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SOSV 2021: The Year in Review

To take a company from the founding team with an idea to a product and a global success story takes years, if not a decade or more. That’s especially true for very early stage investors, who write the first check to a founder with no revenue and no working prototype.

At SOSV, my colleagues and I do that all day long. And even tougher, the majority of our investments are risky “deep tech” startups addressing challenges of human and planetary health, which are the central themes behind half of SOSV’s 1,000-company portfolio.

That’s all the more reason why 2021 was a stunning year for SOSV. You might assume that means unicorn valuations and big raises, and yes, we saw more of those in 2021 than in any prior year. SOSV’s assets under management jumped 40% to $1.2 billion and our portfolio companies raised more than $2 billion, twice what they did in 2020. At the same time, SOSV funded 104 new companies as part of its startup programs and joined in follow-on rounds for another 196 companies, all alumni of our programs. It was a busy, record-breaking year on just about every front.

And yet from SOSV’s perspective, those great numbers were secondary to the most important development in 2021: the inflection point we witnessed around deep tech as an investing category, especially for climate-focused startups.

The SOSV Climate Tech 100

Climate tech is a very broad startup category that touches just about every human activity and more often than not engages radical, risky technologies associated with deep tech. SOSV has been investing in climate tech (“planetary health”) for 12 years, with a big increase in the depth and range of those investments since 2015, notably in our HAX and IndieBio programs. In April, we reviewed the 140 climate tech companies that had graduated from our startup development programs and picked the top 100 based on performance and prospects. The results surprised even us.

On Earth Day, April 22, 2021, we published the SOSV Climate Tech 100. As of January this year, SOSV had invested over $123 million into our top 100 climate tech companies, and they in turn have raised over $3 billion, with an aggregate valuation of $10 billion. That valuation has increased 66% just since last April — notable for a portfolio of startups that on average is just four years old. Among the top gainers last year were Notco, Perfect Day, The EVERY Company, Finless Foods, New Culture, Endless West, Abbot’s Butcher, Green Li-Ion, and R-Zero.

The Climate Tech 100 project helped explain why PitchBook rates SOSV the #1 investor in the climate field. The performance of the 100 also stood as a powerful counter argument to the widespread view that climate tech (also known as “clean tech” to VCs) is too risky for venture capital. Indeed, when we looked across the hundreds follow-on rounds in SOSV’s 100, we could see the immaturity of the investing ecosystem: among the more than 500 co-investors there were very few experienced firms or repeat climate investors. We identified that issue as a key challenge to take on later in the year.

HAX Expands to Newark

The debut of the SOSV Climate Tech 100 helped set the stage for one of SOSV’s most important initiatives in recent years: the expansion of the Shenzhen-based HAX program, which is designed for “hard tech” founders working on healthcare, decarbonization (climate tech), industry automation, and more. The HAX initiative combined our missions around human and planetary health, and added our strong conviction that the re-industrialization of the United States, and the Western world in general, is a huge investment opportunity as well as a national priority.

Our team ran an RFP process with half a dozen US state economic development authorities, and in September SOSV closed a $50 million partnership with the New Jersey Economic Development Authority (NJEDA) to open a 30,000 square foot coworking manufacturing and prototyping facility in downtown Newark, NJ. In two years, there will be over 200 startup founders and staff in the new HAX facility busy prototyping and preparing to scale-up manufacturing. NJEDA will invest $25 million to support the build-out and staffing, and SOSV will invest at least $25 million into 100 startups in the Newark-based HAX program over the next five years.

The NJEDA’s purpose is to attract growth in quality jobs and tech investment in New Jersey, which HAX has already shown it can deliver. To date, HAX companies around the world have raised more than 17 times the $96 million SOSV itself has invested in those companies.

Unicorns OpenTrons and Formlabs

In September, HAX’s first unicorn surfaced when Brooklyn-based Opentrons, an open-source lab automation company, raised a $200 million round led by Softbank at a reported $1.8 billion valuation. OpenTrons started at HAX in Shenzhen seven years ago, and in the past two years OpenTrons soared by supplying low-cost lab automation for COVID testing. The firm is one of SOSV’s top investments in the health category.

SOSV had another exciting hard tech headline earlier in 2021 when Formlabs, which was a 2011 SOSV investment, raised a $150 million round led by Softbank and doubled its $1 billion valuation. Formlabs is a 3D printing platform designed to print parts with complex geometries, which makes the firm a disruptive player in both health and climate. Formlabs machines fabricate dental models and appliances in doctors’ offices, as well as facilitate local, custom manufacturing in many fields — one way to reduce waste and transportation.

The SOSV Climate Tech Summit

After announcing the NJEDA partnership, we turned our attention back to climate tech, and in particular, the paucity of experienced, committed climate investors. In order to convene a global audience, we decided to produce the SOSV Climate Tech Summit (Oct. 20–21): a virtual and free event intended to help VCs everywhere become better versed in the companies and the concepts emerging in climate tech.

The program featured founders and technologists including Breakthrough’s Bill Gates, IdeaLab’s Bill Gross, The Engine’s Katie Rae, Khosla Ventures’ Vinod Khosla, and Future Shape’s Tony Fadell, among dozens of other speakers. They discussed the crucial role deep tech startups will play in the effort to save the planet. More than 2,000 people participated, and Gates lit up the press coverage with his prediction that as a result of climate investing, “There will be 10 Teslas and only one of them is well known today.”

We also hosted 16 breakout sessions presented by early-stage, deep-tech climate investors, including at Khosla Ventures, Prime Movers Lab, The Engine, DCVC, and TechStars, all of whom both compete and partner with SOSV. It may seem counterintuitive to share our stage with rivals, but zero-sum thinking is the last thing we need in the face of an existential climate challenge. As I piped up at the close of the summit, “If you’re wondering, ‘can we tackle this ridiculously great challenge?,’ of course we can — because the crazy aim here is to save the planet.”

The Food Revolution

In order to slow climate change, it’s very clear that we must make rapid progress across many fields, ranging from electric vehicles, to low-carbon steel and cement production, to renewable energy and sustainable production of food and biomaterials.

SOSV has startups native to all of those areas, but 2021 turned out to be exceptional for companies that came out of our biotech-focused IndieBio program and its predecessor, RebelBio, especially around foodtech and agtech, two categories where Pitchbook rated SOSV #1 last year. Here are a few highlights:

  • In July, NotCo, a 2017 IndieBio grad, raised a $235 million series D led by Tiger Global and reached a reported $1.5 billion valuation. NotCo is a food technology company that originated in Chile and makes plant-based milk and meat replacements.
  • In September, Perfect Day, a 2014 RebelBio company, raised $350 million in a round led by Temasek that pushed the company to a reported $1.5 billion valuation. Perfect Day makes animal-free dairy products.
  • In November, Upside Foods (FKA Memphis Meats), an IndieBio 2015 graduate, opened the world’s first commercial scale production facility, in Emeryville, California, for the production of sustainable, cultured meat.
  • In December, The Every Company (FKA Clara Foods), another IndieBio 2015 graduate, raised $175 million and earlier this year reached an agreement with AB InBev to brew animal free proteins at industrial scale.

Five years ago, I would never have guessed that in 2021 late-stage VCs would invest hundreds of millions in alternative protein companies. Now it’s not crazy to think that in a decade or two, much of the chicken on the grill and the ice cream in the freezer will come from the companies above (and their many excellent competitors) instead of from chickens and cows farmed at massive scale, with attendant vast greenhouse gas emissions. As Bill Gates projected at the SOSV Climate Tech Summit, there is likely a future Tesla in the race already, but the trillion-dollar meat market will produce many winners. We believe that some of them will get their starts at SOSV’s unparalleled deep tech IndieBio and HAX startup development programs.

A Change in Terminology

It’s worth a pause here to take note of an important change in terminology at SOSV. In 2021, we dropped the use of the term “accelerator” to describe what we do. When I started running “accelerators” a dozen years ago, there were only a handful globally, and the term had some cachet. Now the word is used so loosely that it does not mean much. There are accelerators today that offer as little as zero investment, minimal hands-on staff support, no specialized (if any) facilities, and typically no follow-on funding.

Compared to those Yugos, SOSV offers a Ferrari. As of 2021, SOSV’s standard US-based programs provide $250k to $500k in funding. Our deep tech programs have dozens of staff and mentors who are highly trained specialists. They work side-by-side with founders in well equipped laboratories and fabrication facilities. Our deeply experienced GPs work tirelessly across our huge network of co-investors to help our founders raise their first qualified seed or A-round. SOSV almost always joins those rounds as well as later ones. Last year, we invested $90 million in follow-on rounds, 3.5x what we invested in pre-seed rounds and 2x the prior year. That was thanks in part to the $100 million SOSV Select Fund, which we also raised last year to help SOSV continue investing in our expanding, successful portfolio.

It’s hard to know what to call our approach, so we’ve settled for “startup development programs” for now. I believe that our results speak for themselves.

The Year Ahead

The SOSV team has more in mind than climate. Another major investing theme is human health. In a few days, we will publish the first SOSV Human Health 100 list, which shows the breadth and success of our human health investments.

The list draws on the strongest companies across all our programs, including Chinaccelerator and MOX, our thriving programs that work with fast growing enterprise and consumer companies in cross-regional and frontier markets. Our MOX consumer mobile ecosystem provides our startups with a unique, free-user acquisition program that last year doubled active users for our portfolio companies, reaching 103 million monthly active users. Those programs have produced one unicorn, crypto-exchange BitMEX, and our focus on the frontier and emerging markets, the fastest growing in the world, is paying off with many other portfolio contenders coming on fast in markets such as India, Pakistan, Indonesia, Egypt, Nigeria, Kenya and elsewhere.

And following the SOSV tradition of getting in early on emerging categories, our fledgling dlab program has shown promising early results in the technology companies at the core of blockchain and decentralization, such as blockchain infrastructure standout API3.

Around the world, the 100+ staff at SOSV are working relentlessly on behalf of our founders. This year we will take another 100 or more companies into our startup development programs in locations as diverse as San Francisco and Shenzhen, New York City and Newark, Shanghai, Tokyo, and Taipei — or even virtually in some cases. We will open the permanent home for IndieBio NY, the sister location to IndieBio SF, at 7 Penn Plaza in Manhattan, as part of our partnership with the Empire State Development Corp. We should also see HAX light up its new facility in Newark. It’s no coincidence that these two preeminent deep tech programs will be only a short train ride apart. We will also raise SOSV’s Fund V, our largest and most exciting expansion yet.

We are deeply grateful that our team’s hard work has produced so many great advances in 2021 and helped make a dent in the profound climate challenge facing us all. We aim to do even better in 2022.

Sean O’Sullivan, Princeton, NJ, January 25, 2022

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Posts from HAX (hardware), IndieBio (life sciences), Chinaccelerator/MOX (cross-border internet), and dlab (blockchain).

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Sean OSullivan

Sean OSullivan

founder of SOSV (deep tech VC), MapInfo, JumpStart Int’l, Carma, @OpenIreland, engineer, vc, inventor, creator of things :-)

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