#23: SystemOne, Homeday & more📍

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Read 📕 

Perhaps the most interesting article I’ve read in the past week. If there’s a shift in power after the midterm elections, here’s potentially what to expect in 2019:

‘Winter is coming’: Companies brace for flurry of investigations Politico

Elsewhere on the theme of regulation, Expedia’ CEO has offered his thoughts on Google:

Expedia’s Barry Diller Calls on Google to Be RegulatedSkift

Elsewhere still, that theme was present in this NYTimes piece on the role Facebook played in Myanmar’s genocide; people in Mynamar can’t distingusish between Facebook and the Internet:

“The military exploited Facebook’s wide reach in Myanmar, where it is so broadly used that many of the country’s 18 million internet users confuse the Silicon Valley social media platform with the internet.”

A Genocide Incited on Facebook, With Posts From Myanmar’s MilitaryNYTimes

Separately, but still related to the theme: founders, likely in light of the brutal killing of journalist Jamal Khashoggi, have begun to ask about who their VC investors have as Limited Partners:

Who Are My Investors? Fred Wilson

Taking the theme of regulation and also wanting to know the provenance of your investors’ money, I’d love to hear your thoughts on the following questions:

Can early stage-startups take a moral position on an issue or is that something that only later stage startups are entitled to or can afford? Are there any early-stage start-up that aren’t using Facebook because of how the platform became weaponized by Mynamar’s miliary?

If you’re an early-stage founder, to what extent do you feel your VC investors would disclose who their Limited Partners are?

Unrelated. Unrelated. Unrelated.

This is an incredible story of resiliency. David Price, Red Sox pitcher, has had a disastrous time in the playoffs. A couple weeks ago, the star pitcher had a track record of nine playoff starts and nine playoff loses. He seemed unable to win.

The Red Sox clinched the World Series a couple nights ago and “everyone raved about starter David Price.” Wow. That ability to keep going, to keep believing in yourself, and then to ultimately succeed on the largest stage, that’s nothing short of incredible.

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Recent Startup Funding Announcements 💰

US— Massachusetts

SystemOne (Chris Macek, CEO)

SystemOne, a Springfield, Massachusetts and Johannesburg, South Africa-based provider of disease intelligence solutions for rapid detection and response to infectious diseases and response, raised a USD 5m Series A earlier this month.

  • Recommended book: We're currently reading "Measure What Matters" by John Doerr - the book that explains Intel and Google's goal setting process (OKRs).

  • How long did the round take to closeThe raise took almost a year to close.  After 5 months we considered giving up because it was taking up so much of the CFO and CEO's time that it was starting to disrupt the business.

  • How many firms did you speak withIn contact with roughly 100 investors.  Talked on the phone to 50-75. Pitched 30 in person.

  • What capital will be used for: We have some key hires to make, a number of improvements to our Aspect product, and some serious partnering to do to help shape our market.

  • Comment on valuation after the round: Between USD 10m-20m.

  • Seems as though the process of raising money isn’t efficient. Your thoughts: Everyone goes about it differently.  Every product comes positioned for a different market. Each company has different relationships with venture capital.  As mentioned above, it took a lot of time and energy of the CEO and CFO to make this happen.  We almost gave up after 6 months. Sheer stubbornness kept us going through the end, which was almost a year to the day.

  • Total amount raised to date: We had an initial seed round of $800k as a convertible note about 2 years ago. Then another $100k convertible note earlier this year that heard about us during the raise, but didn't want to wait for a Series A lead.

  • Macro trendsThe internet of things is exploding and how these things communicate, interact, and learn to optimize their domains and functions is just at the beginning. Interoperability is the next horizon of development. We have a smart team that views these trends in an evolutionary framework unfolding through a known set of features and principles. We extend our platform and products in organic ways to partner with successful emerging technologies and companies.

  • Other details: This is going to sound a bit cliched, but any startup is going to go through ups and downs. I had heard all that and said "yeah, yeah... sure, sure" at the time, not really knowing what that would mean. It's a whole other thing to live through the down times and get up each morning to keep the wheels on the bus.  

Canada — Québec

Optina Diagnostics (Chantal Miklosi, CFO)

Optina Diagnostics Inc., a Montreal, Canada-based provider of an early detection of Alzheimer through the use of AI and Spectral Retinal Imaging, raised a CAD 4m round earlier this month.

  • Recommended rule to live by: Collaboration. In a new market, we believe that we need to collaborate internally and externally to continue build our company and grow

  • Recommeded book: “Getting to yes” by Roger Fisher and William Ury and “Who moved my cheese” by Spencer Johnson

  • How long did the round take to closeIt's a continuous process, but more specifically for this round, we started in December of 2017, so 9-10 months.

  • Seems as though the process of raising money isn’t efficient. Your thoughts: I've been doing this for over 20 years, first as an i-banker both in Canada and in the US and it's actually good that it's this long because, there's such a thing as a bad "marriage" between a company and an investor or investors. The consequences can be quite negative for either side, so it's worth taking the time to make sure that the partnership is good.

  • How many firms did you speak withQuite a bit, part of our role is to talk about our company, to get the objections out and to make sure that we stay nimble and at the forefront. 

  • What capital will be used forExtend our clinical sites and focus on our regulatory approval.

  • Total amount raised to date: About $8 million.

  • Competitive landscape: Optina’s diagnostic testing is performed in a single visit, does not require the administration of external drops, and can be used in patients who have undergone cataract surgery. In addition, this technology can detect other biomarkers and pathologies. In contrast, our competitors’ products are uniquely limited to the diagnosis of Alzheimer's disease. Other technologies are CSF, blood and Ab-PET.

  • Macro trends: The current macro trends related to Alzheimer Disease are quite scary, every 3 seconds around the world, a person is developing Alzheimer disease. In USA, 16% of the population aged between 65-74 years old will suffer from AD, this represents 4.5 million people. If nothing is done to set-up coordinated and proactive Public Health programs, you can only imagine the building burden to every health care system around the world! Another striking fact worthwhile knowing is that currently patients and their family struggle a few years (can be 2 -3 years and more), before any proper diagnostic is made. 

    One good news is that there are still on-going therapeutic development, some programs in Clinical phase III stage even though there were a lot of disappointment in that regards over the last years. Another developing good news is that easily accessible, non-invasive and cost efficient, diagnostic tests will be released to market in the coming years. 

    The idea, at Optina Dx, is to identify and screen at risk population (>55 years old) and align with scientific studies based on large cohort which demonstrate that preventive life style based on: Diet, exercise, cognitive training, social activities etc. can positively impacts AD on-set and delay symptoms. This is quite exciting and empowers patients giving hope and tools for better life plans for themselves and families. Although aging and genetic background cannot be change, giving patient a diagnostics in time could also permit enrolment in clinical trials while disease state is not too advanced.  

UK

Forward Health (Dr Barney Gilbert, co-CEO and co-founder)

Forward Health, a London, UK-based provider of a healthcare messaging app, raised a USD 3.9m earlier this month.

  • Recommended rule to live by: Focus on the three most important things. For me right now, that’s people, product, processes. All other noise should hit the bin!

  • Recommended book: I’ve just read a brilliant book by Warren Bennis called “Organizing Genius: The Secrets of Creative Collaboration.” I loved the tales from Walt Disney and Black Mountain College. My co-founder Philip believes great missions seek both the divine and the impossible; this theme is echoed throughout the book.

  • How long did the round take to close: It took us longer than we’d anticipated - six months open to close. Any founder who doesn’t admit that has got to be lying!

  • Seems as though the process of raising money isn’t efficient. Your thoughts: It feels crazy that the founders take three to nine months “off” at a critical phase for the business. We thought about doing it like an Apple product launch, with our VC network all present in the room and committed to one evening only! That sounds scary, but it would be cool. After signing termsheets, we were grateful to the team at SeedLegals for pulling docs together at lightning pace and working brilliantly with us.

  • How many firms did you speak with: At least 25 angels and funds, with a heat map of how we were progressing.

  • Comment on valuation after the round: In the USD 10m-20m ballpark - which was a great seed valuation for a currently public-facing company still in beta.

  • What capital will be used for: We’re hiring fast and building a world-class product and engineering team.

  • Total amount raised to date: $5.2M.

  • Competitive landscape: We see WhatsApp as the main competitor. Microsoft Teams is making a play in the health space that we need to be aware of. There is also a great early team at Siilo in the Netherlands.

  • Macro trends: It’s an amazing time to be innovating in healthcare. VC’s know that healthcare is the big missing piece of the data puzzle, and health systems both in the west and across the developing world are primed for disruption on mobile.

Germany

Homeday (Steffen Wicker, founder and managing director)

Homeday, a Berlin and Cologne, Germany-based online real estate agent, raised a €20m round last week.

  • Productivity hack: I use the Eisenhower Matrix to prioritize, which helps me focus on the right topics.

  • Recommeded book: “Sapiens: A Brief History of Humankind” by Yuval Noah Harari.

  • How long did the round take to close: The company devoted nine months to raising the round. 

  • How many firms did you speak with: During the period of discussions we had conversations with about 30 investors.

  • What capital will be used for: Homeday will invest the funds in further personnel growth, marketing and product development to create a unique customer experience throughout the real estate transaction process. 

  • Total amount raised to date: The overall amount totals 26 million euros.

  • Competitive landscape: In Germany there are about 30,000 real estate agencies, most of them, however, still work very traditionally and haven't digitized their business processes at all. Our closer competitors include McMakler, Realbest and Maklaro. Among the top-4 hybrid estate agents Homeday has a 45%-market share and the gap to the largest traditional agents is closing quickly.

  • Macro trends: One of the most interesting questions regarding our market will be whether the so-called "Bestellerprinzip" of purchasing real estate is going to be established by law. Homeday would be well prepared for a possible introduction. We have invested in the development of technology and efficient processes and could offer very good real estate services at fair prices, also within the framework of the "Bestellerprinzip." On the other hand, small and less efficient brokers are likely to face a major challenge here.

Finland

Varjo Technologies (Urho Konttori, CEO)

Varjo Technologies, a Helsinki, Finland-based creator of hardware and software for VR/AR/XR computing devices, raised USD 31m in Series B funding earlier this month.

  • Recommended rule to live by: Set a target and stick to it. For a startup, being nimble and agile does not mean you try many things, but that you move faster, overcome obstacles better, not change the direction like a hyperactive squirrel. Having said that, Varjo pivoted 180° at around week three. For what it’s worth, we did then set a very clear target for the next four years, and have been following that to the letter ever since.

  • Recommended book: Instead of book, I recommend Blinkist as a service. It has made me “read” much more variety of books and discover ones that I would not otherwise ventured to. Jogging is now as much for the mind as it is for the body.

  • How long did the round take to closeWe had two people, me and Timo Toikkanen, our COO working on the round. In total we spent 3 months and a few days on the round. So, I guess a little faster than typical four month rule. We didn’t devote our time fully, but perhaps around 50%.

  • How many firms did you speak with: I think our long list was around 30. Some only on the zoom, but almost half in person. We had overflow of strategics, but focus was of course finding neutral lead VC.

  • Comment on valuation after the round: 100-200m.

  • What capital will be used for: Less than a year. We are moving and growing as fast as we can while keeping everything in control. I experienced explosive growth twice at nokia and it was always catastrophic. At Varjo we grow at constant flow of people, not in bursts. Only way to keep quality and culture intact.

  • Seems as though the process of raising money isn’t efficient. Your thoughts: We made a schedule to the deck: four months from start to signing the deal. We split the time to introductions one month, short list deeper negotiations one month, DD 1onemonth and closing 1 month. Then we followed the model diligently. Lots of meetings in the first and second months, DD whiteroom well prepared ahead of time, with a few whitepapers written/updated on the third month and faster than expected closing. I don’t see any need for longer process than that.

  • Total amount raised to date: 46M.

  • Competitive landscape: We like to think that we are the only game in town. A true professional quality above the rest. Vive Pro is perhaps the closest in mindset, but we are around 20x the resolution. In AR side Hololens has a bit similar market strategy, but products are completely different, so not really competing, rather complementing.

  • Macro trends: I don’t know if macro trends count in such short time, but this is how I see the VR landscape: Next wave in VR is coming from companies taking VR into use in areas where business value is clear as day, like training, simulations and design. Where ability to work in virtual is cheaper and yields better results, faster. A bit the same way PCs originally landed in the businesses, solving real problems one at a time. This starts spreading so that in five years time the immersive computing is part of all our daily lives. True VR revolution is not from consumption but from creation. That is where Varjos focus is crystal clear.

  • Other details: Varjo is bringing first human eye resolution headset to the market at the end of the year. It’s a great enabler for not only businesses making use of it, but also for companies making the software tools of the future. Our headset is at the end game of VR resolution, so perfect device to use to target the future software. This is a journey of the entire computing industry and it’s incredible that Varjo is at the forefront of the revolution.