Seed Stage VCs Want to Grow Your Food

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Seed Stage VCs Want to Grow Your Food

Y Combinator (YC for short) is a unique venture capital firm from just about every angle. In a world where late stage mega-rounds are de rigueur, it only puts in $120,000/company and spreads its bets around a large number of startups. Their long-term track record is excellent, so the competition to be a YC-funded company is intense; you have a better chance of getting an acceptance letter from Harvard.

Companies who do get the nod have to go through 3 months of intensive boot camp-style training in Silicon Valley, where they refine their pitches and hone their products. Then, twice a year, there is a Demo Day (really 2 days now), where other VCs show up to hear presentations from the latest crop of YC companies and start making deals for their next financing rounds.

The latest Demo Day just wrapped up, well attended as always by the Valley’s VC community, and there were two notable trends from the event:

#1. Wired magazine reported yesterday that for the first time in YC history a quarter of the companies were in the “Bio” category, which includes agricultural technology and food as well as health care. A few examples:

  • 64-x. Co founded by rock star Harvard genomicist George Church, the company creates organisms with entirely new genetic codes. In the Wired article (link below) one of Church’s co founders was quoted as saying the company’s creations can be immune to “every virus on Earth”.
  • Togg. A wall-mounted radar sensor for nursing homes that can monitor physical activity, heart rate and breathing at a distance instead of having the patient wear monitoring devices. The technology here was unaffordable just 5 years ago, but advances in automotive radar systems now makes them scalable into new applications such as this.
  • Cambridge Glycoscience. The company develops plant based sugar substitutes for all baking/cooking applications. Samples at Demo Day were “just OK”, but Wired speculated that perhaps biochemical engineers were not very good bakers.
  • CB Therapeutics. Not mentioned in Wired, but Techcrunch called it out as a top company from Demo Day. They manufacturer artificial/biosynthesized cannabinoids that can be produced at industrial scale.
  • C16 Biosciences. Also mentioned by Techcrunch, they produce lab-grown palm oil.
  • Cytera Cell Works. Automating the production of lab-grown meats. As in turkey, beef and chicken…
  • Spero Foods. You can actually buy their products right now (just Google the name), which are bioengineered cheeses that use plants rather than dairy.

Several other examples in the Wired article here: https://www.wired.com/story/y-combinator-startups-manage-molecules-rather-than-code/

#2. International/emerging startups also had a strong presence at Demo Day, with a lot of familiar ideas in the mix:

  • Ajaib: Indonesian online wealth management similar to US companies Wealthfront/Betterment or Ant Financial in China, charging 140 basis points but with only a $15 required minimum balance to start.
  • Grin. Electric urban transport scooters in Latin America similar to the Bird offering in Los Angeles.
  • Kobo360. Uber for trucking in Nigeria, matching truckers with extra cargo space to sell with shippers.
  • Sterblue. A French drone startup that specializes in the inspection of industrial facilities like wind turbines and power lines.
  • Tenderd. The Uber of heavy construction equipment, based in Dubai and serving the entire Middle East and North Africa.

One final observation from all this: YC’s choices for this latest crop of investments are quite telling, since seed-round investors have to be 2-3 years ahead of the curve. Funding emerging market clones of existing US/Chinese business models like urban scooters and online financial services is smart. Larger players will buy those businesses in the coming years, executing a classic global roll-up strategy.

But what is really fascinating is the emphasis on food and agriculture. That may seem like science fiction right now, but YC’s emphasis here is a ringing endorsement that it may be science fact soon enough.

If you want to read more:

List of Day 1 companies: https://techcrunch.com/2018/08/20/here-are-the-63-startups-that-launched-today-at-y-combinators-s18-demo-day-1/

List of Day 2 companies: https://techcrunch.com/2018/08/21/all-59-startups-that-launched-today-at-y-combinators-s18-demo-day-2/