Techstars Boston Demo Day: VC Gets More Selective, Plus 3 Takeaways
[Corrected 4/28/18, 5:14 pm. See below.] It’s getting tougher out there for early-stage startups, but Techstars Boston keeps plugging away.
In the age of “unicorns” and “mega-rounds” of venture capital, investors are placing bigger bets on fewer, often later-stage, companies. At the early stages, deal sizes are also growing, but the number of investments continues to fall, according to recent data from the Venture Monitor report produced by PitchBook and the National Venture Capital Association. In other words, the gap between the haves and the have-nots in startup land is widening.
That could spell fiercer competition to get accepted into a startup accelerator program like Techstars Boston, as young ventures seek a seed investment, connections to mentors and other investors, and help honing their business and sales pitch.
On Thursday, the Boston program—one of two local outposts of the global accelerator network and venture fund headquartered in Colorado—held a pitch event showcasing the 10 companies that just completed its latest three-month session. The session was the first under new managing director Clement Cazalot, who took over for Semyon Dukach. (Dukach is now a managing partner at One Way Ventures, a venture fund focused on immigrant tech entrepreneurs.) Techstars Boston doesn’t seem to have missed a beat in the regime transition, if the packed auditorium inside Northeastern University’s Ell Hall on Thursday evening is any indication.
As for broader venture capital trends, Cazalot (pictured above) says he’s not worried about the industry’s shift toward larger and fewer deals. He predicts it will lead to a “fragmentation” of early-stage deals; instead of raising one relatively large seed funding round, more startups will raise a series of smaller seed deals tied to achieving specific business milestones, Cazalot argues.
“That is pushing companies to do more with less money, which is also not necessarily a bad thing for their core business,” Cazalot says.
Startups are also being more selective of their investors, placing more of an emphasis on backers that have the right kind of expertise to help their businesses, he says.
“They’re focusing a lot on this concept of smart money … even if that means raising less,” Cazalot says. But even if it’s getting more difficult to secure early funding rounds, “great companies always raise the money they need for their growth,” he adds.
Cazalot’s first crop of Techstars Boston companies is all over the map—cleantech, marketing tech, healthtech, fintech, connected devices, cybersecurity, and more. The common thread, Cazalot says, is all of the companies are working in sectors that play to the Boston area’s strengths.
Here are a few takeaways from speaking with some of the latest Techstars Boston alums:
1. Healthcare and wellness continue to merge. Brio Systems, one of three health or life sciences-related ventures in the latest Techstars Boston class, sells a blood-testing service aimed at helping consumers keep closer tabs on metrics like levels of blood sugar and hormones. The idea is to deliver insights that might improve people’s health and to track the impact of changes in diet and lifestyle.
Boston-based Brio is selling the monthly subscription service through personal trainers who offer it to their clients, says CEO Boris Lipchin. Consumers have their blood drawn using a medical device developed by Medford, MA-based Seventh Sense Biosystems. The sample is sent to a lab for analysis of biomarkers, and the results are reviewed by a physician, Lipchin says. Brio then distills the information into a more easily digestible report and sends it to the consumer. [An earlier version of this paragraph incorrectly stated that Brio’s service involves genetic sequencing. We apologize for the error.]
The company is emblematic of the blurring lines in health and wellness. Gyms are starting to offer more health services to consumers, Lipchin says. Meanwhile, the traditional practice of medicine is moving outside the walls of hospitals and clinics and into people’s homes, aided by wearable devices, smartphone apps, telehealth services, and other technologies.
Lipchin says he hopes Brio’s service can contribute to the larger battle against chronic disease. He says he was pre-diabetic, and after he started tracking his blood sugar more closely and taking steps to keep it in check, he was able to avoid becoming diabetic.
“The reality now is healthcare is focused on defining disease,” Lipchin says. “Nobody really knows what it means to be healthy.”
2. Cybersecurity tech is crowded, but cybersecurity services have openings. As cyber threats have grown more numerous and complex, data protection has become a chief concern for business leaders. That has contributed to a flood of new security software products from startups and big companies. It’s also creating demand for companies that can help businesses make sense of their vulnerabilities and take steps to remedy them.
Securicy is in the latter category. The Nova Scotia-based company has developed software to help businesses—particularly small and medium-size ones—quickly assess their cyber defenses, create official policies and procedures for protecting their data and IT infrastructure, and map out step-by-step tasks to implement them, says Darren Gallop, the startup’s CEO.
“We don’t consider ourselves a security [software] company,” Gallop says—his company doesn’t develop the actual software tools that defend networks and other IT assets. It’s more about compliance and implementing security programs. “Most customers are starting from ground zero” when it comes to security, he adds.
3. Entrepreneurs still see opportunities for reinventing old industries. Three of the latest Techstars Boston companies focus on applying new technologies to some of the oldest sectors in the world: banking, insurance, and real estate. The one focused on real estate, OpenFrame, has developed a tiny, 360-degree camera that attaches to smartphones, enabling real estate agents to shoot photos and videos of their property listings and quickly share them online. The product is intended to help agents market properties, drive up listing prices, and bring more qualified buyers to the door, while giving prospective buyers more information to help in their decision, OpenFrame CEO Aymeric Vigneras writes in an e-mail to Xconomy.
“People expect everything to be instant, quick, fast, in a snap,” he writes. “We make it possible for a real estate agent to do videos in [a] few minutes with a phone, at a very affordable price.”
Cambridge, MA-based OpenFrame, which says it has raised $3.8 million from investors to date, isn’t the first Techstars Boston company trying to bring real estate into the 21st century. The accelerator previously backed real estate software maker Placester, which has raised $100 million in venture capital. Placester co-founder Fred Townes is one of OpenFrame’s advisors.
“These guys have been growing like crazy,” Townes says in a video touting OpenFrame. “I’ve seen a lot in my years at Placester, and it’s super difficult to make a solution for the real estate professional and help them be successful today.”