Bluebird Bio is a symbol, in a way, of the renaissance of gene therapy. The Cambridge, MA-based company raised $116 million in an IPO last year, and a number of startups pursuing gene therapy have cropped up since. So perhaps its no surprise that the field’s new entrant, AAVLife, comes from some of the same people that indirectly helped Bluebird get off the ground a few years ago.
Today, AAVLife is emerging from stealth with the help of a $12 million Series A round led by San Francisco, CA-based Versant Ventures and the Inserm Transfert Initiative, a venture arm of the French Institute of Health and Medical Research. The funds will help Paris and New York-based based AAVLife build on an animal study just published in Nature in which researchers used gene therapy to curb the cardiological dysfunction associated with Friedreich’s Ataxia, a rare, often fatal, genetic neuromuscular disorder that causes a progressive loss of motor function, among other things. AAVLife has been built to advance that work into clinical trials and hopes to get its first human study up and running in early- to mid-2015, according to CEO Amber Salzman.
To be clear, at this point, AAVLife isn’t trying to cure Friedreich’s outright—just the part of it that effects the heart. But Salzman says the biggest reason people with Friedreich’s end up dying young is heart failure from the damage that accompanies the neurological symptoms. So on one hand, reversing these effects would still leave Friedreich’s sufferers dealing with the neurological symptoms of their disease, which get progressively worse and can often leave patients in a wheelchair. On the other, these patients would theoretically get many more years, “possibly decades” of life, says Versant venture partner Thomas Woiwode.
“The thought from the patient groups and everyone involved has been, if we can make sure that [these patients] live and they don’t die of heart failure in their 20s, that’s a huge benefit. We didn’t want to slow down anything just because we couldn’t cure everything,” Salzman says. “But we are very rapidly looking at what’s the best way to approach getting to the other cells as well.”
AAVLife’s roots can be traced back to Bluebird (NASDAQ: BLUE). About 12 years ago, Salzman’s nephew and later her one-year-old son were diagnosed with x-linked adrenoleukodystrophy, a crippling genetic brain disorder. Salzman, then an R&D executive at GlaxoSmithKline, took action: she dove into research, helped form the Stop ALD Foundation, and began collaborating with pediatric neurology specialist Patrick Aubourg. The two began thinking about a gene therapy approach to treat the disorder, which is triggered by a specific genetic mutation.
Through her foundation, Salzman helped coordinate the backing to advance the concept, ultimately leading to a successful gene therapy procedure that Aubourg helped perform on two boys with ALD. The results of that study were published in Science, and Third Rock Ventures and Genzyme took that work forward in the form of Bluebird, now a publicly-traded company with a roughly $500 million market cap.
“When it comes to rare diseases, when you get a passionate and effective foundation behind it, it’s amazing what they can pull off,” she says.
Salzman and Aubourg kept working together over the next few years, even as Salzman took over a startup called Cardiokine and eventually sold it to Cornerstone Therapeutics in 2011. Aubourg was looking into treatments for other rare, neurodegenerative diseases—among them Friedreich’s. The disease is caused by a mutation to the FXN gene, which leads to low production of frataxin, a protein that helps mitochondria—the cell’s power plants—function normally.
Aubourg convinced Salzman to take a project on and form a company with him once she sold Cardiokine. With some pressing from the Friedreich’s Ataxia Research Alliance, Salzman decided to center the project around a therapy for Friedreich’s. She then helped bring together an international team of researchers and gene therapy experts to work on the project—among them Ronald Crystal of New York’s Weill Cornell Medical College and Helene Puccio of the University of Strasbourg in France. With the group in place, AAVLife officially formed in January.
Indeed, while AAVLife is a small startup at this point, it’s also an international effort. The company’s offices are in Paris, where it can tap into Inserm for R&D help, but it’s also leaning on Crystal in New York to … Next Page »Comments | Reprints | Share:
More cash is flowing into the online marketing business with Act-On Software hauling in a $42 million investment led by Technology Crossover Ventures and eying an initial public offering perhaps next year.
Based in Beaverton, OR, Act-On, a maker of marketing automation tools, is following what is becoming a well-worn path towards the public markets for software as a service (Saas) companies. These include competitors such as San Mateo, CA-based Marketo, which went public last May, and HubSpot, the Boston company advancing its IPO plans.
“We seem to be following a script of companies that are growing to plan,” says founder and CEO Raghu Raghavan. “You know, every 18 months or so we seem to go back to the capital markets and add to the war chest. And it’s relatively easy when the performance is there.”
The company has been on a predictable, fast-growth track for nearly three years, Raghavan says. Act-On says it has more than 2,000 customers, mostly small to mid-sized marketing teams—15 people is the sweet spot, Raghavan says—but some of which are within large businesses.
Act-On says it more than doubled revenue in 2013, though it declines to disclose baseline revenues. “That’s one of the advantages of being private,” Raghavan says, adding, “We look at the IPO as the next funding round and we would rather not be thinking about an IPO until we are of a size and a scale and a heft that makes us a long-term, viable public company.”
HubSpot, for example, says it grew revenue 50 percent in 2013 to $78 million. Seattle-based Moz pulled in $29 million, up 33 percent. Both companies pride themselves on transparency.
Meanwhile, many of their publicly traded peers are seeing enterprise value to revenue multiples—a way of valuing a company that compares its equity, debt, and cash on hand to its sales in a given period—in the high single and low double digits. That represents among “the most generous multiples of most sectors in the market,” notes Redpoint Ventures partner Tomasz Tunguz in a blog post last week parsing a correction in Saas company valuations.
Marketo, a publicly traded Act-On competitor, reported 2013 revenue of $95.9 million, up 64 percent. Its enterprise-value-to-revenue multiple was 11.5 on Monday after its stock closed at $30.75 a share, according to Yahoo! Finance. But the company had a net loss of $47.4 million in 2013.
Another example is Responsys, the online marketing company that Oracle acquired earlier this year for $1.5 billion (and that Raghavan co-founded in 1998). It reported revenue through the first nine months of 2013 of almost $150 million, up 26 percent from the comparable period in 2012.
Raghavan says the generous revenue multiples that public Saas marketing companies are enjoying are trickling down into private company valuations. “A few years ago, my [current] valuation would have been an IPO valuation,” he says.
He noted IBM’s acquisition of Silverpop, an Atlanta-based marketing automation company, for around $270 million, according to the Atlanta Business Chronicle.
“My pre-money valuation in this round is higher than that,” Raghavan says.
So what’s driving these valuations?
“I think in some sense you’re being rewarded for being in a big market,” he says, adding: “If you look at marketing, it is still a green field.”
Act-On counts at least 200,000 potential customers just in North America. Frequently, potential customers have no comparable technology, or they’ve cobbled together bits and pieces to carry out the marketing campaigns that Act-On’s offerings orchestrate over multiple online channels. These make for easy sales for Act-On and its competitors, provided they can reach the right customers with the right offering, the company says.
“If you don’t spend to grow, you’re just leaving an opportunity on the table,” Raghavan says.
Act-On intends to spend its new capital on increased sales and marketing, and on product development.
The funding round is more than double the $16 million Act-On raised in late summer 2012 and brings total investment in the company to $74 million.
Raghavan says Act-On was glad to land an investment from Technology Crossover Ventures (TCV), which has a history of holding stock in its portfolio companies through and past their public stock market debuts.
“This is a big round. The last thing you need is the company files to go public and all the existing investors bail out at the IPO,” he says. “You don’t want that….It makes the stock offering not as attractive.”
TCV general partner David Yuan is joining the Act-On board of directors.
Act-On has 260 employees at offices including its Beaverton headquarters, San Mateo and Roseville, CA; Spokane, WA; Phoenix, AZ; Redding, U.K.; and Bangalore, India. Raghavan says he expects the company to make 70 to 80 new hires this year.Comments | Reprints | Share:
The day that iPad users and Microsoft Office suite lovers have been waiting for has finally arrived. Now the fate of dozens of third-party applications like Prezi and SlideShark hang in the balance.
In a break with tradition, Microsoft CEO Satya Nadella announced the release of Office iPad on March 27. Under former CEO Steve Ballmer, Microsoft protected its Windows franchise by first launching software on its own operating system, though Ballmer did eventually make the decision to ship Office for the iPad. With this move, Microsoft has moved Windows beyond its own product domain, and expanded further into the tablet market.
Does this mean that Microsoft is no longer prioritizing its own operating system? Not likely, according to Tab Times contributor Don Reisinger. However, Nadella made it clear that he would like to focus on cloud and mobile capabilities for Windows in the future. Until he has time to dive into these objectives, Nadella is approaching iOS with a new outlook.
Before Ballmer stepped down as CEO, he hinted that Microsoft was already considering rolling out Office for Apple products. Word of this rumor broke in the fall of 2013. It’s taken almost six months for the idea to evolve into a reality, and there’s no telling how long Microsoft had been mulling over the concept. Now, the time has finally come to see Office and the iPad in action.
Contrary to much of the news that you hear coming out of Silicon Valley, it’s a bit premature to compose the eulogy for Office. More than 1 billion people around the world use Microsoft Office, most on a daily basis. As of 2011, approximately 100 million licenses 2010 have been sold, and Office generates nearly a third of Microsoft’s product revenue.
The fact of the matter is that today’s generation of enterprise leaders grew up with Office—it’s in their DNA. People crunch their numbers and tell their stories with Microsoft Office, and professionals at large corporations are going to be using Excel, Word, and PowerPoint until the day they retire. I understand them because enterprise leaders are my customers too.
Many people believe that Microsoft is late to … Next Page »Comments | Reprints | Share:
There’s a Boston-area travel tech company that you may have forgotten about, because it moved its management team to London a few years ago to focus on the European market. But no longer—the team is back, with a major new wad of cash.
SilverRail Technologies, based in Woburn, MA, has raised a $40 million Series C venture round led by Mithril Capital Management, the growth equity firm run by Peter Thiel and Ajay Royan. Previous investors, including Canaan Partners, Sutter Hill Ventures, and Brook Venture, also participated in the round.
It’s one of the biggest funding deals in Boston tech this year, and it brings SilverRail’s total amount raised to just over $73 million. But what’s more notable is what the company is building.
SilverRail got started in 2009, working to connect rail carriers like Amtrak (its first rail customer) to travel sellers through its online software platform. The idea was to be like a global distribution system for trains, the way companies like Amadeus and Sabre work for airlines. “In rail, none of that exists,” says SilverRail CFO James Harland. “We had to establish that from scratch.”
The company quickly focused on European rail systems—while Amtrak is a $2 billion annual market, the U.K. alone is a $16 billion rail market, Harland says. And European rail as a whole is about $80 billion.
In November, SilverRail acquired the travel-planning business of Jeppesen, a division of Boeing. That division’s technology powers more than three-quarters of all U.K. train-travel searches, according to SilverRail. Harland says that means now “we’re both the Sabre and the ITA Software piece.”
He’s referring to ITA, the Cambridge, MA-based airfare pricing and shopping company that was acquired by Google for $700 million in 2010. ITA built its business over many years by selling its software to airlines and online travel services, rather than consumers. SilverRail is hoping to follow a similar model.
“We try and do a deeper integration… for high-volume customers, rather than focus directly on consumers,” Harland says. In this way, he says, SilverRail is “more like ITA Software than Kayak.” (By contrast, most of SilverRail’s competitors, especially in Europe, tend to focus on consumers buying rail tickets.)
Could the startup’s outcome be similar to ITA as well? All Harland would say is that Google eventually owning this kind of technology “is a possibility for rail.”
In the meantime, SilverRail has grown to about 70 employees, split between Woburn, London, and a development office in Brisbane. Harland and founders Aaron Gowell (CEO) and Will Phillipson (chief product officer), among others, are based in Woburn. The company declined to share revenue growth numbers.
Harland says the focus of the next few years will be on solidifying its market in Europe and, interestingly, expanding to Asia. Japan is a $90 billion annual rail market, he says, and China, India, and Korea are all important places to be. “We’re at the conversation stage,” he says.
A primary selling point for SilverRail is that rail carriers are “really good at running trains, but they don’t do IT,” Harland says. That, plus deregulation in European long-distance rail service (which started in 2010), would seem to bode well for SilverRail. But of course it still faces big challenges as it grows.
At its Woburn office, the company is hiring in engineering and product development, Harland says—everything from Java developers to data scientists to user-interface experts. And that’s probably what this funding announcement is really about—trying to drive a new wave of recruiting.
“It’s been challenging being a quote-unquote ‘boring’ B2B technology company, to get attention and press,” Harland says. Especially being “based in the U.S., where people don’t really care about trains that much.”Comments | Reprints | Share:
[Corrected 4/14/14, 6:13 pm. See below.] Facebook is aiming to become a telco. Drones are the towers. Oculus are the phones. WhatsApp is the service.
Twenty-one billion dollars is cheap for a next-generation telco. There is more behind the WhatsApp and Oculus deals than the apparent need to bring teens and gamers under Facebook’s fold. Facebook and Google are in a heated race to become international telcos. Consider the value of a service with the potential to disrupt an aging international telecommunications industry worth well over a trillion dollars. Imagine the subscriber base of AT&T, Verizon, T-Mobile, and NTT DoCoMo combined. Under that lens, WhatsApp was a steal. So, how does one become a telco?
First you start with infrastructure: drones, fiber, and airships. Investment in infrastructure in one market can lead to an advantageous beachhead when entering larger related markets. Think, for example, about the humble origins of the telco MCI, which provided coast-to-coast relay stations for truckers using CB radios in the 1960s. Today MCI is part of Verizon, the largest mobile carrier in the U.S.
With Google’s balloon-based Project Loon and drone-based Titan Aerospace and Facebook’s acquisition of Ascenta, these Internet companies are targeting regions with the least competition—those without towers or with limited connectivity, such as developing nations and medium-sized cities—as test-beds for next generation technology. [The previous sentence had stated that Facebook acquired Titan.] What happens once these new technologies are perfected and become faster and cheaper than maintaining cable? Similar to Moore’s Law and silicon, we are witness to an exponential performance curve in wireless. Look at the relative speed in which Wi-Fi has progressed in the 2000s. Now imagine a mobile fleet of drones that could be retrofitted or replaced at the speed of a Formula 1 pit stop.
Think of that time when you walked behind a building or drove past part of a highway where the signal goes dead, or you are in the crowd at SXSW and there is just too much traffic for the telcos to handle. Usually, AT&T would drive in extra trucks with cellular towers on top in order to add a few more bars back to your phone’s signal, but that takes months of planning. Imagine a system of drones that could swarm over cities like vultures, reacting in real time and seeking out locations where phones are reporting low signals before customers even notice.
So where does Oculus VR fit in? Oculus Rift is the phone. Client hardware such as the Rift, Google Glass, and the Moto 360 is required to run a service. One utility for the Rift is for tele-presence, getting experts in areas where they can’t be at an instant. However, the acquisition of Oculus means more than people in masks … Next Page »Comments (1) | Reprints | Share:
We’ve got financing deals across business software, consumer products, cleantech, and transportation to report in this weekly collection of innovation tidbits:
—NetProspex, a provider of data software for marketing customers, has raised another $13 million. The Series C round was led by Spring Lake Equity Partners, and ups the company’s total fundraising to $27 million. Edison Ventures and other previous backers returned for the new round, Waltham-based NetProspex said in a press release.
—Lucidity Lights, a Cambridge-based developer of next-generation lightbulbs, has filed paperwork for a new $10.8 million equity financing. The company is headed by IdeaPaint founder John Goscha, but it’s staying under the radar—it doesn’t have a website, and a spokesman declined comment. One investor is New York-based New Legacy Capital. There’s some more detail in this Boston Globe story from 2012.
—Ubiquitous Energy, a Cambridge-based solar-energy materials startup, has filed SEC paperwork for a $5.2 million equity investment. The company, which has deep MIT ties, is developing coatings that it says could generate electricity from everyday surfaces, including windows. Much more detail in this story from Technology Review.
—GroupZOOM, a Cambridge-based startup that has previously tested group bus service for college students heading out on spring break, reports that it’s raised $3 million from various private investors. The announcement comes in a Boston Globe story profiling the company’s upcoming service, Bridj, which it says will attempt to create private bus service around Boston by coordinating riders via a smartphone app.Comments | Reprints | Share:
More handwringing from investors this week as the Nasdaq Biotechnology Index (NASDAQ: IBB) continued falling, and new entrants to the market had to lower their expectations to make a debut. It wasn’t all bad in biotech, however. This week’s roundup below.
—Amid a dismal week for biotech stocks, Cambridge, MA-based Agios Pharmaceuticals (NASDAQ: AGIO) was the sector’s big winner. Agios released its first human clinical data at the American Association of Cancer Research’s annual meeting, and while it’s a small, early sample size—Agios reported on just seven patients with acute myeloid leukemia taking its lead drug, AG-221—the results were enough to send the company’s shares up more than 36 percent. Agios immediately cashed in, announcing plans to raise up to $75 million through a stock offering.
—Alarm bells are always going off about the dearth of new antibiotics. Cambridge-based Spero Therapeutics, Atlas Venture’s new seedling startup, says it’s bringing a new approach to fight tough-to-kill bugs. Spero emerged from stealth this week with $3 million in backing from Atlas, SR One, and Partners Innovation Fund. Roche, the big Swiss drugmaker, has also got an option to acquire Spero’s lead program once the startup has all the data ready to submit an investigational new drug application with the FDA. I spoke with Spero president and Atlas Venture partner Ankit Mahadevia about the company’s plan to switch off bacteria, rather than kill them.
—Perhaps Cerulean Pharma (NASDAQ: CERU) simply picked the wrong week to go public. Or perhaps investors just weren’t willing to give its nanoparticle drug delivery technology another shot after it flunked a clinical trial last year. Either way, the Cambridge-based company had to cut its IPO price to $7 (from a projected $11 to $13 per share), and closed its first day of trading down another 2 percent, at $6.85 per share. Cerulean sold 8.5 million shares in the offering, instead of the 5 million originally projected. It will use the cash to push through ongoing clinical trials of CRLX-101, a cyclodextrin-based polymer linked to a chemotherapy drug, in kidney, rectal, and ovarian cancer.
—Multiple reports this past week from Forbes, FierceBiotech, OncLive, and others indicated that New York’s Memorial Sloan Kettering Cancer Center temporarily suspended a trial testing Seattle-based Juno Therapeutics’ prospective cancer therapy because two patients in the trial died. OncLive reported on Wednesday, however, that the trial is expected to be up and running again in the next 7 to 10 days. One of the study’s investigators told the publication that there’s no direct evidence that Juno’s treatment—which involves isolating T cells from a patient’s blood, re-engineering them into cancer killers, and infusing them back into the body—are to blame for the deaths, but that researchers are amending the trial to curb risk.
—Dublin and Waltham, MA-based Alkermes (NASDAQ: ALKS) reported positive top-line results from a Phase 3 trial of aripiprazole lauroxil, a long-acting injectable form of Bristol-Myers Squibb’s blockbuster schizophrenia drug aripiprazole (Abilify). Alkermes plans to file a new drug application with the FDA in the third quarter, setting up the company—traditionally known as using its drug delivery technology to boost drugs made by others in exchange for royalties—with a potentially big revenue stream of its own.
—Cambridge-based Mersana Therapeutics found its latest partner, inking a deal with Japan’s Takeda Pharmaceutical for its antibody-drug conjugate technology. Mersana didn’t reveal the numbers involved, but it’s getting an upfront payment from Takeda to tap into the ADC platform, and stands to receive milestones and royalty payments should potential drugs from the partnership progress. Mersana already has drug development deals in place with Teva Pharmaceuticals (NYSE: TEVA) and Endo Pharmaceuticals (NASDAQ: ENDP).
—Eleven-year-old cancer drug company Deciphera is moving from Lawrence, KS, to Boston led by a new president and CEO, Mike Taylor—last seen heading up Cambridge-based Ensemble Therapeutics. Deciphera also got a $6 million milestone payment from Eli Lilly (NYSE: LLY) for taking the experimental cancer drug it’s developing with the Indianapolis drugmaker into a Phase 1 clinical trial.
—New York-based Health tech accelerator Startup Health announced the 16 newest members of its Startup Health Academy, an entrepreneurship program designed to help shepherd companies through early development. Startup Health has put 63 nascent companies through its program. So far, three of them—most recently Basis Science—have been acquired.
—Roche agreed to snap up Marlborough, MA-based iQuum for $275 million up front, and potentially another $175 million in milestone payments. iQuum is a diagnostics startup with a “Laboratory in a tube” system, which the company says supposedly enables clinicians in hospitals to quickly perform molecular diagnostic tests—in 20 minutes to an hour— with little training.
—Undaunted by the FDA’s decision to reject multiple sclerosis drug alemtuzumab (Lemtrada) in December, Sanofi and its Cambridge-based Genzyme unit are heading back to U.S. regulators once again. Genzyme said this week that following “constructive” talks with the FDA, it has resubmitted another application for the drug to the agency. Alemtuzumab is already approved in 30 countries, but the FDA questioned the company’s trial design and cited certain potentially serious side effects when turning the drug away from the U.S. market last year.
—A few weeks after the FDA approved its hemophilia B treatment, Cambridge-based Biogen Idec (NASDAQ: BIIB) posted positive Phase 3 results testing its prospective long-lasting hemophilia A drug, Eloctate, in children under 12. Biogen is developing both drugs with the help of Stockholm-based Swedish Orphan Biovitrum.
—Basking Ridge, NJ-based Regado Biosciences (NASDAQ: RGDO) priced a secondary stock offering of 10 million shares at $6 apiece, raising $60 million. Regado shares plummeted about 18 percent in pre-market trading, having closed Thursday at $7.17 apiece. The company is funding a massive Phase 3 trial for a two-pronged anticoagulant to be used in coronary procedures.Comments | Reprints | Share:
Recently, the Houston Technology Center asked me to join a panel discussion on “The Future of Telemedicine” at NASA’s Johnson Space Center. I was a bit surprised as I’ve never thought of myself as being part of the telemedicine industry. My business partner, Bryan Haardt, and I last year co-founded Decisio Health to sell software that creates a patient dashboard designed to give care-givers increased situational awareness when treating patients. In developing our product and pitching investors over the past year, “telemedicine” is not a term either of us has used to describe Decisio.
But Tim Budzik, the managing director of the technology center’s JSC campus and event host, insisted that I and Decisio were a perfect fit for the discussion, which further confused me. It did start me thinking however, on just what is “telemedicine” and could my “hip” new startup be a telemedicine company?
For the panel, we were directed to discuss “the future of telemedicine,” which struck me as funny since, to me, the concept is something of the past. To me, telemedicine conjures up a vision of a video conference between a doctor in a stuffy corporate board room and a patient somewhere remote and inaccessible. The term “telemedicine” seems quaint and a touch archaic, like a technology from the ’90s and early 2000s that came and went, like the PDA or AOL. To prepare for the panel discussion, I tried to reconcile this picture in my head with the technologies I am now seeing being developed in what I tend to think of as healthcare IT.
We are now in a world where companies like 2nd.MD can put patients in contact with an expert physician in whatever particular disease they have and setup a consultation in a matter of minutes, on a cell phone, a tablet, or a laptop—all from the comfort of their home. At MD Anderson Cancer Center, an Oncology Expert Advisor is being developed using IBM’s super-computer Watson, which is sifting through millions of data points, in order to inform patients of exactly what their best treatment options are for their specific genotype of cancer. So where does telemedicine fit into this landscape?
I realized that all of these technologies derive, in part, from “telemedicine,” a catch-all moniker that served as the foundation for current innovations like our dashboard. In addition to the video-conferencing, practitioners and policy-makers were tackling issues that are relevant to our industry today. Questions like, How does reimbursement work when the patient and doctor never actually meet? What about liability, and how does the FDA fit into all this?
Some of these answers are still evolving, … Next Page »Comments | Reprints | Share:
Technology entrepreneurs and investors have long criticized non-competition agreements in Massachusetts, saying they stifle the ability of smart, ambitious people to create new companies and find better jobs.
But, for the most part, they’ve lacked a powerful political ally to push the cause.
That changed Thursday, when Gov. Deval Patrick said he would seek to have non-competition agreements outlawed in the state. In their place, he proposes a trade-secrets protection law that is already in place in 47 states and the District of Columbia.
The issue is just one piece of a wide-ranging economic development package from Patrick, who is at the tail end of his last term. But it’s quickly shedding light on a major rift in the Massachusetts business community, and the technology sector in particular.
By pushing to end non-competes, technology entrepreneurs and their financial backers are facing off against plenty of big companies and trade groups that have opposed similar efforts in the past. At the top of that list is data-storage giant EMC (NASDAQ:EMC), a supporter and enforcer of non-compete agreements whose $55 billion market capitalization makes it the most valuable technology company in Massachusetts by far.
As EMC general counsel Paul Dacier told The Boston Globe in response to Patrick’s proposal, “The legitimate business interests of companies in Massachusetts are well served by the longstanding case law that allows covenants not to compete.”
Non-competition agreements, which generally give a company the power to sue an employee who leaves to work for competitor, are regularly cited by entrepreneurs and venture capitalists as a brake on innovation in Massachusetts.
Supporters, however, argue that Massachusetts’ technology sector has managed to become one of the best in the country under the current rules, and that non-competes are essential to preventing unfair looting of important trade secrets by simply hiring away top workers.
But money is flowing freely in the tech sector, with a relatively active IPO market and companies like Facebook, Yahoo, and Google buying up smaller companies almost routinely, sometimes with gaudy pricetags attached. That’s intensified Massachusetts’ competition with New York, which has marshaled investment cash to help it boost a growing technology sector.
With that backdrop, some insiders say non-competes are clearly holding Massachusetts entrepreneurs back—in New York, non-competition clauses are generally difficult to enforce, while in California, where they are largely banned by law.
Bijan Sabet, a top Boston-area venture investor with Spark Capital, has invested in huge tech-industry names like Twitter, Tumblr, and Foursquare—none of which are based in Massachusetts. And while he does have some notable Boston-area investments such as RunKeeper, Sabet wrote Thursday that VCs will regularly pass on Massachusetts companies if there’s a risk of lawsuits over talent.
“Boston VCs have tremendous capital under management. Much more than NYC VCs,” he wrote. “Yet, we invest mostly out of this state. We see founders all the time that want funding but we aren’t prepared to deal with legal risk, so we pass on those opportunities.”
The early campaign against non-competes appears to have serious backing from the New England Venture Capital Association, which has set up a website to help entrepreneurs and tech enthusiasts send letters supporting a ban on non-competes to their local legislator.
The issue will be a test of the political savvy of up-and-comers in the Boston-area tech industry. Last year, small software companies and their supporters were largely clueless about a multimillion-dollar sales tax increase on their businesses until it was already signed into law. But they bombarded Beacon Hill with outraged reaction, and got legislators to repeal the tax hike in a stunningly quick turnaround.
State Sen. Will Brownsberger, who has led recent unsuccessful efforts to get rid of non-competes in the state, said Patrick’s support is a key moment that supporters of change shouldn’t waste. “The tech community and those who favor meaningful reform of non-competes need to take advantage of this opening,” Brownsberger said.
Brownsberger’s point about timing is spot-on because, although he didn’t say it, the truth is that Patrick is a lame-duck governor. Come January, there will be someone else in the governor’s office, and the former occupant’s priorities won’t mean much anymore.Comments (3) | Reprints | Share:
[Updated 4/10/14, 11:22 am] Apparently Wall Street wasn’t too keen on helping Cerulean Pharma get a second shot at proving its drug delivery technology.
According to IPO research firm Renaissance Capital, the Cambridge, MA-based company priced its IPO at $7 per share, far below the $11 to $13 per share range it had been hoping for. Cerulean will begin trading on the Nasdaq today under the ticker symbol “CERU.”
Cerulean had originally been looking to raise as much as roughly $75 million through the offering by selling 5 million shares. Instead it sold 8.5 million shares at the $7 price, and granted underwriters a 30-day option to purchase up to 1.275 million more, according to a press release. [Paragraph updated to include additional information from the release.]
Leerink Partners, Canaccord Genuity, JMP Securities, and Wedbush Securities are underwriting the offering. Prior to the IPO, Cerulean had raised over $80 million in equity financing its since its 2005 inception from investors like Polaris Partners (32.3 percent stake), Venrock (20.8 percent), Lilly Ventures (16.2 percent), Crown Ventures (10.9 percent), and Lux Capital (9.8 percent).
Cerulean was formed to commercialize a nanoparticle drug delivery technology developed at MIT and Caltech. The company has been using it to administer cancer drugs as a way to boost their effectiveness. Cerulean’s lead drug candidate, CRLX101, for instance, is a cyclodextrin-based polymer linked to camptothecin, a chemotherapy agent. That’s supposed to make it small enough to slip through leaky holes in the blood vessels that feed tumors and deliver a toxin over a sustained period of time, but too large to get into healthy tissues.
Cerulean’s first attempt to prove that approach worked, however, fell flat. The company designed a tough Phase 2b study in terminally ill lung cancer patients, trying to see if CRLX101 could help them live longer—a much more difficult goal than progression-free survival, which is how long a therapy prevents a tumor from spreading. The drug missed its goal in that study, which included 157 people, though Cerulean said at the time it demonstrated a “favorable safety profile.”
Cerulean turned to an IPO to finance a second shot, aiming to use the cash to move ahead with other ongoing clinical trials in kidney, ovarian, and rectal cancers. The cash was urgent too—Cerulean had just $5.5 million on hand at the end of 2013, according to its IPO prospectus.
Cerulean intends to start a Phase 2 trial later this year to test CRLX101 in tandem with Roche/Genentech’s bevacizumab (Avastin) in patients with kidney cancer. It’s already started a two-part mid-stage study testing the drug’s impact on ovarian cancer both as a monotherapy and in combination with bevacizumab, and is planning to start a Phase 2 trial of CRLX101, radiotherapy and capecitabine (Xeloda) in rectal cancer by the end of the year.Comments | Reprints | Share:
Agios Pharmaceuticals gave investors its first glimpse of encouraging, but early human clinical data a few days ago, and saw its shares soar as a result. Now, it’s looking to cash in.
Cambridge, MA-based Agios (NASDAQ: AGIO) wants to raise up to $75 million through a public stock offering, according to a regulatory filing. Agios had about $194 million in cash at the end of 2013, and is eyeing the extra dollars from the public markets to move its prospective cancer metabolism drugs—AG-221, AG-120, and AG-348—through their respective early-stage studies.
The offering comes during a week where Agios’ shares have climbed more than 36 percent. Its shares closed Wednesday at $48.42 apiece, the company’s highest closing price since debuting on the Nasdaq in July.
Investors have piled into the stock after Agios produced an interim look at its first clinical trial for AG-221, a potential treatment for cancers with the IDH2 mutation. Agios only has data from seven patients with acute myeloid leukemia so far, but six of them responded to AG-221, and three of them had no trace of cancer in their blood after 28 days of treatment. This is despite the fact that those patients only received the lowest two of four planned dosages of Agios’s drug.
There’s still much data to accrue, and it’s unclear at this point how durable each of these responses are—or if Agios will even get the same type of responses out of the next batch of patients. But the results were a promising sign for Agios’s approach of going after cellular metabolism targets. The data, for instance, had analysts talking up streamlined regulatory approval paths for AG-221.
“While patient numbers are small, there appears to be more than enough activity to support a potential accelerated approval strategy based on a single arm Phase 2 trial assuming even a 2-3 month duration of response,” wrote Leerink Partners analyst Howard Liang in a note to investors.
Summit, NJ-based Celgene (NASDAQ: CELG) holds worldwide rights to AG-221 as part of the partnership it struck with Agios in 2009. About 10 to 15 percent of patients with AML, a fast-moving type of blood cancer, have the IDH2 mutation. AML patients are typically treated with chemotherapy, and often wind up needing bone marrow transplants.
You can read my wrap on the AG-221 study results here.Comments | Reprints | Share:
Venture capitalists saw the public markets awaken in the first quarter, and they’re betting the trend will continue.
A new report from New York-based venture capital research firm CB Insights counts 35 venture-backed IPOs through the end of March, more than any single quarter since the fall of 2000. Mergers and acquisitions were also strong, with 174 deals tallied in the first quarter.
In response, investors have been pouring money into the next wave of mature companies that might make for a strong payout.
Venture investments in the first quarter were just short of $10 billion, the highest level for VC funding since the second quarter of 2001, CB Insights reports.
Overall, Series D and later financings represented a whopping 47 percent of all the U.S. venture dollars raised last quarter, a much bigger share than we’ve seen for the past year at least.
The first quarter also saw more companies cross the threshold of raising money at a reported $1 billion or higher valuation, with 11 such deals reported. That equals the number of first-time billion-dollar valuations recorded by CB Insights all of last year.
“Yes, the market is frothy,” the firm said.
Things stayed pretty close to the script in regional competition for venture deals. California leads the way, of course, with New York and Massachusetts jockeying for the No. 2 position nationally.
Texas rose to a five-quarter high in CB’s report by capturing 6 percent of the venture dollars invested nationally last quarter. Washington state’s venture funding share, meanwhile, fell after an outperforming fourth quarter.
Space can be a frontier—in a non-Star Trek way.
Like gold miners of old, some technologists see opportunities for disruption and commercialization beyond our atmosphere. NASA’s annual International Space Apps Challenge, coming up this weekend, will be a chance for innovators around the world to spawn ideas that might boldly go amongst the stars.
The 48-hour hackathon brings together folks trying to create novel ways to meet objectives in five categories: robotics, asteroids, Earth observation, human spaceflight, and technology in space. The Space Apps Challenge will be held simultaneously in 100 cities on six continents this year, with its “main stage” hub in New York at the AlleyNYC coworking space. Other participating U.S. cities include Cambridge, MA; Round Rock, TX; San Francisco; and Seattle.
Mike Caprio, co-founder of Space Apps NYC, will shepherd the action at the New York main stage. Space Apps NYC is a collaboration between Startup Bus NYC, where Caprio is a community leader, and the New York Technology Council. The first Space Apps hackathon was held in 2012, Caprio says, in 40 locations worldwide. Last year, he says, upwards of 11,000 participants joined in around the world. This year he hopes to see 15,000 people involved across all the sites.
Teams who meet at weekend hackathons rarely follow through on their ideas, but sometimes something does stick. James Wanga and his teammates at Gotham Laboratories (Go Lab) are alumni of last year’s Space Apps Challenge. Wanga believes ideas that were just science fiction several years ago are becoming industrially viable now. The Go Lab crew is working on a way to use what they call “nano satellites” as relays for the Internet of things.
“We’re building a transceiver that will allow machines to have an inexpensive, ubiquitously available [data] connection,” he says. By using nano satellites in near-earth orbit to relay information between land-based machines instead of cell phone towers or Wi-Fi radio, he believes Go Lab can disrupt the global communications industry. For now the team is still working on a prototype, he says.
The technology has a ways to go before it launches into orbit, but the team has been eagerly keeping their eyes on the stars. The Go Lab team initially came together to work on a prototype for mapping asteroids. The night prior to the 2013 hackathon, Wanga posted the idea online about using a drone to mimic zero gravity and simulate a spaceship surveying the surface of an asteroid. His post got the attention of his future teammates.
His team’s plan at the hackathon was to equip a drone with sonar to map the walls of rooms. “We wanted to show you could use small inexpensive spacecraft to map the surface of an asteroid,” Wanga says. In actual use, he says, such a drone would need technology other than sonar to function in space. That could be a camera that turns images into data, for example.
The team ended up winning the best hardware prize, Wanga says. Though he thought little would come from the Space Apps Challenge, the team promised to refine the idea. Soon that idea would gain traction.
NASA has been working on the Asteroid Initiative, Wanga says, an attempt to visit, capture, and retrieve a small near-earth asteroid. The space agency wanted to hear more about the team’s idea, which eventually led to a proposal on how to proceed in the real world. While working out the logistics of sending a robotic drone to an asteroid, the Go Lab team started looking at micro ion thrusters to move the device through the solar system. Ion thrusters are sort of electric propulsion used in some satellites.
As the team worked on how to maneuver the drone in space, Wanga says more opportunities emerged. “We thought we may have a scalable business on our hands,” he says, “if we’ve discovered a way to build small spacecraft for orders of magnitude cheaper than is typically done.”
The business plan evolved further, he says, as the team worked on its technology. Wanga says they considers different uses for cameras mounted on the tiny nano satellites, capturing real-time images of the Earth from anywhere in the world. “That has huge ramifications for people in environmental sciences, disaster response, agriculture, and traffic management,” he says.
Along with those possible applications came a bit of a dilemma. “We were going to … Next Page »Comments | Reprints | Share:
Just a few weeks ago, Facebook’s surprise $2 billion purchase of virtual reality headset developer Oculus riled up some of the startup’s earliest financial backers, who said they got a raw deal while the founders got rich.
We’re talking about pre-order backers on Kickstarter here, not investors. But if new equity crowdfunding rules had been in place, those early Oculus supporters might be singing a different tune right now.
Unfortunately, the crowdfunding envisioned by the federal JOBS Act that Congress passed over two years ago is still not a reality. However, thanks to advocates and enthusiasts, state-level equity crowdfunding is popping up all over.
The trend has strong ties to Washington, where in 2013, state Rep. Cyrus Habib introduced what may have been the first state-level equity crowdfunding bill in the nation. As an attorney who specializes in early stage companies, I’ve also been paying attention to this issue for some time—I actually might have written the first blog post advocating state-level equity crowdfunding, complete with a proposed statute, in 2012.
First, Wisconsin passed a bill. Then Michigan. And now Washington. A half a dozen other states are also considering legislation, providing enough legislative momentum to fuel a dedicated website that tracks the various proposals. (Lawyer Alixe Cormick has also written a really nice summary of the current state of play.)
So why are these laws popping up at the state level?
First and foremost, states are vying to become tech hubs, and legislators want to support startups and entrepreneurial efforts in their backyard. Legislators are carefully tracking where the investment dollars from venture capitalists and angel investors are being deployed, and are trying to attract those funds and businesses that attract those funds.
The preamble to the Washington bill does a nice job of summarizing what state legislators are trying to do:
“The legislature finds that start-up companies play a critical role in creating new jobs and revenues. Crowdfunding, or raising money through small contributions from a large number of investors, allows smaller enterprises to access the capital they need to get new businesses off the ground.
The legislature further finds that the costs of state securities registration often outweigh the benefits to Washington start-ups seeking to make small securities offerings and that the use of crowdfunding for business financing in Washington is significantly restricted by state securities laws.
Helping new businesses access equity crowdfunding within certain boundaries will democratize venture capital and facilitate investment by Washington residents in Washington start-ups while protecting consumers and investors. For these reasons, the legislature intends to provide Washington businesses and investors the opportunity to benefit from equity crowdfunding.”
Second, there is widespread disappointment over the federal law, for which the SEC still has not finalized the rules putting it into practice. Venture capitalist Fred Wilson aptly described the frustration: “Two years later, it’s as hard as ever to raise equity capital and if you aren’t rich (accredited or qualified investor status), you can’t legally participate in the world of startup investing.”
But even when we finally get federal equity crowdfunding, the federal law is not going to work—it’s too complex and too expensive. There are estimates that to raise $1 million under the federal law, companies are going to have to spend something on the order of $250,000 in intermediary (broker-dealers or registered portals), lawyer, and accounting fees. This simply won’t work for the vast majority of companies. It certainly won’t work for brand-new or naked startups.
Perhaps the federal law’s worst defect is that it forces companies to use third-party intermediaries. The SEC estimates that third-party intermediary fees will cost companies about 8-10 percent of gross offering proceeds. But startups don’t typically use third parties to raise funds, so I’m not sure why Congress wanted to force startups into the arms of intermediaries.
It’s possible that state laws won’t fall into the same trap. Washington’s bill does not require the use of an intermediary or a portal.
Why should you care? If you are a state legislator or a crowdfunding advocate, and you want to know how to make a great state equity crowdfunding law, I would recommend the one we wrote in Washington.
I believe that what we put together here will actually work for startups for several reasons. For one, it won’t be ridiculously expensive—companies will be able to start the crowdfunding process just like they do now in all accredited investor offerings under federal Rule 506. Meaning, with a little lawyer help, they will be able to get out to market to see if they can actually succeed in raising money.
So much of the trouble with various other securities law exemptions is the investment of tens of thousands of dollars in legal and accounting fees before a company even knows if it has a deal it can sell. That’s a big contrast to one of the wonderful attributes of Kickstarter and similar non-equity crowdfunding platforms: the ability to test the market. Are you proposing to build something people will actually buy? If not, it is good to know before you spend a bunch of money building it!
I believe equity crowdfunding can help transform business climates around the country. I also believe that if we continue to work on our federal legislators, perhaps they can fix the JOBS Act. But in the meantime, we can work on creating state-level equity crowdfunding laws that do the job better.
Here’s my quick checklist of what makes up a great state equity crowdfunding bill:
—Do not require startups to use a third-party intermediary. Allow companies to raise funds the way they raise money right now. Again, right now, founders go it alone. They do it themselves. They don’t hire brokers or finders.
—Do not require audited or reviewed financial statements. Startups won’t have these and won’t be able to afford them; if you require them the bill won’t work for startups.
—Require disclosure that companies can hack through without teams of accountants and lawyers and spending thousands of dollars.
—Do not impose novel or new theories of liability of directors and officers (like the federal bill did).
To prevent fraud, state laws should also require an advance filing and approval with the state regulatory agency, preclude bad actors from participating, and require companies to make ongoing disclosures to both investors and the state regulatory agency.
To make sure that people know the risks, these laws also should make sure that investors sign a statement acknowledging they know they are likely to lose their money. The Washington statute does that, and says the disclosure must be conspicuously presented at the time of sale on its own, separate page.
Will people lose their money? Sure. There are going to be companies that don’t work out. But there are also going to be success stories. It will be great for startups and founders, giving them an avenue to capital that doesn’t exist now. And people want the ability to participate, even in this risky area.Comments (2) | Reprints | Share:
If you want to check out a few fitness-tracking gadgets, the Boston headquarters of RunKeeper is a fine place to start. Scattered here and there in the bustling startup office, you’ll find piles of the smartwatches, sleep monitors, and motion-sensing wristbands that typify the recent surge in connected wearable devices.
As a software company that helps people monitor their fitness, it’s natural for RunKeeper to study the next wave of personal electronics that can collect data for its users. RunKeeper also integrates with many of those new devices, including products from Fitbit, Jawbone, and Withings.
But after a lot of research and monitoring, RunKeeper CEO Jason Jacobs is pretty sure of one thing: most of the standalone, limited-purpose fitness trackers out there probably won’t make a big dent in the consumer market.
The reason, he says, is simple—the smartphone is just as good, and already in millions of people’s hands.
“That whole category’s on a path to commoditization,” Jacobs says. “Meanwhile, they’re not just duking it out with each other—they’re duking it out with the phone. And ultimately, the phone is going to win.”
A recent survey by analysts at Cambridge, MA-based Endeavour Partners backs up that verdict. The research firm’s survey of thousands of Americans found that some 10 percent of consumers owned an “activity tracker” like those offered by Fitbit, Nike, Jawbone, Misfit Wearables, and others.
But “the dirty secret of wearables,” Endeavour wrote, was that they’re not very sticky with users—more than half of survey subjects who owned one of those activity trackers had abandoned the thing entirely, with a third of them ditching it within just six months.
“It’s not enough to sync with, link to, or work alongside one of the current devices on the market, or to partner with one of the many startups to design an even better device. Designing a strategy to ensure sustained engagement is the key to long-term success,” Endeavour reported.
There are some major investors who would presumably disagree with the notion that personal activity trackers are destined for the discount bin. Fitbit raised $43 million from venture investors last summer, and Jawbone (which also makes music-focused electronics) banked a reported $250 million investment in February. Major companies like Nike and Samsung also have put significant effort into fitness-tracking wearables.
But Jacobs thinks those particular types of wearable devices—aimed mainly at tracking ambient, ongoing physical activity and giving their owners data about their daily movements—are just too duplicative of the smartphones that millions of consumers already carry.
He points to the wrist-mounted GPS band, which was really the best way for runners to monitor their distance before smartphones became ubiquitous, and are still used by some dedicated athletes.
“It isn’t that the Garmins of the world went away. But the smartphones were really the vessel that took activity tracking to the masses,” Jacobs says. “Phones and general wearables are just poised to do the same thing on the passive side as they did on the active side five years ago.”
Of course, Jacobs has a deep investment in the idea that the smartphone will be the platform of choice for metric-obsessed athletes. The RunKeeper app, which launched in 2008 from parent company FitnessKeeper, has about 30 million users for its activity-tracking smartphone apps. The startup’s argument has always been that the smartphone is the right device for fitness tracking, since you always have it with you. If it’s not in a pocket, then it’s tucked into an armband, where you’re probably using it to listen to tunes as you run.
The company doesn’t say how many of its users check in with its apps on a monthly or daily basis. But it points out that going out for a run is a much bigger commitment than playing another game of Candy Crush.
Jacobs also says RunKeeper is looking for ways of serving its users more often throughout the day, possibly incorporating contextual clues about the user’s schedule, the weather nearby, or what they might want to eat for lunch.
The possibilities for those kinds of regular reminders get more intriguing as smartphones get, well, smarter. For example: the newest incarnation of the iPhone includes a new type of processor that can collect motion, speed, and location data at any time—something previous versions of the phone didn’t do because of battery drain.
New kinds of accessories that extend and build on the smartphone—basically serving as a second screen for its applications—also play into Jacobs’s theory that limited-use physical trackers will remain a niche product. That means smartwatches, like the RunKeeper-integrated Pebble and Apple’s often-rumored iWatch, and field-of-vision wearables, like Google Glass.
“It’s not that the Fitbits and Jawbones will go away. But for more and more people, the smartphones and general wearables will be good enough,” Jacobs says. “If the intelligence is in the phone and the sensors are in the phone, conceivably, you don’t even have to interact with the phone itself. You can interact with something that’s on your wrist or in your glasses.”Comments | Reprints | Share:
There seems to be a new scare every week in the world of antibiotics, because bacteria have the frustrating habit of evolving and becoming immune to current treatments. Atlas Venture’s latest seedling startup, Spero Therapeutics, believes it has a new type of answer for those tough-to-kill bugs—one that’s caught the attention, and potential dollars, of Roche.
Cambridge, MA-based Spero is emerging from stealth today and is announcing it’s given Roche the option to acquire its lead program—a preclinical antibiotic that inhibits an unspecified target—at a prenegotiated price once the startup is ready to file an investigational new drug application with the FDA. Spero didn’t say how much that deal would net the company, but Roche is bankrolling its R&D costs in exchange for its exclusive buyout option, and would pay Spero an unspecified upfront payment and milestones if the buyer chooses to use it.
Spero was seeded by Atlas and the Partners Innovation Fund in April 2013, with Ankit Mahadevia, a venture partner at Atlas, taking on the head seat as acting president. Atlas, Partners Innovation Fund, and SR One (the VC arm of GlaxoSmithKline) then teamed up to provide the company with $3 million in Series A funding. Atlas’s Jean-Francois Formela, SR One’s Vikas Goyal, Partners Innovation Fund’s Reza Halse, and Achillion Pharmaceuticals CEO Milind Deshpande joined the board.
“We would’ve raised a lot more, but the Roche upfront really helps defray that budget quite a bit,” Mahadevia says.
It’s rare to see an antibiotics biotech startup these days, for a multitude of reasons. Mahadevia points, for example, to a historical lack of clarity around the the standards antibiotics must meet to gain FDA approval. Antibiotics also just don’t get the same type of pricing power that life-saving drugs for other diseases do. So much of the industry’s resources have shifted elsewhere—to drugs for treating cancer and cardiovascular disease, for example.
But Mahadevia says a few things are changing. First, the unmet need in antibiotics keeps getting “worse and worse.” The Centers for Disease Control said recently that 2 million Americans each year suffer from drug-resistant bacterial infections and more than 23,000 of them die. Second, in 2012, the U.S. Congress passed the Generating Antibiotic Incentives Now (GAIN) Act, an initiative to spur antibiotic R&D by offering an additional five years of market exclusivity and potentially shorter timelines to approval.
Pharma companies like Roche—which abandoned anti-infectives research more than a decade ago—have started making their way back to the table as a result. The Swiss pharma giant has cut deals with Cambridge, UK-based Discuva and Switzerland’s Polyphor in the past six months alone, and is now adding Spero to its list of partners.
“The halo effect of the GAIN Act has really gotten people excited again,” Mahadevia says. “I think it’s a good time to be back in.”
Time will tell if that’s true, of course, but at the very least, antibiotic startups are familiar territory for Atlas. The firm was an investor in Novexel, a privately held Paris-based startup that sold itself to AstraZeneca for up to $505 million in late 2009, generating a “nice outcome,” according to Mahadevia (it’s unclear how much Atlas put into Novexel).
With that, and the shifting industry factors in mind, Atlas decided to jump back into antibiotics once again. The firm homed in on work being done by … Next Page »Comments | Reprints | Share:
Silicon Valley is one of the most dynamic engines of capitalism the world has ever seen.
For decades, technology providers focused on creating cutting-edge hardware and software designed to optimize efficiency, productivity, and data-based knowledge for large corporations. But today, many technology innovators are also working hard to level the playing field by providing individual consumers with technology platforms, online information, and decision-making support.
This move to empower individuals is not a result of the Occupy Wall Street movement; nor does it signify conflict between producer and consumer classes. Indeed, it validates Adam Smith’s theory that competitive economic individualism (which critics called “capitalism”) yields positive benefits for society, chiefly through promoting innovation and cutting costs for consumers.
Yet it also represents an acknowledgement on the part of the technology industry that increased transparency and trust, better service, and improved efficiency for consumers are essential for long-term Internet growth and general economic prosperity. This is especially important at a time when citizens are so skeptical about big business and government institutions in general, and it’s particularly topical in the wake of the financial crisis of 2008 and the recent Edward Snowden episode.
The full scope and span of the emerging “People’s Web” becomes evident when you look at some of the start-ups and growth companies that are currently flourishing and being funded. These entities can be clustered into four main groups: Transparency Enforcers; Industry Watchdogs; Cartel Busters; and Enterprise Liberators.
The groups represent four trends in the technology sector that are related, mutually reinforcing, and worth understanding as an investor. At Blumberg Capital, we have recognized and embraced these trends as a way of identifying disruptive innovations that can build large new businesses and yield outstanding investment returns.
Many investors have acknowledged the benefits of the SaaS model vs. the traditional enterprise sales model, but we think it is also worthwhile to highlight companies that are bypassing historic distributors and bottlenecks in order to reach individuals directly via social, mobile or freemium platforms. It’s worthwhile, as well, to focus on companies that are using crowdsourcing, big data aggregation, API feeds, sensor networks and algorithmic engines to deliver new and improved services—a combination that was unfeasible only a few years ago.
The rise of the individual as technology consumer and beneficiary is all the more important as emerging economies around the world boost hundreds of millions of people into the middle class. These upwardly mobile individuals are powerful, because they’re eager to pursue their economic choices across the global marketplace.
Now that I’ve laid out a basic investing thesis and rationale, let’s look at some examples and illustrations that will add dimension to my views.
Each company in this group helps protect people by making sure that they’re dealing in an authentic and transparent digital environment. Examples in this category include Quora, which brings transparency and credibility to online Q&A forums by adding social profiles, and TRUSTe, which certifies Web sites regarding data privacy policies and compliance.
In a related segment, e-commerce merchants increasingly seek consumer feedback, because customers trust other customers. That said, there is a growing problem with fake online customer reviews. With a view to solving this problem, Blumberg Capital invested in YotPo, which automatically solicits and verifies reviews from customers (with transparent social profiles), ranks them by credibility, and shares them across search engines and social networks. Another of our investments in in this category is Trulioo, which improves transparency and protects consumers by authenticating real users and denying fraudsters in real time by validating social profile information.
This group helps protect people by shining a light on hidden cost structures, opaque business practices, or arcane processes. Familiar brands in this segment include traditional not-for-profit organizations such as the Council of Better Business Bureaus and Consumer Reports. More recently, technology companies are harnessing crowdsourcing and comparison analysis to reduce information asymmetry between seller and buyer. For instance, FeeX, an early-stage company in our portfolio that calls itself “The Robin Hood of Fees,” aggregates and analyzes objective, crowdsourced data to reveal … Next Page »Comments (1) | Reprints | Share:
The U.S. saw slightly fewer businesses created last year, but there’s a silver lining: the poorer numbers nationwide likely indicate that a stronger job market relieved some of the pressure on people to start companies out of necessity.
That’s among the takeaways from the latest Kauffman Index of Entrepreneurial Activity, an annual study from the Kauffman Foundation.
An average of 0.28 percent of adults nationwide, or 280 per 100,000, started new businesses each month in 2013. That was down from 300 per 100,000 adults nationwide, or 0.3 percent, the previous year. The 2013 entrepreneurial rate is a return to the pre-recessionary level of 2006, which is more in line with historic rates, the study says.
The Kauffman study also found that 78.2 percent of new entrepreneurs last year had not recently been fired from a job, 4 percentage points higher than at the end of the recession in 2009. While it’s not a flawless link, the study says this measure can suggest that the overall jobs market is improving and forcing fewer people to take the entrepreneurial leap.
Entrepreneurship rates decreased across all U.S. regions last year, with the highest entrepreneurial activity in the West and the lowest in the Midwest. (It’s important to note that the study looks at manufacturing, construction, trade, services, and “other” industries—not just the high-growth tech companies often associated with entrepreneurship.)
Wisconsin’s entrepreneurship rate tied with Washington for 46th in the country, at 170 new entrepreneurs per 100,000 adults last year, or 0.17 percent. Wisconsin’s ranking improved from last year’s study, when it tied with Michigan for 48th place, but its entrepreneurial rate declined from 180 per 100,000 adults, or 0.18 percent, in 2012.
Wisconsin also saw one of the largest declines in entrepreneurial activity over the past decade, with a decrease of 0.08 percent. That’s despite plenty of talk by Wisconsin politicians about the importance of entrepreneurship, a surge in angel investment groups, and a flurry of new organizations and publicly funded initiatives aimed at fostering startups.
“The good news is you can’t fall out of a well,” joked Joe Kirgues, who co-founded the Wisconsin-based startup accelerator gener8tor in 2012. “From the venture perspective, we see promising signs of new growth in this state, but this is a fresh reminder that we have a very long way to go until we consider these efforts a success.”
He sees promise, however, in the “money for minnows” strategy by the state and venture capital communities, which means making small investments in a lot of early-stage companies. “Like a baseball farm system, it will take a few years to pay off, but the major league results should be there,” Kirgues said.
Ryan Murray, deputy secretary and chief operating officer of the Wisconsin Economic Development Corp., pointed out that the Kauffman study is “simply a snapshot of where things stand now based on a very limited set of federal data.” He emphasized the state-sponsored programs that have been enacted in recent years to … Next Page »Comments | Reprints | Share:
There’s been a lot of personnel movement in Boston-area venture firms lately. On Tuesday, Dan Primack at Fortune reported that Atlas Venture partner Fred Destin is leaving the firm and that Jon Karlen, formerly of Flybridge Capital Partners, is joining Atlas as a new partner on the tech side.
This is notable because Destin is one of the more popular VC figures among local tech entrepreneurs. And Atlas has built a reputation for focusing on New England companies at the seed-stage level.
In March, Karlen left Flybridge Capital Partners, where he had been for eight years, having led investments in companies such as Digital Lumens in connected devices, Open English in edtech, 33Across in adtech, and Zing Systems (acquired by Dell) in digital media. His official start date at Atlas is May 1.
But first things first. Karlen says he has “huge respect for the Flybridge team. It’s a great team, and they’ve done great work.” Flybridge is currently raising its fourth fund, reportedly targeting $125 million. Karlen says his role with his Flybridge companies—whether he’ll retain any board seats and so forth—remains to be determined. Flybridge had no comment on Karlen or the fundraising.
He brings expertise in online education and the software side of “Internet of things.” “The ways in which connected devices are powering our world, there’s so much room to go there,” Karlen says. “I’ll continue to look for massive disruption and innovation that’s software driven.”
As for Destin, the 10-year Atlas veteran told Fortune that it’s “gut-wrenching and heart-breaking to leave this firm and my portfolio companies,” but that he and his family wanted to return to their native Europe (sounds like either London or Paris). He also said he plans to stay in venture capital.
Destin (pictured) moved to Boston in 2010 and was an integral part of Atlas’s refocusing around its Boston-area office. He wrote a detailed blog post about the process last year. His portfolio companies include CustomMade, Kinvey, Lagoa, PillPack, Recorded Future, and Zoopla. Keep an eye on that last one: the U.K. real-estate site is looking to go public this summer. Destin’s most notable recent exit was Dailymotion, a French video site acquired by Orange for $168 million in 2013.
Atlas partner Jeff Fagnan understands where Destin is coming from, family-wise. “When we first talked about it, I was super bummed. But if the shoe were on the other foot, and I had gone to Europe,” Fagnan says, he would want to return to his roots, too.
It sounds like Karlen’s arrival and Destin’s departure are mostly independent events. It also sounds like, for all his popularity with Boston techies, Destin’s business network has remained rooted in Europe. “Jon may have actually more New England network and momentum,” Fagnan says.
Fagnan and his Atlas colleague Ryan Moore have known Karlen for 10 years and have been actively recruiting him for a year and a half, Fagnan says. “He brings a like-minded philosophy about service to entrepreneurs. He fits in perfectly.”
And Fagnan says Atlas is still looking to add another partner on the tech side, if the right person becomes available. “We’ll remain serendipitous and add the best talent to the team,” he says. (Atlas has four partners on the tech side—Fagnan, Moore, Karlen, and Chris Lynch—and three partners on the life sciences side.)
So what’s next for the firm, which raised a new $265 million fund in 2013?
“The next phase for us is really focusing on early stage in New England,” Fagnan says. He cites established portfolio companies like Bit9, Veracode, and DataXu—as well as newer startups like InsightSquared and DraftKings—as ones to watch.
“What we really need to do is move the portfolio along and drive some exits,” he says. A mantra at Atlas, he says, is “Let’s make Boston worth winning before we worry about winning Boston.”
As Fagnan puts it, “Boston’s got a little resurgence going, but it’s going to take some big successes.”Comments (1) | Reprints | Share:
For the past two years, Xconomy has held an invitation-only event in the heart of California wine country with a general focus on the economy, emerging technology, competitiveness, and jobs—and spanning the range of topics we cover, from information technology to life sciences, healthcare, energy, cybersecurity, food, and much more (read on). We convene some of the leading innovators in the country, and some of the best attendees, too—almost all of whom could easily take the stage themselves.
It’s my favorite event of the year—and Napa Summit 2014: The Xconomy Retreat on Technology, Jobs, and Growth is shaping up to be the best summit yet. I hope you can make it. Below are the details and how to request your invitation.
This year’s Napa Summit will take place on June 2 and 3. There’ll be a wine tasting and dinner at the amazing Silver Oak vineyard on the 2nd, with the event itself taking place the next day at the Villagio Inn and Spa. We’ll have plenary talks, chats, and interactive panels, along with three special focus sessions in design, food technology, and connected devices. And plenty of wine.
Our all-star lineup this year includes: Rick Wagoner, former CEO of General Motors; genomics pioneer Lee Hood; Electronic Arts founder Trip Hawkins; Mick Mountz, founder and CEO of Kiva Systems; Indiegogo co-founder Danae Ringelmann; Ric Fulop from North Bridge Venture Partners; TaskRabbit founder Leah Busque; cybersecurity expert Brian White of The Chertoff Group; former frog design executive creative director David Merkoski; and Minerva Project founder and CEO Ben Nelson. And that’s just to name a few.
You can find all the speakers so far and request your invitation here (read on for a few more details).
June 2: Silver Oak Vineyards
Registration and cocktail reception begins 5:30 PM
Vineyard tour and dinner commences at 6:30 PM
June 3: Villagio Inn & Spa
Program from 8:15 AM to 3:45 PM
We only have room for about 75 attendees at this invitation-only event. Early bird registration is $1,195 (you can apply for a discount if you’re from a government organization, non-profit, or startup, or you are a student), and includes wine reception, vineyard tour, and meals (lodging is separate).
Again, to request your invitation—and for more event information, including the full list of speakers to date—please visit our Napa Summit event listing here.
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