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Venture water, biotech investing and 2021’s carnage

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Welcome back to the working world, friends, I hope that you survived the return to the desk in good stead and are both warm and healthy. The current boom in COVID cases is a huge bummer, but perhaps this is the last year we’ll have to drag ourselves back to productivity under the specter of lockdowns, mass death and a lack of hugs. I hope so.

Regardless, today we have a lot of fun stuff that should keep your mind off the state of the world for a few minutes.

Kicking off today, let’s talk about Liquid Death. The excellently named company kills thirst with water, hence its name. That’s really the company in a nutshell. Liquid Death sells water in a can, a business around which it has tailored an anti-plastic stance and a general heavy metal vibe. It’s neat.

But Liquid Death also raised $75 million this week, which has me wondering why everything is so expensive to build these days. Why does a water company need to raise a whole pre-seed fund in a single investment? What does it need the money for? Research? It’s selling water!

There was a general perspective a few years ago that it was cheaper than ever to build a startup. With off-the-shelf software, cloud computing and modern fintech back ends, putting together the building blocks of modern business was becoming faster and less expensive. Apart from the high costs of hiring software developers, it seemed that startups would be able to do more with less.

And yet. Startups are raising more money than ever. The Exchange is diving into venture capital data next week, but it’s clear that the venture and startup classes are still moving funds around with great relish. So much so that Liquid Death has raised over $130 million to date, per Crunchbase data.

Square the circle of lower startup costs, and mega-rounds for me if you can. Are we seeing marketing spend raised through equity capital sources? If so, that makes me worry a bit!

(Note that Liquid Death could be a kickass business with great margins and lovely economics; I don’t know its numbers. But why does it need $75 million if it’s in such good shape? What are we missing here?)

Level raised money

From deep in the notes docs, a brief note on Level. Level is a company that I covered back in February of 2021. The company had just closed a $1.5 million round for work we described as bringing “credit to workers who might not be able to tap it from traditional sources, using their current income from freelance work to back the advance.”

It was a neat model, as lending based on assets over cash flow is a bit silly in a world where lots of folks work but don’t live asset-heavy lifestyles. (That’s a polite way of dissing NIMBY boomers, of course).

Anyway, Level raised another round as 2021 closed, this time a $7 million Series A. Anthos Capital led the funding, with NextView Ventures and other prior inventors also kicking in cash. The capital came after the company grew its size by “10x,” per its own data.

What I find most notable in the Level news item is not that the company raised more money — more that its goal set is super big. Per the company, it wants to build a “financial OS for microbusinesses.”

I dig that because tiny businesses are not the sorts of companies that get lots of attention from traditional financial institutions. Fintech should be, in my view, a method of applying tech to break down walls and bring more value to more folks. Level seems to be working along those lines, while also building a venture-ready business. Neat!

PsyMed raises a biotech fund

On the heels of news that a16z has put together $9 billion in new funds for venture, growth and biotech investing it’s easy to forget that there are smaller funds in the market as well. And some that are quite new, in fact.

On the biotech front PsyMed Ventures is busy raising a $25 million fund, the first close of which ($8 million) is in the bank. I chatted with the group Friday to dig in a bit more to their model.

First, basics. PsyMed has three investing partners: Dina Burkitbayeva, Greg Kubin and Matias Serebrinsky. As you can work out from its first fund size target, it will be investing on the earlier side of things in the psychedelic medical space, along with a few related areas. The group isn’t new to working together, having previously formed an investing group using AngelList tech to invest around $15 million to date.

A few thoughts about PsyMed. First, I am hype that we’re expanding the boundaries of what we’re testing for medical use. Prudishness in my home country has held back this sort of work, to our detriment. Second, the biotech investing space is interesting to me as the companies founded go public a lot earlier than what we tend to see in, say, the enterprise software market. So, you get to see more about companies, more quickly and more frequently.

For venture investors in biotech companies, this can also mean earlier liquidity possibilities than what is often seen in today’s unicorn era.

Talking with Burkitbayeva, Kubin and Serebrinsky gave me the impression that we’re nearing a confluence point in terms of regulatory, scientific and medical progress that could unlock a lot of neat new treatments for some sticky human matters. Things like PTSD, treatment-resistant depression and my personal favorite, substance-use disorder.

All this is to say that I’ll be keeping out an eye for where the group puts its new fund to work and how quickly they can boost early-stage pharma startups into the public markets. Here’s to reading more biotech S-1s this year and next, I suppose!

The weekend

And that’s what I have for now — don’t forget that Equity is back to its regular thrice-weekly cadence next week, so I’ll chat with you on your podcasting app of choice in short order! Hugs!

Alex