Congratulations, Stig and team!!!
Now THAT is inspiration for ALL generations.
Life is long. Donât judge yourself.
VC CORNER: Negotiating Debt
by Scott Alpizar, PhD â We may have wrapped up what to think about when negotiating your term sheets, but getting a term sheet from a VC for an equity investment isnât the only type you may come across. Donât forget about convertible debt!
Although in recent years there has been a shift to using  SAFEs more often (which are intended to streamline things and remove the need for negotiation), you may not necessarily have a choice. In this current funding climate, taking debt, most likely in the form of a convertible note, may be your only option. Letâs make sure you know what to look for! Â
BRAZEN BREAKDOWN
Conversion Price. This is the price that the note will convert at in the next round, and is usually calculated with either a discount or valuation cap:
A discount is just thatâa discount on the price per share that the investors in the next round pay. In the range of 15-30% is typical.
A valuation cap puts a maximum on the valuation used to calculate the price. I like to think of this as a discount of sortsâif you have a $3MM valuation cap and end up with a $10MM valuation, thatâs basically a 70% discount. This can be a sweet deal for an investor, so be careful! Further, some notes include both a discount and a cap and give the investor the better of the two.
Interest Rate. Exactly what it sounds like! A common rate is 8%. This is largely inconsequential, so may not be something even worth negotiating. [This unfortunately WAS consequential to my startup as it took 2x longer to raise an equity round than anticipated⌠will discuss this in a future issue. âEd)
Maturity Date. This is when the amount of the note, plus interest, is due. This isnât always used as a hard deadlineâinvestors may be willing to extend this date as they often want the upside of getting the equity versus just being paid back. Between 3-5 years is fairly normal to see.
Investor Rights. Investors may provide themselves with the ability to participate in future rounds, obtain a board observer seat, or have access to certain information. Many investors may also want to include a âMost Favored Nationsâ clause that lets them obtain the same terms as any other notes you give that may have better terms than theirs does.
There are some other minor terms that you could potentially negotiate as well, such as the size that the qualified financing round will need to be or what happens upon a change of control (if this may be something likely). In the end, you should be able to get to a reasonable deal by focusing on the main points that may be most impactful to your startup, even if they donât come into play until later.
đ BRAZEN SNAX
𼌠Stanford twin study proves Bryan Johnson right: broccoli can save the world
đ Science News favorite books of 2023!
đ§ Neural implants improve cognition YEARS after traumatic brain injury
đś Mystery dog illness or social media facilitated hysteria?
đĽ Lab-grown gametes: eggs and sperm from any cell in the body Â
đĄ Evidence supporting the existence of Ser Brienne of Tarth (IFYKYK)
𧴠Discovery scratches the itch of new potential blockbuster drugs
đ¤ Harvard Business Reviewâs take on the ongoing OpenAI debacle
đŚ Re-re-re-re-re-refresh your supply of FREE COVID tests (thanks reg capture)
â° TikTokCrak:Â What if ChatGPT wrote a Hallmark Christmas movie?
đŞ CARVEOUT
Check out this fantastic primer (with a subfantastic title) on AI in healthcare from our friends at OCV Partners, a Los Angeles-based tech and biotech focused venture capital firm: How to Think of AI in Healthcare: Fantastic AI and Where to Find Them
đđ˝ A DOSE OF GRATITUDE
We are grateful for 20 years of the NIA Interventions Testing Program (ITP) for providing a model that may improve clinical translation in ANY field (hint, hint).
đ BRAZEN MEME
âď¸ FEEDBACK
Leave a comment and letâs continue the conversation on X:Â @brazencapital