Positive Science typifies dogged growth of hardware startups
Via the Rochester Business Journal
By: Gino Fanelli, September 5, 2019
In the first cohort of NextCorps’ Luminate NY accelerator, Positive Science founder Jason Babcock found his way into a semifinalist slot, garnering $250,000 in follow-on funding. It was an invaluable kick for the young tech startup, who now, just over a year later, has settled into the company’s home at RIT’s Venture Creations business incubator.
Positive Science is the developer of practical eye-tracking technology with a litany of uses, for example, in the advertising field, monitoring precisely where a child looks when placed in front of a room full of toys.
Babcock demonstrates a video recorded with Ruby, the dog of Boylan Code attorney Jason Klimek. One camera points outward from Ruby’s head GoPro-style, while a second points inward toward an eye. As she runs toward the target, a marker identifies exactly where Ruby’s pupil is focusing.
“A lot of what people know about dog vision is it’s a lot blurrier than human vision,” Babcock said. “But if you look at the eye movements of this dog, it’s very similar to the way humans look at things.”
Part of the beauty of the Luminate NY accelerator, the world’s largest business accelerator focused on optics, is finding real-world uses for experimental technology, tech that is undeniably cool and impressive, but is nebulous in its real world applications. But Babcock has found his niches. That clip of Ruby has led to a test with New York State Troopers for training K9 units, which Babcock hopes will lead to a full-on partnership for training. Coupled with that are research clients from New York University to Scotland’s University of Dundee.
Most exciting for Babcock is a fresh government contract to develop a sensor for testing in field locations. That comes in the form of a palm-sized circuit board, worn as a badge, in an enclosure powered by a single battery that can detect the presence of another such badge and share information when in proximity. The first prototypes were sent out on July 26.
“It’s an infrared and BlueTooth module, so we can not only detect when another unit is nearby, but send information back and forth between these sensors,” said Carter Nesbitt, engineer with Positive Science.
It took 13 years from its founding in 2006 before Positive Science truly started as a revenue-positive tech company. That’s not uncommon, since, as the old startup mantra paints it, hardware is hard. In contrast with software ventures, hardware startups rely on building manufacturing connections and have difficulty pivoting once those processes are established. Scaling up is a costly challenge and finding the financiers to do it can be even more challenging.
According to CB Insights, in the consumer hardware startup world from 2012 to 2013, just 24 percent of companies received their second round of funding. Eleven percent made it to third, 4 percent made it to fourth and 1 percent made it to fifth. None made it to their sixth round of funding. Likewise, of the 35 “Unicorn” startups to hit $1 billion or more in valuation in 2018, according to PitchBook, four were tech hardware companies selling completed products.
For Sujatha Ramanujan, managing director of Luminate NY, hardware is filling a critical gap.
“Not everything can be software, and those companies that aren’t software struggle to raise the money needed,” Ramanujan said. “But they are such an integral part of the high tech environment, we can’t neglect them.”
Luminate is going against the grain in that regard. Rather than following a worldwide boom in software, the accelerator is playing to Rochester’s historical strength—optics hardware development. While Kodak no longer powers the region’s economy, the remnants of what was once here have not faded. Former lab workers have gone to start their own companies, such as Optimax, founded in 1991, and Rochester Precision Optics, founded in 2005 from Kodak’s Optics group. The infrastructure for a thriving optics community in Rochester, Ramanujan said, is ingrained in the city.
“We’re filling a very important role in the evolution of technology, and this region is the right place to do so,” Ramanujan said.
For at least the next three years, Luminate will be bringing in optics companies from around the world to compete for a total of $2 million in follow-on funding. Each of the 10 companies picked to serve in a cohort receive $100,000 in funding, as well as a six-month stay at Sibley Square, which includes lab space, access to inventors and mentorship. The big winner of $1 million in follow-on funding comes with an agreement to stay committed to Rochester for 18 months. Last year’s winner was Boulder, Colo., nanomicroscopy company Double Helix Optics. This year, it was Rochester-based mobile eye-testing company Ovitz, announced in June at the second Light Tomorrow with Today Investor Summit.
Originally funded through a $10 million grant from Empire State Development (ESD), the next three years were funded by an additional $15 million state grant announced in February. Applications for the third cohort are open until Monday, Sept. 23.
“We wanted to focus our business on where we have the greatest competitive advantage internationally,” said Vinnie Esposito, Finger Lakes regional director for ESD. “And that is leveraging our optics, photonics and imaging talents and resources.”
For Esposito, the hardware focus and the long period before such startups get off the ground is very intentional. Luminate is not poised to foster companies that are going to blow up overnight but companies that can steadily build by pulling from the regional tech ecosystem.
“I think it’s intentional; it’s a good thing,” Esposito said. “We want companies that can take root here, take advantage of the supply chain that already is in the optics and imaging space. Just because everything is compared to how fast, say, Twitter and Instagram might have exploded onto the scene without traditional manufacturing doesn’t mean it’s not worthy to support other startups and businesses because they’re actually making things.”
Looking at the list of companies in this year’s cohort, it can seem a bit scatterbrained, from motorcycle heads-up display developer REYEDR to biosensor diagnostic tool developer Efferent Labs. But it’s all very calculated. These companies are meticulously curated, taking into account everything from general market potential to their ability to utilize resources here in Rochester.
“These companies aren’t chosen on a snap judgment basis at all,” Ramanujan said. “They start with sending an application, which goes to an outside expert judging committee, and over a month they’re brought in, interviewed (and) 10 are selected. They spend six months working hard with us to make sure” they’re viable. “No one’s perfect, and some of them are really not perfect.”
It’s after all a business accelerator, and the goal of Luminate is not just to help some companies get off the ground that otherwise might not have made it. Rather, it’s something James Senall, president and CEO of NextCorps, is an undying cheerleader for, and that’s building the next generation of technology companies to power the region.
“It means a lot for our region, because we have this legacy of being the optics capital, the imaging capital of the world,” Senall said. “But I think most people viewed that as an aging industry sector, and so with Luminate coming along, and some of the other initiatives coming along, we’re really revitalizing that, putting a little more energy into that sector.”
Back at Positive Science, that energy is powering a growing company with promise, fresh ideas and motivation. For nearly a decade and a half, Babcock has plugged away at getting the startup to a place where it’s self-standing and profitable. On the cusp, he’s excited, eager to take the next step into growing a functioning business.
“Long story short, we’re doing a lot of interesting fabricating,” Babcock said. “I’m still running the eye-tracking portion of the business alongside these (sensors). In the past 13 years I’ve been running this company, I’ve been busier in the past year than I have been in the past 10 or so years of work.”