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How to Diligence a Medical Device Startup

How to Diligence a Medical Device Startup

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    Top Investors in Food and Beverage Companies Over the Last 5 Years

    The top investors for the last five years by number of deals puts Circle Up at the top of the list with 96 deals, followed by Accel Foods at 29, Food-X at 17, MassChallenge at 16, and 14 by Indie.Bio.  The list contains not only venture capital but funding portals, angel networks, and accelerator groups.  You can see the list here: Last Year Last 2 years Last 5 years CircleUp – 30 CircleUp – 75 CircleUp – 96 AccelFoods – 9 AccelFoods – 20 AccelFoods – 29 CAVU Ventures – 9 Food-X – 17 Food-X – 17 MassChallenge – 6 MassChallenge – 14 MassChallenge – 16 301 INC – 5 Indie.Bio – 12 Indie.Bio – 14 Food-X – 5 CAVU Ventures – 10 Khosla Ventures – 14 New Crop Capital – 5 301 INC – 7 Central Texas Angel Network – 12 S2G Ventures – 5 New Crop Capital – 7 Emil Capital Partners – 11 HSBC – 4 S2G Ventures – 7 Ben Franklin Technology Partners – 10 Indie.Bio – 4 Ben Franklin Technology Partners – 5 CAVU Ventures – 10  

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    Food & Beverage Investments in Q4 2016

    The Food and Beverage Industry has seen over $2.8B in funding in nearly 270 deals in Q4 2016. The Ingredients and Flavorings industry leads the way with over $2B worth of funding in 19 deals, followed by Candy & Snack Foods at $221M in 62 deals. Meat, Fish, and Seafood follow with $185M in funding. Check out the complete list of funding and deals by industry: Industry Funding Total # of Deals Ingredients, Flavoring & Condiments $2B 19 Candy & Snack Foods $221M 62 Meat, Fish & Seafood $185M 13 Non-alcoholic Beverages $115M 51 Alcoholic Beverages $73M 69 Food Safety & Preservation $53M 12 Fresh Foods $49M 10 Canned & Frozen Foods $48M 13 Wholesale Food Distributors $46M 6 Dairy Products $36M 8 Bottling & Distribution $7M 2 Food Service $4M 4 Total: $2.85B 269

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    Venture Capital Seeks Food and Beverage Investments

    The food and beverage space is seeing tremendous innovation.  Venture capitalists are now making investments into innovative food and beverage companies.   Target investments must bring innovation and offer a scalable business model.  Their food & beverage investments nearly all focus on replacing common food items.  Investments typically target technologies around plant-based protein.  Often, startups raising funding are developing new processes that could change what we eat.  Several trends top the list for venture capitalists.   Here are four food and beverage trends with Texas companies leading the way: Fermented flavors – fermentation brings health benefits and for soda lovers fermentation also provides a natural fizziness to the drink.  Salt and Time and Buddha’ Brew are two Texas-based companies leading the way Food safety testing—new testing tools such as in the field mass spectrometry, and food processors are gaining attention. Evaptainers uses evaporation cooling technology to provide refrigeration for foods  and Green Ocean Sciences has developed a field mass spectrometer for food testing. Next generation foods which include cold brew coffee such as High Brew Coffee and Chameleon Cold Brew.   New fruit and vegetable offerings include novel ways of packaging and distributing fruit and vegetables.  Rhthym Superfoods offers a new way of consuming Kale.   Veggie Noodles delivers vegetables in the form of pasta, and Beanitos offers beans in the form of chips. Floral flavors – adding herbal and plant flavors to foods and beverages such as Sway Water and Daily Greens. Here’s a list of the top 24 VCs in food and beverage investing: Sequoia Capital Benchmark Capital Accel Partners Greylock Partners Andreessen Horowitz Union Square Ventures First Round Capital Bessemer Venture Partners Kleiner Perkins Caufield & Byers New Enterprise Associates Founders Fund Lightspeed Venture Partners Foundry Group Index Ventures Khosla Ventures Social Capital Emergence Capital Partners True Ventures Floodgate Fund General Catalyst Partners CRV Spark Capital Battery Ventures Redpoint Ventures

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    NDAs, Not on the First Conversation

    Everyone once in awhile I’ll come across an entrepreneur who wants to tell me about his deal but before giving me any details wants me to sign an NDA which is a Non-Disclosure Agreement that requires the signer not divulge the details of the subject matter to anyone for a certain period of time (usually 2 to 5 years). To an angel investor this is a red flag. When an entrepreneur won’t even show me his one-pager without my first signing his Non-Disclosure Agreement that tells me his deal is not protected and most likely is not protectable. I advise entrepreneurs to have a one-pager ready to share with investors who show interest after a brief discussion. The one-pager should state what the business does but doesn’t necessarily go into details about how the IP actually works. If the discussion goes far enough that it enters the due diligence phase and the investor wants to see the “secret sauce” then it’s reasonable for the entrepreneur to ask the investor to sign an NDA, but not at the beginning of the first conversation. While I understand the entrepreneur’s concern about protecting his idea and subsequently his business, it’s difficult to generate interest among the investors when you can’t even tell them the basic concept. The entrepreneur should be able to inform the investor about what the product or service does at a high level and what performance advantages it has over other methods. My rule for signing NDAs is that I should know exactly what is being protected – the technology, the business model, the concept, etc. Signing an NDA without knowing this could mean the investor is signing away his ability to invest in any deal that is related to the entrepreneur’s target market or application. To carry out the conversation, I invite the entrepreneur to tell me about the non-confidential matters. “Just tell me what you can without an NDA.” This potentially keeps the conversation going. Of course, the first subject to discuss after receiving the one-pager is how can one protect the idea – patents, copyrights, trademarks, trade secrets, etc. Best regards, Hall T.

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    Top 20 Investors in Drones

    Drones continue to attract investor interest from venture capital, corporate VCs, and other funding sources.   Here’s the list of the top drone investors by number of investments.  While VCs dominate the investing category by dollars, angels, and accelerators account for a large number of funded deals. Investor Name Investor Type Number of Investments Sequoia Capital Venture Capital 1,303 500 Startups Accelerator 1,279 Y Combinator Accelerator 1,197 New Enterprise Associates Venture Capital 1,187 Accel Partners Venture Capital 991 Techstars Accelerator 652 Lightspeed Venture Partners Venture Capital 516 Battery Ventures Venture Capital 503 Andreessen Horowitz Venture Capital 493 General Catalyst Partners Venture Capital 465 Startupbootcamp Accelerator 370 Union Square Ventures Venture Capital 217 Social Capital Venture Capital 190 Sherpa Capital Venture Capital 115 GE Ventures Venture Capital 112 Peter Thiel Angel 92 Xiaomi Venture Capital 18 Daimler Corporate Venture Capital 16 Cognizant Technology Solutions Venture Capital 3 DJI Venture Capital 2

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    Non-Starters in Angel Investing

    When the Conversation is Over Before it Begins I have an espresso each morning at the Trianon coffee shop in Westlake. It’s part of my daily routine. I often meet entrepreneurs and angels during that time to hear their story. In this blog you read about the up and coming companies and the story behind the people making it happen. What you don’t hear about are the non-starter discussions or as I call them, the conversation was over before it began. Here are some examples: “We’re raising money to build a software system to . . . “ Angels look for the entrepreneur to spend their own money to get the initial software up and running. It’s okay to raise money to develop it further but angels aren’t going to invest money to build the software in the first place. “We only need $8M to . . . “ The raise limit for the angel group is $2M. If it’s close to that then it’s a possibility but beyond $3M too far beyond that and it goes out of range. “Our premoney valuation of $20M is justified by . . . “ There’s almost no investment return in deals that start with a $20M valuation. I won’t say those deals will never get funded but it’s not far from there. “The market is $10B and we only need to get 3% of it to . . . “ Revenue projections based on achieving market share have little connection to reality. A bottom-up list of accounts in the sales pipeline is much more convincing. “We just hired our 14th employee and hope to complete our first customer sale later this . . . “ Startups with large headcounts bring the business plan into question. And finally, the ultimate conversation stopper: “We just ran out of money and . . . “ If you didn’t manage the last round of funding, what does that say about the next round? Best regards, Hall T.

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    Top 5 Big Data Investors of 2016

    The 5 Big Data investors of 2016 include Highway1, Microsoft, Alphabet, Mercedes Benz, and Benoit Marrel with a combined number of investments of 161.  Microsoft and Alphabet led 15 of the rounds. The top 5 held a portfolio of 146 companies with the difference being exits.   Investor Name Number of Investments Number of Lead Investments Number of Portfolio Companies Highway1 83 – 77 Microsoft 74 14 65 Alphabet 2 1 2 Mercedes Benz 1 – 1 Benoit Marrel  1 – 1 Total: 161 15 146  

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    Top 10 Texas Big Data Ventures from 2016

    Big Data continues to see strong growth.  In 2015 there 462 deals funded at $5.6B. Big Data companies in Texas raised $284M in 2016.   Of the top 10, Austin has 6 companies totaling $210M as follows: Company Name Total Funding Headquarters Location Civitas Learning $88,949,999 Austin, Texas, United States Continuum Analytics $45,000,000 Austin, Texas, United States Dachis Group $37,500,000 Austin, Texas, United States Worksoft $32,000,000 Addison, Texas, United States CognitiveScale $25,000,000 Austin, Texas, United States PROS Holdings $25,000,000 Houston, Texas, United States UpSnap $9,900,000 The Woodlands, Texas, United States ImageVision $7,519,000 Anna, Texas, United States UnaliWear $7,100,000 Austin, Texas, United States InforcePRO software $6,551,147 Austin, Texas, United States Total $284,520,146    

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    The Importance of Monitoring Startup Deals

    by Hall Martin Investors in startups need to monitor the candidate startup before investing so as to better understand the company and to see some consistent progress. As an angel investor, I hear pitches every day.  It’s been a while since I heard a software pitch that WASN’T going to market in two months.  In fact, everyone is “going to market in two months,” but the reality is that most take one to two years to really get traction in a market. When I find a potential investment that looks interesting, I put it on my watch list.  My father was a buy-and-hold value investor in publicly traded stocks.  He had a watch list of 10 stocks that he checked every month. He would look up their earnings, check for any management team changes, see what new products they were offering, and then he would look at the price.  After a period of time, sometimes a few months, sometimes a few years., he would decide to invest or not.  A no meant he took it off his watch list.  A yes meant he invested money and put it in his portfolio. Startups are pretty much the same.  You can track them on their sales growth, team changes,  product development, and  in this case their fundraise.  As you receive reports you can start to build out a list of key traction points– leads, sales, channels, etc.  As one investor said, “I don’t invest in dots. I invest in lines.”  It’s important to build out a picture of how the business is growing. By watching the deal over a period of time, you can better understand it and also hopefully see an upward trajectory at which point an investment makes sense.

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