Desktop Metal team, Savitz on Smart Lunches, LevelUp grows up

The case for Desktop Metal, the next big Boston innovation company

This past week, Ric Fulop was awarded the “Entrepreneur of the Year” at the New England Venture Capital Associations annual NEVY awards for the VC community (A good event for networking and celebrating the Boston innovation community, but also a bit of a surreal experience, since, you know, it gives out awards to venture capitalists.)

I believe that Fulop is most definitely one of the top entrepreneurs in the Boston-area, but I think a better title to bestow upon him is the “Best Executive to Lead the Startup with the Most Potential for Unimaginable Success.” He is a visionary and a great leader, but what he has built at Desktop Metal, the cutting-edge metal 3D printing developer, is bigger than Fulop alone.

This was quite evident on a recent trip I made to Desktop Metal’s headquarters in Burlington.

Sitting down with Fulop as he went through a presentation of what exactly DM is up to was an enlightening experience.

Fulop is best known as the founder of A123 Systems, the lithium-ion battery maker, and for five years as a VC with North Bridge. While at North Bridge, he led the firm’s investment in Markforged, which at the time was developing a carbon fiber 3D printing system. Fulop even sat on the company’s board for a while. In the past couple of years something interesting happened, Fulop pulled together a team of experts to go after the metal printing space at around the same time Markforged expanded its machines to also print metal. When I asked him about the two companies, Fulop told me that they are a “very different technology” from Markforged. I’m not sure what the exact nature of the relationship between the companies is, but Fulop included Markforged in his slide presentation as one of the companies he has backed as an investor.

The move to conquer the 3D metal printing space is a shrewd one for Desktop Metal. As Fulop pointed out, most of the hardware already being used for this type of fabrication is expensive, cumbersome, slow, and have an array of safety precautions that add time, cost, and instability to the process. The genius of Desktop Metal is that, as its name suggests, it is safe, affordable, and small enough to be used in an office.

The two products that the company announced, one that allows for fabrication on a small scale and one that is geared from the mass-production of printed metal parts have already made massive waves in the industry.

But more than Fulop and the product, it is the people that make up Desktop Metal that, from my experience touring their facility, will push this company into the same conversation as companies such as iRobot, and potentially beyond.

From its VP of software, Rick Chin, to its metallurgists to its lead engineer of sintering, Mark Sowerbutts, everyone I spoke with was giddy with joy to be working on this project. The passion that was evident for what they were building is unparalleled in my experiences engaging with local companies of all sizes.

Sowerbutts in particular, standing in a room surrounded by older sintering hardware — massive kiln like machines used to heat and coalesce the metal — was like a kid in a candy shop showing off the differences from what currently exists in the industry to the products that Desktop Metal has devised for the process.

More than the impressive numbers for the financial opportunity that exists in the industry that Fulop showed off, the 138 patents that Desktop Metal has filed for their innovations is incredible. And that is the product of those outside of the C-suite.

For Desktop Metal, how big they can grow depends on the people involved, and, in my experiences, what Fulop has pulled together is impressive.

As Fulop told me, “Nobody here is wearing training wheels. They’ve gone through $1 billion IPOs and have Ph.D.’s.” While that is impressive, their obvious love for what they are creating will be the defining feature as Desktop Metal grows into one of the areas potentially next big companies.

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This week,  DataPoint Capital’s Scott Savitz said that the company in his portfolio that isn’t getting the type of love it should is Smart Lunches, a fresh and healthy lunch delivery program for school systems.

The reason they are so under-the-radar, according to Savitz is that Smart Lunches’ CEO David Morris is “probably as modest and heads down as it gets and just doesn’t look at all for media attention.” In an email conversation, Morris concurred with Savitz’s assessment.

“All he cares about is providing the best service and killing it,” Savitz added. He also said that Smart Lunches is “somewhere around a million dollars a month in lunches with the start of the new school year.”

Savitz has a ton of praise for Morris, who he said “has built a great business, team, and product.”

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What went down this week…

$50M – That’s the funding number for LevelUp, the payments company that many people I’ve spoken to in Boston over the past few years had worried about. Many of the concerns had to do with the space — the payments space is highly competitive — as well as concerns a few years ago about CEO Seth Priebatsch’s readiness and maturity to lead the company.

While there were a couple public issues a few years ago, over the past four years, Priebatsch and the LevelUp team have been heads down, building out the product.

And that worked as it was it just got a $50 million lift from the likes of J.P. Morgan Chase, Highland, and GV.

I asked Priesbatsch if this was validation to prove the naysayers wrong, but he wouldn’t bite, showing just how far he has grown as a CEO.

What he did say was that “Boston’s a great place to build and grow a fintech startup. A huge amount of talent, a growing hub of activity and 6 long months of winter to force us to hunker down and actually get work done.”

“We’ve really appreciated the support we’ve received from the community here and look forward to using our new space in the financial district to host events, hackathons, learning nights and more.”

BIG Evolution – One of the most important networking events that helped promote some of the biggest up-and-coming startups in Boston was Webinno, which was run by NextView’s David Beisel. Companies like Dropbox and Crashlytics showed off their nascent products at the events that were always packed with a who’s who of tech and innovation leaders.

Webinno evolved recently to become the Boston Innovation Group, or BIG for short, and it just announced that it is shifting yet again to be more subject matter oriented. You can read more about it in Beisel’s blog post on the matter.  It was announced that the first of these will focus on voice computing. Should be interesting.

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Maximize a photo op with Spotted, Techstars standouts

Marketing in real life

It’s not too often that the perfect example to explain why your startup is necessary to the world comes along serendipitously, but this is what happened this week for Spotted.

Actually, this happened twice this week.

During one of last week’s Cavs-Raptors blowouts, Lebron James ended up in the crowd during what was a relatively easy win for Cleveland. The game was so out of hand that James mocked drinking a beer he had grabbed from a courtside vendor. The beer company used a photo of the moment on Twitter to take advantage of its product’s use by a sports celebrity. However, James’s reps threatened legal action unless the image was taken down by the beer company for illegal use of Lebron’s likeness.

There’s a bit more intrigue to the story (here), but this issue about the use of celebrity photos using a product, in media res, is why Janet Comenos founded her digital celebrity advertising platform.

Spotted allows brands to legally advertise using paparazzi images in which their products are used by compensating both the celebrity and the photographer.

The example of what happened with Lebron and Great Lakes Brewing Co. is exactly the type of scenario for which Spotted was created. As Comenos explained, “We built Spotted for the purpose of allowing brands to legally advertise with real-life paparazzi photos of celebrities using their brand.”

“LeBron’s attorney likely went after Great Lakes Brewery for infringing on LeBron’s rights of publicity, which are the state-by-state laws that dictate how a famous person’s name and likeness can be used for commercial purposes without their consent,” she added.

“Long story short, brands (regardless of how big or how small) should never use a paparazzi photo for advertising purposes without approval from the celebrity,” Comenos said. “Prior to Spotted, the only way for a brand to use these photos was via a costly endorsement deal with the celebrity. Spotted, for a small fraction of the cost of celebrity endorsement, now allows the brand to legally advertise with these photos.”

Comenos is definitely onto something as this wasn’t the only incident that was in the news this week involving celebrity social media endorsements. Jezebel had a story today about the Federal Trade Commission sending letters of warning to celebrity influencers for not disclosing sponsored content. As Comenos explained, this isn’t exactly similar to what Spotted does, because these potentially offending posts are organic, meaning they are set up by the brands and the influencers.

“All influencer marketing that I’ve seen requires the brand to script the content with the celebrity and requires the celebrity to post the content on their social channels,” Comenos said. “With organically posted content, the influencer must disclose the paying relationship with the brand by adding #ad or #sponsored at the end of the post.”

“Conversely, all of Spotted’s outputs are targeted ads (no organic posts) that automatically have “sponsored” at the top of the ad. Our ads feature real-life paparazzi photos of celebrities actually using that brand,” she added.

As Comenos told me in another recent conversation about Spotted, most celebrities have been open to what Spotted is doing and are happy to receive compensation from brands that they just happen to be caught using. It’s so been so successful that Comenos explained that more recently, once a celebrity realizes the value of getting “caught” using specific products, they tend to get captured using other products from the same brand.

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Under-the-radar

This week, we’ll focus on a few companies that are not getting quite enough of the attention they should, even though they just concluded their participation in Boston’s successful Techstars program.

I’ve said this many times over: Boston has traditionally had the most successful output of any of Techstars’ programs. Companies like DocTrackr, Localytics, GrabCAD, Evertrue, Help Scout, Placester, PillPack, Amino, and more, who have been acquired or raised significant amounts of money, have all come through Boston Techstars.

At last week’s Demo Day, there were quite a few great ideas pitched by the 13 ventures in the most recent cohort. But three stand out, having generated buzz prior to Demo Day, and, being the first companies mentioned when I asked investors at the event who impressed them most.

Nix – Nix is a bio-sensor company that tracks, in real-time, the hydration needs of athletes. CEO Meridith Unger has a wealth of experience, from leading life sciences companies in the past two stints in venture capital (Lux and the life sciences side of Atlas). She also has a few accomplishments to speak of, including a Blatvonik fellowship at HBS and completing all but one of the World Major Marathons. Nix is currently kicking off a new round of fundraising and is a key part of the robust sports technology market in Boston, which includes fellow Harvard Innovation Labs alum Whoop.

RateGravity – Another company in a fast-growing space, RateGravity is trying to change the way consumers finance their homes by removing the salespeople involved in the mortgage and refinancing processes. Led by Patrick Boyaggi and Mike Tassone, RateGravity announced on the morning of Techstars Demo Day that it had raised $2 million in funding from the likes of former Where and PayPal guys David Chang and Walt Doyle, Evertrue’s Brent Grinna, Diane Hessan and InsightSquared’s Fred Shilmover. Its list of advisors list is impressive as well, including Jere Doyle and Brian Kalma, among others. This is a busy market with a bunch of fin-tech startups taking different approaches to home financing, including Rocket Mortgage and Boulder-based Neat Capital.

Tive – While some major brands are rushing to research, test, and build out complex processes for driverless shipping, Tive is solving a less sexy, yet more substantial problem for the supply chain. Its multi-sensor tracker uses cellular connectivity monitor shipments in real-time. Hyperplane VC’s Vivjan Myrto mentioned Tive a couple months ago when I sat down with him to find out which companies in Boston weren’t getting enough love. From the reception at Techstars, I’d say this is definitely another company to keep an eye on.

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What went down this week…

Congrats to the team from Grammarly on their recently announced first round of investment funding. The company, founded in 2009, raised $110 million, for its AI-enabled grammar and spelling tool, from the likes of General Catalyst, Spark Capital, and more. You read that number right, $110M for the previously bootstrapped SF-based company. Although there isn’t any real Boston connection — Hemant Teneja was the lead for GC, and he’s based out west; Jeremy Phillips was the point man for Spark, and he’s in NYC — I’d be remiss if I didn’t give a shout out to Grammarly because its services have been vital to the improvement of this newsletter in so many ways.

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Bridj’s overexposure, Pillar on PathAI, and Lull responses

Rumors of our demise are under-exaggerated

On Sunday evening, Matt George, the CEO and founder of transportation company Bridj, published a Medium post, “Out of Aces,” announcing that the company would be abruptly shutting down. Starting, “Today, our incredible journey unexpectedly ends,” and closing with — I kid you not — a video of Kenny Rogers’ “The Gambler,” the note is, undoubtedly, one of the more surreal ways to tell the world that you are closing your business.

Bridj, a company looking to innovate the transportation industry, had raised at least $4 million — although BostInno once reported that it was raising $15 million (more on that in a bit). The news was delivered mid-evening on Sunday, affecting those who were planning to use the service on Monday. After the post went live on Medium and word began to spread on Twitter, George took to the social media platform to offer his thanks to those who were bemoaning the company’s demise and to fight back at some criticism.

According to reports, at least 50 people are out of a job because of this sudden closure.

A couple of things to note here. First, Bridj was a noble and ambitious effort from George and his team to improve the stale state of innovation in Boston’s transportation system. Some of the earliest established routes, especially those that connected Brookline and Cambridge with the city’s business centers, seemed to have been the lifeblood of quite a few people, judging from comments online and on social media. Also, in general, George has a good reputation among founders in Boston.

Putting aside the details that George mentions in his blog post that the closure has to do with a “major car company” deal** that fell through, a large part of the disappointment from within and without the company stems from a bigger issue not just for Bridj, but for many early-stage companies: Overexposure.

Bridj’s expansions outside of Boston, which took its focus off fine-tuning its product locally, didn’t work. Bridj tried to expand to three other cities, Washington D.C., Kansas City, and Austin. The D.C. experiment failed after one year; the Kansas City project seemed like it could be a success, but the contract between the city and the company expired in March, according to some folks I spoke with; and after making an announcement to launch in Austin last summer, the closest that project seemed to come to getting off the ground was the creation of a BridjAustin Twitter account.

In March, the Boston Globe’s Scott Kirsner wrote a piece about transportation companies that heavily featured Bridj and San Francisco-based Chariot, which was acquired by Ford (a previous Bridj partner). In the piece, Kirsner quotes George extensively. In reference to the D.C. failure, Kirsner writes, “Bridj’s George now calls that a test of the economics of serving neighborhoods with “a lower average income by far than the rest of the city.” Of Austin, George says, “We chose to focus on a different project.” The Kansas City effort is “a massive success,” according to George, although Kirsner questions the numbers a bit. At one point, Kirsner writes, “Without supplying numbers for 2015, George says Bridj ‘grew by 550 percent, in terms of rides and revenue, in 2016,’ and that the company plans to add more service to Cambridge and, ‘hopefully,’ Somerville this year.”

At the end of the story, Kirsner writes, “George says Bridj is ‘actively working with a number of auto manufacturers’ to explore self-driving electric vehicles. Testing could begin later this year or early next. ” Overall, George describes Bridj to Scott in glowing, positive terms, which fits the theme of the article about the evolution of the transportation space. Looking back at the piece, it’s easy to poke holes in some of George’s claims that make it seem as if, to use the parlance of the day, Bridj was crushing it.

This is something that is quite common for private companies: Overpromotion, and the working theory that if you can make the market and public perception believe that a company is doing well, eventually the reality will catch up to the narrative. But, in an overwhelming amount of cases, this is not at all the case. There are almost too many companies to list that have pushed a public storyline that differs greatly from what is actually happening inside the company.

Why does this happen? Because on rare occasions, it works — at least for a while.

(Now, all of the blame for this hype cycle should not fall squarely on the shoulders of Bridj and George. There are many others, the media especially, who cheerlead, with excessive vigor, for some of these unseasoned hopefuls. I’ve contributed to this too many times to count, but hope to have learned my lesson from past pronouncements of greatness. I mean, BostInno has a March Madness startup competition that real companies actually waste some of their marketing spend to try to “win.”)

Like many other early-stage founders before him, George pushed the myth of Bridj’s greatness. One sign that things might not have been as they seemed was an oversensitivity to having the messaging be exactly right. For instance, after the very positive article, George sent Kirsner an email that, as far as I can read from a Twitter exchange, complains about the company being described as a “commuter bus service.” The whole exchange is preserved in these tweets. Check out all the responses to get a full sense of the argument over Bridj’s economics that transpired after Kirsner’s initial tweets. At the end, George tweets “D.C. is high on the list for markets that will get BRIDJ v1 later this year. ” That’s George hinting that Bridj might try to go back to D.C…a nary two months ago.

Looking back, it’s evident that George wasn’t very forthright with Scott about the actual realities facing the company. This isn’t something new. Let’s go back to the BostInno story from 2015. In “Bridj is Raising Up To $15M in Series A Funding at a $60M Valuation,” Nick DeLuca writes about the company that it is “raising a Series A round of $10 million to $15 million, according to a source close to the matter, who also told BostInno that the round is expected to value Bridj at a cool $60 million.” The key, odd word combo in this headline I must point out is the progressive present participle “is raising,” connoting something that has started and is ongoing, which is quite unusual for a fundraising story. Later, DeLuca quotes George and then head of marketing Ryan Kelly for the piece. However, in reaction to his ask about the funding “rumor,” DeLuca writes: “Both George and Kelly declined to comment on the series A funding round.” Seems odd, right?

Well, the reason is that BostInno was tipped off by Bridj itself that it was raising money, and then, when asked to go on the record, the company reps said no. How do I know this happened? Because, they had tried to do the same thing with me when I was working at the Boston Globe. First, came the tip email, then when I asked for a quote, I got a serious response from George (who had also sent the initial tip-off of the fundraising in media res) that he couldn’t comment on any reports of new funding. Needless to say, neither the Globe nor I had any interest in running a gratuitously manipulative story that gave a company trying to raise money from investors (it now seems quite unsuccessfully) a fictional valuation of $60 million. (If you go to Angellist right now, you will see these $15M Series A/$60M valuation numbers under the company’s funding profile as if they actually did raise that money.)

And it’s in this cycle of overhype that Bridj seems to have fallen tragically. Now, don’t get me wrong, the product had some impressive qualities and piqued enough interest from local governments to get some serious consideration for a greater burden of responsibility within the machinery that is mass transit. But when you are basically running a minimum viable product and promoting it as if it is the second-coming of the London Metro, a correction is inevitable.

There’s a bit more weirdness, however, to the entirety of the Bridj story. According to a number of people I spoke with, many employees, it seems, were uncomfortable when George decided to install Nest cameras at the company’s office. From what I’ve heard, the belief was that the feeds, which went directly to George’s computer, could be misused by the CEO to keep tabs on employees.

I had multiple email exchanges with George and spoke with him on the phone about this claim, which he categorically denied, going so far as to say that it’s the first time he has ever heard anything of the sort. He then sent me an email, giving the details of the location and coverage of each of the five Nest cameras at Bridj’s office. He also stated in the email, “We installed the system when we moved in, and since have had no suggestions, formal or informal concerns raised that there was a security system in place to cover entrances and access points to the building,” and that, “There are zero workspaces covered by the NEST system, full stop. Any suggestion otherwise is demonstrably and factually false.”

That last part is interesting because it relates to something that George told me during our conversation about a former employee who raised concerns about the cameras possibly covering the work area and the unintended perceptions they could create. Once he told me that story, I asked if what he just told me undermines the point he was adamant about making that this was the first time he had ever heard of the cameras being an issue. Somehow, he didn’t think that telling me about a previous instance when an employee expressed the potentially problematic nature of the cameras counted as a suggestion or a formal or informal concern about the security system.

Nevertheless, the only thing I know for certain is that this issue, whatever the reality is, compelled enough people to share this odd aspect of Bridj’s operating culture. Not only that, but it buzzed so freely through the Boston tech community that multiple people felt the need to tell me, someone who writes about startups, about the weirdness weeks ago, which was well before the company’s deal with an unnamed car company fell through.

Many folks were surprised by Bridj’s “unexpected end,” including its unfortunate employees, customers, and, in his own words, the founder himself. The story of Bridj will be one about a company with both a great deal of potential and a large amount of bluster. Young founders who think that the best way to build a company is a never-ending stream of media clips should take heed from Bridj’s demise. I think George sums the entire Bridj story best with his Kenny Rogers’ kicker from the Medium post…”You got to know when to walk away, know when to run.”

**According to the Globe, that partner was supposedly Toyota.

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Under-the-radar

Pillar VC gives us this week’s local company that should be getting more love. When I recently asked which company in its portfolio doesn’t get enough love, Jamie Goldstein pointed to PathAI.

As Pillar partner Sarah Hodges elaborated, “PathAI is transforming pathology by using machine learning to improve cancer diagnostics.”

Led by Andy Beck and Aditya Khosla, PathAI recently added as an advisor Pillar “Co-Founding CEO” Stan Lapidus, the founder of Cytyc, which had a $6 billion exit to Hologic in 2007. “Andy and Aditya are a powerhouse team,” Hodges said

“There is a multitude of applications for their technology, from lung cancer to breast cancer to cervical cytology,” she added. “The team already has active partnerships with Philips, Bristol-Myers Squibb, and the Gates Foundation, and is experiencing huge momentum securing new partnerships.”

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What went down this week…

Lull? – Utterly Biased received quite a few response in regard to last week’s query about whether or not the idea of a downtick in startup activity in Boston is real or just the perception of a few. Here are a few of the best responses, and they all differ sharply:

  • “If we’re going with the definition of “calm before the storm” for lull then I say, yes.” Tom Coburn, Jebbit.

 

  • “Where have you been spending your time? What’s this based on? What I’m seeing is probably the most interesting time in Boston tech I’ve seen in the last 15 years. It’s very strong in a number of areas that are driving the next big waves of tech: robotics, voice/NLP [neuro-linguistic programming], industrial IoT, genomics and precision medicine, healthcare IT, cyber security, etc…Boston’s strength has always been R&D and this wave is R&D heavy.” – Drew Volpe, First Star Ventures.

 

  • “One way to look at the current lull in the market is to look at “hot opportunities” being hawked by contingency recruiters and reputable staffing firms in the Boston area. We’ve noticed that the number of hot opportunities being offered started to deteriorate around October of 2015.  That deterioration has continued to today. Hot opportunities being pitched have slowed to a trickle of problem-child companies, like American Well, who’ve been running the same job openings for 3 continuous years. During the first half of 2016, a couple of us had gotten calls from a reputable staffing firm in the area, not to offer a hot opportunity, but to see what we were seeing “in the market.” Boston is the worst of the major tech job markets, so the lull here may be longer and deeper in comparison to the other major tech job markets.” – Anonymous

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