Investing modest sums and copious energy, Ben Littauer helps tech companies sprout. His focus is startups that do the most good for the world. Founders and angel investors value Ben’s advice greatly.
Highlights:
Sal Daher Introduces Ben Littauer
Discovering Angel Groups
Why Be an Angel Investor?
Startups That Ben Littauer Has Invested In
" It started off as being a soft robotic glove that allows a stroke survivor to move their hand ... measure how it's doing, and do multiple repetitions"
The Importance of Coachability
"The stuff that you and I invest in now are people inventing new things and there are no right answers"
Sal's Angel Investing Journey
"Jeff helped me realize that ... where I should be focusing all my energies is in these early-stage companies"
"Aquaculture is the future of food"
Advice for Potential Investors
ANGEL INVEST BOSTON IS SPONSORED BY:
Transcript of “Backing Biotech”
Guest: Angel investor, Ben Littauer
Sal Daher: I'm really proud to say that the Angel Invest Boston podcast is sponsored by Purdue University of Entrepreneurship and Peter Fasse, patent attorney at Fish & Richardson. Purdue is exceptional in its support of its faculty of its top five engineering school, in helping them get their technology from the lab out to the market, out to industry, out to the clinic.
Peter Fasse is also a great support to entrepreneurs. He is a patent attorney specializing in microfluidics and has been tremendously helpful to some of the startups which I'm involved, including a startup, came out of Purdue, Savron Technologies. I'm proud to have these two sponsors for my podcast.
[music]
Sal Daher Introduces Ben Littauer
Sal Daher: Welcome to Angel Invest Boston, conversations with Boston's most interesting angels and founders. Today, we have one of Boston's most interesting angels with us. Welcome, Ben Littauer.
Ben Littauer: Thanks, Sal. Happy to be here yet again.
Sal Daher: Ben has been on the podcast several times because he is a guy that's so thoughtful and I just like bouncing ideas off of him. Offline, I talk to Ben frequently, several times a month, I'd say. I just ping things off of him, and he always has a thoughtful answer. He may not have the answer, but he always has something thought-provoking or he'd connect me with the right person. So, invaluable person. Welcome, Ben.
Ben Littauer: Thank you very much.
Sal Daher: Thanks for making the time. Ben and I, because we work together as full-time angel investors, thought we would do a podcast to discuss how our approach to angel investing has changed over the decades. Ben, I don't know about you, but my first angel investment was back in the early 1990s. How about yours?
Ben Littauer: I started angel investing when I was looking for a job in 2008. I wanted to get in on the ground floor of a startup. Then I was having too much fun learning about all sorts of different things to put all my energy into a single startup. It's been since 2008.
Discovering Angel Groups
Sal Daher: 2008. Let me just put it into context. Before 2008, maybe I'd invested in three or four startups. I wasn't doing it full-time, I was working full-time. It was around 2011 that my brother-in-law, Martin, thank you, Martin Aboitiz, mentioned to me, "Remember we invested in Beth Marcus's first startup, EXOS Inc? We had that nice exit and so forth. One of the guys who was involved with that is in this group called Walnut Ventures. They meet together, and they're an angel group." I said, "There's such thing as an angel group?" Jump to 2010 and that's when, 2011. By 2013, I was investing with Walnut.
Ben Littauer: I had a similar story. I had no idea that angel groups existed. A friend of mine, the son of a former colleague of my wife said, "Hey, I'm working for this VC company. Did you know there are angel investment groups too?" [chuckles] I shopped around and ended up at the Boston Harbor Angels first, and then very shortly, Walnut as well.
Sal Daher: Just a word to listeners who may not be familiar with angel investing. Angel investing is an activity where someone who invests her or his money, his own money, or his children's money or her children's money, money that will become someday children's money in an early-stage venture, puts in a little bit of money in a lot of sweat equity.
It is not venture capital because venture capital is investing other people's money. It is done professionally. It is done to make money. Angel investing is presumably done to make money but also with the purpose of helping to achieve some higher purpose. Ben, tell me about the evolution of your angel investing. What is it that caused you to change your thought? Name a company.
Why Be an Angel Investor?
Ben Littauer: It was less of a company that caused me to change my thought, but let's go back to the beginning where I've always been a small investor with a big mouth. That's how I characterize myself with one superpower, which is asking stupid questions.
Sal Daher: Too modest.
Ben Littauer: That makes me really appropriate for seed-stage investing because once people have figured things out, stupid questions just get in the way. I figured out what stage I like quite early, and because of that I need to be out in the ecosystem a lot, which is why my name is reasonably well-known, not because of the checks I write, but because I talk too much. Early on, I would say as an angel, I don't have to have a thesis.
Sal Daher: You're bragging about talking too much. I talk too much more than you do.
Ben Littauer: Well, there we go. We're birds of a feather, but I think we are doing it in the interests of the ecosystem. I always said, as an angel, I don't have to have a thesis. Well, over the past four years, I've developed a thesis and that is that I want my money to do some good. One of the things that I learned about four years ago is a new model of investing called revenue-based financing. I spent three years studying that hard and I didn't make a whole lot of investments during that time. I realized that revenue-based financing isn't really appropriate for groups like Walnut or TBD Angels, where I'm a member, because there's a lot of infrastructure required and we don't have that. You need to do accounting and if anybody is interested in revenue-based financing, I have a page on it that is a little bit out of date, but it's at my website, littauer.blkk.com/rbf, revenue-based financing.
In order to satisfy that itch, which I think does some good, because if you do a revenue-based financing, you have a success rate, we hope, in the 80% range of companies not failing. Whereas in equity investing as we do as angels and VCs, we expect a failure rate north of 70%. That's not necessarily a good thing. I invested in a fund called RevUP, which I encourage you to look at and it's called revupfund.com and that put that money aside and that allowed me again to think, where does equity investment still fit? There are a few places where I can do good with a small amount of money, and that's again at the seed stage, but instead I'm focusing in two dimensions on doing good with that capital.
One is that the product does some good. For example, both you and I, I think, are invested in AOA Dx, which is an early-stage diagnostic for ovarian cancer. We invest in the team, the CEO and her two partners are just incredibly impressive and that's why we went in there and it may or may not work. This is science still, but the founders, if it can work, these founders will make it work. I have a double bottom line, actually a triple bottom line and when we talk about double bottom line, we mean we can make money, we can do some good, but this one, the team is two women and a guy. We're already investing in underinvested founders. The product can do some good. That's the second bottom line.
Sal Daher: Tremendous good, yes.
Ben Littauer: And I hope to make a boatload of money off it.
Sal Daher: Tremendous.
Ben Littauer: That's the third bottom line.
Startups That Ben Littauer Has Invested In
Sal Daher: Let's quote Shakespeare here. Give airy nothing, a local habitation and a name. Oriana Papin-Zoghbi-
Ben Littauer: Who's been on the podcast, I believe.
Sal Daher: -he's been on the podcast. I invite you to listen to AOA Dx, she's a really compelling founder. One of the reasons that I like AOA Dx, is that, unlike most life science startups, she and her team had the luxury to go out and pick the tech, find the tech that work for them. They the luxury of finding the space to address it, and then to find the technology. It seems like it's more complexity, but it actually increases your chances of success, because you are not-- What I do all the time is typically an academic founder who's tied to a technology that she or he has to take from the lab to the clinic or to industry and it may just be that the technology doesn't have value in the long run.
Ben Littauer: Oriana and her team were a team that had worked together I think for 10 years and knew that they could take these academic projects and turn them into commercial products and so they went shopping and that's what they did. I think that that's a very clever way to go about it. They knew that they could do something with whatever they found, if it was good enough and so they looked for what was good enough and we hope they have found it
Sal Daher: Let's be a little specific. The problem they're addressing is the fact that ovarian cancer is called the silent killer of women because it is really hard to detect. It's hard to discern from other types of symptoms and by the time that it's diagnosed, most are at stage three or stage four, which means extremely, very low survival rates. The symptoms are usually abdominal pain, the stress, can be a hundred different things and by the time it's diagnosed it's usually too late.
Ben Littauer: That is one of the reasons that I invested is as an Angel, I don't have to have all financial reasons, I can have an emotional reason. A good friend of mine died at age 50 from ovarian cancer that was diagnosed in stage four, and she died a few months before I met Oriana. By the way, every investor that I run into who says, "Hey, I invested in AOA Dx." I found her first.
Sal Daher: When she pitched to Walnut, I was like, "Wow, she has tremendous presence." Oriana pitches extremely well. She comes from a marketing background and so she presents really well, does her stuff. AOA Dx?
Ben Littauer: AOA Dx.
Sal Daher: That encapsulates, do good, and also do something that's hard-headed, and also address groups that are traditionally neglected in entrepreneurship.
Ben Littauer: I've done five life sciences last year, investments. I think four of the five are led by women. I've also done green deals. A company called Magnomar is solving a problem for plastic recycling. Your best plastic for recycling is the number one that you see on the bottom of that bottle, that's called P-E-T-E or PETE. Sal is now looking at a bottle to see what number it has.
Sal Daher: Diet Snapple, has number one, yes.
Ben Littauer: That's number one, but the diet Snapple probably has a shrink-wrap label on it.
Sal Daher: You are right.
Ben Littauer: Then it has multiple colors, because doing that on PETE ruins the PETE, or can't be done. I don't know the details on that. When you recycle that bottle, you'd like it to be PETE at the end not PETE plus some fragments of shrink wrap label, because that's not recyclable and that ruins the recyclability of the PETE itself. So what Magnomar decided to do was, "Hey, why don't we make a magnetic ink to print those nice colors on the shrink wrap, and then when the PETE bottle is shredded, and the label along with it, the magnets will pick up, and that's what they do."
They have a very large manufacturer of those drinks. I don't know if it's the one on Snapple or not. They've done a pilot with it, and the damn thing works. They are on their way, my biggest concern for them is that they haven't raised enough money, which is a concern that we have as angels all the time, is that they're constantly in a battle to raise the next round. That one again, this one happens to be run by males but immigrants. Just to keep Sal happy with the immigrant story. It is a do-good that I expect will make a lot of money over time. That's another one.
Sal Daher: There's Magnomar, yes. I saw those guys, very impressive. There's a magnetic tag, these magnetic beads are used in the life sciences. Actually, it was developed in the life sciences. They're taking a technology that was developed in Life Sciences that's now being applied in Green Tech.
Ben Littauer: Another company that we both know well, I have invested in is Imago Rehab, which is run by Chrissy Glover.
Sal Daher: I love Imago Rehab. That is such a promising company. I love the founder, I love the concept. You've met my sound engineer, Raul, right?
Ben Littauer: Yes.
Sal Daher: Raul really opened my eyes to the fact that people who come from a creative background can be very, very, very effective in doing things in the real world because we usually think of artists like impractical people, Beethoven, people like that.
" It started off as being a soft robotic glove that allows a stroke survivor to move their hand ... measure how it's doing, and do multiple repetitions"
Ben Littauer: It's been an uphill battle for Chrissy. If you've heard her, you know how well she speaks, you know how cogently she covers every single topic that she is asked, and that is all to her credit.
Sal Daher: No, no. The point here though is mentioning Raul and creative types. Raul, one of the things I learned from my collaboration with Raul now going five years, is that being a creative person means doing the hard work over and the boring stuff over and over and over, getting it right. He can create tremendous sounds. He composes tremendous music, can take a picture, because he sweats the details. This is the aspect of creative endeavors that I had missed. Being an engineer, you're a little narrow-minded, and Chrissy exemplifies that to a great extent.
Ben Littauer: Being a young and younger-looking woman has been a detriment and made it more difficult for her and some of the horror stories that I've heard from her and others, from people who ought to know better about people who ought to know better have been quite frightening, but she seems to be raising the round and I think that this is a hot one.
Sal Daher: She does her homework, listens, she's assembled a team, she knows what she doesn't know. She knows how to reach out to people, how to bring people together. This is so powerful. Let's talk about what Imago Rehab does.
Ben Littauer: It started off as being a soft robotic glove that allows a stroke survivor to move their hand or have their hand moved by the glove, measure how it's doing, and do multiple repetitions. That improves outcomes for these stroke survivors. She has some absolutely marvelous videos from her early users who formerly couldn't open a refrigerator door with their crippled hands and now can do much more than that.
It's an incredible piece, but it wasn't enough to do that. You need to actually build a complete supply chain, if you will, from that glove, but someone needs to monitor that glove, someone needs to train the user, someone needs to make sure that it's all going together. She is building up a telehealth service that is enabled by the glove because if you can't reach out and help the person move their hand, you can't do telehealth. If you have a glove that lets you tell them how to move, or you can tell the glove how to move, suddenly telehealth is enabled.
This is a tech-enabled service, which is a wonderful place to be, and it is riding the forefront of a wave. She's going to be surfing down an incredible wave where telehealth is going to really take over as one of the primary modalities that we see our physicians and our clinicians.
Sal Daher: Connected device plus telehealth.
Ben Littauer: Yes, exactly.
Sal Daher: Listeners, I invite you to listen to Robots in Rehab with Chrissy Glover. I interviewed her a little while. It's just a trend. I couldn't resist Robots in Rehab [crosstalk]. She's tremendous. We're talking about a whole class of startups. They are surfing this wave that was created during COVID of telehealth. Finally, the benefits of telehealth broke through the obstacles that used to hold it back. It's been available for well over a decade, pretty well developed, but it wasn't used much, and then in COVID, used a lot.
What Chrissy is doing here excites me because she is harnessing, she is using a very scarce resource, which is physical therapists. The current workflow for stroke patients is that the stroke patient gets bundled up, gets in her car, or somebody drives her to the office of a physical therapist. The physical therapist tries to open her hand and does a few repetitions. It's painful and it's hard to keep track of, and it's done in the office. This is before COVID. As a result, a lot of people weren't doing a lot of reps.
What she's trying to do is basically get to the point where the physical therapist visits the patient at home, shows the patient how to use the glove, puts the glove on. The glove is connected so the physical therapist knows how many reps the patient is doing. Her early data shows that there's an explosion in the number of reps. It's like 300 reps of hand movement per day is what's needed and stroke patients now get maybe 30 reps twice a week if they can get to the clinic. With 300 reps a day, magic happens.
Ben Littauer: It's transformative.
Sal Daher: It's transformative. You have these components. You have telehealth, connected device, and a scarce provider, the physical therapist, because there are going to be a lot more stroke victims in the future and there's a shortage of them. She is the person to create this. The next in her product plans is a shoulder stroke robot. Ben, this brings to mind a couple of things. She connected me with someone, a urologist named Jeremy Weigel.
Ben Littauer: Yes, I know Jeremy,
Sal Daher: How did you know Jeremy?
Ben Littauer: The same source.
Sal Daher: Jeremy, the problem he's addressing is a problem of pelvic floor disorders. He came by it because his wife, when she gave birth had problems with bladder control. He's a urologist who specializes in this. She had a hard time getting the adequate level of care because there's so many different things that have to be coordinated. It's not just getting the care, it's getting the right care, the right device, the right data, and so forth. He's doing something very similar to what Chrissy is doing for stroke, but for the pelvic floor. You know Senan Ebrahim?
Ben Littauer: Yes.
Sal Daher: You've met, of Delfina. What they're doing is taking the massive amounts of data and devices and so forth and integrating them in tele-health to address problem pregnancies in underserved populations. There's a ferment going on in this type of startup. I love these kinds of startups. They're not the wet lab biotech stuff that I like to do, but because of my brother-in-law, he's in digital health and funny thing, a lot of these people have the stuff that he does connects with what they do because of the HR's.
The Importance of Coachability
Ben Littauer: One thing that I wanted to loop back on founders in general, but Chrissy in particular, I've been working with her since last July, 2021 and through the Capital Network's Female Founder Program, we talk about it being the team. One of the words you used earlier in this conversation was coachability. Coachability doesn't mean doing what I say. Coachability means listening to a lot of inputs, synthesizing them, integrating them, and coming up with a good decision.
I've made a number of introductions to Chrissy of people who could help her. She has pulled some of them in to be formal advisors to the company. She has listened to others and she has made incredibly smart decisions based on those inputs. That's what we're looking for, is someone who can take the data and make smart decisions. If you find a founder like that, that's the person you want to invest in.
Sal Daher: Coachability is funny. If people get confused, doesn't that mean somebody who listens to the last advice that she or he got, it's exactly the opposite. It is someone who doesn't think that he typically has all the answers. Anywhere where it's not that you think you have all the answers, you're going towards coachability. It doesn't mean you listen to every bit of advice. It means you talk back, you ask questions, you listen to questions, you may do the same thing, the idea that you had originally, but it's been enriched, it's been tested by conversations with the advisors. This is what coachability means and she is no pushover. She is very impressive founder. Ben, let's recapitulate this transition of yours. From originally investing all over the place to zeroing in on these kinds of startups.
Ben Littauer: Well, I made a number of investments in companies that do Facebook marketing or video marketing, or a couple of them that people know about like Pixability, ViralGains and Mavrck were all in my portfolio. I had the best exit to date from Mavrck.
Sal Daher: Yes, same here.
Ben Littauer: But on no dimension can I really, honestly say, other than financially, Mavrck does good for the world. The CEO is a fabulous CEO. Very coachable, extremely smart, did a wonderful job.
Sal Daher: Exemplary CEO.
Ben Littauer: He did not need my money. He wanted my money. Having my money was good for him, but he did not need it.
Sal Daher: Lyle Stevens CEO of Mavrck, just a very impressive founder.
Ben Littauer: He's a great guy. He's done amazing things. Here I am, I'm the beneficiary of that. The product that Mavrck makes is influencer marketing, which improves your social media outcomes. However one feels about social media, it's hard to argue that that's actually doing the world any good.
Sal Daher: I'm not so negative. What it does is it helps people find people with whom they have affinities more quickly, more effectively, and therefore, there's less wasted time and wasted bullshit.
Ben Littauer: They can buy better Nike sneakers.
Sal Daher: You got to buy sneakers anyway.
Ben Littauer: I'm less forgiving than you are, Sal, on this particular--
Sal Daher: I spent 30 years in finance and people poo poo finance because it's too abstract, they don't understand. Without finance, nothing works. Same thing with digital marketing is a very, very important thing. From my perspective, digital marketing is wonderful. I don't have moral qualms about digital marketing.
Ben Littauer: I don't have moral qualms against it. I'm just not wanting to promote it on my scarce dollar.
"The stuff that you and I invest in now are people inventing new things and there are no right answers"
Sal Daher: It's a mature market, okay? I like going to markets that are immature, that are extremely promising which is where I am particularly in the life sciences.
Ben Littauer: That we can agree on. I do want to mention one thing, when you talk about immature markets, you had Gil Syswerda, the smartest man in the world, on your podcast several times. Gil, I, and you are all members at Walnut, and he brings an incredible amount of horsepower to the room. I have only the most respect for him, but I predated him at Bolt Beranek and Newman, BBN, and so I get to tell a BBN story, because he does -
Sal Daher: Is it Bolt Beranek or Bolt Beranek?
Ben Littauer: I believe it's Beranek. Leo Beranek was the middle guy there.
Sal Daher: Okay. BBN the company that created the--
Ben Littauer: I'm going to explain where BBN was. BBN started off as an acoustics company out of MIT.
Sal Daher: During World war II?
Ben Littauer: The number of what we call rat rings around the office was quite amazing. Rat rings being the beaver on the MIT rings, and so we called them rat rings, but BBN got the contract from ARPA to build the ARPANET back in the '70s. Also, got a lot of the contracts to build internet stuff. I got hired there in 1981, and I was working on TCP/IP for their terminal concentrator. Then, I started working on network management for the internet. We invented many of the protocols that are still in use on the internet including one Ray Tomlinson who invented the @ sign for email.
He is credited by many as being the true inventor of email, just as a consequence of that, but I was a member of a task force that we were trying to develop some new protocols for network management. We had maybe 15 people in a room discussing this new protocol. There was this meeting, and we had recently hired a young ivy league CS grad, I believe out of Brown, and she was there. At the end of the meeting, after we had discussed and reshaped this protocol she piped up and she said, "So when are we going to ask someone who knows." Because, at school someone knows the answers, and you're going to figure this out, and they want to know if it's right or wrong, but at BBN we were inventing new stuff.
The stuff that you and I invest in now are people inventing new things and there are no right answers, and so what we need are people who can say this is a good answer, and then turn a little later and say this is a better answer, and that's what we're investing in is the person who can make those turns. You love to talk about pivots, but these are the people that we want to invest in. People who have a new idea, and can execute on them and adjust as the circumstances change. I was really lucky to be at BBN in that age. I consider that one of the biggest things that launched beyond my tech career.
Sal Daher: The advantage of working in immature markets is that you don't have to be a genius. You don't have to be Warren Buffett. You can just be like, maybe this thing could work, and you latch onto it. Then it becomes huge. It's very, very easy early on. You don't have to have deep expertise in a field to figure out that this could really be consequential. Some of it will not be, some of it won't pan out, but if one or two of those pan out you could make an enormous, enormous amount of good.
Ben Littauer: Yes. Not to mention an enormous amount of money which will help you invest in more of them.
Sal Daher: Invest in more of them. Exactly.
Ben Littauer: Absolutely. I'm not spending my retirement capital today. I'm hoping that these investments that I've made over the last few years will allow me to make more investments over the next few years.
Sal's Angel Investing Journey
Sal Daher: Now, Ben, let me talk briefly about my journey as an angel investor.
Ben Littauer: Please do.
Sal Daher: First angel investment that I made prompted by my brother-in-law Martin Aboitiz. He used to say, "Hey I know this woman for Burton House at MIT. She went off to Imperial College and did her PhD over there in control theory. She's got this robotic glove that helps measure-- Again this is like -
Ben Littauer: Déjà vu all over again.
Sal Daher: Déjà vu. I was talking to Chrissy and I was like, "Jeez," no, I got to get Chrissy and Beth together.
Ben Littauer: I think I did make the introduction.
Sal Daher: Oh, that is so much Déjà vu. Anyway, so Beth says, I got this robotic glove. What it does is it's forced feedback and it allows a hand surgeon to map out how dysfunctional someone's hand is because they use these calipers and these things for measuring how much strength there is between the fingers and all that stuff. It's very time consuming. This force feedback robotic glove allowed the hand surgeon to save a lot of time. Michael Mark was an investor in this venture.
Ben Littauer: As was Frank Ferguson.
Sal Daher: Frank Ferguson, the sainted Frank Ferguson who's been on this podcast. You should listen to him because he represents a whole different school of angel investing. Elon Musk, deep investment in a few things, very different approach from ours. Anyway, this investment, she managed to actually get, I think 35 units installed in the offices of-- It was amazing what she did. In those days, people raised a lot more money. I think she had a million dollars in the bank. She went to the board and said, "I'm going to give this money back because we've basically figured out that without FDA approval, without a reimbursement code, this is not going to scale."
Plus, the devices kept crashing because the computer technologist, they were running this on some early apple computer and it just didn't have enough computing power and it crashed all the time. She was ready to give money back to the investors and to shut the thing down when she ran into Bob Metcalfe. She reached for the chocolate-dipped strawberries the same time that Bob Metcalfe reached the founder of 3Com at an MIT event. He started talking to her and she said, "I got this force feedback glove." He said, you should talk to my friend Pierluigi Zappacosta of Logitech in California.
I think she borrowed a computer and went out there and she showed Pierluigi. She came up with this idea of a force feedback mouse. She flew out to California with her force feedback mouse and she showed it to Pierluigi Zappacosta and he said, " [clicks] force feedback mouse, that won't fly, but a force feedback game controller is another thing. Why don't you go up to Seattle and show this to Microsoft." She did and they got acquired. It was very nice exit for all of us. She managed to sell 10 million copies of this force glove. It has some name like force glove.
That was my introduction to angel investing. I had a bug in my ear about this stuff and then I made an investment in something with my-- I won't even go into it. It was just a misconceived. It was a terrible idea. Trying to get men to care about their health, men's health center, this is the dumbest thing I ever invested in. Then the next thing is a friend of my business partner, Bob Smith, Robert Posen was involved with this group called PureTech Ventures. He said, Bob, Sal, you got to meet these people at PureTech. You got to meet Daphne Zohar.
I think Daphne is the most under appreciated biotech founder around because she heads up an amazing outfit that has grown greatly because of her talent for understanding how to motivate people, how to find really bright people, how to get them to work on things that matter, and so forth. She's a genius at this. My first investment was in a company called Gelesis which is, you know, run by her husband, Yishai Zohar. It's gone public via SPAC. As someone who struggled with his weight his whole life, I think it's a very promising product. It's a hydrogel that expands in your gut and helps you control your weight.
That investment, that was around 12 years ago. Then I made a bunch of other investments related to that. These were all companies in the PureTech universe and some of them are extremely interesting companies. Some of them are public, including Keely. I think in the public markets right now, someone who wants to start thinking about investing in the life sciences, they could do a lot worse than to look at a company like PureTech Health, which is trading way below where it was trading two years ago or a year ago or a company like SQZ Biotech. I'm an early investor in SQZ.
Remember, I'm not giving investment advice, I'm expressing my opinion. You should seek professional advice. I'm a CFA charter hold, but not your investment advisor, but I just find that they are in the public markets right now, Ben, a lot of very, very compelling companies that are trading to a fraction of the cash they have in their balance sheets.
Ben Littauer: Which is incredible to me. Just buy them up and take the money. [laughs]
Sal Daher: I wouldn't say necessarily buy the XBI index, but they are in the XBI index, but companies like SQZ Biotech, SQZ, companies like PureTech Health, trying to think of another one, Kodak DNA, for example, that's a tools business. I should actually put up a list of the companies that I have in my portfolio of this type. I'm going to put it up in the show notes.
These are companies that I think are interesting bets. Some of them will probably go to zero, but some of them will, could have acquisition. Point is that, early on, I had this exposure to the life sciences, but without a rhyme, a reason, it was just by accident. And then over time I found that the life science companies took over my portfolio. Until recently, [laughs] until the Mavrck exit reshuffled the whole deck, like the next step of the Zen story. But I think the thing for me in the life sciences, the eye-opening experience for me in the life sciences came because of you.
Ben Littauer: Me?
Sal Daher: Yes, because you connected me to Jeff Barons.
Ben Littauer: Aha, Jeff is an amazing guy.
Sal Daher: Yes. He was on the board of Savran Technologies and I had been an investor in Savran before I met Jeff. I've been noticing this, the life science companies taking over my portfolio and all this, and Jeff helped explain what's going on, why there's such a massive opportunity. His discovery was because he's in Siamab.
Ben Littauer: Which I was an investor in as well.
Sal Daher: A happy outcome, you have a very happy outcome with an exit. They ended up raising $14 million in--
Ben Littauer: All from angels, essentially.
"Jeff helped me realize that ... where I should be focusing all my energies is in these early-stage companies"
Sal Daher: 45, I think the number mentioned was 45 different angels, it must have been quite a cast of characters and Jeff was never able to raise VC money. He knew lots of VCs, he came from pharma, a very experienced, very capable guy, never able to get VC money, and he was wondering something, is it my bad breath or something?
Ben Littauer: No. It wasn't that the product didn't work?
Sal Daher: No, the product ended up being acquired and worked, and you guys have had progress payments, I understand. I've heard rumors.
Ben Littauer: We have had progress payments and there are a couple of different-- there was another arrangement so there's two different indications being pursued by the same fundamental technology. It could be a very nice big win. Right now it's a small win, but so far everything looks very positive there.
Sal Daher: That is something that VC should have been all over and they were not. The reason is that even before Moderna, even before the success of Moderna, they were already on this moonshot approach which is the path beater on this. The trendsetter was definitely Zohar.
She was doing this 20 years before which is created their own found entities, and then they put together the founding team and so forth and they back it with their own money, and then they help them get money and so forth. That is a model that has worked tremendously well. I don't mean to cast aspersions on it, they're doing it for a reason because what Daphne has done shows a lot of promise.
Because the technology has developed, it leaves a lot of interesting companies that have to be funded by angels with their $25,000 checks. This is what I'm working on. I'm working on the companies and companies like this, company like Savran Technologies is a company in this, like this. A company like this is QSM Diagnostics using quorum-sensing molecules for instant diagnostics.
Companies like also Chrissy's company which is in the digital health space. This is my journey here. Jeff helped me realize that this is where I should be focusing all my energies is in these early-stage companies typically started by academic founders who need the handholding of an angel.
Ben Littauer: The risk we run in doing that, Sal, if you look at the model that Jeff and you went into detail in your podcast together, VCs are creating unicorns. Right now, actually, VCs aren't interested in unicorns anymore as of about five years ago, they're only interested in decacorns, companies that get to a $10 billion valuation. They create them, and they create them using just boatloads of money. Sometimes, those boatloads of money are used for non-competitive practices. Anti-competitive practices, witness - WeWork, for example, which had no reason to exist, except that they could undercut the opposition because they had more money in the bank.
Sal Daher: They didn't have more money in the bank. I mean, they thought they had more money in the bank, but the opposition is gigantic. I mean, that is a mature industry. Okay, you're going to be the disrupter of a mature industry with these people who know gazillion times more than you do because I'm in real estate. Real estate is loaded with freaking friction and these morons thought that there's some way they're going to-- Oh, give me a break.
Ben Littauer: These morons put an awful lot of money into it, and those morons are still in business. [laughs] One has to give them a certain amount of credit, and where I'm going with this, Sal, is that it puts us at risk.
Sal Daher: Where are they in the market? I mean, they've got a gazillion competitors. It's like everybody around the corner is a competitor. They don't--
Ben Littauer: In the meantime, the VCs have actually made some money.
Sal Daher: Yes.
Ben Littauer: By creating these unicorns and decacorns, what that does, for me as an angel investor, and probably you as an angel investor, is if someone decides that, really, this ovarian diagnostic stuff is good, they will go hunt out a competing technology, put 10s of millions of dollars in it, where we put millions of dollars in it, or hundreds of millions of dollars in it. That will make AOA's road much more difficult. There is this concern that I have that the VC model, especially with the self-feeding VC model where they grow their own companies-
Sal Daher: They've got so much money, they don't know what to do with it.
Ben Littauer: -could be very damaging to the competitive landscape for people like AOA or Hilltop Biosciences, which, fortunately, isn't in a big enough market to attract the VCs, but all of these companies are at risk if a VC decides that a competitor is the one to back.
Sal Daher: Right, right. For me, I don't look for companies like Imago Rehab, Chrissy's company. I was impressed with her so I invested, but that was kind of like a violation. What I'm looking for in my screen are biotech companies with a very strong IP in a space that can 10x or 100x the business of an existing strategic player. The strategic player has to buy it or has to do a deal with it because it's so compelling economically.
Okay. The VCs play no role here because the VCs don't know enough. They can acquire the technology, yes, maybe. The strategic players are so much smarter than the VCs. They know the regulatory environment and all this stuff. That for me, in the deep biotech stuff that I really am interested in, is not such a concern. The concern is just the fact that there's not enough capacity.
"Aquaculture is the future of food"
Ben Littauer: I'm going to highlight one other company that I went into last year. It's called BioFeyn, B-I-O-F-E-Y-N.
Sal Daher: Adam Pool and I talked about BioFeyn.
Ben Littauer: Adam is an investor and this is in an area that I now have two companies, the other one being K-N-I-P, KnipBio. I'm a board observer there and these are aquaculture companies. Aquaculture is the future of food. for many of us. If you're looking for an inexpensive source of really high-quality protein, fish are a good way to go there but many fish eat other fish.
There is a shortage of feed and so there are all sorts of companies that are working to improve the feed supply for farmed fish. There are insect-based proteins, there are single-cell proteins like KnipBio, and there are therapeutics, which is where BioFeyn is playing, that improve the ecosystem where these farmed fish swim because it gets polluted very easily.
All of these companies are looking to improve the supply chain for our food. I feel very good about those sorts of investments. It used to be that Norway, for example, which is the largest farmer of salmon, used to be all about, just give me cheap protein and I'll be happy.
They have gone in the last eight years from it's all about the price of protein to tell me about your sustainability story. We know that we have to do better in terms of not killing as many of the fish that we're raising and making them higher quality, keeping them at high quality. That's very, very difficult these days. When I listened to your podcast with Adam, I said, "He's onto something here." I made my second blue tech investment last year as well and I'm very proud of that.
Advice for Potential Investors
Sal Daher: Yes. Adam is a pioneer. He's also someone whose investing style is worth-- You want to compare angel investing styles. Ben and I are similar, but Adam has a different approach. Frank Ferguson, entirely different approach. I recommend you look at all these three approaches to see which one fits your personality.
Ben Littauer: There are opportunities if you are listening and are not an accredited investor. In other words, you don't have the fattest wallet in the world. You can still help out through community funding through reg CF, as it's called, regulation crowdfunding, that allows people to write much smaller checks, but help out their companies. One of the earliest companies that came through reg CF was a company here in Boston, Beta Bionics, that was building an artificial pancreas for diabetes. The founder there said I'm really looking for people who are in my community to help build this company because it does so much good.
They were much less financial investors and much more trying to do some good with the hope of a great financial outcome. I encourage listeners who are interested in doing what Sal and I do, but don't necessarily want to spend the kind of money that Sal does, especially. To do it look at places like Wefunder, SeedInvest, Republic. There are any number of these platforms where you can find companies that are doing really interesting stuff and are funding on a community basis.
Sal Daher: This equity crowdfunding is extremely promising. You remember Sam Bogoch?
Ben Littauer: Absolutely. I refer people to your podcast with Sam, people who are interested in looking at reg CF crowdfunding because he has a very clear picture of what's involved. This is not, "hey, post it and they will come" material. You have to do a lot of work in order to have a successful raise, which Sam did. He did the work, he got the money.
Sal Daher: His company is, the right fit. Axel.ai is a company that's in a very understandable business. Business of helping people figure out, people who have a tremendous amount of video content, what's in the content.
Ben Littauer: I think that it would make a lot of sense for Chrissy Glover, for example, to make a reg CF crowdfunding raise as part of this round or the next round where she gets stroke survivors and their families.
Sal Daher: Oh, that would be so compelling. Yes.
Ben Littauer: Because the advantage of reg CF is that you get regular people who feel your pain or feel their pain and hope you will solve their pain. They're going to tell their friends and you have suddenly a complete network of people who are promoting your company for their own benefit.
Sal Daher: Yes, I think that's a very good idea, Ben, getting Chrissy on the reg CF path. Very good. Is there anything that's on your mind that you want to get across to our listeners, angel investors, people who are thinking about becoming angel investors, founders?
Ben Littauer: Well, I do want to put one thing in which is that I need to tell one more BBN story just to close things out.
Sal Daher: Does it involve a fish cookout?
Ben Littauer: It does not. However, I'm going to have to tie this into the angel investing somehow. I'll do that at the end. Basically, when I started at BBN, my manager went on a college recruiting trip and hired recent CS grads into my group. On the interview cover sheet, there was a handwritten annotation, "not super bright, but seems stable." We hired him. We'll get back to him in just a moment, but he's one of the smartest people I ever worked with. Just amazing, an amazing programmer.
Sal Daher: The guy who was not supposed to be super bright, but was stable.
Ben Littauer: Exactly. He was extremely bright.
Sal Daher: Yes.
Ben Littauer: At the same time at BBN in the early '80s, there was a huge fad at BBN to juggle, juggling balls.
Sal Daher: Juggling on monocycles, yes.
Ben Littauer: It was such a thing that at least one employee had a "thank you for not juggling" sign in his office. The best juggling balls were these from Zen products in San Francisco that were filled with wild bird seed and had of a velour cover and they were much less expensive when you ordered them by the gross. Now, this guy who had been hired, the not very bright, but stable guy decided that he wanted some Zen juggling balls but he didn't want to pay full freight.
He went around the whole of BBN and put together a gross of Zen juggling balls. This box that was three by three by three arrived some weeks later in his office full of wild bird seed-filled balls. So he sends an email--
Sal Daher: Just a minute, a gross is 144.
Ben Littauer: 144 balls. He had probably 200 balls and he sent an email to the entire company with the subject line. "I've got balls."
[laughter]
The manager who had originally hired him, my manager, wasn't very happy with this. He actually talked to me and said, "You're going to have to talk to this guy and make sure that he doesn't do something like that again."
Sal Daher: Maybe he's just not as stable as--
Ben Littauer: Exactly. That's the point, but the real point here is, to tie it back to entrepreneurship, is, this fellow did actually start a company and actually a second company. He was very successful in those. The people that you--
Sal Daher: What is his name?
Ben Littauer: I'm not going to give you his name because I've embarrassed him already on this show, and I've called him unstable, man. I'm not going to go there. You meet someone, you say not super bright, but seems stable. You may be wrong on both counts, but you may still want to work with this person and support them, so don't judge the book by the cover. Get to know your entrepreneur, find out how smart they are, how coachable they are, and how easy they are to work with and you will be happy. That's my BBN story. I had the one up poor Gil.
Sal Daher: That's extremely valuable BBN story.
Ben Littauer: I still juggle and I still have some Zen juggling balls down in the living room.
Sal Daher: Awesome. You've got balls. I'm glad to hear.
Ben Littauer: [laughs] Well.
Sal Daher: Great. Ben, I am very grateful to you for making time to yuck it up.
Ben Littauer: It's my pleasure.
Sal Daher: Very busy time for you. We'll continue to be in touch and to work hard on getting these interesting startups off the ground.
Ben Littauer: I'm looking forward to seeing you at Walnut next week.
Sal Daher: So much fun. Having in-person meetings again is just so much fun.
Ben Littauer: It's a good thing and I hope we'll see some very interesting companies that we can take to the next level.
Sal Daher: Inshallah. Very good. Thanks a lot.
Ben Littauer: My pleasure.
Sal Daher: This is Angel Invest Boston, I'm Sal Daher. Thanks for listening.
[music]
Sal Daher: I'm glad you were able to join us. Our engineer is Raul Rosa. Our theme was composed by John McKusick. Our graphic design is by Katharine Woodman Maynard. Our host is coached by Grace Daher.