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Retooling the Lab-Software Stack

Day-to-day software used by scientists remains stuck in the dark ages.

While great strides have been made in biomedical research over the past decade with breakthrough technologies like CRISPR and gene therapy, the day-to-day software used by scientists remains stuck in the dark ages.

On a product-level, legacy lab-software is often difficult to deploy (anyone heard of SaaS?), terrible to integrate (API still means Active Pharmaceutical Ingredient) and shockingly bad from a UI/ UX perspective (think Pong from 1972). On a functional level, it’s often unfit for modern data-types/ data-volumes and lacking in embedded intelligence (i.e. AI/ML). Software may be eating the world in other industries, but it only ever nibbled at the R&D lab.

Thankfully, over the last few years we’ve seen a new breed of start-up emerge looking to overhaul the lab-software stack. These companies are built on modern tech foundations and tend to be product-led with freemium, self-serve versions that delight users not dissuade them. Several F-Prime portfolio companies exemplify these traits: Benchling has thoroughly modernized what a Lab Operating System should look, feel and function like; Owkin is empowering scientists to create predictive models for drug efficacy; and BenchSci (our newest investment) has mapped the world’s biomedical research to improve the efficiency of reagent selection and experiment design.

The DNA of this new breed of start-ups is also fundamentally different. They’re demographically younger (born in the web). They’re educational ‘dual-citizens’ (fluent in Biological Sciences and Computer Science). And they bring a healthy disregard for incumbent vendors in the R&D market (they’re “in the world, but not of it”).

The challenge of commercializing biomedical research is well understood by everyone involved (e.g., high profile clinical failures, experimental irreproducibility and escalating costs of drug development). While better lab software is clearly not THE answer, it is AN answer. It’s an exciting time to be building a company in this vertical and if you’re doing so, we’d love to hear from you.

Whatfix: A New Breed of Global SaaS Start-up

Whatfix

Enterprise SaaS has been a prolific sector for start-up creation over the last decade. Billions of dollars invested, and billions of dollars returned to investors and employees. Notably, almost all in the US. However, enterprise SaaS is becoming a global opportunity, both in terms of target markets and company creation. Through our investments teams across the globe, F-Prime and EightRoads are in the unique position of being at the forefront of investing in these global enterprise SaaS opportunities. We are excited to announce our most recent joint investment in Whatfix, a company we believe can become the next great global SaaS company.

The Whatfix Digital Adoption Platform

Whatfix, a company started in Bangalore, India, is helping define a new class of software user experience for customers across the globe. Historically, software user experience was mostly an afterthought; when the alternative is paper and pencil or spreadsheets, the bar for delivering a high-quality user experience is low. However, as spend on software by enterprises has increased, and the software is increasingly a key driver of operational excellence, there is an acute need to find better ways to drive digital adoption and to ensure employees are deriving full value from the software. Legacy approaches of off-line training, support desks, and help documentation were never very effective, and the ‘consumerization of IT’ means today’s employees expect software to be intuitive to use.

Whatfix helps solve the digital adoption challenge with their contextual, in-app support tools. Across any enterprise application, Whatfix’s product suite enables delivery of support at the exact time the user needs it and at the precise place in the application where it is needed. The support can also be personalized to the user’s past behavior (e.g., first time user) or to their role in the organization. In addition, product usage analytics enable Whatfix to help identify the most commonly used features and the most commonly faced issues to enable further improvement of business processes. Through this suite of capabilities, hundreds of Whatfix customers are already seeing significant uplift of employee engagement across their key enterprise software tools, including Salesforce, Oracle, and Workday.

One of the most interesting aspects of Whatfix’s product is they collect robust usage data across a suite of enterprise applications. Looking ahead, they expect to leverage this unique data asset to provide predictive support, anticipating challenges employees will face, and to automate much of the tedious work of accessing and maintaining data across these applications.

Building a global product business out of India

Whatfix is a true pioneer of the next generation of global enterprise SaaS companies from India. While the technical talent from India has always been world-class, building global product businesses has been a longer journey. However, the last several years has seen the emergence of several significant success stories, such as Freshworks and Druva. Given the best-in-class SaaS growth metrics and unit economics that Whatfix already enjoys, we believe they are well on their way to joining this elite group.

The path Whatfix founders, Khadim and Vara, took to build the company is one we hope many future entrepreneurs from India can learn from. Here are a few of the key decisions they’ve made:

Rapid product iteration and customer feedback: Khadim and Vara have personally spent significant time with their global customers to get feedback on early versions of the product and to ensure product market fit at every step of the product lifecycle

Hiring entrepreneurial leaders: recognizing the lack of experienced hires in India who have built global SaaS businesses, they prioritized hiring leaders with entrepreneurial experience, who bring not only a deep sense of ownership to their roles, but also a willingness to learn and innovate best practices

Building a low-cost inside sales team in India: capitalizing on the increased willingness of enterprises to buy products through an inside sales-led approach, Whatfix has continuously optimized the sales hiring profile, sales pitch, and lead nurturing process to successfully sell high five-figure and even six-figure deals out of India. This has been a critical stepping stone to eventually building a high-impact field sales team in the US

Setting up in the US in the early days of the company: early in the life of the company, once they validated product market fit, Vara relocated to the US and Vispi, an early investor, joined as head of sales, based in the US. Investing early in being close to the customer not only helped build credibility for the company with international customers, but it also tightened the cycle of product feedback

Continuously learning: Khadim and Vara have been true students of building a global start-up, proactively finding mentors amongst many of the leading SaaS entrepreneurs in India and also seeking out guidance from experienced global executives across every functional area

Whatfix is a remarkable company, both in terms of the value they bring to their clients and in their ability to chart their own path to building a global company. We are fortunate to be investors, and we are excited to partner with Khadim and Vara on the next leg of their journey!

Plaid Acquires Quovo — Another Brick in the New Financial Services Tech Stack

Last year I gave a talk at a FinTech Sandbox event about the new financial services tech stack, showing Quovo and Plaid emerging as the new data access layer. Last week, less than one year later, news broke that Plaid acquired Quovo for over $200M. This new infrastructure layer feels solidified.

F-Prime Capital co-led Quovo’s Series B round and I have had the joy of working with co-founders Lowell Putnam and Niko Karvounis as they willed their way through the challenging early years when no one but financial advisors cared about account aggregation, and later as they surfed the tsunami of new applications incorporating account authentication and aggregation. They did it with grit, humility and class.

In the future, I think we will look back on the Quovo-Plaid merger as a significant milestone in the FinTech wave of disruption. For one, I believe the combined Quovo-Plaid will become the data access layer in the new financial services tech stack. In addition, this merger is happening at the same time as authentication and aggregation move from a ‘nice to have’ to a ‘must have,’ and as we transition from building out the infrastructure to delivering analytics and insights. We are moving from Chapter 1 to Chapter 2, but it won’t stop there.

A quick view on the past, present and future.

Chapter 1: new consumer financial data infrastructure. Together Quovo and Plaid have helped millions of consumers connect their financial accounts to services like Venmo, Coinbase, Betterment and to a long tail of other financial service providers. They connect to over 14,000 financial institutions and provide clean consumer transaction data via APIs, making it easy for consumers to add a bank account for payments (e.g., Venmo), transfer funds into their brokerage account (e.g., Stash), see their categorized spend in budgeting tools (e.g., Personal Capital) and power frictionless rewards programs (e.g., Drop). They are literally everywhere consumers touch a financial service. They do not move money; but they provide the metadata, and in the process have enabled hundreds of new FinTech applications and services.

As a combined entity they will continue to build out the infrastructure in the US and soon the world, but we are already well on our way to Plaid and Quovo owning the data access layer of the new financial services stack.[i]

Chapter 2: analytics and insights. What do you do once you have poured the foundation? You build on top. Plaid and Quovo are now helping businesses analyze consumer data to make better decisions in an automated, real-time way. Lenders like SoFi use Quovo to estimate W-2 income when a consumer applies for a loan, rather than asking for tax returns. Stash uses Quovo to predict the best day to move funds from a consumer’s bank account to help them avoid overdraft fees. Insurance companies can quickly authenticate a policy holder’s bank account to direct deposit insurance proceeds, rather than sending a check. The surface area is wide and Plaid and Quovo should someday generate 3–4x more revenue from derived insights embedded into business workflow.

Chapter 3: what’s next? One inevitable path is for Plaid and Quovo to give consumers more tools to control access to their financial data. In all of my examples, consumers proactively permission use of their data, but what do they do afterwards? Consumers will need easy dashboards to track and revoke access when for instance they no longer use a service. Plaid and Quovo will be well-positioned to do this on behalf of consumers and may become consumer brands themselves in the process. The combined entity can turn over many other cards and it’s exciting to consider other ways they could leverage their data access and analytics, such as, to support identity or credit verification.

Closing thoughts

There are many issues to navigate, from Open Banking in Europe to privacy and regulatory concerns in the US, but I’m optimistic that the triad of regulators, financial institutions and data access providers will act sensibly and with consumers’ interests in mind. If so, the combined Plaid and Quovo has a tremendous future ahead.

And if all goes well, in several years closing documents for company mergers will not require investors to submit their bank account numbers in writing…the final irony in the merger of the two leaders in digital account authentication.

[i] To be fair, time did not start with Quovo and Plaid, and for more than a decade Yodlee (now part of Envestnet) was the data access layer and one of the great early FinTech success stories.

A student was tasked with sending his international tuition payment to the university — but the entire process lacked transparency.

While preparing to attend MIT in 2008, an international student was tasked with sending his international tuition payment to the university – but the entire process lacked transparency.

His payment couldn’t be tracked, so he had to hope that it would be delivered before the deadline—if it was delivered at all.  The payment was subject to fees and fluctuating exchange rates, affecting the total amount that would be actually delivered. Wire transfers rarely included essential student information universities required to post funds correctly. Schools frequently received insufficient funds because of the wire fees, and had to send additional bills to students or bar them from registering for classes. Confident a better process could exist, Flywire was created.

Flywire partners with schools and hospitals to receive payments from around the world, easily reconcile them with their accounting systems, and provide consumers with a seamless payment experience.

Mike Massaro was an early employee leading sales for Flywire that became CEO at the same time F-Prime invested in its Series A round. Mike has led the company to tremendous growth in the education sector and lead its successful expansion into the healthcare industry as well. It’s a world leader in vertical payments, having processed over $8 billion for 1,600 institutions.

Flywire aligned well with F-Prime’s investment theme of vertical payments. Flywire is a leading example of solving a simple problem with a great user experience and an elegant, scalable business model. Mike has built a truly global company with a culture of transparency, empowerment and authenticity. Flywire is headquartered in Boston with operations in London, Manchester, Valencia, Shanghai, Singapore, Tokyo, Cluj, Sydney, and Chicago.

Neurodegenerative disease has remained an undefeated adversary for too long.

That needed to change. Through our affiliate FBRI, F-Prime has had a long-standing commitment to cure neurodegenerative diseases. But all previous disease-modifying trials in this arena had failed. In the past decade, though, major scientific insights into the underlying genetic causes and biological processes—along with new translational medicine tools—gave us hope for a different future.

We saw an unprecedented opportunity for a serious, well-funded effort to discover and develop new, effective therapies to treat and cure Alzheimer’s disease, Parkinson’s disease, ALS, and other rare neurodegenerative diseases.

So we seeded a new company. Named after the highest mountain peak in the United States, Denali Therapeutics aspires to conquer a most challenging problem by adopting a rigorous approach to drug development, identifying the right patients, observing treatment efficacy at earlier stages, and conducting clinical trials geared towards patient success.

We partnered with other like-minded investors and, through our deep relationships in the field, were able to attract Ryan Watts as CEO, who in turn assembled a spectacular team. Denali Therapeutics has attracted some of the most talented scientific innovators in the world who bring extensive experience and an intense passion to develop therapies for these devastating diseases.

Since being founded in 2015, Denali Therapeutics has raised more than $300M privately and in December 2017 went public, breaking the 2017 record for initial market valuation of a biotech company.

“The team at F-Prime led the founding of Denali and helped create a company focused on solving big medical problems. They brought the scientific and business firepower to rapidly found and grow Denali.”

—Ryan Watts, CEO

Prof. Bobby Gaspar wanted to solve a big puzzle.

But he only had a few pieces in hand. He and his co-founders had some of the most exciting-edge gene therapy medicines-and clinical data showing they worked-but that wasn’t enough.

To turn these academic developments into actual medicines, he needed to create a biotech company that could bring the right people together, build the necessary regulatory and manufacturing infrastructure and have the business acumen to aggregate multiple rare disease assets from several academic counterparties through complex license negotiations.

He needed serious leverage.

Other investors had met with him but passed up the opportunity. F-Prime saw the potential of his vision and stepped in as his co-founder in Orchard Therapeutics and lead investor. We provided the founding operational team with the biotech industry expertise and the financing they needed to secure several licenses with other academic institutions and create the operational infrastructure.

This enabled Bobby, now Orchard’s Chief Scientific Officer, to create a category-leading biotech company. Orchard Therapeutics went on to raise $300M in private financing, and it took only three years to go from incorporation to NASDAQ IPO.

“I couldn’t have created Orchard without F-Prime.”

Prof. Bobby Gaspar, Founding CSO

Patients get care from many providers. When these caregivers don’t coordinate, it’s dangerous and expensive.

Could this be improved by solving a communication problem?

That’s what Jay Desai and David Berkowitz believed. So they co-founded PatientPing, a community of providers coordinating patient care through real-time notifications across facilities, networks, and even states. When we met Jay and David, they had recently founded the company and were sharing co-working space. We were immediately impressed with their industry knowledge, passion, and vision for improving provider coordination across the continuum of care. F-Prime led the company’s seed investment and welcomed Jay and David into our offices as they began to build the team, develop product, and close early customers.

During the following year of sharing space and snacks, we enjoyed being close to the company as it scaled to ten team members and prepared for their Series A, which F-Prime was pleased to co-lead with GV. Since then, PatientPing has rapidly built a vast national network that enables thousands of providers around the country to share information in real time and better coordinate patient care.

“Since early on, when F-Prime generously shared the office you see in the picture, the team has consistently and thoughtfully supported us. They’ve been a terrific partner.”

—Jay Desai, CEO

From the willingness to listen and the ability to innovate in the face of failure, a Boston unicorn is born.

Steve, Aman and Jon were at dinner when they realized the restaurant industry needed a serious tech upgrade. The three MIT grads had met at enterprise software company Endeca, and had been thinking of starting their own company in the mobile commerce space.

The first product they made was a customer-focused mobile payment app, developed in Aman’s basement and launched at a local Boston pub. It flopped.

But that didn’t stop them. They realized that the app was just adding to the restaurant operators’ woes on an already-busy Friday night; servers certainly didn’t need one more thing to juggle. The trio probed further, and discovered that what was really broken was restaurants’ central operating system: the POS. So they shifted gears.

This pivot was critical. Restaurateurs previously reluctant to discuss the mobile payment app would now talk hours about how much they hated their existing POS: they were difficult to operate, poorly serviced, and expensive to fix. Here, indeed, was a big problem worth solving.

Using their background in enterprise software, the team hired restaurant experts and relied heavily on early customer feedback to iteratively build a platform to manage all operations. The platform prioritized mobility, ease of data access and updates, and a better consumer experience.

The company virtually exploded overnight. Two years from being founded, Toast had signed over 1,000 merchants across the United States and grown to over 120 employees, requiring a space upgrade from 7,000 sq ft in Cambridge to 40,000 sq ft at the Hatch Fenway co-working space. In early 2015, Toast brought on Chris Comparato (Acquia, Endeca) as CEO.

Shortly after, they met F-Prime Capital which participated in their first round of institutional round funding, raising $30M; within three years, Toast raised $115mn in Series D funding, and its official unicorn status at a valuation of $1.4bn.

As the company continues to grow, it remains obsessed about customer feedback and hyper-focused about the entire restaurant experience, both cornerstones of its success.

Emil Kakkis has always been driven to solve difficult problems.

When he approached us, he was looking for an investor who would understand rare diseases the way he did. His vision was to build a mission-driven company to treat rare and ultra-rare genetic diseases—all the way from concept to globally-approved drugs.

The mutual trust between us was strong from the start. Emil demonstrated great leadership recruiting the team and hunting for drugs. Together we had to be opportunistic, and willing to go off-script and embrace a vision larger than “VC-101”-focused company building. We had to have the ability to support product acquisition, collaborations, and the additional investment that effort implied. Most small companies don’t have four clinical programs just three years after being founded. Ultragenyx did.

And in 2017—just six years in—Ultragenyx launched Mepsevii, a globally-approved therapy for Sly’s disease, an extremely severe and rare genetic disease that had remained untreated since it was first identified in 1972. 2018 saw the global approval of Crysvita for the rare bone disease X-linked hypophosphatemia.

It was a privilege for us to support Emil right from the beginning of the Ultragenyx story.

“F-Prime was a great partner, they understood the vision we had at Ultragenyx, and helped us make it a reality.”

—Emil Kakkis, CEO

Where Are They Now — Exploring Boston’s Iconic Startup Stories. Introducing Founders Diaries.

Do you remember VH1’s hit TV series Where Are They Now? It was kind of addicting. Each episode would chronicle the journey of a celebrity who had achieved greatness in the past, yet was no longer in the public eye. Well recently, that’s what we’re thinking about in our office at F-Prime.

Like many of you, we think a lot about the entrepreneurs who built iconic companies in Boston; such as, Mitch Kapor, co-founder of Lotus Development Corp, the forerunner to Microsoft Excel, and Amos Hostetter, co-founder of Continental Cablevision (one of our early investments). These entrepreneurs paved the way for many of us and built the foundation of today’s fertile entrepreneurial ecosystem in Boston.

We decided to do some research.

And long before the PayPal Mafia became famous, these Boston founders inspired their own future generation of entrepreneurs. Take Akamai — we lost count at 39, for the number of companies started by its alumni. Employees of Steve Papa’s Endeca (acquired by Oracle in 2011 for $1.0B) are just beginning to fan out and start new companies — 10 and counting.

But while we know where Mitch Kapor is most weeks — backing entrepreneurs making a social impact (and a co-investor of ours in FutureAdvisor) — we had no idea where Drs. James and Janet Baker were, Co-Founders of Dragon Systems, and pioneers in speech recognition.

What followed was a wonderful journey of our own. We analyzed the hard numbers — what are Boston’s biggest startup successes — and we delved into the soft stories of founders — how did they achieve such success? We even pieced together the web of startups formed by alumni of these Boston success stories.

The more we went down the rabbit hole, the more we thought other Bostonians would enjoy this as much as we do, so we decided to do two things.

For those who like data. We’ll start to share our research on the big startup successes of Boston with an initial post today. And if you enjoy this as much as we do, please help us with our research! Peering into founder journeys is a process of exploration and takes many contributors. We welcome additions and corrections from anyone in the community.

For those who like the stories behind the data: Founders Diaries. We also quickly figured out that listening to iconic founders tell their stories is a privilege. The tribal knowledge they share is a gift. We started inviting other entrepreneurs to join us and finally made it a regular event open to Boston’s startup community. It’s called Founders Diaries and we hope it will serve as an intimate forum for the current generation of Boston founders to hear the stories of Boston’s most iconic startups. It’s been a joy so far. A big thanks to Robin Chase, Founder of Zipcar, and Jeff Glass, Founder of m-Qube, for joining us at our last two events. We look forward to welcoming Mark McWeeny, founder of Rue La La and Michael Simon, founder of LogMeIn, who will share their stories at events in April and May (click on the links to request an invite).

So, on to some fun findings on Boston startup successes.

Boston’s Greatest Hits

There has been good research from folks like Jeff Bussgang on the current crop of Unicorns and Reindeers, so we looked back over the last 25 years for startups that built companies worth at least $400M (“Large Exits”).[1] Most achieved that valuation at exit (IPO or M&A), but some got there after going public — don’t you wish you had bought LogMeIn in 2009 when it IPO’d at $340M. It’s added $2.2B organically since then, and now sits at a $5.0B market cap following the recent merger with GoTo.

TL;DR Boston entrepreneurs rock!

200 startups with Large Exits producing $370B in total valuation. 60% were by M&A; 40% by IPO. The median exit valuation is $668M and the median valuation of the 66 surviving standalone companies is $1,318M. Check out the table below, but these points standout:

Boston keeps getting better. Exits among venture-backed startups tend to be cyclical, but Boston has generally produced more Large Exits — by number and value — every five years. From 71 startups and $157B value during the 15 years before 2005 to 129 startups and $213B value in the 11 years after 2005.

The rise of healthcare. For a long time tech startups accounted for the large majority of exits in Boston — 82% of all Large Exits were tech from 1990–2004; however, that is quickly changing. Since 2005, healthcare exits have been 53% of Large Exits (including several companies from our portfolio such as Blueprint Medicines, Ironwood Pharmaceuticals and FoldRX). It’s clear to anyone living in Boston that our city has become a world leader in healthcare.

Great companies do not stop with the “Exit.” ~30% of our Large Exits (66) are still public and operating as standalone companies, generating an additional $133B in net value since IPO. Not surprisingly 10 of them account for 65% of the value increase and the winner by far is Vertex (+$20.8B). Other top 10 include: Tesaro (+$9.8B), Akamai (+$8.4B), and Nuance (+$4.5B). And yes, we use ‘net value’ because some startups did suffer post-IPO, but it was nice to see 53 startups rise in value while only 13 fell.

Building big businesses takes time. Co-founders who were there ‘day one’ appreciate just how long it takes to build a big business. On the outside, success can look so easy and sudden! One of the things that has not changed in Boston is that it takes years of hard work to achieve a Large Exit. From 1995–1999 it took eight years on average from founding to exit and it took 13 years from 2010–2014. 12 years is the average over the last 25 years.

Say what you want, but Boston is not a Consumer tech town…yet. Of the 200 Large Exits over the last 25 years, only 13 (7%) were consumer focused. We defined that generously too, counting Nuance and Monster as consumer even though they derive significant revenue from business customers. On the positive side, 9 of the 13 Large Exits were in the last 10 years and Boston definitely rocks in online travel producing both TripAdvisor (TRIP) and Kayak (acquired by Priceline).

Success has many fathers…and many children too.

We started our research to learn more about the founders of these iconic Boston startups, but we came away equally intrigued by the alumni. Alumni say a lot about the founders themselves — the culture, support and inspiration they provided to their employees. The more we looked at this, the more we appreciated how much it said about the strength of the Boston ecosystem too.

For now, we’ll share our first pass at 10 startups that we were curious about — no particular prioritization other than our personal interest. You may be as surprised as we were. Akamai alumni have co-founded 39 startups! Nearly 30 each for Vertex and RSA Security. And check out Hubspot. Just two years after exit and already 25 alumni-founded startups. On future posts we will look at more of these alumni networks — it’s really fun to piece it all together. You should try it. No, really, we could use your help! We must be missing some and were wrong about others. We would love your help filling in the gaps.

And we will definitely look at the alumni of Rue La La and LogMeIn before our upcoming Founders Diaries event and welcome any contributions in advance. Please comment below or send us an email. And of course, we invite you to join us as well. Mark McWeeny, founder of Rue La La will speak on April 19th ( request invite here) and Michael Simon, founder of LogMeIn (NASDAQ: LOGM) will speak on May 18th ( request invite here). Both Rue La La and LogMeIn are extraordinary companies, with unique founders, journeys and outcomes. We hope you can join us.

[1] Sadly we excluded the hidden gems that have stayed private like Bose (estimated $3.5B revenue), Intex (THE financial modeling platform in asset-backed securities), and Bain and The Boston Consulting Group.

Originally published at https://www.linkedin.com on March 28, 2017.