Angel investors play a critical role in launching early stage companies
VisionTech is delighted to share that our portfolio company Elevate K12 has completed its $40 million Series C in a round led by venture capital firm General Catalyst. This funding will allow the company to continue investing in their product and continue to scale beyond the 27 states currently using the livestream teaching platform. Former Google executive Lexi Reese has joined the board of directors, another huge positive.
We are gratified that our investors recognized and believed in Shaily’s vision and focus in the company’s earliest days, investing in a total of four rounds. As early investors, we took a big risk in a small startup. To see how far Elevate K12 has come in their mission to bring quality teaching to all kids regardless of zipcode, is very gratifying as is seeing the company’s valuation increase exponentially.
Congratulations again to Shaily and the Elevate K12 team and to all of the VisionTech Angels who invested. It will be exciting to see what comes next.
Welcome back from the long Memorial Day weekend celebrating our nation’s heroes; enjoying time with family and friends; perhaps taking in the greatest spectacle in racing, the Indianapolis 500; or, if you’re like me, catching 2022’s first bona fide blockbuster movie, Top Gun: Maverick, which grossed a a record $156 million over the four-day holiday. I am sure Tom Cruise, the producer, and director are ecstatic about the ROI after a two-year delay on the film.
Here’s my review of Top Gun: Maverick: “WOW.” What a wonderful sequel to a film I watched many times in my youth. “I have the need for speed” and so many other phrases are still in my lexicon.
As I was watching the film, I couldn’t help but compare the nearly impossible mission (another Tom Cruise tribute – pun intended) to the mission of starting a company and what that means to investors. In Top Gun: Maverick, pilots had to be precise, adaptable, and a little lucky as part of a team led by a visionary capable of seeing how to succeed. How is that different from a startup?
Today’s environment requires the same precision of startup teams. You have to stay focused on the core business, recognize what you’re good at, hire talent where you have gaps, and don’t get too thin on efforts. At the same time, you must be able to evaluate new opportunities as they arrive with a set of KPIs that increase the startup’s longevity or cash flow. It’s o.k. to say ‘no’ to opportunities that aren’t mutually beneficial or don’t align with your mission. Finally, startups must stay laser focused on target market personas and develop a strategy to get them as enthusiastic fans/buyers of your product.
Adaptation is the next parallel between startups and Top Gun: Maverick. Specifically, market conditions and customer sentiment are changing. What is your response? One approach might be examining the cohort of customers acquired in the last 30 to 90 days and comparing them to the prior period. Are they the same or different in the price they paid for your product or service, their decision-making process, or in your cost to acquire them as customers? Have new threats or competitors arrived on the radar, how does their offering compare to yours, how well are they funded, and do they have momentum? Examine this data carefully with as much objectivity as you can apply – are there any adjustments to your business that need to be made? This is critical; the last three years are probably not going to look like the next three years.
The last similarity is luck, and is tricky to discuss. It is likely the X factor in the success of many startups. I often ask startup founders and CEOs: Would you rather be lucky or smart? Personally, I would rather be lucky. You can prepare for smart by gathering information, critically thinking through scenarios and hiring talent where you have gaps. Luck is out of your control and somewhat randomized or odds based. However, I think you can increase your odds of being lucky. Situational awareness, being able to identify and take advantage of true opportunities, focusing on what you can control, being relentless in your preparation, and putting in the work can increase the odds in your favor.
As investors, we know startups are risky and that founders must be gutsy, resilient and laser focused. Even so, they will make mistakes. Their primary job is to make sure that those mistakes aren’t fatal. As you invest, whether with VisionTech Angels or another group, think critically about who is in the cockpit, where you put resources and welcome to the “Danger Zone.”
Ben Pidgeon
Interested in learning more about VisionTech Angels, our approach to investing and how to join our angel investing network? We welcome new members. Please contact Executive Director Ben Pidgeon or visit our website here.
Living in Indiana, I haven’t thought much about the issue of biofouling of ships and recreational boats and unless you’re a boat owner, it’s likely you haven’t either. Consider the beautiful cruise boats we see on ads. It’s a constant and costly challenge to keep the hulls white and free of barnacles, mussels, and other grunge. Buildup of these unsightly freeloaders causes drag, which slows the ship and increases fuel costs. Typical solutions are not environmentally friendly. Adaptive Surface Technologies (AST) led by CEO David Ward has additive and coating solutions for this and other sticky problems. ASTis benefiting from strong global interest in more sustainable solutions. The VisionTech Screening Committee was impressed so we invited David to present at our May virtual pitch events. Here’s a preview.
BP: Tell me about your company and what unmet need you saw in the market(s) you serve? DW: Adaptive Surface Technologies (AST) is an industrial technology company that produces additives and coatings that repel biological fouling we see in the marine industry plus other fluids, food, contaminants, and ice. Our products can be used for a wide range of aviation, consumer, industrial, marine, and medical applications—any applications where you don’t want material to stick.
A universal unmet need in consumer and industrial applications is better performing, environmentally friendly additives and coatings that keep material from adhering to and/or building up on a surface. You mentioned the marine industry. Current solutions to deter fouling often include biocides such as copper, which are not environmentally friendly. In the packaging industry, recycling is a top priority. Consumer products companies have to be careful not to add something to a package to improve performance that renders it nonrecyclable. Our products solve customers’ problems while protecting and improving the environment.
BP: What’s your solution (products) and what are the benefits? DW: So far, we have brought two distinctive product groups to market: “Wet” SLIPS® liquid surface coatings and “Dry” AST repellent coatings and additives. We have SLIPS coatings for industrial and consumer packaging applications that deliver better non-stick properties than Teflon®. SLIPS coatings create a fully liquid surface that is ultra-smooth and super-slippery so unwanted fluids and biological foulants slide right off. One example is our SLIPS® ZERO™ coating for plastic food packaging that allows for the complete emptying of the container and does not interfere with recycling once the package is empty. With our coating, you can easily get all of the toothpaste or viscous food product out of the packaging. There are some videos on our website that demonstrate exactly how SLIPS® Zero works.
The “dry” AST products are based off of proprietary Surface-Active Polymer additives, which stratify to the surface and create hydrophilic domains within a hydrophobic matrix. These additives were developed to repel marine biofouling and have been commercialized as SLIPS® Foul Protect for marine applications. One product we currently have on the market is SLIPS® Dolphin™ Bottom Paint for recreational boaters. This paint creates an ultra-smooth, slippery surface that organisms can’t attach to. It lasts multiple seasons, so boat owners don’t have to worry about painting their boat every year. It’s also environmentally friendly. The commercial versions for tankers, cruise ships, and other commercial vessels performs the same way. Go to our website to see a demo of SLIPS Dolphin in action.
We’re currently working on a solution for repelling frost and ice for industrial and aerospace applications, a project which was started with the help of two government SBIR grants from the US Air Force (AFWERX).
BP: How big is your addressable market? DW: The marine anti-biofouling coating market is close to $4 billion annually. The majority of the market is commercial shipping; recreational boating is just a fraction. The consumer packaging market is a bit difficult to quantify as there isn’t an existing solution to compare against but given there are billions of packages filled in our target market every year, the prospective licensing income is also very large.
BP: Do you have competitors? Is yes, what is your competitive advantage? DW: Again, it varies by market but centers around performance and sustainability. In the marine market, various paints and coatings are currently used but 90% contain biocides and create microplastic waste because they are designed to decay into the water over time. Neither of those are environmentally friendly and with all of the attention on keeping oceans free of plastics and other non-natural material, we have a significant competitive advantage. In consumer packaging, we improve performance without adding anything that interferes with the package’s recyclability.
BP: You have very robust IP protection: 27 issued patents, 22 in prosecution. DW: Yes, we do. They are split between patents filed by Harvard University when the liquid coating was developed and exclusively licensed to AST for our fields of use. The balance of the patents are owned by AST as we developed the dry coatings used for the marine industry.
BP: What is your revenue model? DW: We predominantly license the use of our products to customers, and therefore gross margins are high. This keeps our revenue model simple. The sales cycle includes time for product validation, but when you’re written into the specs you are in a long-term relationship with the customer. The one outlier is our SLIPS Dolphin Bottom Paint for the recreational boating market. This is a traditional sales model.
BP: What is your traction to date? DW: We have commercial products for the marine, consumer packaging and semiconductor manufacturing markets. As mentioned earlier we have benefited from non-dilutive funding from the U.S. Department of Energy, ARPA-E, U.S. Navy, and the AFWERX SBIR grant supporting development of our anti-frost dry coating.
We’re also excited that one of our new investors is AkzoNobel, a Dutch multinational company that creates paints and performance coatings for both industry and consumers worldwide, which we see as a major vote of confidence.
BP: How do you plan to use the funds from this round? DW: Primarily as working capital as we expand our commercialization team and efforts. Our technology is done for marine and consumer packaging; it’s time to develop our market presence.
BP: Why should VisionTech Angels invest in Adaptive Surface Technologies? DW: We have a very large and growing market opportunity. That’s aided by the environmental benefits we offer. Our technology is proven in the markets we’re focused on. Lastly, we have an expert management team who have deep industry and commercialization experience.
To learn more about Adaptive Surface Technologies, visit their website. VisionTech Angels’ May Pitch Events will be virtual on Thursday, May 26 at Noon ET and at 6 p.m. ET. Pitch events are open to our members and accredited investors interested in joining our group. To register, check your email for an invitation, go to our Events page where you’ll find the RSVP links, or email Ben Pidgeon at bpidgeon@visiontech-partners.com.
Business travel took a huge hit during the global pandemic. Fortunately, the skies are becoming friendly again and here to take advantage of the situation and changing demands of business travelers is a startup called Tripkicks led by CEO Jeff Berk. There’s a lot to be impressed by with Tripkicks; you’ll read about it below. What’s really cool is the splash they’ve made in the business travel industry. Tripkick was recognized as thePhocusWire Hot Startup 2021 and winner of the Seventh Annual Business Travel News (BTN) Innovate Award for advancing business travel and the TechLaunch BullPen #20. With business travel returning to a new normal, Tripkicks is on trend and has strong traction with large Fortune 500 brands. The VisionTech Screening Committee was impressed so we invited Jeff to present at our April virtual pitch events. Here’s a preview.
BP: How did you hear about VisionTech Angels? JB: We were introduced through one of our board members, Eric Baum, who is a partner at Solidea Capital. He spoke highly of VisionTech through the work they’ve done with other VisionTech portfolio companies.
BP: Tell me about your company and how it came to be. What unmet need did you see? JB: Before Tripkicks, I was a managing director at consulting firm that specialized in corporate travel, expense and procurement technology. I saw first-hand how incredibly slow the business travel industry moves. Companies were concerned with reducing travel expenses and increasing policy compliance. They spent considerable resources putting in platforms to enable that. Now, as business travel restarts, new objectives are being introduced around important initiatives like health and safety, employee satisfaction and ESG. Companies want to address these priorities, but are also keen to not lose sight of the more traditional goals around cost and policy.
This, combined with the fact that business travel is re-emerging after a global pandemic, business travel programs are looking for new capabilities as their travelers return to the skies and roads. As an add-on to business travel programs, we provide tools to influence traveler behavior and bring additional information and capabilities that allow travellers to make better decisions that are in line with company goals and individual preferences. Our initial focus is around point-of-sale for the business traveler.
BP: How are you solving your market’s pain point? JB: We’re focused on making business travel better by helping companies address these new priority areas without changing their existing infrastructure. Tripkicks does three things. First, we provide important travel insights such as health and safety information, entry/documentation requirements, local destination intelligence, notifications from employers, and more when travelers are booking a trip.
We also provide guidance to help these travelers select the most appropriate travel options. Examples of this are that we show travelers which options are the most eco-friendly and where additional benefits are available through their corporate agreements. Finally, we motivate travelers to make specific decisions and change behaviors. Here’s an example, we’ve built an algorithm that introduces rate targets to guide appropriate trip spend, and we can even reward travelers for specific decisions such as choosing a cheaper flight or a more ecofriendly property. This allows them to earn gift cards or fund a carbon offset project.
BP: What is your traction to date? JB: Even though the business travel industry is still finding its legs after the global pandemic, our traction is strong, particularly in the enterprise segment. Early customers include some of the world’s largest companies and cover a wide range of industries like social networks, apparel, technology, media, and pharmaceuticals. We’re currently in implementation with several others, and our pipeline has never been stronger. We’re a lean team that has been able to build a big reputation in our industry given the problems that we are solving and the high-profile accounts coming onboard.
BP: How big is your addressable market and what is your revenue model? JB: In 2019, the annual spend for online corporate bookings of airlines and lodging was $82 billion. Online travel bookings by Fortune 500 companies are generally between $35 million to $100 million annually, with smaller travel programs spending anywhere from $1 million to $35 million. Much like other business travel companies, Tripkicks takes a percentage of the spend on airlines and lodging.
BP: With other, increasingly sophisticated options to in-person meetings, why do you think business travel will return to pre-pandemic levels? JB: Business Travel is a resilient industry that has a history of coming back faster than expected. We’re already seeing strong signals from the mid-market. Larger companies have been more conservative in restarting travel, but we continue to hear from our clients that platforms like Tripkicks help provide the confidence to restart. Of course, some previous trips will be forever replaced by video conferencing, which is positive for us as a society, but we’re also seeing new types of trips. For example, more frequent and purposeful team travel, a direct result of more remote work environments. Industry trade shows are returning to in-person events, and people are excited to once again meet in-person.
BP: What is your competitive advantage? JB: We are first to market and have taken full advantage of that by building a strong brand and network of resellers and referral partners to keep us ahead of future competition. A major advantage for Tripkicks is that we don’t replace existing services or technology, which reduces the burden of change for a company.
Additionally, our partnership and unique integration with SAP Concur, the dominant corporate booking tool, has propelled us into the spotlight. These partnerships give Tripkicks industry credibility while also demonstrating that we work with rather than against legacy service and tech providers in the business travel space. Business travel is a close-knit industry that is extremely difficult to break into, but once you’re in, the potential exists for rapid growth.
BP: What raise is this and how much are you trying to raise? JB: This is a pre-seed round. We raised $1 million in 2021 for product development. Our goal is to raise an additional $500,000 to support us to a Series A round in early 2023.
BP: What is you planned use of funds? JB: We have rapidly added clients to our portfolio and our pipeline is very strong. This raise will go to continuing our sales growth and supporting clients as they restart business travel in their organizations. Additionally, we plan to expand our ESG-related product functionality and expand into other traveler touchpoints beyond the booking process.
BP: Why is ESG functionality important? Is that something business travelers or their companies care about? JB: ESG is really the perfect storm right now. Not only are we seeing pressure from the top-down as boards of directors mandate new requirements, but it’s also something that is coming from the bottom-up. The environment and social issues are incredibly important to younger generations who make up the majority of business travelers.
BP: Give three reasons why VisionTech Angels should invest in your company? JB: Sure, Ben. First, our early traction within our primary market, Fortune 500 and large companies, is impressive and demonstrates the desire for Tripkicks’ offering. Second, while we’re focused on sales and client engagement, we continue to build out our platform to add more of the functionality our target clientele wants and can’t find elsewhere. Third, we have an all-star team that is immersed in this industry. We’re highly visibility, capitalizing on opportunities for high exposure among our prospects. As part of that, we’re fortunate to have a brain trust of advisors, board members, and supporters with deep experience in travel and growing companies.
To learn more about Tripkicks, visit their website. VisionTech Angels’ March Pitch Events will be virtual on Thursday, April 28 at Noon ET and at 6 p.m. ET. Pitch events are open to our members and accredited investors interested in joining our group. To register, check your email for an invitation, go to our Events page or email Ben Pidgeon at bpidgeon@visiontech-partners.com.
Two angel investing group executives with whom we’ve done deals in the past suggested I take a look at CryptoStopper. What impressed them also impressed me. The CEO, Greg Edwards is an experienced entrepreneur and leader with a good track record. He’s taken three companies to liquidity events. His people are very loyal, following him from one company to the next. His current company, CryptoStopper, is on trend and has impressive traction. The VisionTech Screening Committee was also impressed with what Greg’s doing so we invited him to present at our April virtual pitch events. Here’s a preview.
BP: You’re based in Iowa. How did you hear of VisionTech Angels? GE: Raising capital, you have to look beyond your backyard. I’ve been working closely with Frontier Angels in Bozeman, Montana, and NO/LA Angels in New Orleans, securing $860,000 toward our $1.5 million raise. They suggested I speak with VisionTech Angels and made the introduction.
BP: Tell me about your company and how it came to be. What unmet need did you see? GE: I’ve been in the managed service provider (MSP) space for almost 25 years. Since 1998, I’ve owned WatchPointIT, reselling off-the-shelf security solutions. At the same time, I founded and successfully exited Axis Backup, an offsite backup company. I saw firsthand the rise of ransomware events happening in the backup space. Ransomware attacks accounted for 15% percent of all cyber attacks in the United States in 2018, and almost every business, government entity, university, healthcare system, and utility company are targets. I realized that backup was a horrible last line of defense against ransomware. CryptoStopper was created to stop the unnecessary destruction and chaos caused by ransomware.
BP: How are you solving your market’s pain point? GE: CryptoStopper solves the pain of ransomware attacks by stopping actively running ransomware that gets past traditional cybersecurity tools. CryptoStopper software tool literally shuts down active ransomware attacks in milliseconds, preventing the attack from encrypting anything beyond “bait” files. This limits costs incurred by customers due to server down time, tracing the attack, restoring backup files, and paying ransoms to recoup data. If it sounds like a nightmare, it is. Best to avoid it with CryptoStopper.
BP: How large is your addressable market? GE: Currently there are about 42,000 MSPs in the United States with a total addressable market of $252 million in annual recurring revenue. The mid-market and enterprise business represents another, larger opportunity down the road.
BP: What is your traction to date? GE: For a young company, we’ve been strong out of the gate. We already have 94 MSP partners, more than 14,000 license in use and annual recurring revenue of $300,000. March was our best month to date with 21 new MSP partners. Our goal is to have 2,000 by the end of 2024.
BP: What is your revenue model? GE: Simple and sticky: SaaS in the form of perpetual monthly recurring licenses sold to MSPs.
BP: Do you have any competitors and if yes, what is your competitive advantage? GE: There are competitors entering the space. Our advantage is ease of deployment and configurability along with being a separate point product that can’t be stopped by the ransomware attackers. Also, we’re targeting small- and mid-size organizations , a market segment that’s relatively untapped. These entities have fewer resources, less infrastructure and many remote workers, which make their needs unique. They tend to outsource their cybersecurity solutions to a third-party MSP.
BP: Do you have any IP protection? GE: We filed a provisional patent in March 2021 to protect trade secrets related to our detection algorithm; however, it has not been completed due to concerns the application may give away our competitive advantage. We have put in place Proprietary Information and Inventions Agreements with all founders, employees, and consultants. We’re also planning to keep our techniques, algorithms, and strategies as trade secrets.
BP: What raise is this? GE: This is our seed round. We have about $640,000 to raise before the round closes.
BP: How do you plan to use the funds? GE: Primarily on sales and marketing. We want to expand our lead generation as we are ready to scale.
BP: Please give three reasons why VisionTech Angels should invest in your company? GE: I have four reasons! he opportunity and growth potential for CryptoStopper as an anti-ransomware cybersecurity company is massive and perfectly timed. The leadership team taking CryptoStopper to market is experienced and has an exceptional understanding of launching a product within the MSP space. We plan to supplement our leadership team with a board of directors that will include industry experts in cybersecurity and SaaS. Next, the scalability of the business is built-in using Azure Apps. Finally, with a 98 percent retention rate of customers and the ability to add thousands of additional MSP partners with limited additional resources, CryptoStoppers growth potential is exponential.
BP: Sounds great! Thank you. GE: My pleasure.
To learn more about CryptoStopper, visit their website or listen to this podcast. VisionTech Angels’ March Pitch Events will be virtual on Thursday, April 28 at Noon ET and at 6 p.m. ET. Pitch events are open to our members and accredited investors interested in joining our group. To register, check your email for an invitation, go to our Events page or email Ben Pidgeon at bpidgeon@visiontech-partners.com.
I have known Dr. Jim Donahue since 2016 when he joined VisionTech Angels as an investor through AngelBOM, a chapter made up entirely of physicians. He is one of our more active members, often joining us for our “Breakfast with Ben” gatherings despite his busy schedule as a fertility specialist. I was a little surprised to learn that he was pivoting his career from helping human parents conceive to helping farmers and ranchers with cow reproduction with a startup called ReproHealth Technologies. Intrigued, I invited Jim to present to VisionTech’s Screening Committee. We were impressed by ReproHealth’s device and the potential to dramatically change this important part of agriculture with technology and invited him to present at our special March Virtual Pitch Events. Here’s a sneak preview.
BP: You’ve been an investor with VisionTech Angels? For six years. Did you ever see yourself pitching to the group? JD: I had no idea! It is exciting being part of such a great group of docs and investors. That said, I’ve always been an innovator. Our medical practice did the first ever blastocyst embryo transfer in 1998, the first GIFT procedure at a Catholic hospital, and most recently, the first successful pregnancy with an intravaginal embryo culture device in 2018. ReproHealth was the next step.
BP: You’re a fertility specialist for people. How did you get into the cattle reproduction business? JD: It’s kind of amazing on a number of levels. First, I’m a city boy from Miami. What do I know about cows? But here’s a little-known fact. Human in vitro fertilization (IVF) began with cattle. Dr. Bob Edwards did the first successful human IVF with the birth of Louise Brown in 1978, later winning the Nobel Prize for this breakthrough. I did my master’s degree in Human Embryology at the University of Leeds 20 years ago. Dr. Edwards trained the people who trained me. He said to me one time that since it worked in cows, he knew it would work in humans. It finally worked on the 101st attempt!
Fast forward to 2017, my medical practice team did the first human intravaginal embryo culture procedure in Indiana using an outdated FDA approved device. The patient got pregnant with twins and the embryos were of exceptional quality. We explored the market and we discovered that bovine IVF does not work well. I knew that we could create a better, more effective device that would solve a technical problem. In talking with farmers, they understand what we’re doing and want to try what is now known as the Embvita device. This led to the formation of ReproHealth Technologies.I have met a lot of farmers who seem to want to try the device. Seeing the problem, identifying a solution, and getting early market validation led to the formation of ReproHealth Technologies.
BP: What pain points did you see in the cattle business? JD: In modern agriculture where farmers are breeding for very specific traits like milk production or more heavily muscled animals, cows are often impregnated with artificial insemination, embryo transfer or IVF. While IVF has overtaken embryo transfer as the preferred method, results are disappointing due to the fact that embryos do not grow well in lab incubators. Also, the eggs are typically collected at sites far removed from the farm and shipped to regional IVF labs for insemination and embryo culture. By the time the eggs make it to the lab, they’re old and less than ideal. Typically, of the 17 or so eggs collected, only 25% are fertilized and suitable for implanting in a cow. It’s not very efficient or effective.
Our device, which is implanted in the cow vagina, is essentially a culture chamber, doing the same job as a lab incubator. It brings together the eggs and sperm in a more natural environment. This results in twice as many fertilized eggs that mature into healthy, transplantable embryos. Another advantage is the procedure is done at the farm rather than at a far-off lab. Farmers immediately see that it’s less complicated and results in more calves from their prized dairy or beef cow.
BP: What makes the Embvita device a must have among cattle producers? JD: We recently met with a major U.S. dairy producer. Although they had never seen a company like ours before, they recognized our technology has the potential to completely change how they replace their cattle. They also invited us to come back and work with them for four weeks as part of their accelerator program. Although we’re not a must have yet, it’s impressive when a potential customer that produces over 20% of dairy in the U.S. pays you $10,000 just to travel to their headquarters and work with them.
BP: The typical dairy or beef cow produces one calf a year. With the Embvita device, you can produce as many as eight embryos from one cow in a single season. In effect, you’re turning cows into super producers. JD:Amazing, isn’t it? But it’s not just about the volume of embryos.Our goal is to help farmers optimize the genetic traits that lead to dairy cows that produce more milk and beef cattle that are better meat producers. So yes, with the help of the Embvita device, cows with highly desirable traits have the potential to exponentially produce more high-quality offspring. And with cryopreservation, the farmer controls supply and demand in terms of deciding how many of the embryos are immediately implanted in surrogate mother cows and how many are held for a future date. There is huge potential in maximizing the number of offspring of these ideal mama cows.
Additionally, we feel strongly that our technology and requirements to utilize it are simple enough that it can easily be deployed in parts of the world where there is food insecurity and a need to increase their cattle herds. Our technology could help them. Helping other parts of the world is very important to us.
BP: The cattle industry is under fire by some because of their gas production. How do you counter this? JD: It’s possible that by breeding higher producing cattle with the Embvita device, we will need fewer cattle to produce the same amount of milk or meat. Fewer cows should lessen the greenhouse gas footprint of dairy farms and cattle operations, a plus for the environment .
BP: Explain your revenue model. JD: Our revenue model is pretty simple; it’s based on selling the Embvita device and culture media to veterinarians or larger operations. A typical vet may purchase 600 devices and culture media a year. The device is single use. Depending on how the farmer uses the resulting embryos – either one at a time and freezing the rest or implanting all of the embryos into surrogate cows – we expect repeat sales over the life of the cow.
BP: What is the market size? JD: There are about 40 million beef and dairy cows in the United States. Each year, some 15% (six million) are replaced using IVF, artificial insemination and embryo transfers. The artificial insemination market is much bigger than the IVF market, but the potential to optimize the number of desired trait offspring may make them switch to our device. A cow naturally produces only one offspring a year. With our device, she could produce many more per year. Capturing the current segment where human intervention is used is a significant opportunity. But looking at the market overall, it has the potential to be much bigger.
BP: What’s your competitive advantage? JD: We have three main competitive advantages. First, there is little or no transporting of the cows; we bring the lab to the farm. The cows stay at their home farm which reduces stress on the animal and eliminates transportation time and expense. Second, our Embvita device results in two times as many embryos as the competition. From 17 eggs, we typically get eight embryos while the competition gets four. Third, we have incredible expertise on our team. In addition to my background in IVF, my co-founders include a biomedical engineer at Cal-Poly and an embryologist. We also have a partner who is a veterinarian who specializes in cattle.
BP: Do you have IP protection? JD: We have filed for provisional and utility patents in United States, European Union and Brazil. We have 3D printed a prototype and have testing going on right now.
BP: What round is this and how will funds be used? JD: Up until this time, I have bootstrapped the company on my own. We’ve reached an inflection point where we need more capital to fast track our product development. We also would like to bring additional human capital onboard. So we are raising a $1 million pre-seed round.
BP: What would you say to VisionTech Angels considering an investment in ReproHealth? JD: I have been a human fertility specialist for 30 years, and now plan to focus 100 percent of my time on ReproHealth. We have a unique opportunity to change entire industries, the dairy and beef industries, through a more modern process that also has the potential to decrease livestock-related greenhouse gas emissions. I’m a city boy raised in Miami, but I’m drawn to agtech, the people and the opportunity. With that being said, investing is a personal decision, and I leave it up to each investor to make his or her own decision about investing in ReproHealth.
To learn more about ReproHealth Technologies, visit their website. VisionTech Angels’ March Pitch Events will be virtual on Thursday, March 24 at Noon ET and at 6 p.m. ET. Pitch events are open to our members and accredited investors interested in joining our group. To register, check your email for an invitation, go to our Events page or email Ben Pidgeon at bpidgeon@visiontech-partners.com.
“I was really excited to meet Ross Bundy, president of CRISPR QC, and learn what they’re doing in the hot biotech space of gene editing. There is incredible promise for treating and potentially reversing genetic diseases as well as opportunities in animal science and agriculture. Enjoy this short preview and plan to join VisionTech for Ross’ pitch on Thursday, February 24.”
Ben Pidgeon, Executive Director, VisionTech
Gene therapy, the ability to alter a gene in a living cell, is considered by some to be the greatest scientific breakthrough of the last decade. And it’s easy to understand why. If a person with an inherited disease such as sickle cell anemia , a disease without a cure, could be successfully treated with gene therapy, that would be huge. Indeed, scientists are getting very close to making this a reality
There is a sticking point: gene editing, even when using a technology platform such as CRISPR, is very difficult to master. Accuracy is critical to avoided unintended consequences. Seeing an opportunity in this hot biotech space, San Diego-based CRISPR QC has set out to become the “quality control experts” with automated CRISPR QC testing tools, analytics, and knowledge to assist researchers in improving their CRISPR assay designs.
CRISPR QC is currently raising a $2-$4 million seed round. Company President Ross Bundy will be pitching VisionTech Angels at the group’s February 24 virtual pitch events at 12 noon E.T. and 6 p.m. ET.
Although it is an early-stage startup, CRISPR QC is attracting strong industry attention. Bundy reports that leaders in the CRISPR space are approaching his company and funding projects to advance tools and technology that will support greater accuracy. NIST, the National Institute of Standards and Technology, is also pushing for the development of standards for measuring and quality assuring gene editing outcomes. Also, Dr. Kiana Aran who is the inventor of CRISPR QC’s underlying technology and who serves on the board of directors, recently received a $1.6 million grant from the National Institutes of Health to help establish quality control standards for CRISPR therapies.
Please join VisionTech for what promises to be a fascinating pitch from Ross Bundy of CRISPR QC and Peter Dunn of Your Money Line. Choose from two events both on Thursday, February 24. Our 12 noon ET event offers an abbreviated session. Our evening event at 6 p.m. ET includes pitches and an expanded discussion period. Find details and registration links here.
VIsionTech Angels virtual pitch events are open to VisionTech member investors and accredited investors interested in joining our group. To learn more, visit our website.
Seattle-based React Mobile is a VisionTech Angels portfolio company with a workforce safety platform with solid traction in the hospitality industry. Our group initially invested in 2019. A lot has changed since then with new leadership and a new release of their solution. React Mobile is now raising a convertible round. Based on the company’s progress, VisionTech Angels investors have expressed $100,000 in soft interest prior to the formal pitch on Thursday, November 18. I recently sat down with CEO John Stachowiak and here’s our discussion.
BP: Tell me about yourself and other leadership changes. I hear you have an Indiana connection. JS: I do! I am a proud Indiana University graduate. I’ve been on the React Mobile board of directors since mid 2018. During the pandemic, the board agreed that we needed to upgrade the leadership team with more seasoned members. The first change was replacing the CTO in December 2020. Riley Eller had worked with me at my last company for 10 years. He is without question the most talented CTO and strategic business thinker I have ever worked with. We also replaced the CFO position. I accepted the CEO position this year. This is my fourth time as a CEO, having led companies in the United States and Europe. My experience has been with early growth startups, and I’ve taken three companies to exit with returns of 8x, 13x and 26x respectively. I believe my experience and skills match up very well as React Mobile enters its growth phase.
BP: Any changes in your product offering, technology, or business model? JS: This year we unveiled version 2.0 of our workplace safety platform. It’s designed to deliver the highest panic button reliability and beacon location accuracy on the market while being radically simpler for hotel workers to use. We’ve also simplified our SaaS pricing. Here are some of the new features:
A new responder application that enables employees to receive safety alert notifications on their mobile devices and dispatch help. Management receives analytics measuring how long it took for an employee to respond to an active alert.
Support for all third-party iBeacons such as Aruba, Cisco Meraki and CommScope/RUCKUS®. With iBeacon functionality already existing in a hotel’s WIFI access points, hoteliers will save up to 80% of workforce safety platform install costs.
A double-redundant alert pipeline to ensure that alerts are dispatched from panic buttons to responders in the fastest time possible. React Mobile 2.0 delivers 99.9% of alerts in less than a half-second.
Two-way, multi-lingual conversations in English, Spanish, Tagalog, French, and Chinese. Any language can be supported on request.
There are other important enhancements which I’ll share in my pitch.
BP: What impact did COVID have on hospitality industry and React Mobile’s business? JS: The pandemic has had a devastating effect on the hospitality industry, particularly in the early days when travel ground to a halt. Once areas of the country started to regain a sense of normalcy, the industry focused on adjusting processes and regaining their footing. Some areas around the country have rebounded significantly, which is welcome to all of us. In terms of React Mobile, 2020 and 2021 were both growth years. Our SaaS revenue grew more than 100% in 2020 over 2019 and is on track to grow 100% in 2021 over 2020. The number of installed properties grew by 133% in 2020 and in 2021, we’re up 48% to date.
BP: That’s impressive given all of the disruptions of COVID and now the labor shortage. What do you attribute that to? JS: There are a couple of factors. Employee safety continues to be the number one driver. What’s shocking to me personally is 58% of hotel workers report being assaulted on the job. And 96% of housekeepers say they’d feel safer with a panic button. Leading brands representing 23,000 hotels have signed the “Five Star Promise” committing their organizations to employee safety devices. Compliance must be met by the end of 2022. At the same time, the number of states mandating panic buttons in hotels with more than 50 rooms is increasing.
As a result, demand is strong. We’ve signed 12 Master Service Agreement with major brands that represent 23,000 properties. Of these, about 25% – 5,729 properties – are exclusive agreements. The growth potential for React Mobile is huge.
BP: Any other big wins? JS: We have a strong and growing presence in Las Vegas. Fourteen of the 30 major properties on the strip are React Mobile customers. We are currently covering 37,791 of the 93,022 rooms on the Las Vegas strip.
BP: Now that the platform is proven, are you looking at other industries? JS: Absolutely. Education is a natural one for React Mobile. Looking at elementary, middle and high schools, as well as colleges and universities, we’re looking at a total addressable market of $490 million. There is definitely recognition for the need for improved security methods. We’re also looking at health care. Hospitals represent a total addressable market of $210 billion. A key strategic investor in React Mobile is a respected technology provider in these industries and has provided clear guidance for adapting our technology stack to better serve them.
BP: How much are you raising and what will the proceeds be used for? JS: We are looking to raise up to $3 million with the same terms as our last convertible note. These funds will allow us to continue to scale the company.
BP: Why should VisionTech Angels invest another round in React Mobile? JS: Despite COVID-19, our SaaS revenue will end the year at an ARR of approximately $2.4 million with a pre-money value of about $13.5 million, a multiple of less than 6x. Our new 2.0 product release is the best in the industry and with it, we expect to grow revenue another 100% in 2022 and again in 2023. At this point, we have our workplace safety platform where it needs to be, and in addition to expanding our beachhead in the hospitality industry, we are looking at new opportunities in education and health care. Bottom line, we would like VisionTech Angels to continue to grow with us.
To learn more about React Mobile, visit their website. VisionTech Angels’ November Pitch Events will be virtual on Thursday, November 18 at Noon ET and at 6 p.m. ET. Pitch events are open to our members and accredited investors interested in joining our group. To register, check your email for an invitation, go to our Events page or email Ben Pidgeon at bpidgeon@visiontech-partners.com.
I can’t exactly remember when I met Joanne Zhang, but I’ve always been impressed with her professionalism. We reconnected at this year’s Innovation Showcase. I’m on the board of the Showcase sponsor, The Venture Club of Indiana, and met all of the startups nominated for the pitch competition. One of the finalists was Joanne, who is the CEO and co-founder of Flourring. Flourring was definitely the “sleeper” of The Innovation Showcase. It wasn’t an app, its financial model wasn’t SaaS, and it’s unlikely to inspire tech geeks. What Flourring does have is a huge market and consumers clamoring for its products. Not by name, but for the benefit of making many of the foods and beverages we eat everyday more natural, clean and healthy. I invited Joanne to present to VisionTech’s Screening Committee, and we all agreed she and Flourring should present at our October Pitch Events. Here’s a sneak preview.
BP: Tell me about your professional career before becoming an entrepreneur. JZ: My career track is very different than many entrepreneurs. I spent 20 years in the corporate world, including 14 years at Praxair and a year with Danisco, an ingredients company. Over the course of my corporate career I worked in marketing, procurement and supply chain, and finance. At Praxair, I was in charge of finances for a $200 million business unit. I’m grateful for my time in corporate because it created a strong foundation for my own startup company. I know how and where to avoid mistakes and have been able to run the company professionally from the start.
BP: How did Flourring come to be? JZ: Flourring started as a part of Phytoption LLC, a Purdue innovation startup company I co-founded. We had an SBIR award from the National Science Foundation to develop ingredientsfor drug, food, cosmetics, and agriculture. During that project, we have developed clean and functional ingredients applicable to the food and beverage industries. So we plan to use Flourring to focus on commercializing FLOURA™, a series of all natural, functional flours that could replace traditional emulsifiers and texturizers, many of which are artificial. Traditional emulsifiers, while present in many, many processed or restaurant foods, are usually not natural ingredients and are heavily processed themselves.
BP: What pain points did you identify in the market and how are you solving them? JZ: There are two big pain points: Consumers’ demand for cleaner, more natural foods and food producers’ needs for a natural alternative to traditional emulsifiers that works for their products. Our proprietary natural flours solves both.
Natural and organic foods have been around and very popular with a segment of the population for a long time, but it’s only been recent years that the general consumer population has begun looking for and requesting more natural ingredients. As a mother myself, I had trouble finding healthy snacks for my own child that didn’t contain artificial additives. So there is now a growing “clean label” movement among consumers who are questioning the additives in foods and basing their purchases on what’s on a product’s label.
Consumer packaged goods (CPGs) companies see what consumers want but up until now there were hardly any feasible substitutes for traditional chemical surfactants, gums, or other types of unwanted emulsifiers and stabilizers. And they can’t just remove them as emulsifiers are needed to prevent separation of ingredients, create a smooth texture and extend shelf life. As an example, a liquid coffee creamer would have separate layers, if they took out the emulsifier. Can you imagine how unappealing it is? With FLOURA™, we’re providing a single ingredient option that’s non-GMO, gluten free, all natural, and doesn’t require chemicals to produce it, and works for a variety of food and beverage, supplements, and even some personal care products.
BP: What’s the FLOURA™ product range look like? JZ: We currently have several types of flours under the FLOURA™ brand that address the specific requirements of plant milks, creamers, shakes, and smoothies; sauces, soups, and salad dressings; bakery items such as cakes and tortillas; nutraceuticals like hemp oils and essential oils; frozen desserts like ice creams and ice cream novelties; and finally, natural lotions and creams for personal care. In each of these categories, FLOURA™ helps ensure the stability and texture with desirable natural ingredient for a cleaner ingredients label.
BP: What’s your traction like thus far? JZ: We are building our customer pipeline, and have signed letters of intent from two customers, one in the U.S. and the other in Europe. Both were looking for natural alternatives to current emulsifiers and found Flourring.
BP: How big is the market? JZ: The ingredients market in the United States, Europe and Asia is huge. The overall global emulsifier market is estimated at $8.4 billion (USD), along with another $12 billion for stabilizers or texturizers. If that surprises you, consider this: emulsifiers and texturizers are used in a wide range of not just food and beverage products but also personal care, pharmaceuticals and even industrial applications. Flourring is targeting is clean label products, a market projected to reach $51.1 billion (USD) by 2024. Consumers are driving growth in this segment. More than 90% of U.S. consumers believe food and beverage options with recognizable ingredients are healthier. Beyond this, the market is attractive because of the spend of individual companies, which can range from a hundred thousand a year to a couple of million dollars.
BP: What’s your exit potential? JZ: Very straightforward. There are only a few large players in the ingredients market and they’re watching the trend of clean labels, which has accelerated with COVID-19. Some have already been in contact with us.
BP: Are you required to have FDA approval on your products? JZ: No, our ingredients are natural—corn, rice—so FDA approval is not required. We have gone through a legal review by one of the largest legal firms for the food industry to determine the labeling, and the conclusion was that FLOURA™ is labeled as a flour such as rice flour or corn flour.
BP: Do you have any IP protection? JZ: I’m very proud of our IP protection. We have a lot of experience with patents so securing a worldwide patent for our process was a priority. That patent was filed in 2018 and is pending in many countries or regions worldwide. Ultimately, we’ll have several patents broken down from the initial filing that will protect our products and technology from different angles, which include materials, processing, and applications.
BP: Do you have competitors beyond traditional emulsifiers? JZ: Our natural functional flours are the first of their kind emulsifiers on the market so no, we don’t currently have competitors other than the additives such as modified starches, gums, and synthetic chemicals we want to replace.
BP:How much are you planning to raise and how will the proceeds be used? JZ:We are raising a $1 million seed round, of which we already have $800,000 committed. Half of the funds will be used to scale our manufacturing and the other half will fund our 2022 runway. We have a vice president of sales and will build a production team after the round is closed.
BP: Why should VisionTech Angels invest in Flourring? JZ: There are three very compelling reasons to invest in Flourring. The clean ingredients market is predicted to enjoy high growth for the foreseeable future. Consumers are communicating their preference for natural ingredients and CPGs are responding where they can. Flourring provides new options that can enable CPGs to meet consumer demand. Second, this is a low-risk opportunity. We have established our products and processes. Now, it’s time to scale, which is what this raise is about. Finally, cost will not be a barrier to market entry. Our products are priced at or below competing products. Too, our gross margins are high, about 75% at scale, because the costs of our raw materials are low.
To learn more about Flourring, visit their website.VisionTech Angels’ October Pitch Events will be virtual on Thursday, October 28 at Noon ET and at 6 p.m. ET. Pitch events are open to our members and accredited investors interested in joining our group. To register, check your email for an invitation, go to our Events page or email Ben Pidgeon at bpidgeon@visiontech-partners.com.
Urgent Action Is Needed Now to Ensure Continued Investments in Early Stage Companies by Angel Investors
President Biden’s proposed “Build Back Better Act” is being hotly debated by the House of Representatives and a proposal is likely to go to the Senate today or early next week.
One element of the tax legislation being proposed is of grave concern to angel investors, entrepreneurs, and startups because it would severely curtail the capital gains tax exemption for Qualified Small Business Stock (QSBS) that currently exists in Section 1202 of the tax code.
For a qualified small business, investment in their stock currently benefits from 100% exclusion of capital gains tax on gains of up to the greater of $10 million or 10x your cost basis if the stock is held for at least five years. This incentive is extremely valuable to entrepreneurs/founders, key employees and investors, and serves to stimulate support of early-stage ventures and small businesses that by many measures generate all net new jobs in this country.
The new legislation would reduce the exemption from 100% to 50% and apply the alternative minimum tax that also is currently excluded for tax filers with average gross income over $400,000. One particularly punitive aspect to the change is that this would apply to all transactions after September 13, 2021, even though the investments could have been made many years ago under the assumption that gains would be excluded.
CALL TO ACTION
Please send a letter/note to your elected leaders in both the House and Senate please do so ASAP! A sample letter from the Angel Capital Association you can use or adapt is posted below.
I am writing to you as a constituent who supports entrepreneurship, job creation, and innovation in your district/state. I am deeply concerned that there are provisions in the Build Back Better Act that will set our nation back decades by discouraging investment in and support for start-up companies and small businesses —the backbone of job creation and innovation. Specifically, this bill contains a provision that curtails the capital gains exclusion for Qualified Small Business Stock (“QSBS”).
For years, the QSBS rule has proven effective in promoting the support of startups and early-stage growth companies in regions and communities across the country. QSBS limits capital gains taxes for founders, employees, and investors in qualified small businesses, thereby encouraging investment at the earliest stage in a company’s life cycle. It enables employee-owners who take huge risks to join and build an early-stage company to receive a commensurate return on their investment of time, expertise, and hard work. For this very reason bipartisan policymakers have supported and expanded this provision over the past 28 years. Even more importantly, at a time when our country is trying to expand opportunity to more people, our country’s tax regime should advance that ambition, not make it more difficult.
Developing and investing in startups and early-stage growth companies carries substantially more risk than in more mature companies. These companies fail at higher rates and even those that succeed often remain completely illiquid for years. Most investment capital avoids that kind of illiquid situation, meaning that any investment of time, resources, or capital must be for the long-term. The QSBS framework incentivizes that long-term investment and employee retention that are so vital to startup and early-stage company success.
The House Ways and Means Committee recently approved a provision curtailing the QSBS exclusion as part of the Build Back Better Act and applied the tax change to sales of existing stock, as opposed to new investments. This change diminishes the incentives that have successfully bolstered small businesses and their employees and punishes taxpayers who invested in or earned QSBS shares years ago by changing the treatment for existing shares and imposing a tax on them. Employee-owners, founders, and investors made economic decisions in the past based on the QSBS construct supported on a bipartisan basis. This proposed curtailment changes the rules on them after they followed the rules applicable at the time and held up their end of the bargain.
Finally, it is important to measure the ramifications of such a change against the revenue Congress is seeking to raise with the provision. The Joint Committee on Taxation’s own estimate is that the tax revenue gained by this change to QSBS will only generate approximately $570 million in additional tax revenue per year. This estimate completely fails to consider the impact of losing investment in many early-stage companies and the potential tax revenue those businesses generate. Further, it tends to undermine efforts to attract investment to underserved entrepreneurs (founders of color and women-led companies). By many measures early-stage and small companies are the source of all net new jobs in the United States, but this change in QSBS runs counter to the goal of building back our economy in a constructive manner. Frankly, it strikes me that now is the perfect time to enhance the creation and support of early-stage and small companies! Additional measures might include the reduction of the 5-year holding period to three years and incorporate the holding period to include the time that a limited liability company may have existed before converting to a c-corporation.
I recognize and appreciate the objectives of the Build Back Better Act and policymakers’ desire to expand economic opportunity and accelerate domestic innovation. However, supporting small businesses and startups is a vital economic engine in realizing that vision and I urge you and other House/Senate members to preserve the current QSBS treatment, and even consider enhancing it, all to help drive the related positive impacts on the startup ecosystem and the broader economy.
Thank you in advance for giving this matter your urgent time and consideration.
