THE HOUSE BRAZERYEN: 05DEC2023 🐉

3.1 Billion Reasons Why

Gm! Reserve your CyberBEAST with only $250 down.

[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 — Just to be clear, *I* did not sell my startup for billions (…yet). 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 lab—not just a single bench—for $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, Stig—who BTW is also an amazing winemaker at Whistler Vineyards (named after his wife)—was instrumental in helping me start my own winery in 2016. But that is a story for another time…

The famous Carmot-OncoSynergy LiCor imager we co-owned bc our startups were both super tight on cold, hard cashola (May 15, 2013). The empty lot through the window is now the Chase Center.

30 under 30

Originally, I was going to write about the recent “30 under 30” winner announcements all over social media. Still am, but the Carmot news makes for perfect bookends.

You’ll see…

Anyway, as a social media creator myself, I’m homies with few of the awardees this year and super stoked for them (e.g., Astro Alexandra and Franziska Trautmann).

We must—of course—stop 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 aren’t 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. She’s raised $38M and is technically, non-technical!

To some (Gen Z), it’s inspiring. However, Dr. Nicole LePera has a different perspective:

the.holistic.psychologist

A post shared by @the.holistic.psychologist

We are familiar with the negative aspects of social media in globally scaling mental health issues. I think 30 under 30—which has been around since 2011—is possibly the original sin… driving “age dysfunction”.

BRAZEN BREAKDOWN

Stig Hansen didn’t 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 WERK—plus really fantastic timing relative to the emergence of GLP-1 obesity blockbusters—to 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. Don’t judge yourself.

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VC CORNER: Negotiating Debt

by Scott Alpizar, PhD — 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 isn’t the only type you may come across. Don’t 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. Let’s make sure you know what to look for!  

BRAZEN BREAKDOWN

1. 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 that—a 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 sorts—if you have a $3MM valuation cap and end up with a $10MM valuation, that’s 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.

2. 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. —Ed)

3. Maturity Date. This is when the amount of the note, plus interest, is due. This isn’t always used as a hard deadline—investors 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.

4. 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 “Most Favored Nations” 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 don’t come into play until later.

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😋 BRAZEN SNAX

• 🥦 Stanford twin study proves Bryan Johnson right: broccoli can save the world

• 📚 Science News favorite books of 2023!

• 🧠 Neural implants improve cognition YEARS after traumatic brain injury

• 🐶 Mystery dog illness or social media facilitated hysteria?

• 🥚 Lab-grown gametes: eggs and sperm from any cell in the body  

• 🗡 Evidence supporting the existence of Ser Brienne of Tarth (IFYKYK)

• 🧴 Discovery scratches the itch of new potential blockbuster drugs

• 🤖 Harvard Business Review’s take on the ongoing OpenAI debacle

• 🦠 Re-re-re-re-re-refresh your supply of FREE COVID tests (thanks reg capture)

• ⏰ TikTokCrak: What if ChatGPT wrote a Hallmark Christmas movie?

🔪 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

🙏🏽 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).

🙃 BRAZEN MEME

✍️ FEEDBACK

Leave a comment and let’s continue the conversation on X: @brazencapital