May 2020 in Review
Summer is finally here, and cohort III startups are busy preparing their pitches for Demo Day 2020. This year’s event will take place virtually as part of the 2020 Frontiers in Optics + Laser Science (FiO + LS) Conference and Exhibition, which will be held Sept. 13-17. We will let you know the exact date and time in the next newsletter so you can tune in to watch each team demonstrate their innovative technology and compete for $2 million in follow-on funding.
The Venture Capitalist’s Due Diligence Process
Understanding what impacts business valuations with Temple Fennell of Clean Energy Ventures
In the list of things startups must get right, knowing how to pitch to venture capitalists (VCs) is one of the most important. Last month, Luminate cohort III teams attended a virtual workshop with Temple Fennell, Co-Founder and Managing Director of Clean Energy Ventures (CEV), an early-stage venture capital fund focused on investing in companies that are commercializing disruptive energy technologies.
Temple shared information with the group about the National Venture Capital Association (NVCA) and its many resources for obtaining funding. He also discussed the four key areas of risk that firms like his assess when evaluating companies:
- Market risk (marketplace opportunity, uniqueness, competitive landscape, regulatory factors)
- Management risk (past experience, team dynamics, board composition)
- Execution risk (scalability, sales process, management KPIs, prior mistakes, cash resources)
- Financing risk (milestone valuations, competitors’ financing, potential debt and financing, gross margins)
“Many venture capitalist firms have a model whereby each of these risks is weighted, and if any risk becomes too significant, your company’s valuation is driven down,” said Temple.
Risk assessment is part of an investigative vetting process venture capitalists (VCs) follow to decide what companies to invest in. In the case of CEV, it’s a two-part process that takes about three to six months total. Part one involves gathering information directly from the company.
Temple suggested a list of questions startups should be prepared to answer when formulating their pitches to venture capitalists. These include:
- What is the problem you’re trying to solve, and why should I care about it?
- How can the problem be solved, and what have you already done to do so?
- Why are you uniquely capable of solving the problem?
- How will my money help you solve the problem?
- How and when are you going to pay me back?
Part two of the due diligence process can be summarized as “trust, but verify.” The VC will seek information from outside sources to independently confirm the competitive landscape, as well as the need for a company’s existence.
Luminate startups also attended workshops on:
- “Blitzscaling,” or how to rapidly build out a company to serve a global market, with renowned sales trainer Karen Mesolella, Field Marketing Manager for global medical technology company, Getinge
Look back at Karen’s April workshop on Industry Focused Solution Selling
- A look inside Greater Rochester Enterprise (GRE) and the resources it offers to companies doing business in Rochester, with Leah George VanScott, GRE’s VP of Business Development
- How the Manufacturing Extension Partnership (MEP) can help scale up manufacturing for startups, with Senior Business Advisor, Annette Brenner, from NextCorps Growth Services
- Getting certified as an MWBE Company with Anna Vulaj Fitzsimmons, Program Director for Monroe County Finger Lakes Procurement Technical Assistance Center (PTAC)
- Tips for putting on a successful webinar with Kate Leonard, NextCorps Digital Marketing Manager
COHORT III SPOTLIGHT
The agricultural industry is always in need of new methods for analyzing the impact of chemical fertilizers on the environment, while simultaneously making sure those fertilizers are effective. This chemical analysis can be costly and time consuming but is very necessary. Nordetect, a biochemical diagnostics company based in Denmark, has developed instruments to analyze and measure the levels of nitrogen, phosphorus, and potassium in soil, groundwater, hydroponics, and aquaponics samples. By combining GPS-enabled soil sampling and “Lab-on-a-Chip” technology that integrates directly with the farm management software already in place, Nordetect is able to provide its customers a quick assessment of key nutrients in their soil and then deliver information about fertility levels based on those results.
Founder and CEO Keenan Pinto spoke with Luminate about Nordetect.
What problem is your technology helping to solve and for what target audience?
KP: Chemical analysis in the agricultural and environmental industries is expensive and time consuming. But without this extensive analysis, farmers are in danger of using excess fertilizer, which leads to negative impacts on both the farmers’ economy and the environment through the resulting runoff. Nordetect targets agricultural retailers, agronomy companies, and extension services that serve farmers with our easy to use, affordable test kits that provide in-field chemical analysis to improve agriculture safety and provide farmers a complete overview of fertility levels. Farm managers and agricultural service providers can remove risk and use valid data that is easy to understand and implement to ensure impressive harvests. With near-real-time analysis, ease-of-use, and a cost-reduction of around 70%, the barriers for continuous use of nutrient data in farm management are gone.
When validating your offering, did you uncover stats or research that substantiated this problem/gap exists and there’s ample market opportunity?
KP: When performing an analysis of competitors, we found that farm management services and other software require the “ground-truth” to continuously calibrate their algorithms. That need in the market led us to see a new potential segment of customers, namely farm management software companies.
What trends are you seeing in this industry that support your offering?
KP: Precision agriculture (everything that makes the practice of farming more accurate and controlled) is a fast-growing area within the agricultural sector. Farmers are tasked with growing food using fewer resources and therefore, require multiple sources of data to make better decisions. The precision agriculture trend is growing worldwide and Nordetect’s instruments can help tremendously.
What type of partnerships are you forming to help develop and commercialize your technology?
KP: To help develop our technology, we partner with research institutes and consulting firms that help balance and complement our team’s competencies. For commercialization, we partner with companies that are downstream in the value chain such as fertilizer manufacturers.
Beyond Luminate, how have you or are you connecting with potential investors and securing funding, and what are you learning about this stage of business development
KP: We have been fortunate to have secured grant financing for Nordetect, as well as venture financing from private investors. We have participated in the HAX hardware accelerator and the rocSTARTS AgriFood Program, along with pitch competitions including the EIT Climate-KIC Nordic Chapter where we won €25,000.
How has being part of Luminate helped advance your business so far?
KP: Luminate has helped us with access to Cornell and RIT, which has allowed us to build relationships and plan our participation in ongoing projects. These connections provide us with wide exposure to the agricultural community in New York state and have facilitated dialogue with potential clients in the region. Luminate also has helped us improve our investment case through feedback from investment groups in Rochester and Boston, and has given us access to a stellar team of mentors who have been very helpful in growing our business through their advice and experience.
Where do you hope to be at the end of the year in terms of the next steps with your company?
KP: By the end of 2020, we aim to have pilots completed within our targeted segments and have recurring purchase orders in hand. Further, we expect to have our product in mass manufacturing with a contract manufacturer.
Any advice for other entrepreneurs/startups?
KP: Validate your assumptions about customers and your market as early as possible to avoid setbacks.
COHORT III IN THE NEWS
A series with the Rochester Business Journal
Leading up to Demo Day — the exciting culmination of our program where cohort III startups will compete for an additional $2 million in follow-on funding — the RBJ is profiling each of our ten companies.
- ExPrimary’s health care technology aims to impact ‘every human’ https://luminate.org/exprimarys-health-care-technology-aims-to-impact-every-human/
- AkknaTek finds safer methods for using high-end intraocular lenses https://luminate.org/akknatek-finds-safer-methods-for-using-high-end-intraocular-lenses/
- SunDensity’s Photonic Smart Coating improves energy efficiency
- Sknow, Think Outside product, detects weak snow layers to protect skiers from deadly avalanches
SNAPSHOT: PORTFOLIO MILESTONES
Celebrating Luminate companies’ success
- Bounce Imaging for providing free face shields to first responders who are having trouble sourcing face shields to protect themselves from COVID-19
- Double Helix for being featured in Genetic Engineering & Biotechnology News: “Imaging Module Gives 2D Microscopes 3D Vision”
- Kilo Medical Solutions for being selected as one of four semi-finalists (out of 174 applicants) to present at The Vinetta Project’s Female Founder pitch contest
- LighTopTech Corp. for receiving the Small Business Innovation Research Phase II Award from the National Eye Institute of the National Institutes of Health (NIH)
- Circle Optics for being awarded its second patent in the U.S. (US #10659688)
RECORDING: OVITZ Webinar
“Wavefront Guided Custom Contacts by Valley Contax & OVITZ”
RECORDING: Double Helix Webinar
“3D From Super Resolution to Whole Cell”
Linda Smith Joins the OSA Foundation (OSAF) Board of Directors
The Optical Society (OSA) announced on May 27, 2020 that Linda Smith, President of CERES Technology Advisors, Inc. and member of Luminate’s Advisory Board, has joined The OSA Foundation (OSAF) Board of Directors. Smith has been very active with OSAF’s programs, including the 2019 Innovation School, and the OSAF’s Career Accelerators, a series of unique schools where sessions are led by experts representing key photonics companies.
“Today’s photonics companies are seeking engineers and scientists with strong business fundamentals and entrepreneurial mindsets to take action, solve problems, and create value,” says Smith. “The OSA Foundation is preparing the next generation workforce.”
View the full board of directors on the OSA website.