Gm! Farewell First Republic as we knew it. 😢
[Welcome to Issue Number 30 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 Bio, Brazen Capital, and brainsurgerydropout.]
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CONFESSIONS OF A SCIENTIST-CEO: Pre-Seed C-Suite Myth Busting (say that 5x fast)
by Shawn Carbonell, MD, PhD — A bio-founder myth I’d like to dispel today is that you need to recruit an entire executive team around you from day one.
Nope.
Having looked at dozens of pitches as a newly minted VC, I’ve seen one too many decks with hugely built-out “teams” with lots of impressive logos and it gives me a good chuckle every time. To be clear, it’s the same chuckle that happens with a financial projection slide: it’s pure fantasy. Even worse, it kinda looks bad.
No investor expects an early-stage (especially pre-incorporation) startup to have already recruited three layers of corporate bullshit including a veteran COO, CMO, CBO, head of manufacturing, in-house counsel, etc… all ready to jump in at a moment’s notice upon a funding event.
What are you supposed to do then?
BRAZEN BREAKDOWN
The easy answer is: stop fronting.
Practically speaking, when it comes to the actual work needing to get done…
…you (and your cofounder[s]) will roll up your sleeves, figure it out, and do it your damn selves.
—Shawn Carbonell, MD, PhD
Learning in context is the best way to learn.
For absolute path critical tasks with regulatory implications, don’t hire. Use 1099s (consultants) or advisors as needed for input/data, but do the heavy lifting yourselves. As an extreme example, my startup never had more than seven FTEs (full-time employees) on the team all the way up to Phase I clinical trial.
The bottom line is it is unlikely at the early stage when you have nothing (including cash and excluding nepotism) that you’ll be able to recruit the best talent anyway. And how would you even know they are the best people for the job? Finding people to take free equity is easy. Verifying they are worth it is hard.
So, keep it real. The only people on your pre-seed team slides should really be the founders (and maybe an advisor or two).
SynBioBeta ALPHA: The Genetic Underground (Enter the Biopunk…)
Brazen is all about unabashedly being yourself. As such, we love that our good friends at at Scifind are hosting a big happy hour—slash—rave in Oakland during #SynBioBeta2023!!! This is a major collab with several startup friends including Cultured Supply, Trilo.bio, Spira, LabDAO, ZBiotics, and more!!!
BRAZEN BREAKDOWN
The Genetic Underground is going down on Wednesday, May 24, 2023 at The New Parish in Oakland, CA from 7pm to midnight. GA is $15 per ticket, but it is FREE if you have an account on Scifind! We also have a handful of *VIP tickets* (open bar access) for friends of Brazen (DM Shawn on LinkedIn).
PS: Reach out to them if you are a startup/company interested in becoming a sponsor.
VC CORNER: Serial Dilution
Contributed by Scott Alpizar, PhD — Back in October I wrote about equity funding and mentioned the concept of dilution—the fact that you may need to make room for new shareholders on your cap table by giving up some of your own. I finished by briefly explaining that dilution isn’t always a bad thing since a smaller piece of a bigger pie is still likely a bigger piece than before.
I also mentioned that dilution can be difficult to wrap your head around, especially when certain dilution protections come up in licenses or in term sheets, which happens quite commonly. So, I wanted to take a quick dive into the types of dilution protection you may encounter. To me, there are two main types:
BRAZEN BREAKDOWN
Anti-Dilution
The first is anti-dilution protection, or the protection afforded to a shareholder that usually comes into play in a down round. The intention is to prevent the investment from potentially losing value and means that you may need to ‘top up’ the protected shareholder’s equity. This will of course have a dilutive effect on the founders and any existing shareholders prior to that point.
A common way that this is calculated is through a weighted average. The share price is calculated at a weighted average that would land it somewhere between the share price paid by the shareholder and the share price that would be paid in the down round.
Non-Dilution
The concept of non-dilution is sometimes contemplated under anti-dilution language, but I like to break it out specifically since it is a stronger form of protection. It is also a real issue.
Non-dilution protection means the shareholder cannot be diluted at all (typically) until a given amount is raised. This is where the founder and existing shareholders can lose a huge chunk of equity if they aren’t careful. I’ve seen this come up in license agreements from time to time, and seems to even be present in the NVCA Model License Term Sheet that I previously wrote about (where it is considered under anti-dilution).
I know that this is difficult to follow with just descriptions. I think the impact can be more easily shown via some scenarios and examples, which I’ll show you in the next issue!
😋 BRAZEN SNAX
🦾 LLMs for better antibody therapeutics? (caveat garbage in…)
🎫 ONO Golden Ticket for one year of lab space in SF Bay (Due FRIDAY!)
🤥 Publish or plagiarize: double digit hits from fake-paper detector
🦠 Long COVID linked to viral RNA found in sensory neurons
🧬 Disturbing developments for purveyors of pre-owned jewelry
✈️ SFO first to monitor plane poop for COVID variants
🤰🏽A study concludes that pregnancy makes doing anything harder DUH
🩺 Promoting medical innovation through Healthcare As A Service (HAAS)?
⏰ TikTokCrak: Angular momentum debate… torque versus twerk
🔪 CARVEOUT
A longevity book nearly a decade in the making has finally dropped before we all died: Outlive by Peter Attia. The audiobook is worth the listen as it is read by the author.
🙏🏽 A DOSE OF GRATITUDE
We are grateful for whole-body MRI. How do we scale this? (Read about our friend MM’s story about early detection and surgical treatment of pancreatic cancer.)
🙃 BRAZEN MEME
✍️ FEEDBACK
Feel free to tweet all thoughts, questions, and insults to us. Bring it. No, really. COME👏🏽AT👏🏽US👏🏽BRUH👏🏽
And let’s continue the conversation on LinkedIn: @brazencapital and @brazenbio.