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VC Brad Feld has a new book — and some advice — for startups trying to deal with the unknowable

Brad Feld, the longtime investor and founder of both Foundry Group in Boulder, Colorado, and Techstars, the now-global accelerator program, has a new book coming out next week called “The Startup Community Way: Evolving an Entrepreneurial Ecosystem.” In it, he and co-author Ian Hathaway offer some advice about how to make burgeoning startup communities as powerful as possible now that they exist around the world.

We rang up Feld this week to talk about the book; we also wound up discussing what founders in any ecosystem can do to survive when something like COVID-19 sneaks up, shredding even the best-laid plans.

Here’s a small part of that chat, edited lightly for clarity. We’ll feature more of the discussion — including around what happens with many newly funded companies and what he calls the “measurement trap” — in an upcoming Extra Crunch piece.

TC: Your new book talks about complex systems. How do founders balance the need to manage these complex systems with the fact that controlling these complex systems is sometimes out of their hands?

BF: The first step is getting rid of the notion that you can control the systems, and instead focus on what you can influence [because] in the context of what you can influence, that starts to become a place to focus where you put your energy.

An example of this would be in the current moment. If you have existing investors, and if you have not asked your existing investors directly how much money they have reserved for you for future financings and what you need to do to get that money from them, you’re not focusing on what you can influence.

The worst thing your investor can do is say, ‘I’m not going to tell you that.’ But if your investor is really on your side and wants to see you be successful, it’s likely your investor will say, ‘All right, well, you know . . .’ There might be some wishy-washy [talk] and [dollar] ranges and non-committal language, but you’ll at least have a frame of reference whether that’s zero dollars, a little bit of money, or a lot of money. And you can start to understand, ‘Well, what do we need to do given this moment?’

TC: Let’s assume the company is impacted negatively by COVID.

BF: Step one — that hopefully you did two months ago — was aggressively cut your cost structure to make your cash live as long as it could last. And then next, make sure you understand with your investors what the expectations going forward are around your business, versus whatever the previous expectations.

I think there’s going to be a whole category of companies that get an asterisk for their 2020 performance. It’s kind of like a sports season that gets cut short. Anybody who played in the NBA in 2020, on the back of their basketball card or their online stats, there will be an asterisk because [they played] fewer games. And there’s gonna be a lot of companies where investors are measuring your 2019 to 2021 performance, because 2020 has an asterisk on it.

TC: I hosted an event back in March where Alexis Ohanian suggested to founders that: ‘If what you’re doing now is just not a viable solution in this new world and in a different economy, then find something that is.’ Have any of your portfolio CEOs completely changed course in reaction to COVID-19?

BF: I can’t think of anyone who has torn up their business plan and said ‘This isn’t going to work; we’re going to do something totally different.’ We do have a number of companies that very aggressively stopped doing sets of things — whether it was pursuing a new product, expanding into new markets or trying to go down a particular path that was additive to what they were doing.

Then we had several companies that had to reposition really dramatically. A good example of that would be Formlabs, which is one of the largest desktop 3D-printer companies at this point — maybe the largest in Boston — and very successful and doing very well. Now, a chunk of their business — I don’t know the percentage but greater than 10% — was the dental market. And they had a lot of dental labs buy Formlabs printers. They own a manufacturing facility, so they have a lot of custom resins that are bio-certified so they can make

on a service bureau basis or they can sell printers to the dental industry. But when everybody starts shutting down [earlier this year], dentists are shut down. They’re not essential. You can’t go to a dentist. You can go to dentists now and get your teeth cleaned, but for two months, no dentists. And that market went to zero overnight.

Instead of rolling up and saying, ‘Oh, woe is me,’ they looked at the need for certain things in the context of COVID. And they realized that one of the immediate shortages in COVID was [nasal] swabs for doing PCR testing. And it turns out that on Formlabs printers, using their bio-certified products, you can print swabs quite easily and you can print lots of swabs. So they started printing swabs; they did a deal with one of their customers that was a hospital to get them certified. They designed them, they tested them, they went through the whole certification process that they needed to go through very quickly, and all of a sudden, they started supplying swabs.

Well, as it turns out, all of a sudden hospitals realize that they can’t rely on the normal supply chain for getting swabs. They might be able get the reagents, they might be able to get the testing kits, but they can’t get the swabs. Hospitals started realizing, ‘We can print the swabs ourselves if we have a Formlabs printer.’ So they focused that part of their business that previously sold to dental labs to sell to hospitals.

TC: So the CEOs in your portfolio who are being assertive about this situation are . . .

BF: When I reflect on our portfolio, the CEOs in our portfolio who are doing the best job navigating through this — where their businesses are benefiting or where they’ve been impacted — are being assertive about trying to continue the situational awareness with us and with them, because, by the way, the companies that are benefiting from this could [pandemic’s ripple effects] also see that stop all of a sudden.

It doesn’t mean you’re not still making progress, but the thing that was pushing you forward [sometimes vanishes]. And so assuming that those things are going to continue forever is another problem with linear thinking. If on February 15th you’d said to someone that almost all of the people who work in offices around the world are going to be working from home for the next couple of months, they would have said, ‘You gotta be kidding me, no way.’

Similarly, telemedicine made 10 years of progress in four weeks. The technology existed, the software existed, humans could do behavioral telemedicine . . . But we had this massive phase shift that happened as a result of this thing that occurred in a very short period of time. That happens over and over again with innovation. And, frankly, it’s one of the things I think a lot of entrepreneurs are frustrated with, especially around investors. Because when entrepreneurs start having that sort of logical shift to the next thing, and the investors don’t see that, it can be frustrating. Or maybe it does take five years because of the incumbent dynamics, and you know that you’re going to eventually get there, yet there’s this urgency of ‘Why not more now, faster?’ against the backdrop of these changes.

It’s not a criticism of the venture industry. I think it’s one of the dynamics that’s also hard in this mix.

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Molekule hopes to clear the air with $58 million in Series C funding and Berkeley Lab’s seal of approval

Silicon Valley air purifier startup Molekule was born out of an idea Dr. Yogi Goswami had back in the ’90s using photo-voltaic technology to kill air pollutants. His son, a young boy at the time, suffered from severe allergies and Dr. Goswami wanted to build something those like him could use in their home to clear the air. But the sleekly designed Molekule took a bit of a blow last fall when Wirecutter called it “the worst air purifier we’ve ever tested.”

Molekule has since told TechCrunch comparing its PECO technology to the more common HEPA air filter technology is like comparing apples to oranges. “Up until now, everything has been air filtration, not real air purification,” co-founder and CEO of the company Jaya Rao told TechCrunch.

To disprove the naysayers, Molekule sent off its tech for testing at the Berkeley Lab, which concluded no measurable amount of VOC’s or ozone were emitted; Molekule effectively removed harmful chemicals in the air, like toluene, limonene, formaldehyde, as well as ozone, and that “no secondary byproducts were observed when the air cleaner was operated in the presence of a challenge VOC mixture.”

Compare that to Wirecutter’s own assessment that, “on its auto setting, which is its medium setting, the Molekule reduced 0.3-micron particulates by (in the best case) only 26.4 percent over the course of half an hour. Compare that with the 87.6 percent reduction the Coway Mighty achieved on its medium setting.” TechCrunch reached out to Wirecutter and was told it still stands by its findings and does not recommend consumers purchase a Molekule.

It should be noted Consumer Reports also tested the Molekule device and it, too, did not recommend a purchase as the unit was not “proficient at catching larger airborne particles.” However, Molekule demonstrated to other news outlets at its own facilities that the photochemical reaction in its units did break down contaminants and kill mold spores.

“To test PECO technology you actually need really sophisticated equipment,” Rao said. “Boiling it down to really simple factors is not enough because air is made up of many tiny but toxic things. These are air-borne chemicals nanometers in size, which Wirecutter admittedly did not test at all for.”

Wirecutter’s Tim Heffernan disputes Molekule’s claims of superiority in the category, however. “Now they are comparing apples to oranges,” he told TechCrunch. “The claims about destroying bacteria and viruses, for example, HEPA filters capture them and they capture them permanently.”

So how’s a consumer to know what’s right? First, take into account Molekule commissioned the Berkeley Lab for their independent testing and that Wirecutter and Consumer reports ran their own independent testing. However, it might boil down to understanding the premise of the technology. HEPA filters came out of the Manhattan Project in the 1940s, when scientists needed to develop a filter suitable for removing radioactive materials from the air. It works by capturing and filtering out harmful particles, viruses and mold. However, PECO, the technology in a Molekule unit, uses the science of light to kill mold and bacteria and break down harmful particulates in the air.

Regardless of whether you want an air purifier that captures particulates or breaks them down, Molekule has continued to move forward. The company has since launched a mini unit meant for smaller rooms and started to grow business verticals outside of the direct-to-consumer model, forging partnerships with hotels and hospitals.

It also just announced a raise of $58 million in Series C funding, bringing just over $91 million to its coffers. Rao tells TechCrunch the raise was unexpected, but came out of chats with Samantha Wang from RPS Ventures, which led the round.

“We feel confident in Molekule’s PECO technology, and have taken an extensive look at the science behind it. It is not only backed by decades of academic research, it has also gone through the peer-reviewed process numerous times, and has been tested and validated by third-party scientists and laboratories across the country,” Wang told TechCrunch.

Other participation in the round included Founder’s Circle Capital and Inventec Appliances Corp (IAC). Existing investors Foundry Group, Crosslink Capital, Uncork Capital and TransLink Capital also participated in the financing.

Molekule also tells TechCrunch it has seen a healthy growth trajectory in the past year, despite the negative press. According to the company, Molekule has seen a 3x increase in year over year filter subscription revenue since launch, and its repeat customer growth sits at about 200%.

It’s a well-designed, though pricier air purification machine with an interesting future in the commercial space, particularly in hospitals, schools, commercial manufacturing and hotels, as Wang points out.

As long as the tech truly makes the air better.

Source: TechCrunch

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Molekule Raises $58M Series C

Air purification startup Molekule landed $58 million for its Series C round, the company announced Tuesday.

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The fresh cash will be used to invest in research and development and scale the business, Molekule co-founder Jaya Rao said in an interview with Crunchbase News.

While the Molekule air purifiers have only been on the market for a couple years, the company has essentially been in the works for two decades, according to Rao.

“We’ve been working in some way shape or form on this company for more than 20 years,” Rao said. “Either academic research, or boots on the ground creating the product.”

Most air purifiers on the market are really air filters, Rao said, because they catch particles. Molekule’s devices, on the other hand, use photo electrochemical oxidation to actually destroy pollutants.

The air purifiers have grown in popularity and developed somewhat of a following–although it’s also received less-than-favorable scores from reviewers like Wirecutter and Consumer Reports.

Rao declined to share any revenue metrics, but did say the company has strong repeat customers and has seen a 3x increase in its year-over-year filter subscription revenue since the company started selling products.

Molekule currently sells an air purifier for $799 and an “Air Mini” for $399. Amazon was Molekule’s first step out of the direct-to-consumer space, besides a couple of collaborations, like with the San Francisco Museum of Modern Art and New York’s Museum of Modern Art. But with the new funding, the company is “looking at how can we be more available to consumers in the channels that they’re most interested in,” Rao said.

The new funding brings Molekule’s total funding to $96.4 million, according to Crunchbase. Molekule raised its $10.1 million Series A, led by Crosslink Capital, in July 2017. It raised its $25 million Series B, which was led by Foundry Group, in November 2018.

Illustration Credit: Li-Anne Dias

The San Francisco-based company has raised a total of $368 million since its 2007 founding by Ken Lin, according to Crunchbase data.

Source: Crunchbase News