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How to prepare for M&A, your most likely exit avenue

Published July 26, 2021
Ben Boissevain
Contributor

Ben Boissevain has 30 years of corporate finance experience at firms including White & Case and Barclays Bank, and 20 years of experience in the tech sector.

Despite the plentiful headlines about mega billion-dollar M&A transactions, record IPOs and the rapid growth of SPACs, small deals will continue to be the most likely exit for the vast majority of tech startups. In the over 30 years I’ve worked on M&A at White & Case, Barclays and my current firm Ascento Capital, I have seen too many startups that are not prepared for an exit via a merger or sale. This article will provide specific recommendations on how to prepare your startup for M&A.

While it is good to strive for a billion-dollar-plus sale, a successful IPO or a SPAC deal, it is practical to prepare your startup for a smaller transaction.

Global M&A hit record highs in the second quarter with a total deal value of $1.5 trillion, but smaller transactions vastly outnumber mega billion-dollar deals. The U.S. saw a total of 16,672 deals in the year ended June 31, but only 583, or 3% of that number, were valued at more than a billion dollars (FactSet). The IPO market is healthy again, but M&A still represents 88% of exits: So far this year, there were 503 IPOs and 5,203 deals, according to the CB Insights Q2 2021 State of Venture Report. After the SEC announced in early April that it was considering new guidance on SPAC IPOs, the rate of new SPAC issuances fell by around 90%.

While it is good to strive for a billion-dollar-plus sale, a successful IPO or a SPAC deal, it is practical to prepare your startup for a smaller transaction.

Here are a few recommendations that will prepare your startup for an M&A exit:

Track M&A in your subsector

Set up an alert on Google News for M&A activity in your subsector. For example, if your startup is in the IoT subsector, search for “IoT acqui” and this will pick up news stories on acquisitions in the IoT space. Save the search so you can go to Google News on a regular basis. Also track your closest competitors on Google News, particularly to see who is selling their company.

Prepare a list of likely acquirers

Prepare a list of the companies or firms most likely to buy your startup. This list should include domestic and international companies, businesses in non-tech industries, private equity firms and their portfolio companies, as well as VC-backed companies. Track these likely acquirers on Google News as well.

Consider executing a parallel track

Consider approaching the top 10 likely acquirers when you are raising the next round of capital. If your startup gets M&A offers and VC term sheets at the same time, this will provide your board of directors choices on the path ahead. Knowing the M&A activity in your startup’s subsector and the 10 most likely acquirers will impress VCs and increase the chances of being funded.

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Glyphic Biotechnologies raises $6M to accelerate protein sequencing by orders of magnitude

Published July 26, 2021

The whole human proteome may be free to browse thanks to DeepMind, but at the bleeding edge of biotech new proteins are made and tested every day, a complex and time-consuming process. Glyphic Biotechnologies accelerates the critical but slow sequencing step, potentially cutting drug development times down by a huge amount, and the startup just raised a $6 million seed to bring its clever solution to market.

Proteins are at the heart of many new treatments and products; the ubiquitous and infinitely varied chains of amino acids twist into shapes that interact with cells, substances in the body, and other proteins, doing everything from interpreting DNA to controlling access to secure areas (“sorry, no potassium allowed”).

In the drug discovery and biotech world, proteins represent unlimited possibility — the right one could clamp onto cancer cells, facilitate natural healing processes, or prompt the creation of helpful substances. But finding and testing novel molecules is not easy — and a big part of that is sequencing, which confirms the exact makeup of the protein you’re trying to test.

Right now there are several large companies doing good business in the protein discovery world, and generally the process involves identifying the amino acid at the end of the protein chain, then snipping it off, identifying the next one, and so on until you’ve done the whole thing.

The trouble with this approach is that the protein’s shape or the molecular properties of the next amino acid in line can interfere with the process of binding to and identifying the one on the very end. As a result there’s a certain amount of uncertainty and a lack of unreliability inherent to the process.

AI is ready to take on a massive healthcare challenge

Glyphic Biotechnologies changes that by adding a step where the target amino acid is detached first and then tethered nearby using a novel molecule called ClickP developed by one of the co-founders. A single stationary amino acid attached to a known molecule is much, much easier to identify, and when it’s done, the process repeats as before.

It’s briefly stated but the advance is significant. Current techniques in the antibody discovery space produce and inspect on the order of tens of thousands of proteins per week per (very expensive) machine. It sounds like a lot but with proteins essentially innumerable, it’s just a drop in the bucket. Even running 24/7 this rate doesn’t come close to satisfying demand.

Glyphic’s approach, utilizing ClickP and single-molecule microscopy (like that used by DNA sequencing giant Illumina), should be capable of millions to tens of millions per week, possibly climbing to billions in time. Even at the most conservative estimate you’re talking about orders of magnitude in improvement — those tens of thousands in the other techniques include lots of (perhaps mostly) repeat or junk information due to their use of B cell cultivation to produce the antibodies in question.

Illustration of the Glyphic process at a molecular level.

Image Credits: Glyphic Biotechnologies

Not only that, but because the ClickP process avoids the problem of interference from the next amino acid in the chain, it has way, way higher specificity and confidence. So you wouldn’t just be sequencing a hundred or a thousand times as many proteins, you’d be far more sure about the results.

At first Glyphic would be processing samples sent to them, but ultimately their tech could live in other labs as their competitors do now. Going from service to hardware sales and support is the current roadmap.

If everything works as advertised, Glyphic could be the new standard in protein sequencing just as demand skyrockets in the biotech world. To do so, though, it needs just a bit more time in the incubator.

The process they pioneered was the result of work done by co-founders Joshua Yang (CEO) and Daniel Estandian (CTO) at the lab of MIT’s Ed Boyden (on the team as “scientific founder”).

CTO Daniel Estandian, left, and CEO Josh Yang. Image Credits: Glyphic Biotechnologies

Yang explained that what stands between them and potential industry dominance is a mere matter of chemical engineering.

“My co-founder [Estandian] developed ClickP himself. The chemistry works,” he told me. “But as a spinout of an academic lab, we didn’t develop all 20 binders, because it would have bankrupted the lab. This isn’t an ‘off-the-shelf’ molecule.”

These binders are a bit like adapters that make the process work for each of the 20 amino acids. It takes time and money to engineer them, so they decided to show the system off with a handful first in order to get the cash to make the rest. “It’s really just about putting the time into getting them out there,” said Yang.

The $6.025 million seed round should finance the company through this early stage as it builds its platform. It was led by OMX ventures (which previously invested in 10X Genomics and Twist Bioscience), with participation from Osage University Partners, Wing VC, Artis Ventures, Cantos Ventures, Civilization Ventures, and Axial VC, and has an angel investor in Mammoth Biosciences CEO Trevor Martin.

Berkeley has a big new biotech incubator in Bakar Labs

Glyphic will be making its first home at Bakar Labs, the freshly inaugurated new Berkeley biotech incubator. There it will stay until it’s ready to take the next big step, likely hardware manufacturing next year on the back of an A round to be raised then. 2022 should then also see the company’s first paid services. And the antibody market, as large as it is, is only the beginning.

“Antibodies are just a starting point, as numerous applications can benefit from protein sequencing,” Josh explained in an email after we spoke. “Another high value area is in industrial biotechnology, where protein-sequencing-based screening of evolved enzymes can help identify enhanced or novel functions (e.g., better laundry detergents, waste-water treatment). Development of diagnostic tests would also benefit because, the more proteins you can sequence and identify in a sample set, the increased likelihood you can identify rare yet important biomarkers and/or develop a robust panel of biomarkers that together can detect or predict disease.”

In an increasingly hot biotech market, protecting IP is key

A company like Glyphic may seem like a perfect target to get snapped up by one of the more deep-pocketed competitors out there, but Yang said they’re confident enough to ride it out.

“The activity in this space is insane. My co-founder and I really want to be the next Illumina or 10X Genomics — we really want to be that leader in proteomics.” And unless the competition has a few cards hidden up their sleeves, Yang’s ambition seems like a distinct possibility.

DeepMind puts the entire human proteome online, as folded by AlphaFold

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Box unwraps its answer to the $3.8B e-signature market: Box Sign

Published July 26, 2021

Box released its new native e-signature product Box Sign on Monday, providing e-signature capability and unlimited signatures as part of Box’s business and enterprise plans at no additional cost.

The launch comes five months after the Redwood City, California-based company agreed to acquire e-signature startup SignRequest for $55 million.

Box CEO Aaron Levie told TechCrunch the company is already securing content management for 100,000 businesses, and Box Sign represents “a breakthrough product for the company” — a new category in which Box can help customers with business processes.

“We are building out a content cloud that powers the lifecycle of content so customers can retain and manage it,” Levie said. “Everyday, there are more transactions around onboarding a customer, closing a deal or an audit, but these are still done manually. We are moving that to digital and enabling the request of signatures around the content.”

Here’s how it works: Users can send documents for e-signature directly from Box to anyone, even those without a Box account. Places for signature requests and approvals can be created anywhere on the document. All of this integrates across popular apps like Salesforce and includes email reminders and deadline notifications. As with Box’s offerings, the signatures are also secure and compliant.

The global e-signature software market was estimated to be around $1.8 billion in 2020, according to Prescient & Strategic Intelligence, while IDC expects it to grow to $3.8 billion by 2023.

Levie considers the market still early as less than one-third of organizations use e-signature due to legacy tool limitations and cost barriers, revealing massive future opportunities. However, that may be changing: Box worked with banks during the pandemic that were still relying on mailing, scanning and faxing documents to help them adapt to digital processes. It also surveyed its customers last year around product capabilities, and the No. 1 “ask” was e-signature, he said.

He mentioned major players DocuSign and Adobe Sign — two products it will continue to integrate with — among the array of technology within the space. He said that Box is not trying to compete with any player, but saw a need from customers and wanted to proceed with an option for them.

The e-signature offering also follows the hiring of Diego Dugatkin in June as Box’s new chief product officer. Prior to joining, Dugatkin was vice president of product management for Adobe Document Cloud and led strategy and execution for Adobe’s suite of products, including Adobe Sign.

“Our strategy has been for many years to expand our portfolio and power more advanced use cases, as well as a vision to have one platform to manage everything,” Levie said. “Diego has two decades of tremendous domain experience, and he will make a massive dent in powering this for us.”

In addition to the e-signature product, Box also introduced its Enterprise Plus plan that includes all of the company’s major add-ons, as well as advanced e-signature capabilities that will be available later this summer, the company said.

Aaron Levie: ‘We have way too many manual processes in businesses’

 

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Equity Monday: China boosts pressure on its tech sector as Duolingo’s IPO looks to raise a few more bucks

Published July 26, 2021

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast where we unpack the numbers behind the headlines.

This is Equity Monday, our weekly kickoff that tracks the latest private market news, talks about the coming week, digs into some recent funding rounds and mulls over a larger theme or narrative from the private markets. You can follow the show on Twitter here and me here.

Ever wake up to just a massive wall of news? That was us this morning, so we had to pick and choose. But since this show is about getting you caught up, we decided to focus on the largest, broadest new information that we could:

  • Asian stocks were down, European shares are lower and U.S. equities are set to open underwater. Bitcoin had a great weekend, however.
  • China’s edtech crackdown continued over the weekend, with the country’s ruling party setting new rules for online tutoring companies; they can no longer go public and will be forced to become nonprofit entities. Chinese edtech stocks around the world fell.
  • China’s larger tech crackdown continued, with new moves against the present-day business models of both food delivery companies and Tencent Music. The former must ensure minimum incomes, while the latter must give up exclusive rights deals. Shares fell.
  • The Jam City SPAC is kaput. It will not be the last similar deal to fall apart.
  • And we chatted about this bit of Rivian news because it stood out to us.

All that, and we had a good time! Hugs and love from the Equity crew — chat Wednesday!

Equity drops every Monday at 7:00 a.m. PST, Wednesday, and Friday at 6:00 a.m. PST, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts!

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SoftBank-backed Embark Veterinary valued at $700M after $75M Series B

Published July 26, 2021

Now that you have that COVID dog, Embark Veterinary wants to help him or her be in your life for a long time by offering DNA testing with the goal of curbing preventable diseases and increasing the lifespan of dogs by three years within the next decade.

The Boston-based dog genetics company raised $75 million in Series B funding in what the company is calling “the biggest Series B for a pet startup to date.” SoftBank Vision Fund 2 was the lead investor and was joined by existing investors F-Prime Capital, SV Angel, Slow Ventures, Freestyle Capital and Third Kind Venture Capital.

The new round boosts Embark’s total funding to $94.3 million since the company was founded in 2015, according to Crunchbase data. It also gives it a post-money valuation of $700 million, Embark founder and CEO Ryan Boyko told TechCrunch.

Boyko has been a dog lover all his life, and also interested in biology and evolution. Dogs, in particular, are fascinating to him because of their variety: they can be bred to be two pounds or 200 pounds, and come in all shapes and sizes. His interest led him to study dogs in order to understand their evolution.

“I began to think about health problems, and honestly, dogs are a better system for using genetics to better their health than humans,” Boyko said. “You can breed them, so genetics has as much power to cause health problems as it can improve quality and life.”

Embark’s dog DNA test retails for $199 and enables dog owners, breeders and veterinarians to personalize care plans based on a dog’s unique genetic profile. It can test for over 350 breeds and 200 genetic health risks, as well as physical traits. Similar to a 23andMe test, test users can learn characteristics about breed, health and ancestry.

For example, the test could show that a healthy dog may have a gene that predisposes them to slipped discs. If the dog has that, then weight management would be an important factor in their care regime, as would not allowing them to jump off the couch. Another common genetic risk is HUU, or Hyperuricosuria, which is elevated levels of uric acid in urine that could lead to bladder stones due to the way dogs process minerals. By changing the dog’s diet, it could reduce the risk for developing the stones, which are painful and expensive to treat, Boyko said.

The test’s technology revolves around proprietary genotyping technology that analyzes more than 200,000 genetic markers, currently two times more information than any other dog DNA test on the market, Boyko said. This gives Embark the world’s largest database of canine health and biological information, enabling the company to provide insights into certain conditions and make new discoveries about health risks, traits and breeds.

Wagmo raises $12.5M to offer pet insurance (and a lot more)

Embark aims to become the standard of care for dog owners and vets. It grew 235% between 2019 and 2020 and saw five times the sales over the past two years. To support that growth, the company intends to use the new funding to bring on key hires and expand its database. Boyko anticipates adding more than 100 employees between 2021 and 2022.

Boyko said the opportunity in the pet startup space is huge. Indeed, U.S. spending on pets reached nearly $100 billion in 2020, up from $95.7 billion in 2019, according to the American Pet Products Association.

At the same time, venture capital interest in U.S. pet-focused companies, from nutrition to travel to healthcare, grew 29.5% from 2019 and 2020, according to Crunchbase data. In addition to Embark’s funding, 2021 was good to other pet startups as well, including pet insurance company Wagmo, raising $12.5 million, connected pet collar company Fi received $30 million and Rover, which announced plans to go public via SPAC.

Lydia Jett, partner at SoftBank Investment Advisers, told TechCrunch that this was her first pet-based investment, and what Embark is doing brings advances to a category right now where people care about their pets enough that they want to do something that will expand their value of life.

Jett said the management team being dedicated to DNA-based analytics is the future, and Embark is starting this big curve when it comes to pets and the convergence of real emotional ties to pets and the ability to improve their lives.

“This company is a driver of change to happen,” she added. “We are the largest consumer investor in the world, and Embark is very much aligned with what we are seeing across our portfolio that consumers are revisiting priorities and choices. That is a major trend, but still early in the cycle of personalization for their pets.”

Where top VCs are investing in digital health

 

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Mark Cuban-backed Eterneva raises $10M to turn your loved one’s ashes into diamonds

Published July 26, 2021

The loss of a loved one is perhaps one of the most traumatic things a person can experience.

When it comes to memorializing someone after their death, most people think of planning funerals and/or picking out caskets or tombstones. And those things are typically done with the help of a funeral home.

Enter Austin-based Eterneva, which is building a rare direct-to-consumer brand in the end-of life space. The four-year-old startup creates diamonds from the cremated ashes or hair of people and pets. It’s a highly unusual business but one that seems to be resonating with people seeking a way to keep a piece of their loved ones close to them after their death.

Since its inception, Eterneva has seen triple-digit growth in sales — including in 2020, when it more than doubled its revenue, according to CEO and co-founder Adelle Archer. And today, the company is announcing an “oversubscribed” $10. million Series A funding round led by Tiger Management with participation from Goodwater Capital, Capstar Ventures, NextCoast Ventures and Dallas billionaire Mark Cuban. (For the unacquainted, Tiger Management is the hedge fund and family office of Julian Robertson from which Tiger Global Management descended.)

“It was an extremely competitive round,” Archer told TechCrunch. “We received three term sheets and were able to put together an all-star investment group.” That investment group included Capstar Managing DIrector Kathryn Cavanaugh, who also joined Eterneva’s board; Lydia Jett — one of the top female partners at Softbank overseeing their $100 billion Vision Fund and Kara Nortman, managing partner at Upfront Capital, one of the first women to make managing partner at a VC fund and co-founder of Angel City with actress Natalie Portman.

Empathy emerges from stealth with $13M for a digital assistant aimed at bereaved families

Archer and co-founder Garrett Ozar launched Eterneva in the first quarter of 2017 after working together at BigCommerce. The company’s origin story is a very personal one for Archer. Her close friend and business mentor, Tracey Kaufman, was diagnosed with pancreatic cancer and ended up passing away at the age of 47. With no next of kin, Kaufman left her cremated ashes to her aunt, best friend and Archer.

“We started looking into different options but all the websites we landed on were so lackluster, somber and overwhelming,” Archer recalls. “Tracey was the most amazing person, and I felt like when you lose remarkable people, you needed better options to honor and memorialize them.”

At the time, Archer was working on a lab-grown diamond startup. Over dinner with a diamond scientist during which she was discussing her mentor’s death, the scientist said, “Well, you know Adele, there is carbon in ashes, so we could get the carbon out of Tracey’s ashes and make a diamond.”

The thought blew Archer’s mind.

“I knew that I had to do that, 100%. Tracy was such a vibrant person, it suited her so perfectly,” she said. “And I’d have a part of her with me all the time.”

Eterneva co-founders Garrett Ozar and Adelle Archer. Image Credits: Eterneva

It was the first diamond ever created by Eterneva, and it gave Archer a chance to be a customer of her own product, which she believes has helped in building an experience for her other customers. Soon, she became “fully focused” on the idea, which she viewed as a way to give grieving people “brightness and healing and a beautiful way to honor their loved ones.”

Since inception, Eterneva has created nearly 1,500 diamonds for over 1,000 customers. It can do colorless or nearly any color including black, yellow, blue, orange and green. The entry price for an Eterneva diamond is $2,999 and that goes up based on the size and color. Pets make up about 40% of Eterneva’s business.

“We view ourselves as the complete opposite tone of everything else in this space,” Archer said. “A lot of people are trying to solve planning and logistics around the end of life. We’re about helping people move forward, and building a platform for the celebration of life.”

The process to create the diamond is intricate, according to Archer, taking 7 to 9 months. The intent is to bring the customer along the journey by sharing the process with them at each stage through videos and pictures.

“We do it in parallel with their processing grief, which is super isolating,” Archer said. “They are usually in a different place with their grief than when they first started.”

One of the plans with the new capital is to enable more people to participate in person with the process, such as starting the machine work, or telling the jeweler stories about their loved one and coming up with a custom design that might have little details that represent aspects of their loved one’s life.

The company also plans to use the money to scale their funeral home channel program nationwide via Enterprise partnerships and scaling its operations and capacity in Austin so it can keep up with demand.

Eterneva is banking on the fact that more and more “people don’t want traditional funerals anymore.”

“They want personalization and meaning,” said Archer. “We plan to evolve the platform with different products and services down the road.”

The startup also wants to continue to build awareness around its brand. Recently, it’s seen more than a dozen videos on TikTok about its diamonds go viral, according to Archer.

Prior to the Series A, Eterneva had raised a total of $6.7 million from angels and institutions. Its seed round was a $3 million financing led by Austin-based Springdale Ventures in 2020. Mark Cuban first became an investor in the company when Archer and Ozar appeared on “Shark Tank.” Cuban took a 9% stake in the company in exchange for a $600,000 investment. Despite claims that the company was a scam, Cuban has stood by the science behind it and put money in the latest round as well.

Via email, he told TechCrunch he views an Eterneva diamond as “a unique, socially responsible way to stay connected to loved ones.”

“There is still so much upside and growth in their future,” Cuban wrote. “So I doubled down.”

He went on to describe the creation of diamond from the hair or ashes of a loved one as “such an intense personal commitment.”

“Eternava takes a very emotional and difficult [time] and helps people walk through their journey in a trusted way that I don’t think anyone else can come close to,” Cuban added.

6 VCs talk the future of Austin’s exploding startup ecosystem

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Sila banks $13M to offer single API for developing financial products, services

Published July 26, 2021

Sila announced Monday it raised $13 million in Series A funding for its banking and payment platform that gives software teams tools to build the next generation of financial products and services.

Revolution Ventures led the round and was joined by existing investors Madrona Venture Group, Oregon Venture Fund and Mucker Capital, as well as Wise co-founder Taavet Hinrikus. The funding brings the total investment to date for Portland, Oregon-based Sila to $20 million.

The company was founded in 2018 by Shamir Karkal, Angela Angelovska, Isaac Hines and Alex Lipton to simplify digital payments and storage in a regulatory compliant way and build on blockchain technology. CEO Karkal has a long history in the fintech space, co-founding Simple, an app unifying various accounts into one accessible bank card, in 2009. It was acquired by BBVA in 2014 for $117 million and shuttered earlier this year.

Karkal told TechCrunch that the idea for Sila was born out of frustration while starting another bank. He saw a need for financial application development, but was hindered by a banking system “still stuck in the 20th century.” He thought consumers expected a different level of service, which is why many flock to fintechs.

However, whenever a business tried to connect existing banking systems, fintechs and cryptocurrency innovators, as it built and scale, would always run into technology and compliance issues, Karkal said.

“The problem with working with banks, is that you have to figure out how to integrate with their mainframe,” he added. “In the process, you end up having to also be compliance experts just to be able to do it.”

Whereas it took Karkal three years to get bank processes set up for other companies, it took Sila 18 months. Its banking APIs enable developers to create their own digital wallets, replacing the need to integrate with legacy financial institutions. Sila also has partnerships with fintech platforms, including Plaid, Alloy, Lithic and Arcus to move money, and is backed by Evolve Bank and Trust.

Sila can now get customers up-and-running in six to eight weeks. And unlike competitors that focus almost exclusively on e-commerce, most of Sila’s customers are doing regulated payments within the fintech, insurtech, commercial real estate and cryptocurrency spaces that tend to be more complex from a compliance basis, Karkal said.

Since the company launched its platform, business was building steadily, and took off in the second half of 2020. The company raised a $7.7 million seed round earlier in the year. In the last 12 months, Sila grew its revenue 10 times and customers’ end users grew over 500% in the last seven months.

Sila will use the new funding to increase headcount, target additional partners and expand product features, including its Ethereum MainNet stablecoin issuance and interoperability between FedWire and the Nacha Automated Clearing House network.

“There is a massive wave of fintechs emerging in the U.S., and we have barely scratched the surface,” Karkal said. “Places like India, Africa and Latin America could accelerate at the same time because they are mainly starting from zero. We are here to ‘arm the rebels’ and help those innovators build applications to give all end users a much better financial experience.”

As part of the investment, Clara Sieg, partner at Revolution Ventures, is joining the company’s board. She told TechCrunch she met the company’s co-founders through the Portland ecosystem.

Revolution tends to look at fintech startups from a consumer angle. Recognizing that the problem with building infrastructure meant dealing with banks, the firm set out how to find a company building the pipes to solve it, she said.

In the landscape of fintech, she considers Dwolla to be a competitor to Sila. Last week, the company raised $21 million to continue developing its API that allows companies to build and facilitate fast payments, specifically with a focus on ACH. However, it comes down to actually signing up customers, and that competitive landscape is pretty thin, Sieg added.

“Sila is building an easy way for people to program money and taking a regulatory eye to things,” Sieg said. “When Shamir was building Simple, he could see how challenging it was for incumbents to provide the tools developers need to embed financial services, and this is why we have confidence in his ability to win.”

Investors, founders report hot market for API startups

 

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NotCo gets its horn following $235M round to expand plant-based food products

Published July 26, 2021

NotCo, a food technology company making plant-based milk and meat replacements, wrapped up another funding round this year, a $235 million Series D round that gives it a $1.5 billion valuation.

Tiger Global led the round and was joined by new investors, including DFJ Growth Fund, the social impact foundation, ZOMA Lab; athletes Lewis Hamilton and Roger Federer; and musician and DJ Questlove. Follow-on investors included Bezos Expeditions, Enlightened Hospitality Investments, Future Positive, L Catterton, Kaszek Ventures, SOSV and Endeavour Catalyst.

This funding round follows an undisclosed investment in June from Shake Shack founder Danny Meyer through his firm EHI. In total, NotCo, with roots in both Chile and New York, has raised more than $350 million, founder and CEO Matias Muchnick told TechCrunch.

Currently, the company has four product lines: NotMilk, NotBurger and NotMeat, NoticeCream and NotMayo, which are available in the five countries of the U.S., Brazil, Argentina, Chile and Colombia.

The company is operating in the middle of a trend toward eating healthier food, as more consumers also question how their food is made, resulting in demand for alternative proteins. In fact, the market for alternative meat, eggs, dairy and seafood products is predicted to reach $290 billion by 2035, according to research by Boston Consulting Group and Blue Horizon Corp.

NotCo’s proprietary artificial intelligence technology, Giuseppe, matches animal proteins to their ideal replacements among thousands of plant-based ingredients. It is working to crack the code in understanding the molecular components and food characteristics in the combination of two ingredients that could mimic milk, but in a more sustainable and resourceful way — and that also tastes good, which is the biggest barrier to adoption, Muchnick said.

“Our theory is that there is a crazy dynamic among people: 60% who are already eating plant-based are not happy with the taste, and 30% of those who drink cow’s milk are waiting to change if there is a similar taste,” he added. “Our technology is based in AI so that we can create a different food system, as well as products faster and better than others in the space. There are 300,000 plant species, and we still have no idea what 99% of them can do.”

In addition to a flow of investments this year, the company launched its NotMilk brand in the United States seven months ago and is on track to be in 8,000 locations across retailers like Whole Foods Market, Sprouts and Wegmans by the end of 2021.

Muchnick plans to allocate some of the new funding to establish markets in Mexico and Canada and add market share in the U.S. and Chile. He expects to have 50% of its business coming from the U.S. over the next three years. He is also eyeing an expansion into Asia and Europe in the next year.

NotCo also intends to add more products, like chicken and other white meats and seafood, and to invest in technology and R&D. He expects to do that by doubling the company’s current headcount of 100 in the next two years. Muchnick also wants to establish more patents in food science — the company already has five — and to explore a potential intelligence side of the business.

Though NotCo reached unicorn status, Muchnick said the real prize is the brand awareness and subsequent sales boost, as well as opening doors for quick-service restaurant deals. NotBurger went into Burger King restaurants in Chile 11 months ago, and now has 5% of the market there, he added.

Sales overall have grown three times annually over the past four years, something Muchnick said was attractive to Tiger Global. He is equally happy to work with Tiger, especially as the company prepares to go public in the next two or three years. He said Tiger’s expertise will get NotCo there in a more prepared manner.

“NotCo has created world class plant-based food products that are rapidly gaining market share,” said Scott Shleifer, partner at Tiger Global, in a written statement. “We are excited to partner with Matias and his team. We expect continued product innovation and expansion into new geographies and food categories will fuel high and sustainable growth for years to come.”

4 sustainable industries where founders and VCs can see green by going green

 

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Spinn taps into $40M to create better coffee brewing, discovery experiences

Published July 26, 2021

When you are a coffee lover, taste matters, and Spinn is brewing up some fresh funding in the way of a $20 million funding round, led by Spark Capital, to bring connected coffee to new customers through its hardware-enabled coffee marketplace.

Joining Spark in the round were Amazon’s Alexa Fund, Bar 9 Ventures and existing investors. It gives the Los Angeles-based company a total of $37 million in funding to date, CEO Roderick de Rode told TechCrunch. He isn’t defining this round, but said Spinn previously raised both Series A and B rounds.

“SPINN is doing for coffee what Dyson did for vacuums and what Nest did for homes, rethinking technology and connectivity for better results,” said Kevin Thau, general partner at Spark Capital, in a written statement. “Their approach, from machine design to roaster assortment, is elevating the entire industry and delivering what consumers seek today: delicious tasting coffee brewed to their personal preferences, with the smallest impact on the planet.”

Spinn debuted its centrifugal brewing method at TechCrunch’s Startup Battlefield in 2016. The connected coffee maker uses centrifugal force to spin, instead of press, coffee grounds. De Rode says this results in a cup of coffee tasting how it was intended by the roaster. The machines can be controlled via voice command from Amazon’s Alexa or a single tap on the machine or from a mobile app.

A survey released in April by National Coffee Association USA found that the global pandemic was the driver for 85% of Americans drinking at least one cup of coffee at home, up 8% from January 2020. Nearly 60% of Americans drink coffee every day, and one-quarter purchased a new home coffee machine over the past year.

Osma’s high-tech instant cold brew could change summertime coffee forever

In addition to Spinn, other startups are coming out with machines aimed at making a better cup; for example, Osma is a new coffee-making technique to make a strong espresso-like drink at any temperature, including icy cold.

Spinn itself has three coffee makers to choose from that retail for $479 to $799, according to its website. The machines don’t require any filters or coffee pods and make a variety of styles, including espresso, Americano, drip and cold brew.

The marketplace offers over 1,500 different kinds of coffee from more than 500 artisan roasters around the world. Customers add their coffee choices to a playlist of sorts, which can be specifically curated to ship or scheduled randomly, de Rode said. Drinkers can leave reviews and get recommendations, as well as take a quiz to match with various coffees.

He plans to use the new funding to further grow and develop its patented brewing technologies, and complete delivery of outstanding pre-orders.

Though de Rode wouldn’t go into specifics about Spinn’s growth metrics, he said there has been triple-digit growth from home users. He aims to do for coffee what Vivino did with wine: provide educational content about the coffee options and the roasters themselves.

“The coffee industry is becoming a food thing just like wine,” de Rode said. “People want to understand the different kinds of beans to make more sophisticated choices. We try to bridge the gap between the coffee shop and home.”

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