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East Coast Biotech Roundup: Raze, Retrophin, Alnylam, & More

Thu, 10/16/2014 - 12:02
Ben Fidler

After a one-week hiatus, the roundup is back, and we’ve got plenty of news to take your mind off of Ebola, the plunging stock market, and the now-defunct AbbVie-Shire megamerger. Let’s get right to it:

—A month after leaving Epizyme for a return to the venture capital world, Jason Rhodes took the helm of a new startup, Cambridge, MA-based Raze Therapeutics, which emerged from stealth this past week with a $24 million Series A round from a group of VC and pharma backers. Raze aims to be a platform oncology company, based on insights from the Whitehead Institute, Massachusetts General Hospital, and Princeton University into a newly discovered set of biological pathways that appear to be a key driver of tumor growth. I spoke with Rhodes—now a partner at Atlas Venture—about the startup, which is similar, in many ways, to the one he just left.

—Last week, we hosted a biotech event, “Boston’s Life Science Disruptors,” giving people a behind-the-scenes look at how three local companies—Zafgen (NASDAQ: ZFGN), Epizyme (NASDAQ: EPZM), and Sage Therapeutics (NASDAQ: SAGE)—made their way from inception to successful biotech IPO. In case you missed it, here’s my wrap-up of the proceedings, including six takeaways from the founder-investor groups taking the stage that night.

—Watertown, MA-based Selecta Biosciences raised $20 million in new equity financing this week to advance its plan to use nanoparticle technology to help tamp down the unwanted immune reactions caused by some biologic drugs. The first test for that approach is a gout drug candidate Selecta is imbuing with its technology and putting into its first clinical trial next year. Existing investors (Polaris Partners, Flagship Ventures, OrbiMed Advisors, NanoDimension, Rusnano, and Leukon Investments) and some new backers (I2BF, Eminent Venture Capital, and one other undisclosed investor) provided the cash. The clinical push is part of a gradual strategic shift for Selecta; I discussed that strategy with CEO Werner Cautreels.

—Cambridge-based Moderna Therapeutics announced a long-term collaboration with the Karolinska Institutet and Karolinska University Hospital. Through the deal, Moderna—which has raised more than $400 million through various partnerships and venture financings—will sponsor research grants for scientists at both institutions to do preclinical work on potential messenger RNA (mRNA) therapies. Moderna will then run clinical trials on those candidates at a lab it’s building in Stockholm, Sweden, should the drugs pass through the preclinical phase. The deal is Moderna’s first academic partnership.

—Shares of Cambridge-based Alnylam Pharmaceuticals (NASDAQ: ALNY) rocketed almost 20 percent on Monday after it posted positive results from a Phase 2 extension study of its experimental RNA drug, patisiran, in patients with a rare nerve-damaging disease called familial amyloidotic polyneuropathy, or FAP. The study showed that Alnylam’s drug helped keep the nerve damage of a small number of FAP patients in check after six months of treatment. (Historical data suggests the nerve damage gets progressively worse in untreated patients, as defined by a statistical measure of their nerve damage called “modified Neuropathy Impairment Score,” or mNIS +7.) Alnylam also reported the drug was still safe and well-tolerated, and that it continued to reduce the level of the disease-causing protein (TTR) that builds up in patients’ blood. A statistically significant improvement in mNIS +7 is the primary goal of Alnylam’s ongoing Phase 3 trial for patisiran—the company’s most advanced drug prospect.

—The messy divorce between New York-based Retrophin (NASDAQ: RTRX) and founding CEO Martin Shkreli concluded this past week. The company announced Shkreli’s resignation from its board of directors, and a deal to sell some of its non-core assets—an oxytocin nasal spray, mecamylamine HCl (Vecamyl), and ketamine—to Shkreli’s new startup, Turing Pharmaceuticals. (Retrophin acquired oxytocin and Vecamyl in two separate acquisitions Shkreli engineered.) Retrophin’s chief operating officer, Stephen Aselage, was named interim CEO of Retrophin on Sept. 30, ousting Shkreli—reportedly a result of missed development deadlines and a host of other reasons you can read about in TheStreet.com. The company is now focusing on the development of its candidates for a rare kidney disorder called focal segmental glomeruloscerosis (FSGS) and pantothenate kinase-associated neurodegeneration (PKAN), a life-threatening neurological disorder.

—Cambridge-based Bluebird Bio (NASDAQ: BLUE) this week dosed the first patient in the sickle cell disease trial it’s running for gene therapy prospect, Lenti-Globin, in France. The company has also opened up a U.S. sickle cell study and aims to treat up to eight patients with the disorder.

—New York-based Bristol-Myers Squibb is putting another combination study together for its PD-1 checkpoint inhibitor, nivolumab (Opdivo). It’s working with Pharmacyclics (NASDAQ: PCYC) and Johnson & Johnson to test nivolumab in combination with their drug, ibrutinib (Imbruvica), in a variety of blood cancers.

—Cambridge-based Infinity Pharmaceuticals (NASDAQ: INFI) reported that its lead drug candidate, PI3 kinase inhibitor duvelisib, failed a Phase 2 study in allergic asthma. Infinity reported that the drug was well-tolerated and hit various “secondary and exploratory” endpoints, but didn’t produce a statistically significant improvement in patients’ lung function. Duvelisib is part of a big partnership with AbbVie; the two companies are testing the drug in a variety of blood cancers, though Infinity is also evaluating the drug in a mid-stage study for rheumatoid arthritis.

—Cambridge-based Ironwood Pharmaceuticals (NASDAQ: IRWD) began a Phase 2 study testing its drug linaclotide (Linzess) in patients with opioid-induced constipation. Ironwood aims to report data from the roughly 240-patient study in the second half of 2015. The FDA approved linaclotide as a treatment for chronic constipation and irritable bowel syndrome with constipation in August 2012.

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Coalition Aims to Fortify MA Robotics Cluster, Turn Town into Test Bed

Thu, 10/16/2014 - 11:13
Martin LaMonica

Massachusetts wants your robots. Local companies and universities are organizing an “innovation hub” that includes a startup incubator, educational programs, and potentially a whole town to test self-driving cars and drone package delivery in real-world conditions.

Central to the effort is MassRobotics, a non-profit designed to grow the robotics industry by fostering collaboration between academia, startups, investors, government, and established companies, say people involved in the organization.

Plans call for an incubator in the Alewife area of Cambridge where startups will get access to shared office services as well as equipment such 3-D printers for quickly making prototypes, says Tom Hopcroft, the CEO of the Mass Technology Leadership Council (Mass TLC). Healthcare company Vecna, which has offices at Alewife and makes delivery robots for hospitals, and Draper Labs are taking the lead on establishing the incubator.

In addition to providing workspace for startups, the incubator will be an academic lab, a community maker space, and provide education to children and adults, according to Mass TLC. “It’s a very ambitious set of things we want to pull together,” says Hopcroft. “But if you think about the ecosystem, I don’t think anybody in the world has 35 research and development labs in one area—the R&D capability here is immense.”

Another part of the puzzle is the New England Robotics Validation and Experimentation (NERVE) center at the University of Massachusetts in Lowell, which provides facilities to test the mobility of ground robots in different terrains, such as climbing steep ramps or driving through sand. The state also has facilities to test air and water robotic vehicles.

In a separate initiative, organizers are hoping to make the town of Devens, MA, into a test bed for robotic devices. The town was once a military base but now is under state control, which simplifies permitting, Hopcroft said. It also has a wide range of facilities, such as an airstrip, and different environments, including woods and a town.

“If you want to start testing drone delivery and whether that operates well with an autonomous fire truck and mail delivery so they’re not crashing into each other, you need to test that in real environment,” Hopcroft said.

At a reception for robotics professionals at the Nerve center in Lowell earlier this week, the people I spoke to about MassRobotics said that the state has good resources, but needs more concerted efforts to reap the economic benefits from emerging robotic technologies. In a statement about MassRobotics, Vecna notes that some talent from the state has been lost to the west coast.

Marlborough, MA-based ReWalk, which makes an exoskeleton to help disabled people walk, came to the Boston area from Israel because of the local talent and because the state effectively supported his plans to move here, says CEO Larry Jasinski. He intends to use the testing center at Lowell. “It’s easier than building the testing ourselves which is what we did last time,” he said.

The planned funding model for MassRobotics is through corporations, which would pay fees or provide infrastructure, such as office space. An official announcement of MassRobotics is expected in a few weeks.

The idea for MassRobotics came about when Rodney Brooks, the founder of Rethink Robotics, was visiting Vecna CTO Daniel Theobald. Brooks looked at facilities and suggested they’d make a good incubator space, says Theobald, who has been one of the leaders in the effort.

Theobald sees the creation of a robotics hub in Massachusetts as critical to not just the local economy but the world. “The future of the world economy will ride on the backs of robots,” he says. “Bringing together and applying robotics to help move the human race forward rather than backward is hugely important.”

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Boston Tech Tidbits: Digital Guardian, MassChallenge, Nara, Quantopian

Thu, 10/16/2014 - 09:32
Gregory T. Huang

Lots going on in the Boston tech startup scene this week:

—Accelerator program MassChallenge announced its top 26 startups that are competing for prize money. The awards ceremony is Oct. 29, and Uber CEO Travis Kalanick is keynoting.

Nara Logics has raised $6 million more from .406 Ventures and other investors. The Cambridge, MA, startup, which has raised $13 million to date, has built a restaurant and hotel recommendation tool and also personalization software to help businesses understand their customers.

—Algorithmic trading startup Quantopian has pulled in a $15 million Series B round led by Bessemer Venture Partners.

Digital Guardian (formerly known as Verdasys) has acquired Silicon Valley-based Armor5, a mobile and cloud security software provider. Terms of the deal weren’t disclosed. Digital Guardian is led by CEO Ken Levine, who previously led NitroSecurity, which was bought by McAfee in 2011.

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Joint Harvard-MIT Events to Showcase Innovation Across Energy Spectrum

Thu, 10/16/2014 - 03:00
Molly Bales

Having grown up in a small town in eastern North Carolina, going to Harvard for college was more than a dream come true. I still remember from my campus visit feeling my jaw drop as I wandered into the freshman dining hall that looked like the Great Hall straight out of the Harry Potter books. I vividly recall eavesdropping on conversations I overheard in Harvard Yard, biting my tongue to prevent myself from jumping into the fascinating intellectual discourse.

The defining moment of that trip, however, was when my mom and I were waiting at the gate in Logan Airport for our flight back to Raleigh-Durham, and I shared with her a sudden realization: “Mom, I gotta go to Harvard.” When fall rolled around and I finally moved to Cambridge to start my undergraduate adventure, I, like most of my classmates, came in feeling like an admissions mistake but left feeling capable and empowered.

Four years after graduation, here I am back in school at the MIT Sloan School of Management, and, while I have noticed significant cultural differences between my alma mater and my new university, I am delighted that these two institutions are embracing those differences while coming together this Friday and Saturday to exchange ideas on how to tackle today’s energy challenges. Comprised of MIT’s Energy Night and the Energy Symposium hosted by Harvard Business School, “Energy Weekend” has been designed to allow each university to host an event that stays true to its spirit while inviting collaboration from the other institution and the public.

Energy Night, the MIT Energy Club’s flagship event in the fall, is a free-form, choose-your-own-intellectual-adventure labyrinth of research, entrepreneurship, and innovation. Meandering through three floors of the MIT Museum, attendees will follow the various colors of glow sticks to find presenters (researchers, startups, and clubs) and other attendees who share their energy interest (e.g., blue for infrastructure, red for oil & gas). Between the glow sticks, cash bars, and live band, the mood will be light and casual to encourage the serendipitous encounters that can spur innovation.

The Energy Symposium at HBS, which starts the morning after Energy Night, will harness its impressive lineup of 20+ CEOs and 60 industry experts with a more traditional conference format. Leading professionals from around the world and students will engage in a high-intensity atmosphere with topics ranging from conventional energy solutions such as oil and gas to renewables and clean technologies.

While these two events will look very different, they are united in a common goal: bringing people together who are innovating around energy. This passion can be seen in the breadth and depth of the events’ organizing teams themselves. The MIT Energy Night team ranges from an undergraduate nuclear mechanical engineer to a Sloan Fellow in climate policy and economics to a computer science research specialist. The HBS Energy Symposium’s organizing team likewise represents the full spectrum of energy careers, with team members working in everything from frontier market oil & gas to cutting-edge clean technology and venture capital. The energy weekend presenters are at least as diverse and have identified unique problems they are attempting to solve:

• MIT’s Solar Electric Vehicle Team is pushing the limits of solar technology to match the demands of the transportation industry. This student-run team has designed, built, and raced solar cars in the Australian World Solar Challenge and the American Solar Challenge. They are currently building their first four-wheeled car, to be raced this July.

• Bill Brown from NET Power is addressing the carbon footprint of conventional power plants with a revolutionary system which is more efficient and more affordable than traditional natural gas plants while providing 100 percent carbon capture and sequestration. NET Power is currently working with several large industrial, power, and engineering firms to commercialize the technology.

• Ambri, a company based on technology by MIT professor Donald Sadoway, is advancing electricity storage in grid-scale applications with the Liquid Metal Battery. Applying the principles of large-scale electrometallurgy, Ambri has created a low-cost, operationally flexible, reliable, long-lifespan and safe electricity storage technology that is unlike anything that exists in today’s market. Professor Sadoway was named one of Time’s “World’s 100 Most Influential People” in 2012.

As a member of the Harvard and MIT communities, I am constantly humbled by the impressive accomplishments and intelligence of my peers. And we’ll need their talents to address the massive energy challenges facing my generation, from reducing the environmental and health risks posed by our current energy portfolio, to satisfying the growing demand for affordable, reliable energy. It is my sincere hope that Energy Weekend will spark conversations between Harvard, MIT, and Boston community members that will begin to answer these questions.

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Is Clean Energy the Sleeper Tech Industry in Boston?

Wed, 10/15/2014 - 07:00
Martin LaMonica

When I step out of the Kendall Square subway stop in Cambridge, MA, on my way to work, it’s hard not to be reminded what a hub for innovation it is. During a short walk, I pass dozens of tech and life sciences companies packed into what’s become the midtown Manhattan of Cambridge.

Having covered energy and cleantech, I also know there’s a sprinkling of energy and water-related startups around here as well. So when the Massachusetts Clean Energy Center came out with its annual industry report, it made me wonder how “clean energy,” however it’s defined, compares to the area’s pillar innovation industries of tech and biopharma.

The answer was surprising, although there are some important caveats (more on that below). The Mass CEC report found that clean energy employs 88,000 people, compared to 57,000 in biopharma last year, according to figures from the Massachusetts Biotech Council (MassBio). Technology, meanwhile, employs more than 209,000, or about 6.5 percent of the state’s workforce, according to the Mass Technology Leadership Council (MassTLC).

But dig into the numbers a little bit, and a few important differences between energy and other innovation-driven industries emerge.

Historically, energy companies drilled oil or generated power, but energy has become far more high-tech and diverse, as a number of local companies demonstrate.

1366 Technologies, for example, has developed a low-cost solar production technique based on materials science and manufacturing research from MIT. Gridco Systems is bringing power electronics and data analytics to the electricity grid so that power flows can be managed and controlled like data on the Internet. And there are probably dozens of companies working on energy efficiency in buildings using digital technologies.

But when you look at the types of jobs clean energy has generated in the state, quite a few are in areas that are not normally considered technology. Twenty four percent of the clean energy jobs are in installation or maintenance—jobs, such as installing HVAC systems and lighting, weatherizing homes, and installing solar panels.

To be clear, these are great jobs but they’re very different from science and engineering jobs, such as programmer or drug researcher positions. The average salary for the 57,000 biopharma workers is high—more than $125,000, according to MassBio. The MassTLC’s annual report for 2014 noted that the average tech sector job pays $116,000.

Sources: MassBio (R&D and Manufacturing only), MassTLC (estimated 2010 and 2011), Mass Clean Energy Center (projected 2015).

Also, how jobs are counted makes apples-to-apples comparisons tricky. MassBio is deliberately conservative in how it counts employees and focuses on manufacturing and research and development activities in the state. According to one study done by the Dukakis Center for Urban & Regional Policy at Northeastern University, the Massachusetts life science industries in 2012 employed more than 113,000 when all related fields are included, such as R&D, manufacturing, and universities and hospitals. Nationally, Massachusetts has the most biopharma jobs with a higher concentration than New Jersey or California, the Northeastern report found.

Another difference between energy, tech, and biopharma is that “clean energy” spans a number of industries. Clean energy was once synonymous with renewable energy—solar, wind, hydro, and so on—but the term “cleantech” now encompasses energy efficiency, batteries, biofuels, grid modernization, and even water. A number of sustainability-minded entrepreneurs are being drawn towards food as well.

The technology industry, by contrast, is more uniform—or at least more clearly defined. HubSpot may not compete with Microsoft or Amazon or iRobot (at least not yet), but tech companies are all providing software, hardware, and services to consumers and businesses.

Perhaps the biggest difference between clean energy and other innovation-driven industries is the dependence on regulations.

In the late 2000s, Massachusetts passed a number of laws favorable to cleantech startups that require utilities to use renewable energy and implement energy efficiency measures. And a number of the state’s energy startups have received federal money, in the form of ARPA-E grants. 1366 Technologies is expected to tap a loan from the same program that funded Solyndra, the government-backed solar company that famously failed.

Massachusetts was able to pass those laws and get the government behind efficiency and renewable energy, but that’s clearly not the case in many other states, where fossil fuel industries have more sway.

There are still plenty of obstacles to the state’s burgeoning clean-energy ecosystem, including a lack of funding for early-stage ventures and difficulty in finding talent, according to the Mass CEC report. Also, Massachusetts governor Deval Patrick, a clean energy booster, will be leaving office next year, notes research firm Clear Edge which ranks the state number two after California in its cleantech leadership index.

But for other states hoping that innovative energy companies can contribute to their economies, the vibrant cluster in Massachusetts is a positive sign. Together, energy companies contribute $10 billion to the state’s economy and employment in the sector has jumped more than 40 percent since 2010. If nothing else, the growth of the Massachusetts clean-energy scene shows how a cluster of companies—funded by investors and enabled by policymakers—in one region can build momentum.

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Selecta, Sharpening Focus, Gets $20M More to Make Biologics Safer

Wed, 10/15/2014 - 06:55
Ben Fidler

Selecta Biosciences started up six years ago with a plan to use nanoparticles to make customizable vaccines. Along the way, however, the Watertown, MA-based company found a potentially lucrative niche for its technology—helping to make other biologic drugs on the market safer. Today, it’s cashing a big check from a group of its venture backers to go prove it in clinical trials.

Selecta is announcing today that it’s raised more than $20 million in new financing, bringing the total its raised since its 2008 inception to $78.6 million. The latest cash comes from all of Selecta’s existing investors (Polaris Partners, Flagship Ventures, OrbiMed Advisors, NanoDimension, Rusnano, and Leukon Investments) and three new ones (I2BF, Eminent Venture Capital, and an undisclosed backer), according to CEO Werner Cautreels.

The funds will help Selecta bankroll an effort to prove that its nanoparticle vaccine technology can neutralize the unwanted immune responses that can render some biologic drugs ineffective, or worse, trigger severe allergic reactions in patients—what’s referred to as “immunogenicity.” Selecta is trying to show this, initially by souping up an old gout drug—pegsiticase—that has had immunogenicity problems in the past. The new program, SEL-212, will begin its first clinical trial next year.

Selecta believes that if it can prove its case in the clinic, it could set the stage for partnerships with pharma and biotech companies that would be interested in improving marketed protein drugs with issues causing immune reactions. Cautreels notes this type of strategy could apply to enzyme-replacement therapies, Factor VIII infusion therapies for hemophilia, or even gene therapies.

That plan is the latest step in what Cautreels calls a “gradual” strategic evolution for Selecta. The company was formed from the work of MIT professor Bob Langer and physician-scientists Omid Farokhzad and Ulrich von Andrian, both of Harvard Medical School. The big idea is to produce vaccines from biodegradable, polymer nanoparticles that can be custom-built (out of “select” ingredients) to have the same size and shape of specific viruses.

Those vaccines are supposed to selectively target a subset of white blood cells (antigen-presenting cells), and elicit more powerful immune responses than traditional vaccines while limiting side effects. Traditional vaccines, by comparison, are typically made with deactivated viruses that cause the immune system to build up a defense to a specific pathogen should it invade the body later on.

Selecta identified a few different potential ways to utilize the technology. One was to make vaccines to help prevent certain diseases (like malaria), or therapeutically treat existing ones (such as cancer, infections, or even smoking addiction). But the company has found that the best way for it to stand out is to focus on “antigen-specific tolerance,” or, using its technology to tell the immune system to call off an unwanted attack—like when the body recognizes a protein drug as a foreign invader, and whips up antibodies to fight it (or, in the case of type 1 diabetes, when the body attacks its own beta cells).

So while Selecta is still developing some conventional vaccines, it’s only doing so through partnerships and non-dilutive grants. The company is instead pouring its venture dollars behind the idea of creating a niche for itself: preventing those unwarranted immune system attacks.

“[That’s] where we are really unique and on the forefront,” Cautreels says. “This is also the space with the highest medical need [and] where we have the highest interest for potential collaborations.”

Selecta has identified some 30 drugs on the market already that have a high prevalence for these anti-drug antibody attacks. Its goal is to form partnerships with the companies making those drugs (or others in development) to add its technology, and reduce the risk of those immune reactions. That would provide Selecta with a quicker, more cost-effective way to generate revenue than trying to develop its own vaccines internally.

That’s the plan, anyway. Now Selecta has to show its technology can get rid of a drug’s immunogenicity. To prove its case, Selecta homed in on uricases, which are enzymes that gobble up uric acid. In instances of gout, uric acid builds up in the blood, leading to a type of painful arthritis. Patients are first typically given drugs that block the production of uric acid like allopurinol, but those treatments don’t work for everyone.

To fill the void for people that fail those initial therapies, a few companies have tried to engineer recombinant uricase to digest the excess uric acid. That’s been tough, Cautreels says, in part because of the immunogenicity associated with the approach. One company, Bridgewater, NJ-based Savient Pharmaceuticals, won FDA approval of such a drug, called pegloticase (Krystexxa), in 2010. For various reasons, its launch was a flop, then last year Savient went bankrupt and sold the drug to Crealta Pharmaceuticals. Another company, EnzymeRx, tried to develop a similar-type drug, pegsiticase. Cautreels says the drug never made it because of “expected immunogenicity,” and further, that similar issues have limited pegloticase’s use. EnzymeRx sold its drug to China-based 3SBio in 2010 for just over $6 million.

Selecta sees those past issues as opportunities. Thinking its technology can effectively fix pegsiticase, the company bought rights (except in China) to the drug for an undisclosed sum in June. The souped-up pegsiticase prospect is called SEL-212, and will begin its first trial next year. In many ways, that trial will determine whether Selecta’s strategic plan really holds water, because it will offer proof of its technology’s value in human patients.

“The gout product by itself will be very compelling, but that’s only the beginning because [if it works], now the platform opens up,” Cautreels says.

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EverTrue Expands, Raises $8M More for Alumni Donor Tools

Wed, 10/15/2014 - 06:00
Gregory T. Huang

Perhaps it’s no surprise that a tech company that’s all about alumni fundraising knows how to fundraise itself.

Boston startup EverTrue has closed an $8 million Series B financing round led by previous investor Bain Capital Ventures, with some of the money coming from Silicon Valley Bank. The 40-person company has raised a total of $14.5 million since its founding in 2010.

EverTrue makes software that helps universities, prep schools, and nonprofits find potential donors and communicate with them through social and mobile channels. The company’s customers include Boston University, Brown University, Colgate University, and Oregon State.

EverTrue is led by CEO and founder Brent Grinna, who was part of the 2011 Techstars Boston accelerator class that also included Hardi Meybaum (GrabCAD), Sravish Sridhar (Kinvey), Dave Bisceglia (The Tap Lab), and Matt Barba (Placester), among other up-and-comers. EverTrue also went through the MassChallenge startup program.

Meanwhile, Silicon Valley Bank is starting to show up in more startup investment deals. The financial institution invested in an equity round for Boston-based Startup Institute last month, as banks and financial services firms are trying to get closer to tech startups and entrepreneurs.

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CommonAngels Ventures Raises $26.5M Fund in Shifting VC Landscape

Tue, 10/14/2014 - 12:52
Gregory T. Huang

There’s a newly raised tech-investment fund in town. Is it an angel fund or a venture fund? A bit of both, actually. But it’s been moving toward the latter.

CommonAngels, the Boston-area angel investment group, has closed its fourth fund at $26.5 million. It has also officially changed its name to CommonAngels Ventures. (Disclosure: CommonAngels is an investor in Xconomy.)

CommonAngels’ previous fund, raised in 2010, totaled $13 million. That fund began the group’s transition from an angel-network model to more of a seed-stage venture model. The new fund represents a big expansion and “crystallizes the transition” from the organization being mainly individual check writers to a fund model, says senior managing director Maia Heymann.

Investors in the new fund include serial entrepreneurs, tech industry executives, and wealthy families. It sounds like a good mix of the old CommonAngels network with quite a bit of new blood.

CommonAngels’ individual investors used to provide the bulk of capital to startups, together with contributions from its fund. Now, the deal structure is flipped and at least two-thirds of the money in any given deal will come from the fund.

Managing director James Geshwiler calls the shift “representative of the broader trend of new business models in venture capital and an increasing institutionalization of capital provided by angels.”

The seed- and early-stage tech investment landscape has gotten busier in Boston in the past few years. Among the recently established firms are Founder Collective, NextView Ventures, Romulus Capital, and Boston Seed Capital. Some of the newer funds around town are G20 Ventures, Project 11, and Blade.

For the most part, these funds are pretty specialized, with two or three general partners making the big decisions. But there is a trend toward limited partners (those invested in a fund) contributing expertise, connections, and deal flow—and CommonAngels fits right into that theme.

CommonAngels has already made 10 investments from its new fund. One company, Directr, was acquired by Google this summer. The fund’s other recent investments include Loci Controls, Dunwello, Vivoom, and Klipfolio. Heymann says the target number of companies the new fund will invest in is 25 to 30.

The firm is looking to invest $250,000 to $750,000, give or take, in tech startups trying to go to market and find customers for their initial product. CommonAngels will also make follow-on investments, to the tune of up to $2 million per company in some cases.

Heymann says the fund will maintain its geographic focus on the Northeast, including Boston, New York, Toronto, and Ottawa. “The majority of the portfolio will be in Boston, but we’re not constrained by that,” she says.

CommonAngels hopes its distributed model and network will pay off in all stages of the investment process—from finding companies and due diligence to helping companies grow and exit. But the firm has plenty of competition in early-stage investing, and that’s good for entrepreneurs.

“There’s nothing new under the sun,” Heymann says.

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Why It Requires Rocket Engineers to Make Your House Comfortable

Tue, 10/14/2014 - 12:34
Martin LaMonica

There are dozens of startups building various pieces of the “smart home,” but Boston-based Ecovent is starting in unusual place: heating and cooling vents.

The company today said it raised $2.2 million from angel investors to speed up production of sensors and vents that make homes more comfortable and energy efficient. The year-old company was hatched at MIT’s Sloan School of Management and incubator Techstars.

Ecovent makes sensors that plug into electrical outlets and “smart” vents equipped with motors and a wireless chip. Using a smart phone app, people can create temperature settings for individual rooms for forced-air heating and cooling systems. The vents adjust the airflow to control temperature.

The system uses algorithms to optimize the comfort level of each room—making the guest room cooler and the living warmer, for instance—drawing on data, such as temperature and the flow of heat through homes. Ideally, it connects to a wireless thermostat, says CEO and co-founder Dipul Patel, a former Lockheed Martin engineer who started the company while at MIT.

Oddly enough, optimizing the temperature draws on the same principles of machine learning that Patel and his co-founders worked on with airflow and missile systems at Lockheed Martin, he says. “When you’re trying to intercept a missile, you don’t know anything about it so you have to take a lot of sensor data and very quickly make a very accurate decision,” he says. “Every home and every family is an unknown, so let’s learn from it. Even if we just open and close vents, it will get more efficient and comfortable organically as the homeowner uses it.”

Patel

In beta tests, Ecovent has found that adjusting vents can cut energy usage from 20 percent to 40 percent. In the world of home energy efficiency, that’s a dramatic improvement, but Patel notes that actual performance depends on the home and usage pattern.

When he worked at Lockheed Martin in New Jersey, Patel turned off vents in spare rooms to save money for a wedding, which gave him the idea for working in efficiency. Later, he realized that the plunge in the price of sensors and low-power wireless chips from smart phones, he and his co-founders could build a smart vent system much cheaper than just six or seven years ago.

“It becomes a software game for us,” he says. He estimates that it will cost about $200 to equip a single room.

Patel said the entrepreneurial community in Boston and MIT helped him make his personal transformation to startup CEO. “I never thought I’d be in an environment as good as this one. Everybody wants to help and nothing is crazy,” he said.

There are many other startups trying to use controls and data to make buildings more energy efficient. Earlier in October, San Francisco-based Building Robotics raised a $5.5 million Series A. The software allows people to use their smart phones to adjust temperature, which is fed into office building heating and cooling systems. Similarly, Boston-based CrowdComfort makes software for commercial buildings that allows employees and visitors to provide feedback on temperature and other building information via a smart phone.

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Public Company, Meet Startup: Demandware Snaps Up CQuotient

Tue, 10/14/2014 - 10:16
Gregory T. Huang

While most eyes have been on the IPOs of Wayfair and Hubspot this month, it’s good to remember the last batch of Boston-area tech companies that went public.

One of them is Demandware, a Burlington, MA-based maker of online shopping software for brands and retailers. The company had its IPO in 2012, and its stock price was up over $50 this morning, despite the downturn in the public markets; the firm’s market cap is around $1.8 billion.

Demandware (NYSE: DWRE) said on Tuesday it has acquired Boston-area startup CQuotient for an undisclosed price. The deal gives the larger company access to customer-level data science and analytics that it can apply to big brands and retailers to create “highly personalized shopping experiences,” says Demandware CEO Tom Ebling in a statement.

CQuotient got started in 2010 (see Q&A) and raised a $3 million funding round from Bain Capital Ventures. The company’s customers include Staples and Men’s Wearhouse.

CQuotient’s top executives, Rama Ramakrishnan and Graeme Grant, are joining Demandware in senior roles. Ramakrishnan and Grant originally met at ProfitLogic, a price-optimization software company that was bought by Oracle in 2005.

Demandware’s future depends on becoming the go-to tech provider for brands to sell their stuff across all digital platforms. The luxury market is especially important for the company, as Amazon and others own the commodity-level business online.

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Venture Firms Turn Down Funding Volume, but Still Rockin’ in Q3

Tue, 10/14/2014 - 07:00
Bruce V. Bigelow

Venture capital activity descended from the stratosphere during the third quarter, but it was still flying high, as venture firms invested nearly $9.8 billion in 879 deals across the United States, according to a report released today by the financial data firm CB Insights.

The amount invested during the quarter was down 30 percent from the $13.9 billion that VCs deployed in the previous quarter, and the deal count was down by 10 percent from the 974 deals that CB Insights counted in the second quarter. But it still marked the third consecutive quarter when VC funding exceeded $9 billion, according to the report.

The accumulated total for VC funding so far this year amounts to more than $33.7 billion—a 59 percent leap from the $21.9 billion deployed during the first three quarters of 2013. As we previously reported, mega venture investments in Airbnb, Uber, and Pinterest helped drive second-quarter VC funding to a 13-year high.

With its quick snapshot of quarterly VC activity, CB Insights is usually first to release its data, which counts only venture capital investments (including corporate venture) in emerging companies. The quarterly MoneyTree Report, which provides a more detailed survey of third-quarter venture capital activity, is set for release later this week.

U.S. venture activity (courtesy CB Insights)

In its 114-page report, CB Insights notes that venture funding for startups increased in New York to a five-quarter high, with close to $1.4 billion invested in 122 deals.

An astounding 85 percent of New York’s venture dollars went … Next Page »

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With $24M and Pharma Backing, Ex Epizyme Prez Aims to “Raze” Tumors

Tue, 10/14/2014 - 06:55
Ben Fidler

Jason Rhodes has taken the helm of a new startup biotech. And in some ways, it’s a bit like the one he just left, Cambridge, MA-based Epizyme—a developer of cancer drugs. Now the question is whether he can help steer the new one, Raze Therapeutics, towards the billion-dollar valuation Epizyme enjoys today.

Fresh off his four-plus-year stint as the CFO (and eventually president) of Epizyme, Rhodes has taken on his first assignment back in the venture capital world. He’s become the acting CEO of Atlas Venture’s latest biotech startup, Raze, which is coming out of stealth mode today with a $24 million Series A round from a group of venture firms and pharmaceutical companies.

The new task for Rhodes: capitalize on insights from researchers at the Whitehead Institute (David Sabatini), Massachusetts General Hospital (Vamsi Mootha), and Princeton University (Joshua Rabinowitz), into a newly discovered set of biological pathways that appear to be a key driver of tumor growth. By doing so, Raze aims to make a new class of small-molecule drugs that Rhodes says might be effective across a wide variety of both solid tumors and blood cancers. (He declined to specify which ones the company is looking at in particular.)

Because these pathways have never been specifically targeted before with a drug, there will a lot of discovery work ahead, and that’s what Raze is going to put the Series A cash towards.

Despite the unknowns, a large group of venture firms and corporate venture arms are willing to bet Raze can succeed. Atlas has been joined in the $24 million round by MPM Capital Management, Partners Innovation Fund, and three pharmaceutical companies: Astellas Pharma (via Astellas Venture Management), Merck Serono (MS Ventures), and Novartis. Atlas partner Peter Barrett is Raze’s chairman of a board that includes members of MPM (Ansbert Gadicke), MS (Nilesh Kumar), and Partners Innovation (Reza Halse).

Atlas entrepreneur-in-residence and Padlock Therapeutics CEO Michael Gilman is on Raze’s scientific advisory board, along with the company’s three scientific founders and Keith Flaherty of MGH and Harvard Medical School.

The central idea behind Raze is to home in on targets in a set of biological pathways called “one carbon metabolism,” that help tumors grow. These pathways, Rhodes says, provide the tumors with substances needed to help them bulk up, cause damage, and spread.

“If you can inhibit those pathways, you can shut down this whole biomass process,” Rhodes says. “It stops tumors from growing and we believe it also actually then kills those tumor cells.”

Rhodes says these targets are “selectively turned on” in tumor cells, meaning blocking them specifically could spare healthy tissues. Initially, Raze aims to develop small-molecule drugs that bind to specific metabolic enzymes in these pathways. So far, the company has delivered encouraging results from tests in petri dishes—showing, essentially, that tumors suffer if you mess with targets in these pathways, and that some targets on these pathways could be drugged with certain chemicals. That was what led Atlas and others to turn the company from a seed project to a startup.

The idea of looking at cancer metabolism isn’t unique. It’s the foundation of companies like Agios Pharmaceuticals (NASDAQ: AGIO), for instance. But Rhodes says while Agios’s cancer drug programs are focused on pathways involved in cell differentiation and maturity, Raze views itself in an “adjacent and separate space” around growth, or anabolic metabolism, of tumors.

“To our knowledge they’re largely separate,” he says. “We certainly believe today that Raze really has a leadership position in these anabolic/metabolic pathways.”

Rhodes helped found Fidelity Biosciences—the biotech venture arm of Fidelity Investments—and was a vice president at MPM Capital before moving over to industry for two significant stints. He was the VP of business development at RNA interference drugmaker Alnylam Pharmaceuticals (NASDAQ: ALNY) and then moved up to the CFO role at Epizyme—a company developing cancer drugs based on epigenetics.

While at Epizyme, Rhodes and CEO Robert Gould helped string together a series of industry partnerships. The tipping point for Epizyme was its big partnership with Celgene, a deal that brought a the company $90 million up front, and the ability to keep U.S. rights to its drug programs and remain independent. That transaction propelled Epizyme towards one of 2013’s most successful biotech IPOs.

Rhodes, however, wanted to do the early dirty work again. “From a career perspective, it was time to be a CEO or go back to venture,” he told Xconomy a few weeks ago. On September 29 he was named a partner at Atlas, where he says he aims to stay “for a long time.” Rhodes will likely hand off the CEO role of Raze at some point, rather than stay.

There are hurdles ahead, but Rhodes’s new gig with Raze does, as least conceptually, look like an attempt at an Epizyme or Alnylam redux.

“The model of building a platform oncology company around a large novel area of biology is something that I’ve done before,” he says. “It made a lot of sense to join Raze.”

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Biotech Startups Tap Spider Genes in Quest to Spin Silk Gold

Tue, 10/14/2014 - 00:01
View the Slideshow Angela Shah

A modern-day Silk Road is emerging, and traffic on it is building up.

These explorers aren’t traversing routes across continents, but instead are seeking scientific and agricultural alchemy to produce a sort of holy grail in apparel: commercial amounts of spider silk.

Spider silk is a multi-purpose fiber able to be transformed into surgical bandages, sports gear, musical strings, or body armor, says David Brigham, founder and CEO of EntoGenetics in Charlotte, NC. The military uses, in particular, motivate Brigham, a biochemist and geneticist by training. “Soldiers need better, lighter protection,” he says.

Spider silk has long been the ultimate textile target. Its beauty was coveted by royalty; Louis XIV of France supposedly had gloves, stockings, and even a full suit made from the weaves of the golden orb spider of Madagascar.

These days it’s the silk’s strength—touted as five times as strong as steel, and as tough as Kevlar but more elastic—that’s attracting attention. Stopping a runaway train from flying off the tracks using spider webs may not only be the realm of Hollywood.

But replicating that material on a scale useful for a modern-day superhero, or mere mortal, has been elusive. Spiders don’t really take to being domesticated for farm work (they get restless minutes into the “milking” process and tend toward cannibalism), so it’s difficult to harvest enough thread for a commercial apparel operation.

If it could be done, though, the stakes are huge. In the U.S. alone, the market for advanced protective gear and armor was worth $4 billion in 2010 and is expected to reach $5.2 billion next year, according to consulting firm BCC Research.

Protective gear for soldiers, as well as police and firemen, is among the top potential uses for spider silk. The fiber could also be used to make high-end performance sports apparel and, further down the line, to contribute to a host of medical applications from sutures to wound dressings. Spider silk is not rejected by the human body, so there’s also potential for artificial tendons, implant coatings, or biomedical scaffolding for organs or skin.

The question is how best to produce the material. Brigham at EntoGenetics says his team has developed a way to take the genes that allow spiders to make such strong silk and implant them into the chromosomes of silkworms, which serve as more willing factories, to produce reconstructed “spider” silk. (Spider silk is stronger, and so preferable, to that made directly by silkworms, he says.) Brigham says EntoGenetics is trying to create silk that is 100 percent from spider genes as opposed to a hybrid of spider and silkworm genes.

The North Carolina startup has plenty of competition. Kraig Biocraft Laboratories in Lansing, MI, is also trying to produce spider silk through transgenic silkworms to make a fiber that is a composite material. “It’s spider DNA spliced into the silkworm so the silkworm produces spider protein but also produces its own proteins,” says Kim Thompson, Kraig Labs’ founder and CEO.

The result, he says, is … Next Page »

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Untying the Knots in Big Data and Big Biology: Q&A with Andrew Su

Mon, 10/13/2014 - 14:15
Bruce V. Bigelow

As big data becomes increasingly important in using genomic information, the National Institutes of Health is funding a sweeping initiative to help untie the knots that make it hard to extract and apply meaningful information from huge biomedical data sets.

The program was conceived, in the words of NIH Director Francis Collins, to “overcome the obstacles to maximizing the utility of the mammoth data sets that are emerging at an accelerated pace.” The funding is intended to develop innovative approaches, software, computational tools, and other resources needed to pull meaningful information from massive data sets on everything from genomics to patients’ medical records.

In San Diego, The Scripps Research Institute (TSRI) and Scripps Translational Science Institute will get about $4.4 million in NIH funding announced last week that is intended to help researchers find new ways to analyze and use increasingly complex biomedical data. The institutes are part of a newly formed consortium designated to receive a total of $11 million to establish a new UCLA Center of Excellence for Big Data Computing. The center’s director is Peipei Ping, a UCLA professor of medicine and physiology whose research is currently focused on understanding proteome biology in cardiovascular medicine. Proteomics refers to the study of proteins.

Andrew Su

“We will be developing a variety of technologies for proteomics,” says Andrew Su, a TSRI associate professor who is a co-director of the new center. In an e-mail exchange over the weekend, Su said new techniques are needed for researchers to better identify post-translational modifications in proteins and to correlate changes to genetic variants. (My Q&A with Su is below.)

The new center also will tap into the Scripps Wellderly Genome Resource, a DNA data set that currently has genomic information on more than 1,300 people who have lived at least 80 years without developing any chronic disease. Among other things, researchers at the Scripps Translational Science Institute and Scripps Health are compiling the data to provide a master reference of what a healthy human genome looks like.

NIH is making an initial investment of nearly $32 million in fiscal 2014 to establish 11 similar “centers of excellence” throughout the United States. They include new centers at the University of Wisconsin-Madison; Stanford University; UC Santa Cruz, Harvard Medical School, and the University of Southern California.

The agency also provided funding for a 12th program, called ENIGMA, focused on human brain diseases that is collecting … Next Page »

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Six Takeaways from Boston’s Life Science Disruptors

Mon, 10/13/2014 - 11:48
Ben Fidler

Failure isn’t just a possibility in biotech—it’s a probability. Plan accordingly, and don’t let your ego get in the way when you do. It doesn’t matter so much “how” a drug works, as long as it does. And when the inevitable fork in the road comes, don’t be afraid to take the more difficult path—as long as enough of your investors are behind you.

These were just a few of the lessons the speakers at our latest biotech event, “Boston’s Life Science Disruptors,” imparted to a packed house at the Novartis Institutes for Biomedical Research this past week. Attendees got an informal, close-up look at the stories of three Boston startups—Zafgen (NASDAQ: ZFGN), Epizyme (NASDAQ: EPZM), and Sage Therapeutics (NASDAQ: SAGE)—and how they navigated the difficult road from a concept to a successful debut on the Nasdaq.

Big thanks to our speakers: Atlas Venture partners Peter Barrett and Bruce Booth; Zafgen CEO Tom Hughes; Bay City Capital managing director Carl Goldfischer and Epizyme CEO Robert Gould; and Third Rock Ventures partner Kevin Starr and Sage Therapeutics CEO Jeffrey Jonas.

Also a special thanks to our event host, Novartis, and our sponsors: BDO, Cubist Pharmaceuticals, Health Advances, Icon, Johnson & Johnson Innovation, and Mintz Levin Cohn Ferris Glovsky and Popeo.

Thanks as well to Tyler Trahan for the photos (more of those to come via a slideshow later this week).

With that, here are a half-dozen highlights from a fun night in Boston:

1. “I remember looking at it and thinking…[it] was probably one of the worst ideas I’ve ever heard in my life.” That was Tom Hughes’s reaction when first approached by the backers of Zafgen. Then in charge of Novartis Institutes for Biomedical Research’s discovery group in cardiovascular and metabolic disease, Hughes got a call from Zafgen’s venture backers in 2006 with this pitch, based on a published paper in Nature: if stopping new blood vessels from forming (angiogenesis) with a drug could shrink tumors, the same approach might work for fat tissue.

Hughes thought it was a terrible idea, but Zafgen over the next few years was able to put together “one of the most compelling datasets I’d ever seen in mice” to back it up. That swayed Hughes to leave Novartis. He later determined the drug’s effect had nothing to do with angiogenesis— it changed the way the body metabolized fat by inhibiting the production of an enzyme called methionine aminopeptidase 2 (MetAP2).

“Whether you dressed it up as an angiogenesis mechanism or not, we were wrong to call it that, but the data were what they were,” said Atlas partner Bruce Booth.

2. A small study, as far away from the FDA as possible. Researchers in the past had tried to develop inhibitors of MetAP2 as an alternative to vascular endothelial growth factor (VEGF) blockers, like bevacizumab (Avastin), for cancer. While those drugs never showed any efficacy, the fact that they’d been tested in humans gave Zafgen a possible development shortcut. But Hughes said that some of the early steps for manufacturing Zafgen’s drug weren’t up to speed; it only had the drug in an IV formulation (rather than a pill); and the underlying paperwork for filing an investigational new drug application with the FDA wasn’t ready. So rather than spending a bunch of money reworking the formulation and getting all the FDA documents ready before getting to the clinic, Zafgen started a very small proof-of-concept study of its IV drug in Australia, which “had a process to allow that to occur,” Hughes said.

The study was a success, and Zafgen parlayed it into more venture financing, sending the startup down the path towards becoming a public company—all while saving some cash and development time.

“This is a great example of the power and impact of being nimble,” Hughes said. “Some things [here] we never would’ve done if we were a big company.”

3. Epizyme: Robert Gould’s chance for redemption. Gould, a longtime Merck executive, was working at the Broad Institute of MIT and Harvard when he got a call from former Merck colleague (and Kleiner Perkins Caulfield Byers partner) Beth Seidenberg about a new company she was helping to put together based around epigenetics—switching genes on or off without affecting the underlying DNA. The idea resonated with Gould. He’d spent decades in drug discovery, but stayed away from kinase inhibitors—which have become fertile ground for cancer drugs.

“One of the great regrets in my life is I personally sort of totally missed the entire kinase inhibitor world,” he said. “How could you ever interfere in something as fundamental as cell signaling safely and effectively? [I] just missed the boat on that totally.”

Epizyme, he said, constituted … Next Page »

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How Much Should I Work?

Mon, 10/13/2014 - 00:01
Joe Chung

My son, a member of the optimization generation, where pretty much every aspect of his life will be tracked, measured, and ultimately ruled by the Alg, posed a fascinating question to me the other day. He simply asked, “How much should I work?”

Now, the context for the question is that he’s undoubtedly a Type A who throws himself into his pursuits with unbelievable intensity, but his job is somewhat loosely structured so that he has a huge amount of discretion over how he allocates his hours and in particular how many hours he works at all. (Hint: he works a LOT.)

So I traced an approximation of the following graph on a restaurant table top:

The X-axis is the average number of hours per day spent working. Zero is of course zero, and 24 means that he would be literally working 24 hours every day, 7 days per week without sleeping! The Y-axis is job productivity measured in percentage of one’s possible potential. So 100 percent is the best one can possibly be.

So obviously if he works zero hours he will achieve exactly zero percent of his potential productivity. On the other end of the X-axis, working continuously without sleeping will also yield zero percent (I’m not allowing negative productivity just to keep things simple), and in fact if he worked so hard that he never slept he might actually die! So in between these two extremes, the graph must surely rise to 100 and fall back down again to zero. In my hypothetical graph I start with a fairly steep rise as the average hours per day goes up, but following the law of diminishing returns, the productivity curve must flatten so that each additional hour per day yields less and less of an increase in productivity. Finally the curve can rise no further having reached 100 percent, and from there the only direction to go is down!

Now at this point, which happens to be around 12 hours per day on my made-up graph (i.e., equating to 84 hours per week), my son is working so hard that spending more time at work actually begins to decrease productivity due to making errors, losing track of things, miscommunications, etc. Once he increases his hours to the point of seriously cutting into sleep, meals, hygiene, and other normal bodily functions, his productivity plummets as errors pile up, e-mails are left unanswered, and important meetings are forgotten in a delirious haze of ill temper and body odor.

But the important takeaway from staring at the curve is that for every level of productivity, except 100 percent, there are actually two levels of work hours that correspond. So at the point at which he is averaging 18 work hours per day yielding a productivity of about 25 percent, at least according to my particular graph, he could also work just 3 hours per day and achieve the same productivity and presumably be a much more pleasant person to share an elevator with. Which brings us to an obvious truth: No matter what level of productivity you are achieving, you are much better off being on the left side of the curve than on the right!

What’s interesting about this line of thinking is that I strongly suspect that the vast majority of driven, hard-working Type A’s are always on the wrong side. Their personalities lead them to push themselves as hard as they can until something (e.g., partner, close friend, nervous breakdown), actually pushes back. If that’s true, then they basically push themselves until they are well past their optimum output and down the declining right side of the hump until something is actually breaking, whereas they could achieve the same level of productivity by working several fewer hours per day.

So to finally answer my son’s question, here are a few simple rules:

1. At the very least, try not to be too far down the right side of the curve. Recognize the signs of declining productivity by seeking out feedback from the people you work for and work with. When they say you’re working too hard, you probably are.

2. Notice how your allocation of non-working hours affects your overall job performance. If your job requires that you be creative, personable, inspiring, etc., you’re probably not going to be those things for long if you are working yourself to death.

3. Experiment. Like any good data-driven analytical optimization, you need to create a varied set of data points from which you can draw comparisons. Try different levels of work and attempt to infer your personal productivity graph, decide where you want to be, and try to be on the left side of the graph. It won’t be perfect, and of course one can’t really measure productivity on a single axis, but it’s probably better than just going pedal to the metal until you burn out!

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HubSpot in Dublin: Lessons in Building a Global Public Company

Thu, 10/09/2014 - 11:30
Gregory T. Huang

The latest U.S. tech company to go public is HubSpot, which has netted about $114 million in its IPO on the New York Stock Exchange. From a global perspective, what’s most interesting about the Boston-area online marketing company (NYSE: HUBS) has been its effort to go into new international markets.

You’ve heard of founders Dharmesh Shah and Brian Halligan, and the company’s illustrious investors, but you probably haven’t heard of Jeetu Mahtani. He is the managing director of HubSpot’s international operations, and heads up the company’s office in Dublin (pictured).

Mahtani started in sales at HubSpot’s headquarters in Cambridge, MA, in 2009. About three years ago, he went to Halligan, the CEO, and said he wanted to start calling the U.K. to get new customers. Halligan, who led PTC’s sales teams in Hong Kong and Tokyo in the ‘90s, said to go for it. So Mahtani started coming to the office at 4am to call overseas; pretty soon he had built a small team that all showed up at that hour (the better to beat the traffic).

Fast forward to January 2013, when HubSpot opened its European headquarters in Dublin. Mahtani moved there with a landing team of a half-dozen people from Boston and quickly hired about eight locals. The office has since grown to a bit over 100 employees, mostly in sales and customer service, with an engineering contingent of about a dozen.

The Dublin operation is increasingly crucial to the company’s growth in a very competitive sector (see Marketo, Oracle, Salesforce). The Irish engineers are fully in charge of the mobile layer of HubSpot’s marketing software. And Mahtani says the company makes 15 to 20 percent of its global sales from Dublin.

For the past year or so, Mahtani has also been in charge of setting up the firm’s new Sydney office, and establishing global best practices across Europe, Asia-Pacific, and the U.S.

Bottom line: going international is crucial for many mid-size U.S. software companies, and HubSpot is figuring out how to do it as it goes public.

Three lessons Mahtani has learned:

1. Go all in. “U.S. companies arrive in Europe, but they don’t commit,” he says. It’s not just the money invested, it’s getting “talent and leadership from headquarters involved,” he adds. “Your output will be what you put into it.”

2. Get the right mix of talent, and promote them. “There are morale and cultural issues in a remote location,” he says. Given the “right roots and leadership,” the company wants to promote from inside. To that end, several of Mahtani’s first sales hires in Dublin have risen to become sales directors, he says.

3. Treat Europe as a different animal. “You have to take into account the backgrounds and cultural differences, end to end, of a region,” he says. Meaning that customers in Germany have very different requirements in terms of technical support as compared to the U.K. or Italy, say.

Looking farther afield, he says, Australian customers “buy like Americans” and “growth has been great.”

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Can Salesforce1 Push the Workforce into the Mobile Age?

Thu, 10/09/2014 - 10:33
Doug Winter

Dreamforce 2014 is quickly approaching, and it has me thinking about the impact Salesforce (NASDAQ: CRM) has had on the way we work and more generally on the future of work itself.

Dreamforce is the annual Salesforce user conference, and it has more or less become a must-attend event for anyone in the cloud computing business. Last year the conference drew more than 120,000 attendees to downtown San Francisco.

From the beginning, Salesforce has revolutionized the way we do business. They were the first pioneers to bring customer relationship management (CRM) to the cloud, and last year Forbes ranked Salesforce as the world’s most innovative company. Today, we’re finding ourselves in a time where massive trends are reshaping the enterprise and in turn, the workforce. How companies respond will dictate the rest of their future within their particular space.

Now Salesforce is driving more changes. As mobile device adoption continues to accelerate and shift everyday thinking, enterprises are starting to evolve beyond the “bring your own device” (BYOD) era and into a full-fledged, mobile-enabled workforce. In fact, according to a recent survey from CA Technologies, 60 percent of companies have an enterprise-wide mobile strategy, or are planning to implement one in the next year.

A mobile-enabled workforce can improve efficiency, productivity, and provide flexibility within the workplace. Moreover, a mobilized workforce enables faster communication, enhances customer experience, and lowers costs. When it comes to a high-profit selling environment, however, a company needs more than a laptop or smartphone—they need mobile applications that make it easier to get work done. This way, sales reps can focus on what they do best—selling.

Realizing the potential that mobile apps represent in this new era of workforce mobility, Salesforce is rolling out their Salesforce1 Customer Platform to connect business apps, devices, and data in one place. Salesforce1 allows users to take their CRM system anywhere they go. It gives sales reps direct access to their reports and dashboards, easy navigation with accounts, and provides access to data offline. This enables reps to … Next Page »

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Online Pharmacy Startup PillPack Lands $8.75M, Led By Accel

Thu, 10/09/2014 - 06:30
Curt Woodward

A lot of technology startups get rightly criticized for not bothering to tackle a problem that will make anyone’s life better. PillPack is not one of those startups.

The Manchester, NH-based company offers a new twist on the concept of a mail-order pharmacy. Instead of sending long-term supplies of drugs in conventional pill bottles, PillPack pre-sorts all of a customer’s medications into small, time-stamped plastic packets that are easy to decipher—open the “8 am” packet, take the pills, and move on.

PillPack also offers a website that lets customers track their orders and bills. But it still takes the personal service side of pharmacy seriously, with pharmacists on the payroll to manage a patient’s refills and answer any customer questions 24 hours a day.

“We couldn’t have done this 10 years ago,” founder and CEO TJ Parker says. “We’re building something that does provide true utility for folks, especially in an industry that hasn’t seen modern technology infiltrate into it.”

A PillPack medication packet

Before starting PillPack, which was part of the 2013 class of Boston Techstars companies, Parker got into the family business as a pharmacist himself. Today, he and his father make up half of the company’s pharmacy staff, which oversees customer orders and communications with doctors out of PillPack’s Manchester offices.

Although he won’t discuss customer numbers, Parker says PillPack is now shipping to customers in 40 states and expects to be available nationwide by early next year—that’s up from 31 states when PillPack officially launched in February.

Venture investors seem to like what they see in PillPack’s growth. Accel Partners is joining the company’s list of backers, leading a new $8.75 million investment. Previous investors Atlas Venture also participated the new round, along with High Line Venture Partners, QueensBridge Venture Partners, Andy Palmer, and David Tisch. The startup has raised $12.75 million since its founding.

There’s a common tie between the two main venture firms being touted with this investment round: Fred Destin, a former Atlas venture capitalist who invested in PillPack before leaving the firm earlier this year to join Accel.

“I think it was a huge win for us to get someone from that good of a fund, who is already in tune with the business and bought in. It worked out very, very well,” Parker says.

PillPack plans to use the money to grow its business on every front. The startup has about 25 people now, split between its pharmacy and shipping offices in Manchester and its software engineering outpost in Somerville, MA.

That growth should be easier now that PillPack has cleared a significant hurdle: it was recently accredited as an online pharmacy by the National Association of Boards of Pharmacy, a year-long process that endorses PillPack’s bona fides as a legitimate business.

Why is that bit of arcane industry vetting so important? Google and Facebook don’t allow companies like PillPack to advertise their services without that accreditation, Parker notes.

Those policies are aimed at keeping the online advertising giants from butting heads with regulators—Google paid $500 million in 2011 to settle federal charges that it was allowing illegal pharmacies to advertise to Web users, and has been accused of being too lax in the following years.

Being able to use those platforms for advertising should be a big boost for PillPack, especially when you consider that another common way of finding customers online—sending out e-mail solicitations—can be tough when the subject is mail-order prescriptions. “Being an online pharmacy makes spam filters lots of fun,” Miller says.

One major change PillPack has made since launching the company earlier this year is a big price cut. At its public debut, PillPack was charging customers a $20 monthly subscription fee for its service, on the theory that people would pay more for a more user-friendly product and around-the-clock service.

That turned out to be wrong, and PillPack has since dropped the extra fees entirely.

“The folks that we thought would use PillPack the most were more sensitive to the fee than we anticipated,” Parker says. “They’re spending so much on meds and doctors that spending another $20 was more impactful to them than I think I realized.”

Now, the startup charges only a regular co-pay, which patients would normally encounter when filling prescriptions (PillPack says it works with “most prescription drug insurance plans, including a majority of Medicare Part D plans”). That cuts down the up-front revenue, but is apparently a better way to grow the “lifetime value” of each customer, one of the key measurements of any e-commerce business.

PillPack is one of those intriguing young businesses that are attempting to improve an established, important industry by injecting a next-generation dose of better technology, improved design, and the efficiency of digital tools.

The difficult-to-master basics of dispensing prescriptions, shipping packages, and building software are falling into place now, Parker says, leaving him optimistic that the new investment cash can help PillPack expand much more quickly. Being able to finally advertise online won’t hurt, either.

“We’re very much about building awareness that the product exists,” he says. “We’ve found that customers absolutely love it, and we’d love to get it into more customers’ hands.”

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HubSpot IPO Raises $114M for Online Marketing Software

Wed, 10/08/2014 - 20:30
Curt Woodward

Online marketing software seller HubSpot, which helps mid-sized businesses attract customers with blog posts, e-mails, and social media campaigns, has raised about $114 million in its initial public stock offering.

The Cambridge, MA-based company said Wednesday night that it sold 5 million shares of its stock at $25 each. That price was higher than HubSpot’s previously estimated price range, indicating good demand for the stock.

After accounting for fees, HubSpot will clear an estimated $113.7 million—cash it will immediately use to bankroll its operations, which had become reliant on debt financing while it waited to complete the IPO. Underwriters have an option to buy another 750,000 shares if demand is high.

The company’s shares would begin trading publicly for the first time on Thursday morning.

HubSpot (NYSE: HUBS) was founded in 2005 by CEO Brian Halligan and technology chief Dharmesh Shah, who met while attending business school at MIT. They decided to start HubSpot after finding that many small companies had to patch together an unwieldy number of software programs to help them market their companies online.

The company faces several competitors, including standalone companies like Marketo (NASDAQ: MKTO) and individual product lines offered by larger software sellers, including Salesforce and Oracle.

Salesforce, in fact, was a venture investor in HubSpot before spending $2.5 billion to acquire a competitor, ExactTarget. Since then, HubSpot has developed new products aimed at salespeople, increasing its competition with Salesforce.

Shah and Halligan

HubSpot’s public-market debut was the second major tech-industry IPO for the Boston area this year. The online home-goods retailer Wayfair went public on Oct. 1.

Like a lot of young companies, HubSpot has historically been a money-loser as it tries to gain a large market foothold. But more recent results show that the company is trying to stabilize its financial position as it heads to the public stock markets. In the first six months of the year, HubSpot reported that it collected about $51 million in revenue, an increase of about 46 percent from a year earlier. The company’s losses grew by less than 9 percent in that same period, to nearly $18 million.

Marketo, by comparison, has reported proportionally higher losses so far this calendar year, with a nearly $26 million net loss on $68 million in sales.

Most of HubSpot’s losses are tied to its heavy spending on sales and marketing for its own services, which give mostly mid-sized business-to-business companies the ability to improve their websites, e-mail pitches, blog postings, and other online marketing assets.

HubSpot’s average revenue per customer grew from $6,580 in 2012 to more than $7,700 in 2013, an increase of about 18 percent. But the company’s customer acquisition costs grew more quickly: HubSpot spent nearly $8,300 to land each customer in 2012, compared with more than $11,600 in 2013, a jump of more than 40 percent.

As a result of its spending on company growth, HubSpot definitely needs the cash injection that the IPO can provide. As of June 30, the company had just $7.3 million in cash on hand, which is less than it’s spent per month on operating costs this year. To keep its operations humming, HubSpot drew $13 million from its $35 million line of credit.

Before the IPO, most of HubSpot’s stock was owned by the venture capitalists who infused the company with more than $100 million in private investment since its founding.

General Catalyst Partners was the biggest shareholder before the IPO, with about 27 percent of the company. Matrix Partners held about 17 percent of the company, and Sequoia Partners had a roughly 10 percent stake.

Halligan owned about 5 percent of the company before its IPO, and co-founder Shah held about 9 percent.

HubSpot also shared some of its newfound wealth with people who typically don’t get the best price on IPOs—in SEC filings, the company said its bankers had agreed to set aside 5 percent of its IPO shares for HubSpot employees and some of the company’s marketing agency partners.

Those partners, typically marketing consultants who sell HubSpot’s software to their own clients, are critical to the company’s success: HubSpot says they’re responsible for about a third of its sales and more than 40 percent of its customer base.

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