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Deep Tech Startups vs Covid-19, with Khosla Ventures, Fifty Years and SOSV

This is a summary of a live panel ran by SOSV to introduce and discuss solutions funded by some of the most active investors in the field. Each of the three funds (Fifty YearsKhosla VenturesSOSV) had published an impressive list of their relevant portfolio startups. IndieBio even made a call to fund Covid-fighting startups as part of its newly launched NYC program. If you’d like to know about future events, follow us on Twitter at @SOSV or sign up to our newsletter.

Introduction

The following presentations and the discussion are mainly focused on biotech solutions, so this first part looked into other things — from 3D printing to robotics.

VCs discuss Covid-19: Jun Axup (IndieBio), Alex Morgan (Khosla Ventures), Seth Bannon (Fifty Years)

SARS was in 2003. In the span of 17 years, several important developments happened:

  • Low-cost genetic tests
  • Sensors & robots
  • Cloud solutions

The challenge of current solutions remain costs, timing and scalability.

A hundred years ago, this is what prevention looked like:

Prevention during the 1918 Spanish Flu

Today, we have a much better understanding of the modes of infection of viruses, and many new tools to prevent it.

While we’re still far from the ‘3D printing revolution’ that was announced 10 years ago, some high-resolution 3D printing technology is able to supply useful parts quickly, at low cost, and on-site.

Clips and buckles for masks or door handles but also test swabs.

3D-printed test swabs by Formlabs — up to 200 in a single print

We need to protect our face from others, but also from ourselves:

  • Many masks don’t effectively protect against infection as the virus is too small (about 120nm). Verdex (a SOSV portfolio company) has developed a nanofiber material that filters out particles above 100nm — effectively blocking the virus — and is also more breathable.
  • HabitAware, a HAX portfolio company, had created a machine-learning-powered bracelet to prevent body-focused repetitive behaviors (e.g. nail biting) by recognizing and alerting of specific gestures. The pandemic provided a new direct application of their technology.

The ‘new normal’ is making frequent and thorough disinfection of our living and working environment necessary, to protect us and helps us get back to work.

  • HAX has invested in various solutions for this, from floor cleaning (Avidbots) to toilet cleaning (Somatic).
  • The dry cleaning robot startup Presso announced its solution initially intended for business travels was now in high-demand with movie and TV studios who are resuming operations.
  • Youibot, an autonomous logistics startup, managed to repurpose their technology to provide disinfection with UV-C lights, and temperature detection.

Left to right: Avidbots, Somatic and Youibot

On the testing front, several countries have introduced testing stations that look like phone booths. Some are also using helmets with IR sensors to detect potential infections.

Some wearable device companies like Oura and Strados Labs are applying their technology to pre-symptom detection or monitoring.

Treating the virus is complicated, as it might also involve treating the immune response, and support the recovery of patients.

  • Various large and small companies are working on vaccine candidates,
  • Some companies are trying to develop new drugs, or repurpose existing ones for a faster time-to-market

The lack of equipment — particularly respirators — is being addressed partly by repurposing other devices. Among them are snorkeling masks and BIPAP/CPAP machines.

Decathlon donated their stock of snorkeling mask to hospitals.

Finally, alongside this pandemic comes tremendous emotional harm due to stress, economic uncertainty and unemployment. Some companies such as Feel are working on low-cost solutions to help people improve their mental health.

Seth Bannon, Founding Partner at Fifty Years

  • The Covid-19 threat is reminiscent of WWII, with potential deaths in the tens of millions.
  • WWII gave us many tech innovations such as: mass production of antibiotics, blood plasma as a therapeutic solution, skin grafts, flu vaccine, radar, microwave ovens, pressurized plane cabins, nuclear power and the first programmable digital computer. It laid the foundation of technical progress for many years to come. A similar rally today could build solutions for the future.
  • Everyone who can help should help, and 17 of our portfolio companies did.
  • HelixNano (from the George Church lab at Harvard). Working on a vaccine to counteract SARS-Cov-2 evolutions and antigenic drift.
  • BillionToOne found a way to run a test on Sanger sequencers at low cost and high volume.
  • Opentrons (a co-investment with Khosla and SOSV) built a low-cost lab robot to automate liquid handling, already deployed in multiple labs around the world to test covid.

An Opentrons robot in Italy (source: 24ORE)
  • Voodoo Manufacturing directed their cloud farm of 3D printers to focus on combating Covid-19 by producing PPE and more at cost.
  • Solugen, that makes hydrogen peroxide, realized they had the capacity to make hand sanitizer and now do so pro-bono.

Alex Morgan, Partner at Khosla Ventures

  • Khosla has over $1B under management, including a main and seed fund.
  • The goal is to ‘reinvent social infrastructure with technology’, looking for investments combining financial returns with societal impact (e.g. Impossible Foods, Color, etc.). We also have a list of companies responding to Covid-19.
  • Genalyte has a FDA-approved testing solution that takes 15min. Current capacity is about~250k patients / month.
  • Luminostics designed an optical test that cane be run with a small device attached to a phone.

Source: Luminostics
  • Pardes Bio is a recent investment working on a therapeutic using a protease inhibitor.
  • Prellis Biologics (IndieBio/SOSV co-investment) is a tissue engineering company that can 3d print lymph nodes ex vivo to produce therapeutic antibodies (here are a recent video interview and media coverage).
  • Some other investments also focus on the distribution of care, and particularly mental health, such as Ginger (remote service for mental health) and Flow Neuroscience (a SOSV/HAX co-investment offering a drug-free treatment for depression using an at-home brain stimulation device, already on sale in EU/UK).

Jun Axup, Chief Science Officer & Partner at IndieBio

  • IndieBio is the life sciences accelerator program of SOSV, based in SF and NYC and investing globally. It invested in 136 companies including Memphis Meats, Clara Food and Perfect Day in the cellAg space.
  • CASPR Biotech uses CRISPR for low-cost testing (covered by NYT).
  • Renegade.Bio was founded as a lab to test at high speed and large volume.
  • ANA Therapeutics is repurposing an anti-worm treatment toward Zika, SARS and now Covid.
  • Halomine found a way to keep surfaces free of viruses by stabilizing chlorine, making the protective film last up to 30 days instead mere hours.

Source: Halomine
  • SmartSteward can track outbreaks within nursing homes, using algorithms to scan metadata from electronic health records and lab reports in real time, identifying critical changing patterns.

The biotech renaissance is strong, but still has many unknowns:

  • Are pandemics a new investable thesis?
  • How do we get back to work, protect everyone?
  • We need to stay nimble, and keep evolving.

Q&A

Q: How did you decide to invest in Covid solutions?

Jun Axup (IndieBio/SOSV): Several are alumni who pivoted (e.g. Prellis), some simply needed more funding (e.g. Caspr.bio), some were opportunistic investments and some more philanthropic. The key was to fund companies who could have impact now rather than in a year.

Q: Are pivots to Covid risky?

Alex Morgan (Khosla Ventures): It varies a lot. Ideally we want to see long-term opportunities. Prellis, for example, are seizing an opportunity within a long-term plan. One challenge for diagnostic technologies is how you get paid, which is exposed to regulatory or policy risks. The landscape is changing and susceptible even to the election cycle. The current situation that delayed many procedures and treatments might push for a ‘pay for outcome’ model, which is more aligned with our investment model and the interests of patients.

Q: What are you looking at investing into related to Covid?

Seth Bannon (Fifty Years): First, we offered a $25,000 uncapped note no questions asked to support any of our portfolio company who felt they had some kind of solution. For those needed more capital we had longer conversations. For new investments we don’t want to fund ‘covid-only’ solutions because it might be too difficult to build a business around, but most likely have applications beyond this pandemic, or beyond pandemics in general. For instance companies building infrastructure solutions, or take vaccine development from years to months, or found better ways to repurpose drugs. We’d love to see a great solution for at-home testing, maybe something CRISPR-based.

Q: What is your biggest challenges in finding companies to invest in?

Jun Axup (IndieBio/SOSV): Deployment and scaling is the hardest. We fund super early companies and getting through both regulations and manufacturing is a challenge, so we prefer teams that have some understanding of how to do that.

Alex Morgan (Khosla Ventures): There is a lack of backchannel conversations that are not happening because [because of SIP/WFH], which could help find out about new companies or research. We’re trying with other media.

Seth Bannon (Fifty Years): Because of the many solutions being developed, it is a challenge to find solutions that are uniquely suited to the pandemic, and whose solution and business would outlast it.

Thanks to our speakers for their insights and to our audience for great questions! Speakers can be contacted at Twitter: Jun Axup (@junaxup@indbio@SOSV), Alex Morgan (@genomicsdoc or @khoslaventures) Seth Bannon (@sethbannon or @fiftyyears). Some of the remaining questions are on Twitter for further discussion.

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Benjamin Joffe

Benjamin Joffe

As Partner at HAX, Benjamin works with startups on strategy, marketing, PR and fundraising. He is considered a global thought leader on hardware innovation and ecosystems, and represents HAX in many global events. He has been featured on Bloomberg TV, WSJ, The Economist, WIRED and is a contributor to Forbes and TechCrunch.

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