Gm! The ultimate Gen X prophecy is complete.
[Welcome to Issue Number 42 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: How Neurosurgery SAVED Karikó
by Shawn Carbonell, MD, PhD — Just after last issue’s Ode to Karikó, I learned something so shocking it knocked the wind out of me: My neurosurgery mentor was the administrator who ultimately pushed the future Nobel laureate out of UPenn!
WTF????!??!
To clarify, he didn’t fire her. He merely nudged her out the door by taking away her lab space and offering her use of a utility closet instead. (She, of course, chose to leave UPenn at that point and joined a little startup in Germany called BioNTech.)
But before you hate on the man who changed my entire goddam life please allow me to tell you about how Karikó’s breakthrough work at UPenn couldn’t have happened AT ALL without three neurosurgeons: David Langer, Eugene Flamm, and Sean Grady.
David Langer, MD. You all know social media’s favorite neurosurgeon, star of the pandemic era Netflix hit Lenox Hill. Well, it turns out he saved Katalin’s UPenn career. How? When her PI in cardiology left for another institution in a different city, Langer convinced his chairman to hire her into neurosurgery by asserting the department needed a good molecular biologist. Good on ya, Dave.
Eugene Flamm, MD. He was the UPenn Charles Harrison Frazier Professor and Chairman of Neurological Surgery who hired Katalin to continue her mRNA work in 1995 despite the fact she was not presently working on neurosurgical-relevant science at all. Phew! But, uh-oh, Flamm left Penn in 1998 to become Chairman at Einstein neurosurgery in NYC. So, who replaced him?
M. Sean Grady, MD. My guy. My dude. My most impactful mentor. And, indeed, Karikó’s last boss at UPenn who ultimately made the decision that she had to go.
BRAZEN BREAKDOWN
Hear me out… The critical context you should know is that when Dr. Grady took the helm in 1998 the UPenn Health System was $400M in the hole and placed in “receivership” (I don’t know what that means exactly, but it sounds bad) by the Board of Trustees. Then—to complicate matters further—just eight months into Dr. Grady’s tenure as Chairman, the supportive med school Dean who hired him was fired!
Speaking of… for the first few years Dr. Grady had to keep his department afloat with a 20% budget haircut by firing people. He fired a lot of people. Who DIDN’T he fire?
Katalin Karikó.
In fact, he continually paid her salary for a full FIFTEEN YEARS even while she failed to bring in one single dollar of outside funding. He also attempted (unsuccessfully) to get her reinstated as a faculty member. This is the Dr. Grady I know*.
In her book, Katalin seems annoyed at him for how things turned out which, for me, is wild and comes off as entitlement. How many chairmen in that position today do you think would have kept her on???
Probably none.
So, before you cast quick judgement [*cough* like I did last issue *cough*] we really should be thanking Dr. Grady for believing in her for so long. Oh—by the way—nearly a decade beyond the time she needed to do her Nobel-enabling work with Weissman leading to mRNA vaccines recently saving the world.
[*For context, Sean Grady took me under his wing as a 19-year old pre-med based on a cold e-mail, allowed me to start my own project after only a month in his lab leading to three first author publications, did departmental gymnastics to get me on payroll for two years, sent me to NINE conferences all expenses paid plus per diem, strongly supported my med school applications, convinced me to apply for MD/PhD programs, made personal introductions to neurosurgery leaders, helped me get the positions at Oxford where I made my initial discoveries leading to my drug invention, strongly supported my neurosurgery residency applications, and even after I quit neurosurgery he continued to support me by joining my startup’s advisory board and writing letters of support for grants (including a $700K STTR we won).]
FREE Lab Bench in Los Angeles for a Year
It’s Christmas for biotech founders again… 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 a brand new facility (opened just before the pandemic) with $2M in brand new shared equipment! As former residents, 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 17. Five finalists will pitch virtually in December and one will be awarded the Golden Ticket in January.
[BTW, you don’t need to currently live in LA to win and as my startup (OncoSynergy) was a finalist last year I’m happy to answer any questions. —Shawn]
VC CORNER: Negotiating Liq Pref
by Scott Alpizar, PhD — Everyone has preferences. Like how some people prefer vanilla over chocolate, sausage over pepperoni, or to only use food comparisons to make their point...
Investors have preferences too. I don’t necessarily mean the preferences that you may think like preferring to lead a round or to invest only in oncology therapies. But in the context of the term sheet, you’ll see certain preferences that the investors will get over other shareholders, especially since that concept is baked into the name of the stock type they’ll receive—‘preferred’ stock.
This type of stock comes with certain rights that we’ve already discussed, but it also gives the investor the right to choose how they are paid out when a liquidation event (usually the sale of the company) occurs. This is known as liquidation preference.
BRAZEN BREAKDOWN
I first mentioned liquidation preference back in my initial list of important terms to track, but as a recap, the liquidation preference defines the order of who gets paid back first—and in what amount—when a liquidation event occurs. This is an important term for an investor since it often moves them to the front of the line to receive proceeds. Generally, it usually gives the investor a choice of:
Their Investment Amount Back. This is self-explanatory, though there is something called a ‘multiple’ to watch out for that I point out below. Note that this amount comes ‘off the top’ of the total proceeds.
Their Pro-Rata Distribution of Proceeds. The investor gets paid an amount based on their ownership, just like all of the other shareholders.
Obviously, the investor usually chooses which of these gives them more money. You’ll likely see the concept of ‘participation’ here as well. Depending on how that is structured (more here—I definitely don’t have enough space), this may give the investor the option to BOTH of the above.
And you’ll want to know these—there are situations where the founders (and employees) may receive ZERO proceeds!
You want to avoid some of those types of participation if you can. For example, if the liquidation preference has a multiple greater than 1x, the investor gets more back than their invested amount right from the start. Also, look out for the ‘participating preferred’ liquidation preference, which is essentially double dipping, since the investor both gets their money back AND participates in the distribution of the proceeds.
When negotiating liquidation preference, investors will likely say that they need a favorable preference to “protect their investment”. You may be able to give on some other terms, or even potentially lower your pre-money valuation, to obtain a better liquidation preference. In any case, at least start a conversation. A good investor knows that the value comes from helping to build a strong company, not getting the best terms. There’s no money paid out if the company isn’t successful!
😋 BRAZEN SNAX
🤖 Are AI foundational models ready to replace certain physicians?
🧬 Modified microbiome enables medical miracle (but not in males!)
🙄 The postdoc perspective we need: Nobody owes you shit
🍄 Magic mushroom mediated (attempted) murder of masses
🧠 Long-COVID brain fog may not in fact originate in the brain
🐭 Mummified mice found atop Mars-like mountains.
🥧 Too good to be true? The serious downsides of GLP-1 blockbuster drugs
🪳 Beetle-mimic cockroach (Diploptera punctata) moms are basically mammalian
🙏🏾 The neurochemical mechanism of employee engagement: oxytocin
🦠 Re-re-refresh your supply of FREE COVID tests (thank you regulatory capture)
⏰ TikTokCrak: Felons in STEM
🔪 CARVEOUT
“If there is one unavoidable truth in this world it’s that there is no substitute for putting in the work.” —The Terminator
🙏🏽 A DOSE OF GRATITUDE
We are grateful for the neurosurgeons without whom Katalin Karikó would not have stayed at UPenn long enough to randomly meet Weissman at the copy machine (because he was hogging it) leading to their Nobel Prize-winning collaboration.
🙃 BRAZEN MEME
✍️ FEEDBACK
Leave a comment and let’s continue the conversation on X: @brazencapital