WP Pro Online

As ChatGPT has so aptly demonstrated, AI is now truly entering the mainstream consciousness. That’s why we weren’t very surprised when a slew of investors told us they rarely see a biotech startup that doesn’t incorporate AI in some form or other these days.

“Most of the companies we have seen have an AI component to support the discovery or development processes,” Francisco Dopazo, a general partner at Humboldt Fund told TechCrunch recently.

But despite becoming quite the buzzword, AI’s apparent ubiquity in biotech isn’t actually driving deal flow or higher valuations. So to get a better idea of how AI is affecting biotech in 2022, we asked six investors to tell us what they look for in a biotech startup today.

For Franck Lescure, a partner at Elaia Partners, in biotech, having an AI component isn’t an automatic deal closer. “We do not favor biotech startups with extant AI over those without: Bio-revolution is not only digital. Digital is one tool; the other major tool is the living organism,” he said.

VCs are also increasingly looking for what biotech startups can do with AI beyond just R&D, and are wary of companies that use the technology as a marketing tool.

“When evaluating ‘AI for drug discovery companies,’ I view AI as a tool,” Shaq Vayda, principal at Lux Capital, told TechCrunch. “Much like how any modern biotech company is using the latest and greatest tools, AI is becoming more and more common as part of biotech workflows. The bigger question for investors is getting a better understanding of what exactly AI is attempting to model and predict.”

Also, just because a startup uses AI doesn’t mean it can escape being compared to struggling public biotech comparables. “The public markets are the final arbiters of value, and the valuations coming back to earth this year have begun to flow through to startup funding,” said Sarah Guo, founder of Conviction. “I expect we’ll continue to see some digestion through the next year or two, as many mid-stage companies have built major war chests and don’t yet need to come back to market.”

The survey also covers the implications of U.S sanctions on China for startups in the space, considerations for startups thinking of taking capital from government bodies, how to pitch these investors, and more.

We spoke with:

Robert Mittendorff MD, general partner and head of healthcare, B Capital
James Coates, health & human performance principal, Decisive Point
Shaq Vayda, principal, Lux Capital
Franck Lescure, partner, Elaia Partners
Francisco Dopazo, general partner, Humboldt Fund
Sarah Guo, founder, Conviction

Robert Mittendorff MD, general partner and head of healthcare, B Capital

The NASDAQ Biotechnology Index peaked in 2021. Have declines in the public-market valuations of biotech companies impacted your investments in the sector?

Public market biotechs are dramatically down as interest rates rise and the focus on near-term development outweighs the promise of longer-term results and approvals. As a result, a significant proportion of biotech companies are trading below cash.

Given the substantial and positive flow of data in the space, we view market sentiment as overly negative. These valuations have affected private-market rounds’ size, pricing and structure. Private biotechs are considering the reprioritization of their assets — deciding whether to partner second or third assets with strategics, and evaluating structure in tranched financings to reach their fundraising targets.

Of the biotech startups you’ve seen lately, how many had an AI component? Do you favor biotech startups with extant AI capabilities over those without?

AI has become a very important part of next-generation drug discovery in both the small molecule and biologics spaces. Boston Consulting Group (BCG) partner Chris Meier reported in the March 22 Issue of Nature Reviews Drug Discovery that 24 “AI native” drug discovery companies have a combined 160 disclosed discovery programs. We are many more above this.

Recently our own portfolio companies Atomwise and InSilico each inked $1.2 billion deals with Sanofi. Still, the majority of biotechs raising capital are not “AI-enabled.” This isn’t a necessary condition for us, but in many spaces, computational approaches can rapidly improve drug discovery success and speed, at a potentially lower cost.

We also see AI being used in the biologics space, although the technology is used there far earlier. AI-enablement doesn’t increase our interest unless the technology is robust, mature and adds value to the platform in a meaningful way.

IBM sold Watson Health to private equity in 2022 after investing billions into it. What can biotech startups and investors learn from what could be seen as a cautionary tale?

Biotech companies will ultimately be measured largely by their therapeutic pipelines and portfolios rather than by their tech platform.

AI for AI’s sake doesn’t hold water anymore. Results, whether in the form of novel therapeutic programs, diagnostic capabilities, or other clinically meaningful outcomes, are necessary.

We know quite a few startups are working on AI-assisted drug or protein discovery. Where else can AI play a role in healthtech?

AI is a capability, or more accurately described as a set of computational capabilities that can be applied to a set of problems where conventional techniques have demonstrable limitations. AI technology can play a role in biologics, small molecules, and even cell therapy.

We have witnessed its application in every aspect of a biopharmaceutical’s business — from discovery, clinical development, and applications in real-world evidence creation to go-to-market motions and post-market patient engagement.

AI is not a monolith; as a set of capabilities, the power of learning systems affords benefits to many previously difficult or intractable problems.

How commercially viable will personalized medicine be in the next five years?

Personalized medicine is already here. See the success in oncology over the last decade, from targeted therapies that are based upon tumor genomics to cell therapies that are N-of-one therapies, where a patient’s own immune cells are engineered to attack the cancer.

Personalized medicine as a viable business has already borne out. The question of how far we can go with personalized therapy is the one being answered in the market today.

Clearly, many therapies do not need hyper-personalization, but as we learn more about cancer, metabolic disease, and neurological disorders, we are enabled with advancements in biologic and computational science to customize or configure therapies for each patient.

Y Combinator welcomed a significant number of healthtech startups in its recent batches. Has YC’s presence had any impact on early-stage valuations?

Y Combinator has been a net positive force in driving innovative experimentation at the early stages of company development. Their healthtech cohorts are solid, and their apprentice model works well there.

They are still perfecting their approach to projects that focus on biologic science, but I remain optimistic. They have had far less of an effect on valuations for us than the larger momentum firms that recently moved into healthcare over the last few years.

How has due diligence in this space changed in 2022?

We have welcomed the investment environment of 2022 as both companies and venture investors can diligence each other at a more natural pace. Venture capitalists and founders need time in the process of diligence to understand each other, and the fervent environment of 2021 diminished and, in some ways, attempted to commoditize both.

As venture capitalists, we focus on selecting teams and projects that have the highest merit as transformative companies. This exercise takes significant effort and a clear understanding of a number of areas that cannot be accomplished in a day.

Diligence is more efficient now than in 2019, but we have returned to a far healthier pace for both founders and VCs.

Is Big Pharma interacting more with biotech startups this year than in prior years? When approaching yet-private companies in the space, do the majors favor M&A or corporate venture activity?

We are starting to see more deal-related activity pick up, but with a heavy tilt towards business development deals, and some corporate venture activity. Biotech has proven its worth as the engine of innovation for the biopharmaceutical industry, and larger strategics have clear programs for engaging with smaller venture-backed entities.

One would imagine given the valuations we are seeing in the venture-backed ecosystem that more M&A would occur given the quality of many of these assets relative to price, but we are at the early stages of that curve.

We heard that U.S. sanctions on China could extend to biotech. What impact could this have on AI-enabled biotech startups elsewhere?

Clearly, CFIUS continues to have important implications on venture financing across all sectors. Biotech is no different, and there may be more sensitivity moving forward, especially as it relates to advanced technologies, particularly in tech and biology.

This may have a modest cooling effect on the pricing of some assets, but I doubt it will affect whether quality companies and teams are funded properly.

Should AI-enabled biotech startups take non-dilutive capital from government entities? Why or why not?

This is a complex question. If the entity is a U.S. government affiliate, the answer is maybe. For other governments, in particular those outside the U.S. or Europe, it is a more challenging question.

Government funding nearly always has conditions of some kind that have to be clearly balanced with the future path of the company. If the funding is from a military source, the implications of dual-use technologies must be considered, and so must be the strategic drift that such funding might encourage.

Are you open to cold pitches? How can founders reach you?

Yes, but warm pitches are usually better. You likely have someone in your network who is also in mine. My email is rmittendorff@bcapgroup.com.

James Coates, health and human performance principal, Decisive Point

The NASDAQ Biotechnology Index peaked in 2021. Have declines in public-market valuations of biotech companies impacted startup investment in the sector?

Definitely. Going public is a preferred exit strategy for many, and those valuations have just been cut by more than 80%, driving down demand for all but the highest-quality startups. As evidenced by the XBI itself, such cycles are part of the sector.

Of the biotech startups you’ve seen lately, how many had an AI component? Do you favor biotech startups with extant AI capabilities over those without?

The ubiquity of AI in pitches that I see is striking. It’s hard for a biotech company to convince me they are doing more than just using AI as a component of their R&D (which they probably ought to be!).

IBM sold Watson Health to private equity in 2022 after investing billions into it. What can biotech startups and investors learn from what could be seen as a cautionary tale?

Commercialization and market expansion are not necessarily immediate downstream consequences of innovation for companies.

We know quite a few startups are working on AI-assisted drug or protein discovery. Where else can AI play a role in healthtech?

Anything involving data, be it electronic health records or imaging and image-guided procedures. We’re particularly excited by cognitive neuroscience and human performance in this context.

Y Combinator welcomed a significant number of healthtech startups in its recent batches. Has YC’s presence had any impact on early-stage valuations?

We work closely with many innovative ecosystems in health and life sciences. None of the investments we are most excited about are from YC (at this time).

How has due diligence in this space changed in 2022?

As I mentioned in my TechCrunch article: cash run-way, non-dilutive capital and market size have reemerged as the key metrics in determining whether or not to invest alongside the science.

Should AI-enabled biotech startups take non-dilutive capital from government entities? Why or why not?

If it aligns with the commercial trajectory of the company, then yes. If the grant or contract doesn’t align with what the company aims to accomplish, they should not take the funding (unless in life support mode!).

Are you open to cold pitches? How can founders reach you?

6 investors discuss why AI is more than just a buzzword in biotech by Anna Heim originally published on TechCrunch

Heartex, the well-funded machine learning data labeling startup, is launching a major update to its platform today that will open up new use cases for its tools by making annotating audio files in the commercial and open source versions of its Label Studio a lot easier for its users. These updates include a new user interface, optimized for working with audio files, the ability to annotate longer files (up to two hours in length) and millisecond controls in the built-in annotation tool. There is also now a new rendering engine for displaying waveforms. In a previous update, Heartex also added to its tool features like frame-by-frame video object tracking and an overhauled annotation UI.

The company says about 150,000 users are currently relying on Label Studio, with more than 95 million annotations created so far.

“When we were originally thinking about building the data labeling solution, we did a lot of data scientist interviews,” Heartex co-founder and CEO Michael Malyuk told me. “And what we figured out is that many of them say they don’t have enough flexibility with existing tools. There is a tool for images, but you can only put a single image on the screen. There is a tool for our audio, but it’s very hard-coded in terms of the use case. And we thought that for the Label Studio, when the data scientists would have a question mark inside their heads ‘does it support my use case?’ The answer always has to be yes — it always has to support your use case.”

And, of course, to label data, all you need to be is a subject matter expert, not a software engineer. The idea behind Label Studio is to enable virtually anyone to label your data. “We think that every AI company is going to transform into a data labeling company or a dataset development company,” Malyuk said. Essentially, he said, Heartex wants to make Label Studio the de facto IDE for dataset development.

Looking ahead, he noted that the company plans to invest heavily in its user community — and it plans to host its first Label Studio user conference next year.

Heartex’s Label Studio makes labeling audio for ML easier by Frederic Lardinois originally published on TechCrunch

Silicon Valley law firm Cooley recently reported that it “handled 298 disclosable venture capital financings for Q3 2022, representing $8.1 billion of invested capital, continuing a downward trend for both metrics and representing the lowest for both since Q4 2019.”

The firm said that deal volume, dollar volume and deal size for financings of life sciences companies also continued to decline in Q3 2022 compared to Q2 2022 and 2021.

Yet, November was also when U.S. bank JP Morgan chose to announce the launch of its healthcare venture capital practice, which will invest in early- to growth-stage companies in the space.

JP Morgan’s announcement comes at a time when, in the words of B Capital general partner and head of healthcare Robert Mittendorff M.D, “public market biotechs are dramatically down as interest rates rise and the focus on near-term development outweighs the promise of longer-term results and approvals.”

Mittendorff isn’t alone in feeling this way. Six active biotech investors we surveyed recently told us that the macro environment has definitely had a big impact on deal flow, valuations and M&A in biotech.

Where does that leave private biotechs? Mittendorff says that startups in the space are “considering the reprioritization of their assets, deciding whether to partner second or third assets with strategics, and evaluating structure in tranched financings to reach their fundraising targets.”

However, Big Pharma’s M&A appetite isn’t as strong as people expected, said Lux Capital principal Shaq Vayda.

“While the broader capital markets were forecasting a highly acquisitive appetite from the top pharma companies due to depressed valuations, in practice, it appears they prefer partnerships plus royalty agreements for the later-stage programs and corporate VC as a tool for earlier-stage involvement.”

This isn’t necessarily bad news for venture capitalists, who seize opportunities that others aren’t even looking at. For instance, Mittendorf noted that he and his B Capital colleagues “view market sentiment as overly negative.”

Among the opportunities biotech VCs are seeing, it is more and more common for an AI component to be involved. “The ubiquity of AI in pitches that I see is striking,” Decisive Point health and human performance principal James Coates told TechCrunch.

You may already have heard of AI being involved in drug discovery, but there’s more, said Conviction founder Sarah Guo.

“We’ve seen amazing progress over the past few years in AI models for protein folding and docking — key scientific problems. But when we look to the commercial side, there are also opportunities for richer use of data and smarter software workflows to increase efficacy and efficiency across the board in healthcare: from diagnostics, telemedicine, clinical trials, patient engagement and clinician decision support to revenue cycle management and claims processing,” she said.

However, investors are also being more thorough in their due diligence than in previous years, and not just because of Theranos. For instance, Elaia Partners partner Franck Lescure said that his firm saw “an exponential increase in concern about climate and environmental issues, whatever the project is — which used to be only a ‘nice to have.’”

Among other trends, the impact of worsening U.S.-China relations is on investors’ minds. “We already have seen CFIUS impacting some of the deals we have participated in,” Humboldt Fund general partner Francisco Dopazo confirmed.

If U.S. sanctions on China were to extend to biotech, Dopazo said that “the impact could go from financing (e.g., companies will not be able to tap strong and strategic Chinese capital) and scaling (e.g., more difficult access to sophisticated CROs) to business development and commercialization (e.g., fewer options for business development deals). Clearly a negative short-term/midterm impact to the industry as a whole.”

To find out more about how investors are thinking about the implications of U.S sanctions on China, what startups should consider when capital from government bodies, how to pitch these investors, and more, read the full survey here.

As AI pervades biotech, what are investors looking for in 2023? by Anna Heim originally published on TechCrunch

Just a few months after buying fellow robotic software firm Vicarious, Alphabet-owned Intrinsic has acquired several divisions within Open Robotics, the company behind the widely-used robotics software packages Gazebo and Robotic Operating System (ROS).

Specifically, Intrinsic is buying Open Source Robotics Corporation (OSRC), the for-profit arm of Open Robotics, and Open Source Robotics Corporation Singapore (OSRC-SG), the portion of the business that led efforts on a project called Open-RMF for interoperability between fleets of robots and physical infrastructure (e.g. doors and elevators). Open Robotics’ nonprofit arm, Open Source Robotics Foundation (OSRF), won’t be impacted by the deal outside of several new executive appointments, according to Open Robotics co-founder and former CEO Brian Gerkey.

In a blog post announcing the acquisition, Gerkey assures that there won’t be any disruption in day-to-day activities with respect to OSRF’s oversight of the ROS robotics middleware, the Gazebo 3D robotics simulator and Open-RMF. OSRF will remain in charge of the open source intellectual property, project governance and growing the ROS, Gazebo and Open-RMF communities after the deal closes. It’ll also continue to administrate the Github organizations, run the respective project websites, put together the annual ROSCon convention, and support TurtleBot, the low-cost robot kit manufactured by Open Robotics in partnership with Clearpath Robotics and ROBOTIS.

“Together we will give the robotics community great new features in ROS, Gazebo, and Open-RMF, while also building new products and services on top … You can expect ROS 2 Iron Irwini to be available in May 2023 on schedule,” said Gerkey, who will join Intrinsic as part of the OSRC team post-acquisition but continue to serve on the board of OSRF. “We will continue to improve ROS, Gazebo, and Open-RMF so that they can be used in even more domains, with ever-higher demands for software quality, testing, and platform support.”

Headquartered in Mountain View, OSRF — which predates Open Robotics — was founded in 2012 with the mission of supporting “the development, distribution and adoption of open source software for use in robotics research, education and product development.” Its beginning can be traced to Willow Garage, a robotics research lab and incubator created by Scott Hassan, an early Google engineer-turned-billionaire tech entrepreneur. Willow Garage was gradually dissolved into a number of spin-offs, including OSRF.

OSRC launched in September 2016 and together with OSRF became known as Open Robotics. In 2018, Open Robotics opened OSRC-SG and announced collaborations with the Singapore government to work on robotics applications for the healthcare sector.

Open Robotics funds its operations through the contributions of various public and private entities including DARPA, NASA, Amazon, Bosch, Nvidia and the Toyota Research Institute. DARPA awarded OSRF its first contract to support open source simulation software for the DARPA Robotics Challenge, and OSRF has in turn provided resources to support NASA’s Space Robotics challenge and the DARPA Subterranean Challenge.

Intrinsic got its start more recently. Spun out of Alphabet’s X R&D lab and led by Wendy Tan-White, the former VP of Moonshots at Alphabet, the company is focused primarily on developing control software for industrial robots. As my colleague Brian Heater notes, Intrinsic has mostly stayed silent since its launch, opting instead to focus on building out some technology pilots with manufacturing firms. But Tan-White did reveal in a recent interview with TechCrunch that Intrinsic plans to launch a software layer next year that will be able to interface with automotive assembly, electronics manufacturing, and logistics robots, allowing users to create apps and test them in a simulator before deploying them on real-world machines.

“Our mission is to democratize access to robotics. We believe that the long-term support for developers of the global ROS community is key to this mission,” Intrinsic said in a statement about the Open Robotics acquisition today provided to The Robot Report. “Our team is eager to welcome and work with our new colleagues, expand our use and integration of ROS tools, and build the Intrinsic platform. As we work together to support and serve developers, we see immense value in creating a software platform that expands access to intelligent robotics in a way that’s compatible, useful, and open, while creating countless opportunities where they didn’t exist before.”

Alphabet’s Intrinsic acquires DARPA-backed firm behind open source robotics software by Kyle Wiggers originally published on TechCrunch

A short one this week, as I’m taking some time off. I didn’t want to leave you hanging, so I’ve spoken with some leading names in the field to keep Actuator chugging along. Last week, we spoke to MassRobotics’ chief of operations, Joyce Sidopoulos. Next week, we’ll be talking to U.C. Berkeley’s Ken Goldberg.

Right now, we’ve got some insight from the VC side. Peter Barrett is a co-founder of Palo Alto–based Playground Global, which has invested in a number of key robotics firms, including Agility, RightHand, FarmWise, Fabric, Canvas Technology and Owl Labs.

Q&A with Peter Barrett

TC: What was the biggest robotics story of 2022?

PB: The Great Autonomous Vehicle Capitulation. Ford and VW abandoning robotaxis are another indication that autonomous vehicles are decades from ubiquity. Autonomous vehicles may be inevitable, but they are certainly not imminent despite lots of very clever people and eye-watering amounts of capital pouring into the domain.

We have had autonomous vehicles driven by neural networks since the ’80s. I think we are about halfway there.

The good news is that in the interim, we do have a mature technology that improves traffic 30% and reduces fatalities at intersections by 90%. It is called a roundabout.

What are your biggest robotics predictions for 2023?

The biggest trend in 2023 will be the realization that robots are best used to amplify people rather than replacing them. Robots as collaborators that work for people in human environments is the best way of exploiting the unique capabilities of both.

How profound of an impact has the pandemic had on robotics?

There are 500,000 unfilled jobs in logistics in the U.S. at the moment. Similar gaps exist in other critical domains, in farming, mining, etc. We need more scalable and practical automation technologies to make people more productive and take on the dull, dirty or dangerous jobs that are otherwise going unfilled.

What under-addressed category deserves more focus from robotics startups and investors?

Life science is yet to have its industrial revolution. Individualized lifesaving therapies (think CAR T) are preposterously expensive, largely due to lack of scalable automation and logistics. Lab operations are stymied by islands of incompatible automation and no common ontologies or data formats, and humans are not integrated into the process. Companies like Artificial are tackling the software layer to orchestrate labs and pharma, but new classes of automation systems are needed to tackle the physical layer.

How will automation impact the workforce of the future?

Human dexterity and cognition will be amplified by strong, trustworthy, collaborative robots that literally do the heavy lifting. As stated above, it is all about amplifying people, not replacing them.

Are home robotics finally having their moment?

The Roomba is over 20 years old and is still the only non-toy robot that has any useful role to play in the home. The simple genius of the original design has been replicated countless times but is rarely improved upon: ask Rodney Brooks about the unwarranted innovation of SLAM versus random bumping.

We still don’t have robots that can cook or clean or be generally useful around the house, largely because we don’t have the cognition or dexterity to do a credible job in unstructured environments. Like the technology gaps that need to be filled to deliver autonomous vehicles, these capabilities will eventually emerge but don’t hold your breath.

What more can/should the U.S. do to foster innovation in the category?

How about a robotics/AI equivalent of the CHIPS Act?

Investing in the future of robotics by Brian Heater originally published on TechCrunch

In September, the FBI warned that more than half of connected medical devices in hospitals had known critical security vulnerabilities, and these flaws are leading to a surge in attacks on the healthcare industry. As Carly Page reported, MedCrypt raised a $25 million round to help device manufacturers think security-by-design when creating the next generation of medical devices.

The company is a Y Combinator graduate that provides software for anything the U.S. Food and Drug Administration would consider a medical device where cybersecurity could be a concern, from insulin pumps and heart rate monitors to AI-based radiology tools and autonomous robots. I’m sure we can all agree that we don’t want to live in a world where people get blackmailed so hackers won’t send their critical health devices on the fritz, so let’s take a look at the story MedCrypt shared with its investors to raise its Series B.

We’re looking for more unique pitch decks to tear down, so if you want to submit your own, here’s how you can do that.

Slides in this deck

The MedCrypt Series B deck is a tidy 12-slide deck. The company’s COO, Vidya Murthy, who shared the deck with me, said that it’s as-pitched, except that some of the customer adoption information has been redacted. Makes sense; security is sensitive business, and I imagine keeping the customer list under your hat might be a smart move. The company does claim that three of the top five device manufacturers use their products.

Cover slide
Problem slide
Target audience/market size slide
Opportunity slide
Mission slide
Product slide: Vulnerability tracking
Product slide: Behavior monitoring
Product slide: Cryptography
Product slide: MedISAO
Team slide
Summary/traction slide
Closing slide

Three things to love

MedCrypt’s slide deck shows that it is a mature organization with a broad product lineup and even the beginnings of an ecosystem influence play. The deck is pretty unusual in that it is missing a fair amount of information that I’d expect to see in a deck from a company at this stage, but the narrative is clean and (mostly) easy to follow.

A surprising amount of the deck focuses on the company’s product lineup, with four of the 10 content slides dedicated to that. It makes sense to tell the story of a company through its products, but the deck itself doesn’t do a great job of that; it’s obvious that it needs a voice-over to contextualize this information.

Rallying the industry

This slide is at once very good and pretty lacking. When it first came up, I was confused about what MedISAO was and why it was on the company’s slide deck. It shows that this deck was designed with a voice-over in mind, rather than being readable on its own. This slide comes after three slides that explain MedCrypt’s products and uses the same design. Perhaps that should have been the tip-off that this is also one of the company’s products, but I found it confusing at first. Why is it good that the FDA recommends ISAO memberships? What the hell even is an ISAO? (I had to Google it; it’s an information sharing and analysis organization). Why is it important that MedISAO is good for MDM? (I know, I know. I had to google that, too: medical device manufacturer). Yay, sales pipeline, I suppose?

When I visited the MedISAO website, it finally clicked. The site’s FAQstates that “MedISAO is organized by MedCrypt, Inc., a healthcare-first cybersecurity company.”

So! We got there in the end, which isn’t really a good thing to say about a pitch deck. Whatis tremendously impressive, though, is that if MedCrypt is able to be the central repository for sharing security information across all medical devices, it has an opportunity to keep a finger on everything that’s going on across its entire industry. It’s a really powerful position to be in.

Of course, there’s nothing on this slide about how successful it is so far, and its website says “MedISAO does not publish a complete list of member organizations, but you can see a partial list of members on the home page.” It’s hard to gauge whether this is a mature, successful initiative that’s helping cement MedCrypt in its space or a website the company flung up over a couple of afternoons. I would have loved to see some metrics here, specifically about the value of the sales pipeline from the site and what impact it has.

A gut punch of an opportunity slide

One of the big questions an investor asks themselves is whether there is a market for a product or company. Regulatory shifts can be a powerful driver for adoption. For example, before GDPR legislation went into effect in May 2018, every website in Europe and every company that wanted to do business with EU countries very quickly needed to make changes. That created a booming industry for web development houses that specialized in privacy.

Well, it seems like the same is happening in the medical device industry; this slide claims that more than $1 trillion worth of devices need to get secured to be in compliance. Unlike web development, however, this is a pretty specialized industry. If you thought GDPR was wild, get a load of HIPAA. On top of that, it’s often non-trivial to update the firmware on embedded electronic devices (that’s part of the reason we are in this mess in the first place).

This slide is an absolute slam dunk: It doesn’t take a lot of imagination to see how there’s an enormous market with a lot of money at stake (and a lot of money to spend) — with a ticking clock. It’s a perfect storm, and MedCrypt has built a boat that just might be able to weather it.

Strong summary slide

Personally, I’m not a fan of READING LARGE AMOUNTS OF TEXT IN ALL CAPS; it’s shouty and reader-unfriendly. It also means that people who are adept at speed-reading aren’t able to use their speed-reading skills. That aside, this slide is a great one to end on. It includes a huge amount of really good information: It summarizes the market opportunity, products, number of customers and previous fundraises, and helps set the tone for the Q&A at the end. Another approach would have been to move the summary slide to the beginning of the deck to set the tone, but it works either way.

In the rest of this teardown, we’ll look at three things MedCrypt could have improved or done differently, along with its full pitch deck!

Pitch Deck Teardown: MedCrypt’s $25M Series B deck by Haje Jan Kamps originally published on TechCrunch

After reports circulated that “Westworld,” among other titles, would soon be pulled off HBO Max, the company sent out an announcement via email yesterday confirming the sad news. Westworld isn’t the only show to get the axe.

More than a dozen shows will leave the streaming service in the coming days, including “The Nevers,” “Raised by Wolves,” “The Time Traveler’s Wife,” “Love Life,” “Made for Love,” “Minx” and more.

However, there’s a silver lining. Warner Bros. Discovery, which has been canceling shows left and right, plans to license 13 of its HBO/HBO Max originals to third-party free ad-supported streaming (FAST) services. While HBO Max subscribers will no longer have access to these titles, they won’t be disappearing forever. And now you won’t have to pay $9.99/month to stream them.

HBO Max series switching to FAST services:

Westworld: seasons 1 through 4
The Nevers: season 1
Finding Magic Mike: season 1
Head of the Class: season 1
The Time Traveler’s Wife: season 1
Raised by Wolves: seasons 1-2
FBOY Island: seasons 1-2
Legendary: seasons 1-3

The remaining titles—“Gordita Chronicles” (S1), “The Garcias” (S1) “Love Life” (S1, S2), “Made for Love” (S1, S2) and “Minx” (S1, S2)—are not guaranteed to have new streaming homes. However, WBD is in talks with studio partners to license the shows to either FAST platforms or other streaming services.

It’s likely these shows were the least-watched HBO Max titles, so it makes sense why Warner Bros. Discovery removed them. Viewership ratings for “Westworld” continued to decline over the years, with the third season finale only getting 1.8 million viewers–about an 18% drop from the season two finale.

WBD didn’t say which free ad-supported streaming service will get “Westworld” and other HBO originals. Popular streaming services in the FAST market include Peacock, Pluto TV, Tubi, The Roku Channel and Amazon Freevee.

The company also noted that, in 2023, it would provide more details about its own FAST offering. Earlier this summer, CEO David Zaslav mentioned the company’s plans for a free ad-supported streaming service. There’s a possibility that its own FAST platform could offer the above 13 titles.

Here are the 13 shows leaving HBO Max (yes, ‘Westworld’ is one of them) by Lauren Forristal originally published on TechCrunch

As China looks to reignite growth, what role will its technology industry play? And is there enough capital flowing to support a new generation of tech startups that could keep China competitive?

It’s not a secret that the Chinese economy slowed in recent quarters, thanks to global macroeconomic turbulence, geopolitical matters and the country’s now-fading zero-COVID policies. The policies, which China’s government is presently dismantling, resulted in frequent lockdowns in the populous nation’s cities, while other precepts of the policy disrupted trade and transit.

The zero-COVID policies worked to limit the spread of the pandemic in the country for some time, but the cost of the policy — in human and economic terms — appears steep today as the nation begins to endure a wave of infections that were perhaps delayed instead of avoided.

The Exchange explores startups, markets and money.

Read it every morning on TechCrunch+ or get The Exchange newsletter every Saturday.

Other factors played into China’s slowing economic growth. The country’s highly leveraged real estate market has taken blows thanks to changing regulations and a history of debt-fueled expansion, the price of which eventually came due. And China’s government cracked down on its domestic tech industry starting in late 2020 with the scuppering of Ant’s then-planned epic fintech IPO.

After Ant was put into the penalty box, a host of other regulations rained down from the Chinese Communist Party’s pen, whacking gaming, e-commerce and edtech, among other technology subsectors. Unsurprisingly, venture capital activity in the country declined.

Can China’s venture capital market help it reignite growth? by Alex Wilhelm originally published on TechCrunch

Dakotah Rice spent years working in the investment banking industry at firms such as Goldman Sachs, Carlyle and Coatue.

One thing that stood out to him was how only a small group of select people and firms could invest in venture capital and private equity funds. The barrier of entry is high, as minimums to invest in private equity often start at $1 million. While attending Harvard Business School, Rice became determined to build a platform that provides accredited investors with access to invest in such entities with as little as $1 — essentially giving them a way to be LPs without meeting the strict requirements that have historically existed.

In building out his business plan in late 2021, Rice talked to players in the space and got feedback that such a product would be welcomed by the industry — so much so that several high-profile investors agreed to back him in his efforts. Earlier this year, Rice raised $5.3 million in seed funding for Poolit, a Miami-based fintech startup that aims to open up access to investing in private equity and VC funds.

Harlem Capital led the financing, which included participation from the family office of The Carlyle Group co-founder David Rubenstein, Coatue Management co-founder Thomas Laffont, Declaration Capital, Picus Capital and Gilgamesh Ventures.

Encouraged by the validation and spurred by the belief that alternative investments should be part of any healthy investment portfolio, Rice in April dropped out of Harvard to work full time on the project. And today, Poolit is emerging from stealth and out of beta.

Currently, Poolit offers accredited investors the ability to put money in two funds. The Imagine fund is all venture capital firms. The Horizon fund is all private equity firms. Bain Capital Ventures, Coatue, CD&R and Apax are among the firms that investors can put money into through the platform.

“This is the first time someone can be an LP in those firms for no minimum amount,” Rice told TechCrunch in an interview. “There has not been a single fund that we’ve talked to that has had any reservations about being on the Poolit platform.”

That might be because Poolit offers the firms on its platform a free way to get investors as well as a diversified channel for distribution. Many of these firms go to private banks to get funding via “an old-school model” of paying a marketing fee to get backers in their funds, Rice said.

“2023 will be a fantastic year in all likelihood for venture and private equity. It’s kind of like you’re starting from a new base,” he added. “So these larger institutions who have had this exposure that goes up and down now have some other channel that they can also bring assets in and take advantage of the environment that we live in today. I do think there’s something unique about this timing.”

To ensure that the startup is adhering to federal regulations, Poolit partners with a firm called Maketa, which has $2 trillion in assets under advisory, to conduct its due diligence and vetting the quality and efficacy of investments themselves. The company spends 2-3 months alongside its sub-advisor rigorously vetting managers for inclusion in its funds before compiling the various funds into a portfolio.

In Rice’s view, Poolit’s registered funds structure is especially critical in today’s environment. Registered funds have strict disclosure requirements from the U.S. Securities and Exchange Commission, which are designed to protect investors more than non-registered funds.

KPMG audits Poolit, and each fund created on the platform essentially operates as their own company. So if Poolit ever ceases to exist, the funds will continue to exist.

“And if anything happened to Poolit, those people would be able to select a new advisor,” Rice added. “There are just all of these protections that exist out there for the underlying investors.”

Registered funds also have majority independent boards. Poolit’s includes a retired PWC audit partner and a JPMorgan executive that are meant to represent the voices of underlying investors and approve fees from third parties (even Poolit).

“In the wake of something like an FTX, I think this is really, really, really important,” Rice said. “They have the external third-party custodians, third-party fund administrators and it’s all codified on the SEC Edgar database website.”

As of December 9, the Poolit platform became available to the public. It currently has more than 500 users and about $140 million of reservations.

The company makes money by charging a percentage of assets under management from investors — an annualized 1% management fee. Most firms, Rice said, charge investors before they even put their money into any funds, and then management and sometimes performance fees on top of that.

So that investors have some flexibility, Poolit has established a limited quarterly share repurchase program that kicks in following the first year in the investment.

To be clear, while Poolit certainly has the potential to bring institutional-style funding to more people, it is still for now only for those in a certain higher income bracket. As defined by the U.S. Securities and Exchange Commission, the criteria to be an accredited investor is having a net worth over $1 million, excluding one’s primary residence — either individually or with a spouse or partner and having an individual income of over $200,000 or combined income of $300,000 in each of the prior two years, “with reasonable expectations for the same for the current year.”

Historically, one has been required to have had over $5 million in liquid assets to be a qualified purchaser.

For Rice, who grew up in rural Alabama before attending Brown University, it would be a dream to one day open access to investing in VC and private equity funds to an even broader pool of people.

“There is a big part of me that wants to expand this to true retail, but that’s a regulatory question, and less of something I could actually control,” he told TechCrunch.

Rice believes his growing up with a challenging socio-economic background and working as a young, black gay investor as an adult enabled him to tackle the building out of Poolit “from a different lens.”

“I thought it was a worthwhile thing to do because of the disparity that exists,” he told TechCrunch. “When you look at the space that we operate in and you look at the founders of a lot of these other companies, there is a lot of similarity in their backgrounds. And I think that’s why people have been tackling the problem in a lot of the same ways.”

Harlem Capital managing partner Jarrid Tingle told TechCrunch he was drawn to Rice’s “passion and grit” in addition to the company’s attempt to democratize access to investments.

“Poolit’s tech platform is phenomenal. Relationships with top firms are essential,” Tingle wrote via email. “Dakotah and the investor group have a significant advantage there. And, Dakotah and the team’s sense of urgency is unmatched.”

Poolit raises millions to turn accredited investors into LPs in VC, private equity funds by Mary Ann Azevedo originally published on TechCrunch

Aztec Network, a privacy layer for web3, has raised $100 million in a Series B round led by Andreessen Horowitz (a16z), the startup’s co-founders Zac Williamson and Joe Andrews exclusively told TechCrunch.

“At a high level, Aztec is an encrypted version of Ethereum,” Andrews said. “Normally on Ethereum everything is public, but we are making it encrypted. That journey has taken us many years to play out.”

Aztec Network launched Aztec Connect, an ecosystem that integrates with Ethereum DeFi protocols like Aave, Lido and Element Finance, in July 2021. In the future, it will integrate with Compound, and five other DeFi protocols, according to its website.

Encrypted blockchains provide transparency for the protocol but privacy for the users, so people aren’t required to show their identities when transacting, Williamson said.

“The world isn’t nice to live in without encryption,” Andrews said. “Go through your day and think about how many things you wouldn’t want people to see. Not all of it is bad; it’s just your daily life. But think about how you take that for granted. Doing things without privacy would be a pretty scary world and not one we want.”

Aside from a16z, there were a “few major funds and new investors” in the round, but Andrews didn’t disclose their names.

“We chose [a16z] to lead the round because they’ve been through this before with the dawn of the internet,” Andrews said. “It’s a similar situation to what we find ourselves in; yes, different, but the same problem. We have this exciting new technology and opportunity to transform the lives of everyone in the world, but we need encryption to make it a reality.”

The capital will mainly be used to hire more engineers globally to build the network, Andrews said. In the past year, the Aztec team has expanded from seven people to about 40, but it hopes to double that number in the near term, he added.

In general, public blockchains lack a “missing piece” of encryption, which could enable more use cases by providing privacy on a case-by-case basis, Andrews said. Adding encryption to blockchain technology could “spawn a whole wave of personal consumer finance,” among other things, he said.

While there are several encrypted blockchains like Zcash and Iron Fish network, Aztec differentiates itself from them because it’s programmable, Williamson said. “Those ones are a bit like Bitcoin — what you can do to those networks is determined by those who created it.”

Until recently, the technology for programmable encrypted blockchains didn’t exist, Williamson said. “One of the reasons we could raise $100 million is because our internal research and development made it a reality.”

The network is targeting a testnet launch within 12 months, but they hope it will be fully deployed on the mainnet within 8 to 24 months, Williamson said. Aztec Connect will be grandfathered into the network as its first application, Williamson added.

In the long term, the network wants to create a system using which people can transact and coordinate with the level of encryption needed for mainstream blockchain adoption, Andrews said.

“The goal is to make blockchains encrypted and use them to disrupt the traditional financial services industry to its core,” Williamson said. “If we succeed, in two to five years banks will have a lot of sleepless nights.”

Aztec Network takes on encrypted blockchains with $100M round led by a16z by Jacquelyn Melinek originally published on TechCrunch