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How fintech and serial founders drove African pre-seed investing to new heights in 2020
When Stripe-subsidiary Paystack raised its seed round of $1.3 million in 2016, it was one of the largest disclosed rounds at that stage in Nigeria.
At the time, seven-figure seed investments in African startups were a rarity. But over the years, those same seed-stage rounds have become more common, with some very early-stage startups even raising eight-figure sums. Nigerian fintech startup, Kuda, which bagged $10 million last year, comes to mind, for example.
Also notable amidst the growth in seven and eight-figure African seed deals have been gains in pre-seed fundraising. Typically, pre-seed rounds are raised when the startup is still in the product development phase, yet to make revenue or discover product-market fit. These investments are usually made by third-party investors (friends and family), and range between $25,000-$150,000.
But the narrative as to how much an early-stage African startup can raise as pre-seed has changed.
Last year, African VCs who usually fund seed and Series A rounds began partaking in pre-seed rounds, and they don’t seem to be slowing down. Just a month into 2021, Egyptian fintech startup Cassbana raised a $1 million pre-seed investment led by VC firm Disruptech in a bid to drive expansion within the country.
So why the sudden change in appetite from investors?
Andreata Muforo is a partner at TLcom Capital, a pan-African early-stage VC firm. She told TechCrunch that last year’s run of 23 pre-seed rounds (10 of which were $150,000+ deals) per Briter Bridges data, was due to the confidence investors had in the market, especially fintech.
Startups building financial infrastructure got noticed
While most African pre-seed investments in 2020 went to fintech, there were exceptions, including Egyptian edtech startup Zedny, which raised $1.2 million; Nigerian automotive tech startup Autochek Africa, which raised $3.4 million; and Nigerian talent startup TalentQL, which raised $300,000.
Just as Paystack and Flutterwave built payment infrastructure for thousands of African businesses, these fintech startups are trying to make their mark in the sweet spots of credit and banking.
“Fintech is compelling. But while most fintech startups play around the commodities side of fintech, it’s the companies building infrastructure around the market that got most of the pre-seed validation last year,” Muforo said. Her firm, TLcom, led the $1 million pre-seed investment in Okra.
Okra is an API fintech startup. So are Mono, OnePipe and Pngme. They are building Africa’s API infrastructure that connects bank accounts with financial institutions and third-party companies for different purposes. Within the past 18 months, Mono and Pngme raised $500,000, while OnePipe raised $950,000 in pre-seed.
It is noteworthy that while these startups are clamoring to solve Africa’s open API banking issues, three of the four deals came after Visa’s $5.3 billion acquisition of Plaid last year in January.
Although the Visa-Plaid acquisition has now been called off, it is safe to say some African investors developed FOMO, handing out sizable checks to fund “Africa’s Plaid” in the process.
Digital lenders remain one of their most important customers for fintech API startups. They can access customers’ financial accounts to understand their spending patterns and know who to loan to.
Egypt’s Shahry and Nigeria’s Evolve Credit are fintech startups building credit infrastructure for their markets. Evolve Credit connects digital lenders to those who need loan services in Nigeria via its online loan marketplace. Shahry, on the other hand, employs an AI-based credit scoring engine so users in Egypt can apply for credit. The pair also secured impressive pre-seed funding — Evolve Credit, $325,000, and Shahry, $650,000.
A recurring theme: Serial founders
Muforo points out that aside from startups building fintech infrastructure, the caliber of founders was another reason pre-seed funding peaked last year.
Adewale Yusuf, co-founder and CEO of TalentQL, a startup that hires, manages and outsources talent for Nigerian and global companies, seemed to agree. He told TechCrunch that trust between the VCs and founders involved played a major role in most pre-seed rounds last year.
“It wasn’t surprising that a lot of investors put money in pre-seed rounds. I say this because we also saw existing founders and serial entrepreneurs coming back to the market. To me, these founders’ credibility was a major part of why those rounds were large,” he said.
A second-time founder himself, Yusuf is the co-founder of Nigerian tech media publication Techpoint Africa. His partner at TalentQL, Opeyemi Awoyemi, is also a serial entrepreneur. He co-founded Ringier One Africa Media-owned Jobberman, one of Africa’s most popular recruitment platforms.
According to Adedayo Amzat, founder of Zedcrest Capital, which is the lead investor in TalentQL’s round, the founders’ experience proved vital in closing the deal.
He says investors are more comfortable backing experienced founders in pre-seed rounds because they have a more mature understanding of the problems they’re trying to solve. So, in essence, they tend to raise more capital.
“If you look at pre-seed sizes, experienced founders can demand a significant premium over first-time founders,” Amzat said. “Pre-seed valuation cap for first-time founders will typically be between 400K to $1 million while we frequently see up to $5 million for experienced founders.”
It was a recurring theme last year. Yele Bademosi, who runs Microtraction, a West African early-stage VC firm, is the CEO of Bundle Africa, a Nigerian-based crypto-exchange startup that raised $450,000 in April 2020.
Shahry co-founders Sherif ElRakabawy and Mohamed Ewis also run Egypt’s largest shopping engine and price comparison website, Yaoota.
Mono co-founder and CEO Abdulhamid Hassan was the co-founder of Nigerian fintech startup OyaPay and data science startup Voyance. Also, Etop Ikpe, the co-founder and CEO of Autochek Africa, was CEO of DealDey and Cars45.
That said, Fara Ashiru Jituboh of Okra and Akan Nelson of Evolve Credit as first-time founders got investments that most of their counterparts would only dream of. For Jituboh, her solid tech background spoke for her — boasting a senior software engineering job at Pexels and engineering consultant role at Canva before founding Okra.
“We backed Fara because she’s a strong tech founder. When you look at the core of what Okra does as a tech-heavy company, you see how important it was to make the decision,” Muforo said about backing Okra’s CEO and CTO.
Nelson also told TechCrunch that his finance background helped Evolve Credit raise its six-figure sum. The team’s bullishness on finding product-market fit and the potential of Africa’s loan marketplace was also enough to bring foreign and local VCs like Samurai Incubate, Future Africa, Ingressive Capital and Microtraction on board.
While early-stage investments in African startups haven’t reached full speed, the explosion in the number of angel investors has lowered entry barriers into early-stage investing.
Now investors are beginning to show readiness toward African startups that have promise as they continue to search for the next Paystack.
“More people are willing to take risks now in the market, especially angel investors. They can easily let go of $10K-$50K because of success stories like Paystack,” Yusuf said about the $200 million acquisition by U.S. payments startup Stripe.
For all of its significance to the African tech ecosystem, what particularly stands out about Paystack’s exit is the return on investment made for early investors.
By the time it exited in October 2020, some angel investors had an ROI of more than 1,400% according to Jason Njoku in his blog post. Njoku, who took part in the round as an angel investor, is the CEO of IROKO, a Nigerian VOD internet company.
For Muforo, witnessing more early-stage investments is a big deal, one the African tech ecosystem should savor regardless of the round in question.
“Pre-seed or seed are just names investors and founders give,” she said. “What I think is most important is the fact that we’re getting more early-stage capital into Africa, and startups are getting more attention from investors, which is fantastic.”
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Extra Crunch roundup: Digital health VC survey, edtech M&A, deep tech marketing, more
I had my first telehealth consultation last year, and there’s a high probability that you did, too. Since the pandemic began, consumer adoption of remote healthcare has increased 300%.
Speaking as an unvaccinated urban dweller: I’d rather speak to a nurse or doctor via my laptop than try to remain physically distanced on a bus or hailed ride traveling to/from their office.
Even after things return to (rolls eyes) normal, if I thought there was a reliable way to receive high-quality healthcare in my living room, I’d choose it.
Clearly, I’m not alone: a May 2020 McKinsey study pegged yearly domestic telehealth revenue at $3 billion before the coronavirus, but estimated that “up to $250 billion of current U.S. healthcare spend could potentially be virtualized” after the pandemic abates.
That’s a staggering number, but in a category that includes startups focused on sexual health, women’s health, pediatrics, mental health, data management and testing, it’s clear to see why digital-health funding topped more than $10 billion in the first three quarters of 2020.
Drawing from The TechCrunch List, reporter Sarah Buhr interviewed eight active health tech VCs to learn more about the companies and industry verticals that have captured their interest in 2021:
- Bryan Roberts and Bob Kocher, partners, Venrock
- Nan Li, managing director, Obvious Ventures
- Elizabeth Yin, general partner, Hustle Fund
- Christina Farr, principal investor and health tech lead, OMERS Ventures
- Ursheet Parikh, partner, Mayfield Ventures
- Nnamdi Okike, co-founder and managing partner, 645 Ventures
- Emily Melton, founder and managing partner, Threshold Ventures
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Since COVID-19 has renewed Washington’s focus on healthcare, many investors said they expect a friendly regulatory environment for telehealth in 2021. Additionally, healthcare providers are looking for ways to reduce costs and lower barriers for patients seeking behavioral support.
“Remote really does work,” said Elizabeth Yin, general partner at Hustle Fund.
We’ll cover digital health in more depth this year through additional surveys, vertical reporting, founder interviews and much more.
Thanks very much for reading Extra Crunch this week; I hope you have a relaxing weekend.
Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist
8 VCs agree: Behavioral support and remote visits make digital health a strong bet for 2021
Image Credits: Luis Alvarez (opens in a new window) / Getty Images
Lessons from Top Hat’s acquisition spree
Image Credits: Bryce Durbin
In the last year, edtech startup Top Hat acquired three publishing companies: Fountainhead Press, Bludoor and Nelson HigherEd.
Natasha Mascarenhas interviewed CEO and founder Mike Silagadze to learn more about his content acquisition strategy, but her story also discussed “some rumblings of consolidation and exits in edtech land.”
How VCs invested in Asia and Europe in 2020
Image Credits: Nigel Sussman (opens in a new window)
Last year, U.S.-based VCs invested an average of $428 million each day in domestic startups, with much of the benefits flowing to fintech companies.
This morning, Alex Wilhelm examined Q4 VC totals for Europe, which had its lowest deal count since Q1 2019, despite a record $14.3 billion in investments.
Asia’s VC industry, which saw $25.2 billion invested across 1,398 deals is seeing “a muted recovery,” says Alex.
“Falling seed volume, lots of big rounds. That’s 2020 VC around the world in a nutshell.”
Decrypted: With more SolarWinds fallout, Biden picks his cybersecurity team
Image Credits: Treedeo (opens in a new window) / Getty Images
In this week’s Decrypted, security reporter Zack Whittaker covered the latest news in the unfolding SolarWinds espionage campaign, now revealed to have impacted the U.S. Bureau of Labor Statistics and Malwarebytes.
In other news, the controversy regarding WhatsApp’s privacy policy change appears to be driving users to encrypted messaging app Signal, Zack reported. Facebook has put changes at WhatsApp on hold “until it could figure out how to explain the change without losing millions of users,” apparently.
Hot IPOs hang onto gains as investors keep betting on tech
Image Credits: Nigel Sussman (opens in a new window)
A big IPO debut is a juicy topic for a few news cycles, but because there’s always another unicorn ready to break free from its corral and leap into the public markets, it doesn’t leave a lot of time to reflect.
Alex studied companies like Lemonade, Airbnb and Affirm to see how well these IPO pop stars have retained their value. Not only have most held steady, “many have actually run up the score in the ensuing weeks,” he found.
Dear Sophie: What are Biden’s immigration changes?
Image Credits: Bryce Durbin / TechCrunch
Dear Sophie:
I work in HR for a tech firm. I understand that Biden is rolling out a new immigration plan today.
What is your sense as to how the new administration will change business, corporate and startup founder immigration to the U.S.?
—Free in Fremont
Hello, Extra Crunch community!
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I began my career as an avid TechCrunch reader and remained one even when I joined as a writer, when I left to work on other things and now that I’ve returned to focus on better serving our community.
I’ve been chatting with some of the folks in our community and I’d love to talk to you, too. Nothing fancy, just 5-10 minutes of your time to hear more about what you want to see from us and get some feedback on what we’ve been doing so far.
If you would be so kind as to take a minute or two to fill out this form, I’ll drop you a note and hopefully we can have a chat about the future of the Extra Crunch community before we formally roll out some of the ideas we’re cooking up.
Drew Olanoff
@yoda
In 2020, VCs invested $428m into US-based startups every day
Image Credits: Nigel Sussman (opens in a new window)
Last year was a disaster across the board thanks to a global pandemic, economic uncertainty and widespread social and political upheaval.
But if you were involved in the private markets, however, 2020 had some very clear upside — VCs flowed $156.2 billion into U.S.-based startups, “or around $428 million for each day,” reports Alex Wilhelm.
“The huge sum of money, however, was itself dwarfed by the amount of liquidity that American startups generated, some $290.1 billion.”
Using data sourced from the National Venture Capital Association and PitchBook, Alex used Monday’s column to recap last year’s seed, early-stage and late-stage rounds.
How and when to build marketing teams at deep tech companies
Image Credits: Andy Roberts (opens in a new window) / Getty Images
Building a marketing team is one of the most opaque parts of spinning up a startup, but for a deep tech company, the stakes couldn’t be higher.
How can technical founders working on bleeding-edge technology find the right people to tell their story?
If you work at a post-revenue, early-stage deep tech startup (or know someone who does), this post explains when to hire a team, whether they’ll need prior industry experience, and how to source and evaluate talent.
Bustle CEO Bryan Goldberg explains his plans for taking the company public
Bustle Digital Group CEO Bryan Goldberg. Image Credits: Bustle Digital Group
Senior Writer Anthony Ha interviewed Bustle Digital Group CEO Bryan Goldberg to get his thoughts on the state of digital media.
Their conversation covered a lot of ground, but the biggest news it contained focuses on Goldberg’s short-term plans.
“Where do I want to see the company in three years? I want to see three things: I want to be public, I want to see us driving a lot of profits and I want it to be a lot bigger, because we’ve consolidated a lot of other publications,” he said.
It may not be as glamorous as D2C, but beauty tech is big money
Image Credits: Laia Divols Escude/EyeEm (opens in a new window) / Getty Images
The U.S. Federal Trade Commission is not a huge fan of personal-care D2C brands merging with traditional consumer product companies.
This month, razor startup Billie and Proctor & Gamble announced they were calling off their planned merger after the FTC filed suit.
For similar reasons, Edgewell Personal Care dropped its plans last year to buy Harry’s for $1.37 billion.
In a harsher regulatory environment, “the path to profitability has become a more important part of the startup story versus growth at all costs,” it seems.
Twilio CEO says wisdom lies with your developers
SAN FRANCISCO, CA – SEPTEMBER 12: Founder and CEO of Twilio Jeff Lawson speaks onstage during TechCrunch Disrupt SF 2016 at Pier 48 on September 12, 2016 in San Francisco, California. Image Credits: Steve Jennings/Getty Images for TechCrunch
Companies that build their own tools “tend to win the hearts, minds and wallets of their customers,” according to Twilio CEO Jeff Lawson.
In an interview with enterprise reporter Ron Miller for his new book, “Ask Your Developer,” Lawson says founders should use developer teams as a sounding board when making build-versus-buy decisions.
“Lawson’s basic philosophy in the book is that if you can build it, you should,” says Ron.
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Chinese esports player VSPN closes $60M Series B+ round to boost its international strategy
eSports “total solutions provider” VSPN (Versus Programming Network) has closed a $60 million Series B+ funding round, joined by Prospect Avenue Capital (PAC), Guotai Junan International and Nan Fung Group.
VSPN facilitates esports competitions in China, which is a massive industry and has expanded into related areas such as esports venues. It is the principal tournament organizer and broadcaster for a number of top competitions, partnering with more than 70% of China’s eSports tournaments.
The “B+” funding round comes only three months after the company raised around $100 million in a Series B funding round, led by Tencent Holdings.
This funding round will, among other things, be used to branch out VSPN’s overseas esports services.
Dino Ying, Founder, and CEO of VSPN said in a statement: “The esports industry is through its nascent phase and is entering a new era. In this coming year, we at VSPN look forward to showcasing diversified esports products and content… and we are counting the days until the pandemic is over.”
Ming Liao, the co-founder of PAC, commented: “As a one-of-its-kind company in the capital market, VSPN is renowned for its financial management; these credentials will be strong foundations for VSPN’s future development.”
Xuan Zhao, Head of Private Equity at Guotai Junan International said: “We at Guotai Junan International are very optimistic of VSPN’s sharp market insight as well as their team’s exceptional business model.”
Meng Gao, Managing Director at Nan Fung Group’s CEO’s Office said: “Nan Fung is honored to be a part of this round of investment for VSPN in strengthening their current business model and promoting the rapid development of emerging services and the esports streaming ecosystem.”
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Hims, the telehealth startup, saw its shares slip in their trading debut — and that’s fine with its CEO
Hims & Hers, a San Francisco-based telehealth startup that sells sexual wellness and other health products and services to millennials, began trading publicly today on the NYSE after completing a reverse merger with the blank-check company Oaktree Acquisition Corp.
Its shares slipped a bit, ending the day down 5% from where they started, but the company, which was founded in 2017 and now claims nearly 300,000 paying subscribers for its various offerings, has never been focused on a splashy headline about its first-day performance, co-founder and CEO Andrew Dudum told us earlier today.
On the contrary, Dudum says that while Hims might have once imagined a traditional IPO, it decided to go the special purpose acquisition company (SPAC) route because of their pricing mechanisms and because it was approached by a SPAC led by renowned money manager Howard Marks, the founder of the global alternative investment firm Oaktree Capital Management. (“We fell in love with the Oaktree team and the capital market experience and deep resources they have.”)
We talked with Dudum about that SPAC’s structure; the lockups involved now that Hims’ shares are trading; and how much of the business still centers around one of its first offerings, which was a generic version of erectile dysfunction pills. Our conversation has been edited lightly for length and clarity.
TC: You’re a Bay Area-based company selling to a mostly U.S. audience. How are you thinking about expanding that footprint geographically?
AD: We do have a small operation selling in the U.K.; we’re getting our feet wet in that market and building out a team and infrastructure and fulfillment. If you look at the regulatory landscape, there’s a huge amount of room [to grow] in Europe, Australia, Canada, the Middle East and Asia, and so in that order, we’ll start to [move into those markets].
TC: What is your average customer cost?
AD: It has come down from $200 when we first launched, to roughly $100 last year, and we make, on average, close to $300 in the first couple of years in terms of a patient’s lifetime value.
TC: How quickly do customers churn?
AD: We break down lifetime value projections by quarter cohorts, and quarter over quarter, year over year, we’re monetizing each of these cohorts better, with high-margin profiles.
As of last quarter, the business was growing 90% year-over-year, with 76% gross margins and greater cash efficiency, and that’s because as we provide more offerings, there is more cross-purchasing. Also, word of mouth is becoming more of a dynamic, with more than 50% of the traffic to the site free at this point because we have built a brand with a young demographic.
TC: When are you projecting that you’ll turn profitable?
AD: We’ve reduced our annual burn and increased our margin efficiency and organic growth, so on a quarterly basis, we think in the next couple of years is a real possibility.
Image Credits: Hims & Hers
TC: Hims’ first wellness offerings included pills for male pattern hair loss and erectile dysfunction. How much revenue does that ED business account for?
AD: What we’ve disclosed is that roughly half [of our revenue] is that sexual health category — which includes [medicines for] generic erectile dysfunction, birth control, STDs, UTIs and premature ejaculation. The other half is predominately dermatology, including hair care [to address hair loss] and acne, and we’ve more recently moved into primary care and behavioral health.
TC: For retail investors, how do you differentiate the business from that of your rival Ro, which heavily promotes its ED products?
AD: There are a number of core differences between us and public and private players. First is our real focus on diversifying our offerings. With our focus on sexual health, dermatology, primary care and behavioral health, it’s in our DNA to quickly expand into new businesses.
We also think we’re different from most [rivals] in that we really invest time in building deep relationships with [those who represent] the future of healthcare markets — people in their teens, 20s and 30s. This demographic has a different set of tech expectations and consumer expectations than people in their 40s, 50s and 60s, and if we want to build for the future, that means building for the largest body of payers in the future.
Traditional healthcare companies monetize only the sick, but optimizing around that demographic precludes you from understanding what the next generation really needs and wants. I’ve never seen such a divergence between a patient population and legacy experience, and that’s a real advantage to us as a business.
TC: Hims just went public through a SPAC in a deal that gives the company around $280 million in cash — $205 million of that from Oaktree’s blank-check company and another $75 million through a private placement deal. How much runway does that give you?
AD: The company doesn’t burn a tremendous amount — between $10 million and $20 million a year — so a relatively long runway if we keep operating the business as is. But it does allow us to expand and grow into new businesses, too, including into big categories like sleep, infertility, diabetes and other chronic conditions.
TC: What about acquisitions?
AD: We’ll keep an eye open for strategic opportunities and consolidation opportunities. More than a dozen businesses a month come to us to be consolidated into the brand, but generally speaking, we’ve had the belief that so much is in front of us that we don’t want to be distracted.
TC: Is there a lockup period for anyone?
AD: There’s a traditional lockup for executives and employees and the board.
TC: Did your SPAC sponsors get a board seat?
AD: No.
TC: How much do they now own of the company, and can they sell?
AD: Oaktree owns a couple percent and [the syndicate they brought to do the private placement] [owns] 12%. But the very reason we went with them was the quality of the team and the organization . . . and they have the added incentive for the next year or two from a compensation standpoint for the company to succeed and to prove [out their thesis that Hims is a smart investment].
TC: Do you think the traditional IPO process is broken?
AD: The traditional IPO market hasn’t changed. It takes 12 to 18 months of preparation, which is a crazy amount of time for management to be distracted, then there’s this one-day PIPE that gives institutions a tremendous amount of money instantaneously. Maybe it makes for a good CNBC headline, but at tremendous cost to the company. It’s atrocious. If you were a founder or employee and getting diluted twice as much as you have to be, you’d be really upset. It’s no surprise to me that founders like myself are looking at other modalities with better pricing and better structures.
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The only take about the future of media is that media is the future
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
This week we — Natasha and Danny and Alex and Grace — had more than a little to noodle over, but not so much that we blocked out a second episode. We try to stick to our current format, but, may do more shows in the future. Have a thought about that? equitypod@techcrunch.com is your friend and we are listening.
Now! We took a broad approach this week, so there is a little of something for everything down below. Enjoy!
- Hims is going to SPAC itself onto the public markets, which should prove interesting for other D2C startups eyeing the same move.
- The final quarter of 2020 and the full year brought an ocean of capital to bear on U.S. startups, something that we delighted in chewing on. Fintech is also hot as all heck.
- Plaid is building a fintech accelerator, which we thought was cool.
- An edtech startup based in Nigeria raised a $7.5 million Series A on the back of a really neat distribution model. The march of live, tech-powered tutoring lives on!
- TripActions raised a pallet of new capital despite having had a somewhat rough 2020 due to the pandemic. It’s a fascinating wager, and one that we will track as it earns out.
- There was lots of news in the movement space, including Microsoft helping put $2 billion into self-driving startup Cruise, electric vehicle startup Rivian raising $2.65 billion from Amazon and others, and Bolt Mobility expanding to new markets.
- Danny’s GPS story.
- Wattpad exits for $600 million, leading to Alex detailing his love of science fiction.
- a16z is doubling-down on its in-house media project, and Forbes is building out a paid newsletter service that we think is very neat.
Like we said, it’s a lot, but all of it worth getting into before the weekend. Hugs from the team, we are back early Monday.
Equity drops every Monday at 7:00 a.m. PST and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.
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Forsaking funding at a $1 billion valuation, Solugen preps a new green chemical product and a big 2021
Late last year, Solugen, a startup using synthetic biology to take hydrocarbons out of the chemicals industry, decided against pursuing a new round of funding that would have valued the company at over $1 billion, TechCrunch has learned.
Instead, the Houston-based bio-manufacturing company raised an internal round of roughly $30 million from existing investors and continued working on its latest project — a new bio-based manufacturing process for a high-value specialty chemical that can act as an anti-corrosive agent.
That work represents a potentially lucrative new product line for the company and charts a course for a host of other businesses that are refashioning the basic building blocks of life in an attempt to supplant chemistry with biology for manufacturing and production.
If Solugen can get its high-value chemical into commercial production, the company can follow the path that sustainable tech companies like Tesla have mastered — moving from a pricy specialty product into the mass market. And rather than over-promise and underdeliver, Solugen wanted to get the product line right first before raising big bucks, according to people familiar with the company’s thinking.
As the world looks to move away from oil and its byproducts to reduce greenhouse gas emissions and slow down or reverse global climate change, the chemicals industry is in the crosshairs as a huge target for disruption. Vehicle electrification solves only one part of the oil problem. The extractive industry doesn’t just produce fuel, but also the chemicals that make up most of the products that defined consumer goods in the twentieth century.
Chemicals are everywhere and they’re a huge business.
Companies like Zymergen raised hundreds of millions of dollars last year to develop industrial applications for synthetic biology, and they’re not alone. Startups including Geltor, Impossible Foods, Ginkgo Bioworks, Lygos, Novomer and Perfect Day have all raised significant amounts of capital to reduce the environmental footprint of food, chemicals, ingredients and plastics through synthetic biology.
Some of these companies are seeing early success in food replacements and ingredients, but the promise of biologically based chemicals have been elusive — until now.
Solugen’s new product will produce glucaric acid, a tough-to-make chemical that can be used in water treatment facilities and as an anti-corrosive agent — and the company can make it with a zero carbon (or potentially carbon negative) manufacturing process, according to Solugen co-founder and chief technology officer, Sean Hunt.
The glucaric acid from Solugen is cheaper to produce and more environmentally friendly than existing phosphonates that are used for water treatment — and the company has the benefit of competing against chemicals manufacturers in China.
Given the continuing tensions between the two countries, the U.S. is looking to make more high-value products — including chemicals — domestically, and Solugen’s technology is a good way forward to have home-grown supplies of critical materials.
Solugen still intends to raise more capital, the company just wanted to wait until its latest production plant for the acid came online, according to Hunt.
It’s also the fruit of years of planning. The two co-founders, Hunt and Gaurab Chakrabarti, first realized they could potentially use the technology they’d developed to make specialty chemicals back in 2017, according to Hunt. But first the company had to make the hydrogen peroxide as a precursor chemical, Hunt said.
“It’s advantageous for us to focus on this,” said Hunt. “As we scale, we can enter more commodity-type markets down the road.”
It’s all part of the notable strides the entire industry is making, said Hunt. “Synthetic biology has really made significant strides,” he said. “We have our commercial plant coming online this summer [and it proves] synthetic biology has gotten to the point where we can compete on price and performance.”
So the capital infusion will come as the company gets closer to the completion of these commercial scale facilities.
“It’s not like we were sitting on a term sheet and we said no,” Hunt said. “We want to make sure that we are hitting the milestones and the goals at a commensurate pace which is this year. I’m extremely bullish and optimistic of 2021.”
Solugen’s co-founder sees the path that his company is on as one that other startups working in the synthetic biology space will pursue to bring profitable products to market at the higher end before competing with more sustainable versions of commodity chemicals.
“How do you start a company that has this level of capital intensity?” Hunt asked. “You can start in the fine chemicals space where everything sells for tens to hundreds of dollars per pound. For us, glucaric acid is that specialty chemical and then we will do commodity.”
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Bodyguard is a mobile app that hides toxic content on social platforms
If you’re somewhat famous on various social networks, chances are you are exposed to hate speech in your replies or in your comments. French startup Bodyguard recently launched its app and service in English so that it can hide toxic content from your eyes. It has been available in French for a few years and the company has attracted 50,000 users so far.
“We have developed a technology that detects hate speech on the internet with a 90% to 95% accuracy and only 2% of false positive,” founder and CEO Charles Cohen told me.
The company has started with a mobile app that anyone can use. After you download the app and connect the app with your favorite social networks, you choose the level of moderation. There are several categories, such as insults, body shaming, moral harassment, sexual harassment, racism and homophobia. You can select whether it’s a low priority or a top priority for each category.
After that, you don’t have to open the app again. Bodyguard scans replies and comments from its servers and makes a decision whether something is OK. For instance, it can hide comments, mute users, block users, etc. When you open Instagram or Twitter again, it’s like those hateful comments never existed.
The app currently supports Twitter, YouTube, Instagram and Twitch. Unfortunately, it can’t process content on Snapchat and TikTok due to API limitations.
Behind the scenes, most moderation services rely heavily on machine learning or keyword-based moderation. Bodyguard has chosen a different approach. It algorithmically cleans up a comment and tries to analyze the content of a comment contextually. It can determine whether a comment is offensive to you, to a third-party person, to a group of persons, etc.
More recently, the startup has launched a B2B product. Other companies can use a Bodyguard-powered API to moderate comments in real-time on their social platforms or in their own apps. The company charges its customers using a traditional software-as-a-service approach.
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South African startup Aerobotics raises $17M to scale its AI-for-agriculture platform
As the global agricultural industry stretches to meet expected population growth and food demand, and food security becomes more of a pressing issue with global warming, a startup out of South Africa is using artificial intelligence to help farmers manage their farms, trees and fruits.
Aerobotics, a South African startup that provides intelligent tools to the world’s agriculture industry, has raised $17 million in an oversubscribed Series B round.
South African consumer internet giant Naspers led the round through its investment arm, Naspers Foundry, investing $5.6 million, according to Aerobotics. Cathay AfricInvest Innovation, FMO: Entrepreneurial Development Bank and Platform Investment Partners also participated.
Founded in 2014 by James Paterson and Benji Meltzer, Aerobotics is currently focused on building tools for fruit and tree farmers. Using artificial intelligence, drones and other robotics, its technology helps track and assess the health of these crops, including identifying when trees are sick, tracking pests and diseases, and analytics for better yield management.
The company has progressed its technology and provides to farmers independent and reliable yield estimations and harvest schedules by collecting and processing both tree and fruit imagery from citrus growers early in the season. In turn, farmers can prepare their stock, predict demand and ensure their customers have the best quality of produce.
Aerobotics has experienced record growth in the last few years. For one, it claims to have the largest proprietary data set of trees and citrus fruit in the world, having processed 81 million trees and more than a million citrus fruit.
The seven-year-old startup is based in Cape Town, South Africa. At a time when many of the startups out of the African continent have focused their attention primarily on identifying and fixing challenges at home, Aerobotics has found a lot of traction for its services abroad, too. It has offices in the U.S., Australia and Portugal — like Africa, home to other major, global agricultural economies — and operates in 18 countries across Africa, the Americas, Europe and Australia.
Image Credits: Aerobotics
Within that, the U.S. is the company’s primary market, and Aerobotics says it has two provisional patents pending in the country, one for systems and methods for estimating tree age and another for systems and methods for predicting yield.
The company said it plans to use this Series B investment to continue developing more technology and product delivery, both for the U.S. and other markets.
“We’re committed to providing intelligent tools to optimize automation, minimize inputs and maximize production. We look forward to further co-developing our products with the agricultural industry leaders,” said Paterson, the CEO in a statement.
Once heralded as a frontier for technology centuries ago, the agriculture industry has stalled in that aspect for a long while. However, agritech companies like Aerobotics that support climate-smart agriculture and help farmers have sprung forth trying to take the industry back to its past glory. Investors have taken notice and over the past five years, investments have flowed with breathtaking pace.
For Aerobotics, it raised $600,000 from 4Di Capital and Savannah Fund as part of its seed round in September 2017. The company then raised a further $4 million in Series A funding in February 2019, led by Nedbank Capital and Paper Plane Ventures.
Naspers Foundry, the lead investor in this Series B round, was launched by Naspers in 2019 as a 1.4 billion rand (~$100 million) fund for tech startups in South Africa.
Phuthi Mahanyele-Dabengwa, CEO of Naspers South Africa, said of the investment, “Food security is of paramount importance in South Africa and the Aerobotics platform provides a positive contribution towards helping to sustain it. This type of tech innovation addresses societal challenges and is exactly the type of early-stage company that Naspers Foundry looks to back.”
Besides Aerobotics, Naspers Foundry has invested in online cleaning service SweepSouth, and food service platform Food Supply Network.
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PlayVS acquires GameSeta to accelerate expansion into Canada
PlayVS, the esports company bringing organized leagues to high schools and colleges, is today announcing its first acquisition. The startup, which has raised more than $100 million, has acquired GameSeta, a Vancouver-based startup that is also looking to provide infrastructure for high school esports teams. The terms of the deal were not disclosed.
The deal will accelerate PlayVS during its growth phase and help it expand into the Canadian market. GameSeta has a partnership with BC School Sports, the governing body for organized school sports in British Columbia, which will transfer to PlayVS.
PlayVS has a similar (and exclusive) partnership with NFHS, the high school equivalent of the NCAA, here in the States. The company has also sprinted into the college market, launching a college product as part of a partnership between PlayVS and Epic Games. Since launching a college offering, total player growth is up 460 percent. The company has also launched a new $900,000 scholarship pool for high schools and colleges.
Founded by Delane Parnell in the beginning of 2018, PlayVS has grown rapidly, brokering partnerships with school sports organizations and publishers alike. In fact, PlayVS title offerings include League of Legends, Rocket League, SMITE, Overwatch, Fortnite, FIFA 21 and Madden NFL 21. PlayVS has served more than 19,000 high schools across all 50 states. It boasts more than 230,000 registered users.
PlayVS acts as a portal for schools to create esports teams and compete against other schools. Traditional sports like basketball and baseball have established systems (and governing organizations) to organize league schedules, playoffs, referees and more. PlayVS has positioned itself as that governing body and organizational system for esports.
Not only does PlayVS facilitate these leagues, but it also offers colleges and esports organizations a much-needed recruitment tool, letting them view games and track metrics of individual players.
As part of the acquisition, GameSeta’s Tawanda Masawi and Rana Taj will join the PlayVS team and lead Canadian operations.
Alongside geographic expansion, PlayVS is also looking to expand beyond high schools and colleges with plans to launch a direct to consumer product.
“We’re going to launch some direct consumer products directly in partnership with publishers to open up the PlayVS ecosystem so people can organize and join competitions, whether they are associated with high schools or otherwise,” said Parnell. “We’re really excited about that. The markets in general have just shown great appetite for gaming as a form of entertainment and content. Obviously, players are really excited about eSports as a form of content and a way to engage in competition and so we want to make sure that PlayVS is a place where people compete more broadly.”
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Cloud infrastructure startup CloudNatix gets $4.5 million seed round led by DNX Ventures
CloudNatix founder and chief executive officer Rohit Seth. Image Credits: CloudNatix
CloudNatix, a startup that provides infrastructure for businesses with multiple cloud and on-premise operations, announced it has raised $4.5 million in seed funding. The round was led by DNX Ventures, an investment firm that focuses on United States and Japanese B2B startups, with participation from Cota Capital. Existing investors Incubate Fund, Vela Partners and 468 Capital also contributed.
The company also added DNX Ventures managing partner Hiro Rio Maeda to its board of directors.
CloudNatix was founded in 2018 by chief executive officer Rohit Seth, who previously held lead engineering roles at Google. The company’s platform helps businesses reduce IT costs by analyzing their infrastructure spending and then using automation to make IT operations across multiple clouds more efficient. The company’s typical customer spends between $500,000 to $50 million on infrastructure each year, and use at least one cloud service provider in addition to on-premise networks.
Built on open-source software like Kubernetes and Prometheus, CloudNatix works with all major cloud providers and on-premise networks. For DevOps teams, it helps configure and manage infrastructure that runs both legacy and modern cloud-native applications, and enables them to transition more easily from on-premise networks to cloud services.
CloudNatix competes most directly with VMware and Red Hat OpenShift. But both of those services are limited to their base platforms, while CloudNatix’s advantage is that it is agnostic to base platforms and cloud service providers, Seth told TechCrunch.
The company’s seed round will be used to scale its engineering, customer support and sales teams.
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