Monthly Archives: July 2021

News: Glyphic Biotechnologies raises $6M to accelerate protein sequencing by orders of magnitude

• July 26, 2021
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The whole human proteome may be free to browse thanks to DeepMind, but at the bleeding edge of biotech new proteins are made and tested every day, a complex and time-consuming process. Glyphic Biotechnologies accelerates the critical but slow sequencing step, potentially cutting drug development times down by a huge amount, and the startup just

The whole human proteome may be free to browse thanks to DeepMind, but at the bleeding edge of biotech new proteins are made and tested every day, a complex and time-consuming process. Glyphic Biotechnologies accelerates the critical but slow sequencing step, potentially cutting drug development times down by a huge amount, and the startup just raised a $6 million seed to bring its clever solution to market.

Proteins are at the heart of many new treatments and products; the ubiquitous and infinitely varied chains of amino acids twist into shapes that interact with cells, substances in the body, and other proteins, doing everything from interpreting DNA to controlling access to secure areas (“sorry, no potassium allowed”).

In the drug discovery and biotech world, proteins represent unlimited possibility — the right one could clamp onto cancer cells, facilitate natural healing processes, or prompt the creation of helpful substances. But finding and testing novel molecules is not easy — and a big part of that is sequencing, which confirms the exact makeup of the protein you’re trying to test.

Right now there are several large companies doing good business in the protein discovery world, and generally the process involves identifying the amino acid at the end of the protein chain, then snipping it off, identifying the next one, and so on until you’ve done the whole thing.

The trouble with this approach is that the protein’s shape or the molecular properties of the next amino acid in line can interfere with the process of binding to and identifying the one on the very end. As a result there’s a certain amount of uncertainty and a lack of unreliability inherent to the process.

Glyphic Biotechnologies changes that by adding a step where the target amino acid is detached first and then tethered nearby using a novel molecule called ClickP developed by one of the co-founders. A single stationary amino acid attached to a known molecule is much, much easier to identify, and when it’s done, the process repeats as before.

It’s briefly stated but the advance is significant. Current techniques in the antibody discovery space produce and inspect on the order of tens of thousands of proteins per week per (very expensive) machine. It sounds like a lot but with proteins essentially innumerable, it’s just a drop in the bucket. Even running 24/7 this rate doesn’t come close to satisfying demand.

Glyphic’s approach, utilizing ClickP and single-molecule microscopy (like that used by DNA sequencing giant Illumina), should be capable of millions to tens of millions per week, possibly climbing to billions in time. Even at the most conservative estimate you’re talking about orders of magnitude in improvement — those tens of thousands in the other techniques include lots of (perhaps mostly) repeat or junk information due to their use of B cell cultivation to produce the antibodies in question.

Image Credits: Glyphic Biotechnologies

Not only that, but because the ClickP process avoids the problem of interference from the next amino acid in the chain, it has way, way higher specificity and confidence. So you wouldn’t just be sequencing a hundred or a thousand times as many proteins, you’d be far more sure about the results.

At first Glyphic would be processing samples sent to them, but ultimately their tech could live in other labs as their competitors do now. Going from service to hardware sales and support is the current roadmap.

If everything works as advertised, Glyphic could be the new standard in protein sequencing just as demand skyrockets in the biotech world. To do so, though, it needs just a bit more time in the incubator.

The process they pioneered was the result of work done by co-founders Joshua Yang (CEO) and Daniel Estandian (CTO) at the lab of MIT’s Ed Boyden (on the team as “scientific founder”).

CTO Daniel Estandian, left, and CEO Josh Yang. Image Credits: Glyphic Biotechnologies

Yang explained that what stands between them and potential industry dominance is a mere matter of chemical engineering.

“My co-founder [Estandian] developed ClickP himself. The chemistry works,” he told me. “But as a spinout of an academic lab, we didn’t develop all 20 binders, because it would have bankrupted the lab. This isn’t an ‘off-the-shelf’ molecule.”

These binders are a bit like adapters that make the process work for each of the 20 amino acids. It takes time and money to engineer them, so they decided to show the system off with a handful first in order to get the cash to make the rest. “It’s really just about putting the time into getting them out there,” said Yang.

The $6.025 million seed round should finance the company through this early stage as it builds its platform. It was led by OMX ventures (which previously invested in 10X Genomics and Twist Bioscience), with participation from Osage University Partners, Wing VC, Artis Ventures, Cantos Ventures, Civilization Ventures, and Axial VC, and has an angel investor in Mammoth Biosciences CEO Trevor Martin.

Glyphic will be making its first home at Bakar Labs, the freshly inaugurated new Berkeley biotech incubator. There it will stay until it’s ready to take the next big step, likely hardware manufacturing next year on the back of an A round to be raised then. 2022 should then also see the company’s first paid services. And the antibody market, as large as it is, is only the beginning.

“Antibodies are just a starting point, as numerous applications can benefit from protein sequencing,” Josh explained in an email after we spoke. “Another high value area is in industrial biotechnology, where protein-sequencing-based screening of evolved enzymes can help identify enhanced or novel functions (e.g., better laundry detergents, waste-water treatment). Development of diagnostic tests would also benefit because, the more proteins you can sequence and identify in a sample set, the increased likelihood you can identify rare yet important biomarkers and/or develop a robust panel of biomarkers that together can detect or predict disease.”

A company like Glyphic may seem like a perfect target to get snapped up by one of the more deep-pocketed competitors out there, but Yang said they’re confident enough to ride it out.

“The activity in this space is insane. My co-founder and I really want to be the next Illumina or 10X Genomics — we really want to be that leader in proteomics.” And unless the competition has a few cards hidden up their sleeves, Yang’s ambition seems like a distinct possibility.

News: Amazon-backed Indian D2C beauty brand MyGlamm raises $71 million

• July 26, 2021
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MyGlamm, a direct-to-consumer beauty brand in India that sells most of its products through its own website, app and retail touch points, said on Monday it has raised $71.3 million in a financing round as the Mumbai-headquartered firm looks to scale its business across the South Asian market. The startup had raised $23.5 million in

MyGlamm, a direct-to-consumer beauty brand in India that sells most of its products through its own website, app and retail touch points, said on Monday it has raised $71.3 million in a financing round as the Mumbai-headquartered firm looks to scale its business across the South Asian market.

The startup had raised $23.5 million in its four-times subscribed Series C financing round from Amazon, Ascent Capital, Wipro in March this year. On Monday, it said it has added an additional $47.8 million as part of the round — which is now closed.

Accel led the investment in the new tranche while existing MyGlamm investors — Bessemer Venture Partners, L’Occitane, Ascent, Amazon, Mankekar family, Trifecta and Strides Ventures — also participated, Darpan Sanghvi, founder and chief executive of MyGlamm, told TechCrunch in an interview.

Sanghvi started MyGlamm in 2017 after pivoting his previous venture. He recalled the struggle he faced raising money for a direct-to-consumer brand, which were not as popular in the world’s second largest internet market just five years ago. To make matters worse, MyGlamm was also among the last direct-to-consumer startups to kick off its journeys at the time.

MyGlamm website

The startup today operates as a house of brands in the beauty and personal care spaces. “We operate across makeup, skincare, haircare, bath and body, and personal care. Unlike other brands, we have been able to successfully build a master brand across categories,” he said over a video call.

“The reason we have been able to build this is because we are truly direct to consumers. This allows us to communicate very directly with them,” he said, adding that most other firms in the industry are too reliant on third-party marketplaces for their sales.

He attributed the recent growth of the startup, which sells over 800 SKUs across categories (up from 600 in March), to its newfound user acquisition strategy. In August, the startup acquired POPxo, a startup that has built a community around content, influencers and commerce and serves over 60 million monthly active users.

“The content to the commerce engine has become our biggest moat,” he said. “We are acquiring 250,000 new users each month without spending any real money.”

POPxo, which is run by Priyanka Gill, engages with nearly 300,000 users each month, gathering their feedback and ideas for new products. Gill said in a video call that “in this line of business, CAC (cost of customer acquisition) is the game and POPxo has solved this problem,” she said, adding that POPxo, which is run like a fairly independent business, is on track to reach over 100 million users by March next year.

The startup also has 15,000 point-of-sale touch points in the physical world across India. The physical presence, which accounts for 40% of the revenue it generates today, “has been crucial to scale in the country,” Sanghvi said.

“We believe that the time is ripe for building out digital first CPG brands with a deep focus on content-to-commerce,” said Anand Daniel, Partner at Accel, in a statement.

“COVID has only cemented this belief. The unique combination of content coupled with a compelling product line gave us the conviction to lead this round in MyGlamm. We are excited to partner with Darpan, Priyanka and the MyGlamm team and look forward to building out the next generation CPG giant,” he said.

The startup plans to deploy the fresh funds to expand its product development, data science and technology research teams. It is also working to expand its offline presence and broadening the digital reach of POPxo.

The new investment comes at a time when Indian startups are raising record capital and a handful of mature firms are beginning to explore the public markets. Last week, Tribe Capital’s investment crowned BlackBuck as India’s 16th unicorn this year, compared to 11 last year and six in 2019. Food delivery startup Zomato made a stellar stock market debut last week and financial services firms MobiKwik and Paytm have also filed for their IPOs. Insurance aggregator service PolicyBazaar and online beauty e-commerce firm Nykaa are also expected to file their paperworks for IPO in the coming weeks.

News: Polestar to double its retail stores as it seeks to ramp up EV sales

• July 26, 2021
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Polestar plans to launch in nine more markets this year, doubling its global presence as it seeks to sell more of its electric sedans.

Polestar plans to launch in nine more markets this year, doubling its global presence as it seeks to sell more of its electric sedans.

The company, which is the electric performance vehicle brand under Volvo Car Group, said it is also planning to double the number of retail stores to 100 locations and add more service centers by the end of the year. Some of the retail locations will be temporary pop-up stores. The Swedish automaker has more than 650 so-called “service points” in Polestar markets and wants to exceed 780 by the end of 2021.

This pace of expansion doesn’t appear to be waning. Polestar CEO Thomas Ingenlath said in a statement that the company aims to expand at a similar rate in terms of new markets in 2022. “This continued pace, combined with new retail concepts, will support our goal to exceed our owners’ expectations,” he added.

Today, Polestar has one primary product: the all-electric Polestar 2. But it has plans to add more to its portfolio in the coming years. The automaker announced in June that it would manufacture its first all-electric SUV in the United States. The SUV, which is called the Polestar 3, will be assembled at a plant shared with Volvo Cars at a factory in Ridgeville, South Carolina.

The Polestar 3 follows the all-electric Polestar 2 sedan and the hybrid grand tourer Polestar 1. Production of Polestar 3 is expected to begin globally in 2022.

As Polestar scales up, it’s keen to find new ways to reach customers. The main strategy is to add more retail stores and expand in existing markets or into new ones. The company said Monday it is also experimenting with a new concept called Polestar Destinations. These “destinations” act just likes its “Polestar Spaces” stores, but are larger and located outside of urban centers. These destination stores will also act as centers where customers can pick up their vehicles, which can be ordered and paid for online.

The company is also adding 60 more test drive locations by the end of 2021 to provide additional access to Polestar 2 vehicles.

All of this expansion is being supported by an influx of $550 million that Polestar raised in April in an external round led by Chongqing Chengxing Equity Investment Fund Partnership, Zibo Financial Holding and Zibo Hightech Industrial Investment. SK Inc., the South Korean global conglomerate, and a range of other investors also participated in that round.

While this was Polestar’s first external round, the company suggested at the time that it wouldn’t be the last.

News: I get it, Elizabeth Holmes

• July 26, 2021
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The next time someone jokes at a cocktail party about Elizabeth Holmes’ baritone voice, remind them how dumb is it that we give more money to people with deep voices.

Elizabeth Holmes’ raspy, deep voice helped her raise more than $700 million for her now-defunct company, Theranos. When I step into any boardroom for a pitch, I can hear her croaking her favorite line: “I hope that less people will have to say goodbye too soon to people that they love.”

Sitting across from a venture partner, I wonder if they might feel more compelled by my words if I cut my hair short (really short), or grew a beard, or removed my pregnant belly. Would they take out their checkbook if I were more aggressive in what I promised? Would they be more interested in getting to know my business and me better if I passionately slammed the table?

Actually, very likely.

Holmes adopted a ridiculously low voice to get her startup off the ground in a world full of men. She promised impossible pinprick tests to detect hundreds of diseases and collected influential investors like Henry Kissinger, George Shultz, James Mattis and Betsy DeVos. She wore a Steve Jobs uniform — including the Issey Miyake turtleneck — and built a team of 800 brilliant people. Did she go overboard with her lies? Yes. But she’s not the only one. The Silicon Valley and venture landscape only exacerbated whatever beliefs she already had in her company and inclinations to promise the moon.

Last week at a virtual hearing, she pushed to keep a huge database of information protected from the government. Before that, she claimed to have made $100 million in revenue in 2014, when it was really $100,000. These things, among others, are hands-down inexcusable. But I still believe that she thought she was doing the right thing taking the universal advice of Silicon Valley: “Fake it till you make it.”

She once said, borrowing from previous thought leaders: “This is what happens when you work to change things, and first they think you’re crazy, then they fight you and then all of a sudden you change the world.” I wonder if she just thinks she’s now on part two.

Raising money to start a company is about two things: having connections and making an appearance. Connections are difficult to make when you’re a woman: “Only about 12% of decision-makers at VC firms are women, and most firms still don’t have a single female partner.”

And even if you have connections, building relationships can be a bit weird: My cofounders end up being text buddies with our investors, while I hear news of things in passing. We hit a peak of 2.8% of funding going to women-led startups in 2019, but in 2020, that dropped again to 2.3%, possibly because investors reverted to their standard habits of keeping their cards close during uncertain times. Furthermore, investors generally have expectations that are aligned with male tendencies. For example, identical slides and scripts that are read by men and women are judged very differently, with men overwhelmingly rated higher. Holmes’ deep voice, although off-putting, probably made her more convincing.

It’s not easy to replicate the fundraising success that Holmes had, though. If other women tried to emulate this, they’d likely be penalized: In general, forward men are viewed positively as assertive, while forward women are viewed as emotionally unstable. This is confusing because, inversely, if women retreat to stereotypically feminine behaviors, they are viewed as weak. Hillary Clinton got stuck in this during her presidential race — criticized for being aggressive and cold when stereotypically masculine traits and pegged as weak when showing stereotypically feminine traits.

To make matters worse, it turns out that in pitches, women are asked more preventative questions about potential loss and risk, while men are asked more promotional questions about upside and gains. Women can work around this by answering any preventative question in the positive. Holmes knew this deep down and played into it. That was the only way for her to win.

I am absolutely no “holmie,” but I do understand firsthand her need to role-play. I’ve been overlooked; hell, I’ve even been told to change my product line (bras) because venture capitalists won’t get it. And they didn’t. I gave in.

I don’t want to defend her, and I can’t. It’s so easy to drop a line at a party or a board meeting about how obnoxious she was in her venture, but what irks me is that we focus on her specifically as the problem, completely bypassing the environment that created her. I remember soaking up John Carreyrou’s tantalizing book thinking, “Wow, I’ll never do that,” as I started my company. But as I have seen the pressures and the biases, I can see how the system shaped Holmes.

Why don’t we judge the biased system we created as much as we judge the person it destroyed? She sticks out like a sore thumb because, well, how many Elizabeth Holmeses are there out there? These problems are so ingrained in the system itself, though, that as David Foster Wallace alluded to in the water speech, we can’t see them and we probably aren’t ready to repair them.

The next time someone jokes at a cocktail party about Holmes’ baritone voice, just remind them how dumb is it that we give more money to people with deep voices.

Former TechCrunch COO Ned Desmond is now Senior Operating Partner at SOSV, which has invested in unspun.

News: Lucid Motors kicks off market debut with EV factory expansion plans

• July 26, 2021
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The former Lucid Motors will expand its factory in Casa Grande, Arizona, by 2.7 million square feet and aims to ultimately produce 400,000 vehicles a year.

Lucid Group (formerly Lucid Motors) will be expanding its factory in Casa Grande, Arizona, by 2.7 million square feet, CEO Pete Rawlinson said Monday just hours after the company officially went public with a $4.5 billion injection of capital.

The company also said it has 11,000 paid reservations for its flagship luxury electric sedan, the Lucid Air.

Part of the expansion will be used to accommodate the manufacturing of Project Gravity, the mysterious title given to the automaker’s forthcoming luxury electric SUV, a Lucid spokesman told TechCrunch. Not much is known about Gravity at this point, other than that it’s scheduled to be available from 2023 and that it will use the same battery platform as the Air. Patent drawings submitted to the European Union Intellectual Property Office, first noticed by a member of the Lucid Forum, reveal little more than the renderings on Lucid’s website.

The company is also planning on bringing more of the component production in-house, including major pieces such as the body panel stampings, the spokesman added. These parts were being handled by an external supplier.

The Casa Grande City Council approved the plans to expand the nearly 1 million-square-foot space in March. The first phase of the factory, which cost around $700 million to construct, went up in a record 12 months after breaking ground. Lucid has said that it wants to expand production capacity from around 30,000 vehicles per year to up to 400,000.

Lucid has had a long, sometimes tenuous road to the public market. The company first set its sights on bringing an electric sedan to production as early as 2018, but it quickly hit funding challenges that pushed this timeline further and further back. Lucid received major funding in 2018 with a $1 billion investment from Saudi Arabia’s sovereign wealth fund, which continued to be its largest shareholder throughout Lucid’s merger with special purpose acquisition company Churchill Capital IV Corp.

That merger hit a bit of a hiccup last week when the company failed to garner a sufficient number of votes on a key proposal — likely due to the rise of retail traders and malfunctioning spam filters, executives said in an investor call.

Lucid, which will now operate under the name Lucid Group, is listed under the ticker symbol LCID.

News: Troubled EV company Lordstown Motors gets $400M lifeline in stock-sale agreement

• July 26, 2021
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This new agreement could allow Lordstown to continue by providing the much-needed capital required to produce its first electric vehicle.

Five weeks after Lordstown Motors issued a warning that it might not have enough funds to bring its electric pickup truck to market, a hedge fund managed by investment firm Yorkville Advisors has agreed to buy $400 million worth of shares over a three-year period, according to a regulatory filing posted Monday.

The tumult within Lordstown Motors, which has resulted in the resignation of its CEO and CTO, has put the company at risk of failing. This new agreement could allow Lordstown to continue by providing the much-needed capital required to produce its first electric vehicle. If approved by shareholders, hedge fund YA II PN will be able to purchase 35.1 million shares, or about 19.9% of outstanding shares.

The capital provides a lifeline to Lordstown, which has struggled in recent months. The hedge fund, which is able to buy the shares at $7.48 a share, could also benefit financially if the stock price rises.

Lordstown Motors is an offshoot of former CEO Steve Burns’ other company, Workhorse Group, a battery-electric transportation technology company that is also publicly traded. Workhorse holds a 10% stake in Lordstown Motors.

The Ohio automaker was founded in 2019, and within a year reached a deal to merge with special purpose acquisition company DiamondPeak Holdings Corp., with a market value of $1.6 billion. The company had planned to begin production of its Endurance pickup truck starting in the second half of 2021 at the former GM Assembly Plant in Lordstown, Ohio.

Those plans faltered and a series of missteps and allegations of fraud compounded the company’s problems.

In March 2021, Hindenburg Research, the short-seller firm whose report on Nikola Motor led to a Securities and Exchange Commission investigation and the resignation of its founder, said it had taken a short position on Lordstown Motors. Hindenburg said at the time that its short position was based on a company that has “no revenue and no sellable product, which we believe has misled investors on both its demand and production capabilities.”

Hindenburg disputed that the company booked 100,000 pre-orders for its electric pickup truck, a stat shared by Lordstown Motors in January. The short seller said that “extensive research reveals that the company’s orders appear largely fictitious and used as a prop to raise capital and confer legitimacy.”

Two months later, Lordstown reported in its first-quarter earnings that production volumes of the Endurance would likely be half — from around 2,200 vehicles to just 1,000 — due to a lack of funding.

Lordstown execs dug themselves into a deeper hole by attempting to calm investors a day after its CEO and CTO resigned with statements that they had binding orders from customers that would fund limited production of its electric pickup truck through May 2022. The company retracted those statements within days.

The Department of Justice and the SEC are separately investigating the company.

News: Court orders US Capitol rioter to unlock his laptop ‘with his face’

• July 26, 2021
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The FBI argued that compelling Guy Reffitt to unlock his computer by sitting in front of it ‘would not run afoul of the defendant’s Fifth Amendment right against self-incrimination.’

A federal judge in Washington, D.C., has ordered a man accused of participating in the U.S. Capitol riot on January 6 to unlock his laptop “with his face” after prosecutors argued that the laptop likely contains video footage that would incriminate him in the attempted insurrection.

Guy Reffitt was arrested in late January, three weeks after he participated in the riot, and has been in jail since. He has pleaded not guilty to five federal charges, including bringing a firearm to the Capitol grounds and a charge of obstructing justice. His Windows laptop was one of several devices seized by the FBI, which investigators said was protected with a password but could be unlocked using Reffitt’s face.

Prosecutors said forensic evidence suggested that the laptop contained gigabytes of footage from Reffitt’s helmet-worn camera that he allegedly used to record some of the riot. Prosecutors asked the court if it could compel Reffitt to sit in front of the computer to unlock it.

Reffitt’s lawyer told the court that his client could “not remember” the password, but the court sided with the government and granted the motion to compel his biometrics. Reffitt’s lawyer told CNN, which first reported the court order, that the laptop is now unlocked.

The government took advantage of a loophole in the Fifth Amendment, which grants anyone in the U.S. the right to remain silent, including the right to not turn over information that could implicate them in a crime, such as a password. But some courts have ruled that those protections don’t extend to a person’s physical attributes that can be used in place of a password, such as a face scan or fingerprint.

In Reffitt’s indictment, the FBI said as much, arguing that compelling Reffitt to unlock his computer by sitting in front of it “would not run afoul of the defendant’s Fifth Amendment right against self-incrimination.”

Courts across the U.S. are still divided on the reading of the Fifth Amendment and whether it applies to the compelled use of a person’s biometrics. The U.S. Supreme Court isn’t likely to address the issue any time soon, rejecting two petitions in as many years to rule on the matter, leaving it largely up to the states to decide.

News: A magnetic helmet shrunk a deadly tumor in world-first test

• July 26, 2021
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We’ve seen helmets and AI that can spot brain tumors, but a new hard hat can actually treat them, too. Researchers used a helmet that generates a magnetic field to shrink a deadly tumor by a third.

We’ve seen helmets and AI that can spot brain tumors, but a new hard hat can actually treat them, too. As part of the latest neurological breakthrough, researchers used a helmet that generates a magnetic field to shrink a deadly tumor by a third. The 53-year-old patient who underwent the treatment ultimately passed away due to an unrelated injury. But, an autopsy of his brain showed that the procedure had removed 31 percent of the tumor mass in a short time. The test marked the first noninvasive therapy for a deadly form of brain cancer known as glioblastoma.

The helmet features three rotating magnets connected to a microprocessor-based electronic controller operated by a rechargeable battery. As part of the therapy, the patient wore the device for five weeks at a clinic and then at home with the help of his wife. The resulting magnetic field therapy created by the helmet was administered for two hours initially and then ramped up to a maximum of six hours per day. During the period, the patient’s tumor mass and volume shrunk by nearly a third, with shrinkage appearing to correlate with the treatment dose.

The inventors of the device — which received FDA approval for compassionate use treatment — claim it could one day help treat brain cancer without radiation or chemotherapy. “Our results…open a new world of non-invasive and nontoxic therapy…with many exciting possibilities for the future,” said David S. Baskin, corresponding author and director of the Kenneth R. Peak Center for Brain and Pituitary Tumor Treatment in the Department of Neurosurgery at Houston Methodist Neurological Institute. Details of the procedure have been published in the peer-reviewed journal Frontiers in Oncology.

Editor’s note: This post originally appeared on Engadget.

News: As China shakes up regulations, tech companies suffer

• July 26, 2021
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Things in China seem to be changing for the worse, in terms of both future access to foreign capital for Chinese companies and doing business in the country overall.

The Exchange spent a little time on Friday ruminating on the impact of then-rumored regulation in China targeting its edtech sector. News that the Chinese government intended to crack down further on the education technology market hit shares of public, China-based edtech companies. It was a mess.

Then over the weekend, the rumors became reality, and the impact is still being felt today in the global markets.

But there’s more. China is also bringing new regulatory pressure on food-delivery companies and Tencent Music. More precisely, we’ve seen successive market-dynamic-changing moves from the Chinese government in the last few days, coming as 2021 had already proved to be a turbulent environment for China-based technology companies.

The Exchange explores startups, markets and money.

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Today we have to do a little bit of work to understand precisely what is going on with the various regulatory changes. Why? Because the Chinese venture capital market is a key player in the global venture scene. And Chinese startups have gone public on both Chinese, Hong Kong and U.S. exchanges; there’s a lot of capital tied up in companies impacted today — and possibly tomorrow.

For startups, the regulatory changes aren’t a death blow; indeed, many Chinese tech startups won’t be affected by what we’ve seen thus far. And upstart tech companies in sectors less likely to be targeted by central authorities may become more attractive to investors than they were before the regulatory onslaught kicked off. But on the whole, it feels like the risk profile of doing business in China has risen. That could curb the pace at which capital is invested, cut valuations and lower interest in the Chinese startup market from private-market investors able to invest globally.

Let’s parse what’s changed, examine market reactions and then consider what could be next. We want to better understand today’s Chinese startup market and what its new form could mean for existing players and future performance.

Changes

The edtech clampdown did not start last week. China’s edtech sector started to rack up penalties and fines in June, which led to what the Asia Times called “warning bells” in the sector. From there, things went from penalties to punishing regulatory changes.

News: Solarisbank raises $224M at a $1.65B valuation to acquire Contis and expand its API-based embedded banking tech in Europe

• July 26, 2021
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Embedded finance — the process by which some of the more complicated, but also commoditized, aspects of financial services are built and wrapped in an API for anyone else to implement in their own products for end users — has become a huge cornerstone of how fintech is built today. Now, one of the earlier

Embedded finance — the process by which some of the more complicated, but also commoditized, aspects of financial services are built and wrapped in an API for anyone else to implement in their own products for end users — has become a huge cornerstone of how fintech is built today. Now, one of the earlier and bigger movers in the space is announcing a major round of growth funding to build out its own.

Solarisbank, a Berlin startup that provides a range of financial services by way of some 180 APIs that others use to build end user-facing products — they include basic banking and card services; lending; payments; and know your customer services — has raised €190 million ($224 million) in a Series D that values the company at €1.4 billion ($1.65 billion), and announced the acquisition of one of its competitors in the space, Contis.

Decisive Capital Management, a Swiss firm that has also backed insurtech startup Wefox, led the round with Pathway Capital Management, CNP (Groupe Frère) and Ilavska Vuillermoz Capital; and previous backers yabeo Capital, BBVA, Vulcan Capital and HV Capital, also participating.

The round is coming about a year after its last round of $67.5 million, but as a sign of the times, what is perhaps more notable is that the company’s valuation has nearly quintupled since then (it was $360 million in June 2020).

This latest round is going to be used for expansion. CEO Roland Folz said in an interview that the Contis acquisition — which underscores a wider consolidation trend in fintech — will help it better cover all of Europe, and start to make its first early moves into Asia. (No plans right now to add the U.S. to that list, he added.)

He added that the combined entity will be making revenues in the “triple-digit euros” — that is, hundreds of millions; it posted net revenues of €35 million in 2020 — and will be in a position to go public next year, if it chooses to.

In the meantime, it’s hoping to double down on the huge shift we’re seeing in the world of financial services, where consumers and businesses are opting for newer and more modern banking experiences as they migrate away from slower, less flexible and sometimes more expensive incumbents.

“Europe is an ideal space for us to work in,” said Folz. “We believe that in Europe there are roughly 800 million bank accounts and some 400 million of those will change ‘ownership’, where traditional banks will be swapped out with non-traditional banks… If we look at the 5-10 year perspective, we want to make sure a  significant proportion of those accounts will be on our platform.”

SolarisBank counts companies like Trade Republic, American Express, BP, Samsung and Vivid among its customers, powering basic banking, know-your-customer checks, lending, digital wallet and other services related to finance for companies that can in turn focus their energies on building more user-friendly customer experiences or other services altogether. It’s been growing at a rate of 40%-60% annually, Folz added, and it has some 50 “partners” (as it calls its customers) in all, covering some 2 million customer accounts.

Contis, meanwhile, is a substantial business in its own right, with some 200 customers covering more than 2 million users and €9.9 billion in transactions annually.

Solarisbank was founded five years ago, in 2016, out of the Berlin-based startup incubator and investor finleap, with Ramin Niroumand, a founder of finleap, essentially the “founder” of Solarisbank too. (Currently and more more formally, he is also chairman of its advisory board.)

Embedded finance is all the rage at the moment, and a number of startups today are providing fintech-as-a-service, or banking-as-a-service tools to third parties. Other notable names in the same segment of the market include Railsbank (which also announced funding earlier this month),  Rapyd, which also raised a big round at a $2.5 billion valuation earlier this year; Unit, another banking-as-a-service startup picking up funding and growing; FintechOS, which really does what its name says (and is also currently raising $$); and the startup 10x, which ironically is targeting incumbents.

Solarisbank believes its particular approach to this gap in the market gives it more flexibility and mileage: unlike its rivals, the bulked-up Solarisbank will have both banking licenses for Europe, and e-money licenses (in Lithuania and UK), with its tech stack living on AWS, giving it an opportunity to build more services, to scale, and to keep better margins in the process — a critical detail in what is essentially an economy of scale play.

It also believes that its own diversity in its customer base — covering not just obvious fintech companies like neobanks, but a variety of others, like Samsung, that are building financial services (in its case, a digital wallet) — gives it more staying power, to cater to whatever segment of that base is growing most at any given time. As Niroumand points out, around 70% of its revenues some from some 30% of its customers. “It’s quite a diverse clientele we are serving,” he said.

The company is currently active in Germany, France, Italy and Spain but says it can cover the whole EEA with passporting.

“With the combined entity, we are looking at numbers that no one else is even close to remotely,” added Folz.

The market opportunity, combined with Solarisbank’s approach and its current customer base, are what attracted investors.

“We are experiencing a paradigm shift in banking, where customers expect financial services to adapt to their specific needs,” says Thomas Schlytter-Henrichen, a partner at Decisive Capital Management, in a statement. “Technology is the key to enable this transformation and Solarisbank’s powerful Banking-as-a-Service platform positions it perfectly for this new banking era. We are both inspired by the team and thrilled to work together on its mission.”