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Investing In Deep Tech - Boston

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What is 'deep tech' and what is unique about it from an investment perspective? SOSV shares the lessons learned from investing in over 800 startups, many in robotics, IoT, medtech, synthetic biology and more.

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Investing In Deep Tech - Boston

  1. 1. Investingin
 DEEPTECH June 7, 2019 — Boston www.slideshare.com/haxco
  2. 2. Benjamin Joffe Partner
 HAX (SOSV) Welcome ! Slides: www.slideshare.com/haxco
  3. 3. Investingin
 DEEPTECH March 21— San Francisco May 21 — London May 29 — Paris June 6 — NYC June 7 — Boston
  4. 4. London Paris Events so far SF
  5. 5. London Paris SF Seminar Series
  6. 6. 2018:
 STARTUP EXITS 7 MASTERCLASSES SF, NYC, London, Paris 50 EXPERTS CEOs, Corporates, VCs, Bankers, Lawyers, Stock Exchanges, etc. (incl. John Chambers, Cisco Chairman, 180 M&As)
  7. 7. AboutSOSV
  8. 8. SOSV Fund $625M AUM 800+ startups Most Active Lead Investors Globally In 2018 #1 in IoT #4 in Health Tech
  9. 9. SOSV Model Advanced prototype Lab prototype Idea Product Growth 1 2 3 4 5 Pre-pre-seed Pre-seed Seed Series A Series B, etc. Follow-on Follow-on
  10. 10. Ireland Back office London Biotech Paris Liaison Taipei Mobile Shanghai Cross-border internet Shenzhen Hardware SF Hardware Biotech NYC Food Blockchain Hands-on Capital
  11. 11. Hands-on Capital Labs Experts 01/ 02/ Unique ecosystems03/ Electronics: Shenzhen, SFBiotech: SF, London 150STARTUPS PER YEAR
  12. 12. JUMP BIKES Uber, $200M + stock HARMONIX $175M + earn-out Makeblock (val. $367M) Memphis Meats (Gates…) BitMEX (#1 Crypto exch) Formlabs GetAround Some SOSV Startups https://sosv.com/portfolio/
  13. 13. Digital Therapy Flow Neuroscience Brain Stimulation Depression Treatment Digital Diagnostic Criam Tech Instant Blood Type Diagnostic Digital Tool OpenTrons Pipetting Robot For Biotech Industrial Automation Youibot Autonomous Robots For Inspection Consumer Tech Nura Personalized Audio (Stevie Wonder) Sweden Portugal NYC China Australia https://sosv.com/portfolio/
  14. 14. Hands-on Capital • Global early stage fund • $625M AUM • Hands-on Deep Tech • Pre-seed + labs + follow-on • >800 Startups • Hardware ~250 + life sciences ~150 • 150 investments / year
  15. 15. SaaSIPOs 14years $300million SaaS vs. Deep Tech
  16. 16. WhatIs DeepTech
  17. 17. Definition Deep Tech Hard Tech Emerging Tech Frontier Tech Future Tech … I know one when I see one!
  18. 18. Definition Not simple website or app Science & Engineering Often tangible component (electronics, molecules…) 01/ 02/ 03/
  19. 19. Deep Tech Tech risk02/ Longer time03/ More capital04/ Tech mix (CS + Other)01/
  20. 20. Why Bother? Connect physical & digital world Real needs in all industries Under-funded = opportunities 01/ 02/ 03/
  21. 21. Hypothesis Car industry is the first in line (EV, A.I.). Others will follow. Tech Disruptor needed 20 years, now 10y Soon 5y or less (Luckin Coffee? 2y) Waves of innovation (e.g. fitbit => specialized tracking => digital therapy) 01/ 02/ 03/
  22. 22. John Deere buys Blue River $305M
  23. 23. J&J (Neutrogena) buys Illumask
  24. 24. Risks (Tech) x (Market) x (Execution)
  25. 25. Walls & Moats Patents Regulations Distribution Network Effects Stickiness Technology Team MOATS WALLS
  26. 26. ~$1B of Failures Jibo $72.7M Rethink Robotics $150M Airware $118M Lytro $216M Anki $182M Meta $73M Laundroid $95M
  27. 27. Moat or Grave?
  28. 28. Unicorns & IPOs Company Type Sector Valuation Funding Founded Country SpaceX B2B Space $30.5B (IPO) $2.4B 2002 US DJI Consumer Drones $15B (*) $105M 2006 China Bitmain B2B Crypto mine $15B $765M 2013 China GM Cruise* B2B AV tech $15B $3.4B 2013 US Magic Leap B2B AR $6.3B $2.3B 2011 US Auris Health B2B Surgery robot $3.4B (acq.) $733 2013 US Zoox B2B AV tech $3.2B $790M 2014 US View B2B Smart glass n.a. $1.8B 2006 US Nuro HAAS Delivery robot $2.7B $1B 2016 US Zume HAAS Pizza robot $2B $423M 2015 US Carbon B2B 3d printing $1.7B $422M 2013 US Ninebot Consumer e-scooters $1.52B $240M 2012 China Desktop Metal B2B 3d printing $1.5B $437M 2015 US Proteus B2B Medtech $1.5B $487M 2001 US Butterfly Network B2B Medical imaging $1.25B $350M 2011 US FormLabs B2B 3d printing $1B $104M 2011 US Cruise B2B AV Tech $1B (acq.) $19M 2013 US Rocket Lab B2B Space $1B $215M 2006 US Geek+ B2B Warehouse robot $1B $239M 2015 China TuSimple B2B AV trucks $1B $178M 2015 China/US OrCam Consumer Medtech $1B $86M 2010 Israel Cyberdyne B2B Exoskeletons $870M (IPO) n.a. 2004 Japan SigFox HAAS Telecom $673M* $311M 2009 France Some are fast and lean. B2B dominates (AV, robots) Old trends worked too (wearables, drones, 3d printing), but most not DT. 01/ 02/ 03/
  29. 29. Focus: Softbank 02/ 01/ The Vision Fund has become a’kingmaker’. DT is mostly B2B & HaaS Company Type Sector Funding* Founded Country GM Cruise B2B AV tech $2.25B 2013 US View B2B Smart glass $1.8B 2006 US Nuro HAAS Delivery AV $1B 2016 US Zume HAAS Pizza robot $423M 2015 US Plenty B2B AgTech $226M 2014 US Light Consumer Cameras $186M 2013 US Nauto B2B Driving Coach $174M 2015 US Brain Corp B2B AV Tech $125M 2009 US TOTAL $6.1B* * includes co-investors
  30. 30. Deep Tech Today Good news: more and more startups and investors Bad news: much fear and misconceptions, as well as funding gaps 01/ 02/
  31. 31. InvestingIn DeepTech HardwareToday
  32. 32. Deal Flow Learnings Some Biases 01/ 02/ De-risking & Milestones Specific to Deep Tech03/
  33. 33. Pre-seed = pre-trend? Deal Flow Hot = too late? 01/ 02/ See the future!03/ A.I. AR ML Blockchain VR Robots IOT Edge Cyber Security 5G EV QC Voice Always -in
  34. 34. Signals Flow of Applicants Needs of Corporates 01/ 02/
  35. 35. Sci-Fi Some Biases Ugly Duckling 01/ 02/ Make-up03/ Darwin-Wallace Paradox04/
  36. 36. Bias #1: Sci-Fi
  37. 37. Electroloom Liquid Polymer + 20,000V = ???
  38. 38. Didn’t find a market…
  39. 39. Cell Robotics A modular robot for the home?
  40. 40. Cell Robotics Modular robotics Toy? STEM? Tool? 01/ 02/ $500 on Kickstarter?03/
  41. 41. >30 staff B2G 01/ 02/ Learning speed vs. Lego (Toy-first vs. STEM-first) 03/ Cell Robotics
  42. 42. Today: Boring & Viable Simbe Robotics, Viabot, Youibot, Plecobot, Avidbots…
  43. 43. Futuristic = Risk Spectacular and Viable are often orthogonal
  44. 44. Bias #2: Ugly Duckling
  45. 45. Example 1 Prototypes might have already overcome huge tech barriers
  46. 46. Simbe Robotics A nice box & video can make a huge difference
  47. 47. Example 2
  48. 48. Adapting medical-grade tech for consumers?
  49. 49. Nura
  50. 50. Second Product Can you ‘see’ the second product in the first prototype?
  51. 51. Example 3 2014: China prototyping & retrofit + Waterloo
  52. 52. Avidbots
  53. 53. $23.6 million Series B Avidbots
  54. 54. Avidbots In Singapore airport = robot works amidst people
  55. 55. Bias #3: Makeup A pretty prototype can be still far from a product
  56. 56. Nura Prototype vs Product May 2016 prototype Jan 2018 product Investing shortly before product launch = Opportunity
  57. 57. Bias #4: Darwin-Wallace Paradox “The year has not been productive in contributions of interest and value” Thomas Bell President, Linnean Society Recognizing the significance of new ideas is not easy
  58. 58. Bias #4: Darwin-Wallace Paradox Recognizing the significance of new ideas is not easy
  59. 59. Tech Risks & Milestones Trend (market) 01/ 02/ Team03/ Timing04/
  60. 60. Do you need a PhD in everything? Tech Do patents matter? 01/ 02/ How to avoid the next Theranos?03/
  61. 61. Due Diligence Prototype check: delivers core signal processing? Assess manufacturability Price vs. BOM + Operation costs 02/ 03/ 05/ Check substance of key patent01/ Validated price point with customers?04/
  62. 62. Due Diligence Clarify the insight or action for end users Evaluate SW complexity & head start ‘What would google do?’ (or Medtronic) 07/ 08/ 10/ Determine next milestone for funding06/ Is the team using the right tech?09/ Skills needed (esp. robotics)11/
  63. 63. • Pre-product Validation • False positives • Features / price / demand Market Risk
  64. 64. Idea + Team + +
  65. 65. i-Corps (US ~100 unis + some in Canada) Pre-Pre-Seed Entrepreneur First (UK, FRA, GER, HK, SIN, Bangalore) 01/ 02/ DeepTech Founders (France / EU)03/
  66. 66. • The enemy within • Highest risk pre-product • Some can be avoided Founders Risk(s)
  67. 67. Give up earlySevere Asperger Can’t execute ‘Artist’ Silicon Valley Burn Rate Caught Up In Startup Theatre Can’t get along ‘Maker’ Addiction DeathHarassment Founders Risk(s)
  68. 68. Give up earlySevere Asperger Can’t execute ‘Artist’ Silicon Valley Burn Rate Caught Up In Startup Theatre Can’t get along ‘Maker’ Addiction DeathHarassment Founders Risk(s)
  69. 69. EntrepreneurInventor ManagerEngineer Skills, inclination, CEO/CTO/CSO, Licensing/Advisory? Founders Risk(s) Scientists as CEOs?
  70. 70. HBDI ‘Right Brain’ Intuitive ‘Left Brain’ Rational Herrmann Brain Dominance Instrument
  71. 71. Spock ‘Do what logically needs to be done’ Scotty ‘I cannot change the laws of physics’ Kirk ‘The final frontier’ Bones ‘I’m a doctor, not an engineer’
  72. 72. Timing Risk • Why now? • How deep tech to go? • 18 months ahead is great • 3 years ahead is terrible …Quantum, anyone?
  73. 73. Magic Leap Founded 2011 Raised $2.3B LaunchAug 2018 Rare case: 7y and $2B before product launch
  74. 74. Sana Health Started as sleep mask to reduce pain…
  75. 75. Sana Health Early 2016 Sleep tech? 01/ 02/ Kickstarter? Medical? Funding?03/ Sleep tech was hype, but crowded
  76. 76. Sana Today FDA route + New Positioning: “Solving Pain Without Pills” Neurotech / Neuromodulation is a thing 01/ 02/ Opioid epidemic03/ Under Armour Innovation award
 Bayer Self-Care winner 
 Mount Sinai Rehab Competition winner Medtech Innovator First prize recipient Repositioned as ‘painkiller’ = success!
  77. 77. Recent News “The latest Apple Watch seemed like the latest in wearable tech when the conference started —not so much a few hours later.”
  78. 78. Not all in one place Best Resources? R&D + initial funding 01/ 02/ Prototyping + production03/ Customers & Growth funding04/ Invention Team Prototyping Production Customers Funding
  79. 79. Labs
 Shenzhen (50,000sqft) + SF Speeding Up Prototyping Suppliers
 #1 electronics supply chain 01/ 02/ Experts & Peers 30 in-house (ID, Sourcing, DFM, etc.) >50 founders (20-30 startups) >700 alum founders (>200 startups) 03/
  80. 80. 1 year => 4 months Compressing Time Lower costs (& burn rate) 01/ 02/ Lower risk03/
  81. 81. Target the next milestone! The Best Resources NEXT
  82. 82. Funding Gap Seed is the new A New rounds: Pre-seed, Pre-pre-seed Obvious gap after pre-seed in deep tech 01/ 02/ 03/ NEXT
  83. 83. Due Diligence Do Not CAC / LTV (no cohort yet!) Pageviews Patents? (vs. business model & distribution) 02/ 03/ 05/ MRR01/ Got FDA? (would not talk about seed…)04/ (it’s not software)
  84. 84. Due Diligence Do Who pays? (medical, etc.) What’s different? (from that competitor that just raised) 02/ 03/ What’s your TAM?01/
  85. 85. Trajectories YEAR 1 YEAR 5 SaaS Deep Tech SWEET SPOT FOR SEED?
  86. 86. Panel InvestinginDeepTech
  87. 87. Moderator Benjamin Joffe Partner HAX (SOSV) John Ho Principal Anzu Partners Frank Andrasco Venture Capitalist Next47 Matt Rhodes-Kropf Managing Partner Tectonic Ventures Questions: @benjaminjoffe / ben@hax.co Joyce Sidopoulos Co-founder MassRobotics
  88. 88. Thanks! ben@hax.co www.slideshare.com/haxco

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