Summary of Episode
#25: Luís Valente joins Annaka and Ethan to talk about iLof, his startup that uses biological data to help create better treatments targeted to individuals. Luís shares his insights on building credibility, finding initial funding, and why it is important to be picky about the investors and mentors you work with.
About the Guest:
Luís Valente is the CEO and founder of iLof, a startup using photonic and AI to gather biological data that will be used to improve clinical trials and drug discovery. Luís has an engineering background and prior to iLof he founded a computer hardware manufacturing company.
Podcast Episode Notes
Tailoring pharmaceutical treatments to individuals [1:42]
Using large amounts of health data to create individualized profiles and establish biological trends [3:15]
How to build a cofounder relationship? Find a big problem and offer an exciting solution [7:58]
Founder relationships are key to achieving early success [11:01]
The trend of moving from university research spaces towards startup spaces [13:12]
Accelerators can provide a startup with structure [17:41]
Navigating the changing landscape of data regulations and healthcare [18:45]
How iLof works with sensitive data using anonymity [21:10]
How is iLof funded? [25:05]
Find “smart money.” Will the investor serve as a long-term asset? [26:48]
Building your first relationships with VCs and investors [31:47]
Sign up for pitch competitions and sell yourself in order to establish credibility and build relationships in the earliest stages of your startup [34:48]
Funding 101: How you communicate to others is key — sell your team and sell your vision [35:55]
As a founder, you need to be picky with investors [42:59]
Interview experts to iterate your idea, build your network, and grow your own knowledge [45:41]
The difficulty that comes with establishing your team’s credibility and getting others to believe in you [52:54]
iLof’s next steps and future growth [55:40]
Luís’s advice — make sure you are solving the right problem and that it is worth the effort [57:44]
Full Interview Transcript
Annaka: Hey everyone and welcome to Startup Savants, I'm Annaka.
Ethan: And I'm Ethan.
Annaka: If you're a returning listener, welcome back and if you're new, this podcast is about the stories behind startups, the founders who run them and the problems they're solving. Today, our guest is Luis Valente. Luis is the founder and CEO of iLof, also boasting a spot on the Forbes 30 Under 30 list. His startup is working to compile and leverage healthcare data to help companies develop pharmaceuticals and treatments.
Ethan: Yeah, so this was one of my favorite conversations that we’ve had so far. In fact, I don’t think I’ve ever met a person whose thoughts are just so organized. I mean you can feel the intelligence just radiating off this guy, but the most interesting part of this interview was getting his thoughts on pitching: pitch practice, pitch competitions. You’re definitely going to want to hear his advice on this.
Annaka: Yeah, and a different perspective on investors and startups and founders being the picky ones and choosing who you want to work with. Building and leveraging co-founder relationships and knowing you’re the person or team for the job and being able to back that up.
Let’s get into it. Hey Luis, welcome to the show. How are you doing today?
Luis Valente: I'm great. Thanks so much for having me.
Annaka: Excellent. We're excited to have you on as well and hear more about your startup and the journey. Tell us about how you started iLoF and the problem it's solving?
Luis Valente: Great. So, iLoF was born out of the realization that for the past centuries treatments have been developed based on this idea that the same medication would work equally for everyone. Which unfortunately for many of the steel and tackle diseases is really not the case and I mean, there's a very clear case of that which is Alzheimer's disease. So for the past 20 years, there's been more than 400 tries of well getting a successful and disease modifying treatment into the market and they mostly all failed for various reasons.
So, it's really important to develop medications that are tailored to specific patient groups and this is basically what iLoF was born to do. So, we are helping researchers, physicians in biotechs and pharmaceutical companies understand better the patients that they are creating the medications or the treatments [for]. And so we are cutting the time and the cost that it takes them to create these medications and hopefully this will allow, well, millions of patients currently living with complex neurological diseases to finally get a treatment that it's actually useful for them. Starting with neurodegenerative diseases, which unfortunately are one of the biggest epidemics of our times.
Annaka: And very complicated treatments and all of that stuff.
Luis Valente: Yes.
Annaka: So, you're tackling a huge and complex problem?
Luis Valente: Yes.
Annaka: Can you give us kind of a layman's definition or walkthrough of what iLoF does?
Luis Valente: So, in developing this medication, it's really important that we have information about the different profiles of a disease and we had that. So, we just been through a pandemic and we really understood that when faced with the same disease, some patients react very mildly, I mean, almost didn't have any symptoms. And some patients just had very serious cases and eventually some of them as we know, or a lot of them actually passed away. And in order to study these profiles further, there really needs a way to collect mass amounts of data on patients' biological profiles. And well, the last couple of decades some companies have been trying to do it with let's say genomics, with multi-omics approaches.
But the truth is that collecting data on genomics, it only gives you half of the picture, it's very interesting in telling you what can happen to your body. So, let's say your baseline profile when you're born but it's not so useful in telling you how your profile changes as you grow old, as you make different lifestyle choices, as you eat differently, live differently, so you need different kinds of data aside from genomics. What iLoF is doing, we are using optical data, so we are using, let's say spectrums, the way that the light interacts with patients' biological fluids, to understand the ensemble of particles in patients' biological fluids. Your peptides, proteins, exosomes, lots of very small particles that are in your blood, in your plasma and that really make your biological profile.
So, what we do is we collect mass amounts of this biological data using, again, optical sources. So literally, we shine a laser beam into a sample, we collect a reflection pattern and then using very advanced machine learning and deep learning methods, what we normally call artificial intelligence. We're able to extract a lot of information that is then very useful for this drug discovery and drug development processes. So, we sometimes say that what we're doing is astronomy for biology, so we're actually stacking together a lot of very noisy and complex data. And this allows us to see very small, so astronomy normally does the same for seeing very big things that are very far away. We are seeing very small things that are very close to us but that are actually very hard to identify. So, this is basically what we do, collecting very large amounts of data. That's basically what we do and working with pharmas and biotechs to help them cut the time and the cost.
Ethan: So, you had a background in tech, you didn't really have a health background. How did you find yourself starting a company in the digital health sector?
Luis Valente: That's an awesome question. So, first of all, yes, my background is in computer science but I had some background in healthcare before. So I was working in, let's call it tech transfer, so I was working in taking innovations in the healthcare sector into the market. And basically what I understood is that there's a lot of very great science being done that can actually help and solve a lot of, well, some of the biggest world problems. But researchers have a hard time translating it into the market and this is something that got me very curious.
So, I eventually left that job but I remain in close contact with the team that was developing what today is iLoF when back then was just still mostly an idea. And so basically with three other co-founders that have, well, PhDs in biochemistry and then let's say a healthcare background, we in late 2018 started making the first steps to launch this company. And I don't think I could have done it without my co-founders but I guess that's what startups are, right? It's building something out of nothing with the help of hopefully very smart and dedicated people.
Ethan: So, let's talk about those co-founders. I mean, you mentioned that they have biochemistry degrees, they're incredibly smart people. And I'm assuming that they were already working in companies that were, let's just say, rewarding them very well for being as smart as they were. How do you convince so many people to go off and do something crazy, like start a startup? Like, so how did you build that? You found a relationship?
Luis Valente: So, the problem needs to be big enough and the opportunity needs to be big enough. So I can give you an example, one of our co-founders, which is currently our COO Mehak, she was working at EY. She was doing strategy consultant consultancy in London, which is, I'll say, as you might imagine, a very well paid job and a very reputable one, right? I think what really makes people drop their day jobs and join you on the journey is just this idea that when they hopefully change the life of millions of patients with something that you built from scratch.
And in this case, the problem that we're facing and let's not speak actually of anything else, let’s just stay on Alzheimer's. I mean, every year, the number of people that are diagnosed with Alzheimer's is growing and growing and it will grow tremendously in the next decades. There's no disease modifying treatment and there are very few ways of actually understanding how to create better drugs for these diseases. So, when you're faced with such a big problem and of course there's also a big market opportunity to match it. Well, I guess if you have that founder I would say mentality, you just feel like a social responsibility to do something about it and this is what I guess every every one of us felt. So, eventually we all came together and said, "Let's start this and let's create iLoF." And three years later, here we are.
Ethan: So, you've brought people in on the idea that we're going to change the world, I mean and that's definitely motivating. But on more of a tactical level, I mean, you've literally got four people it sounds like, who are all going to start a company. And four is more than two and two is more than one and so people are complicated and things get complicated. So, what does that structure look like? I mean, did you just all come together and say we're going to split it equally four ways and just go forward from there?
Luis Valente: No, absolutely. So, co-founder relationships is one of the let's say probably hardest topics. And if you look at statistics, one of the reasons why startups fail, or one of the biggest reasons why startups fail is actually because of co-founder relationships or a team, right, team. So, I think you're spot on, this is not something that just naturally appears, this is actually something that I don't have the numbers by heart. But I think 50% of, or 40%, I think it's 40% of teams, they break up from the start until series A, which normally is like in the first two to three years. So, statistically, when you're starting, the deck is already stacked against you, right?
So regarding how we are going to decide, "Okay, how are we going to divide the workload? How are we going to divide let's say even ownership?" So, my advice is to try and do it using as much data points as possible. I'm very much against the idea of let's split it equally. And I have a lot of founders, which are my friends that are also very much against this idea, because even if in the beginning it might seem like it's the easiest way to go, on the long-term it actually doesn't work. So, I think we used some calculators in the beginning that were online where we just inputted and responded to a couple of questions. And it just output to the number and then we started working around those numbers. But I would say it's a very important thing and I'm firmly again, against equally dividing because situations are different, people are different. And you should take all of that into account when starting a business and assigning ownership.
Annaka: And switching gears a little bit and I might stumble over this question because I'm not entirely sure if I'm using the right words. But as far as innovators in healthcare, in my brain, that happens in academic situations, right? Prestigious colleges and universities, is there kind of, in your opinion, kind of a trend where innovators are moving into more startup spaces where maybe, I don't know if there's more freedom? See, that's where I was like, I don't know if I actually want to say the word freedom there but is that an actual thing?
Luis Valente: It is. So first of all, the reason why normally healthcare innovations come out of, well, research settings and very prestigious research settings is because healthcare is very hard, it's a highly regulated environment. So number one, the market risk is higher because it's a highly regulated market, the tech risk is higher, right? Because you're dealing with people and you really need to build something that helps. It just can't just be, "This is okay but actually I'm not sure this is." I mean, it really needs to be a product that people really trust and see a benefit, otherwise they won't use it. Especially when you're speaking about, I mean, healthcare workers, they all overwork, they don't want anything that will give them extra work. If they won't see a benefit, they won't use it and this is why the various entrances are let's say bigger.
Now, I would make a distinction between med tech and digital health. There's a lot of companies, especially during COVID that were created, working on the digital health space. That was in a way working in this middle ground between pure tech and pure health. And we are talking about telehealth companies, I don't know, facilitating access to healthcare services or something like that. There's a lot of money and a lot of very smart people creating businesses around that space where I guess it was harder.
In our case, we're purely deep tech and this is why I would say since day one, we kind of were supported by also very renowned institutions. So, we were and still are incubated at The Oxford Foundry, which is the Oxford University accelerator and since day one used a lot of that ecosystem to well develop our product, develop our technical and commercial relationships. So, building a deep tech company in healthcare but also in other areas, is definitely a different beast. And I understand why some founders are moving into less regulated and less complicated spaces and I can't blame them actually, because it is hard.
Annaka: I mean, it's just as a person not associated with healthcare or tech really at all, I'm like, you guys are doing what? Like, it's just so cool. So, what's your experience been like, you said you were with an accelerator, right? What's that experience been like so far?
Luis Valente: Very positive. So, we were part of a couple of programs. I normally speak of the Oxford Foundry first because it was the first program we joined and it was completely transformational for us. So, they're part of the Oxford University, they're meant to support businesses that have a connection with the Oxford ecosystem, which was our case. And for us, it was completely game changing. So number one, in my case, I wasn't the first time founder but all my other co-founders were. And I'll say both to me and to them, it really helped with some curriculum, with some let's say learning good practices, so that's number one. Number two network, you just meet a lot of people, advisors that you're going to use and number three just gives structure into something that's not structured.
So, the biggest difference between a startup and a job, or one of the biggest differences is that, I mean, no one will call you if you want to wake up every day at midday. And I don't know, wake up, you go to the beach and you go and enjoy your day, nothing will happen. Literally you won't get fired, especially as a founder, nothing will happen. So, it's a very unstructured, unconstricted space and being an accelerator just helps give some structure. So, they're not your bosses but they do expect you to follow a certain curriculum, a certain path, they kind of push you to deliver certain milestones. And it helps, especially for first time founders, I think it helps a ton and I highly recommend. And if you see, for example, the likes of Y Combinator, Y Combinator is a clear example that not all but some accelerators when they have good processes and when they do the right things, they do help you be more successful and they do tilt the scale in your way.
Ethan: So, you mentioned regulation and regulation specifically in the health and medical industries, so let's talk about that a little bit and let's also talk about data privacy. So, we're living in a time where companies like Apple are doing some public chest pounding on privacy. And there are whole countries cracking down on data collection through apps as ubiquitous as Google Analytics. I mean, it just seems like we're moving in a time where what was once hard is just now getting harder and the same thing with the regulation. So, how are you navigating what is essentially a changing landscape of the rules surrounding data and regulation?
Luis Valente: A good question. First of all, I think there's a significant difference between the use of data and healthcare and the use of data in other industries and I'll give you an example in advertising. Yes, Facebook and Google, they want to know profiles. But if they can, not only do they want to know a certain profile, as they want to know who you are, right? Because they want to sell you something to you as an individual, okay? So, if they can influence you as an individual, if they can bombard you with information, to you specifically as an individual, they will. Because they're really interested in pinpointing specific people and then using that to sell you stuff, influence your behavior.
Now in healthcare, it's very different, right? The only situation where you are, or a company is interested in the private information of a single individual, is when it's trying to help that specific individual, a physician, right? You go to the doctor, I mean, if he could, you would like to have access to all your medical information. Not because he wants to sell your services hopefully but actually because he wants to help. He wants to make the right decision, he wants to make the right prescription for you, okay? He's going to make a prescription for an antibiotic, he wants to see if you had a reaction to that antibiotic in the past, if you had that in the past, so it's very different, I would say access to data, it's not all the same and the reasons are not all the same.
Now in healthcare and speaking of iLoF, we are not interested in data about individuals who are interested in about profiles, okay? And this is why we only receive anonymized data. So, we make a very big push so that our partners actually don't send us private information on individuals or even seal the anonymized information. Is information that it's anonymized but if there's a leak in one of the sides, the receiver or the emitter of the information, it can be traced back. So, actually we prefer to receive the information completely anonymized, even if for some reason there's any breach, it can never be tracked to a specific individual, so that's number one. And then of course, we use it to create profiles that well could never be traced back to a certain individual but can actually help millions of patients, so that's number one.
Now, how do we navigate this? Well, it depends, right? So it depends. In healthcare, it's a lot about the claims that you make, okay? If you make a claim that you're going to cure some illness or that you're going to diagnose cancer, then this is a very big and a very bold claim, which most healthcare companies are actually not allowed to do as including. Even if we have very strong, scientific data to say that, we're not actually allowed to say that we can because it's regulated. And this was actually one of the reasons why we chose to be working mostly with businesses. So biotechs, pharma, hospitals, where we're actually not claiming to be let's say interfering into the patient's pathway. The only thing that we're doing is we're helping them do their job better. “Oh, you're developing a new medication, I'm going to help you do your job better. Oh, you're trying to understand what is the best treatment to this patient, I'm going to help you do your job better.”
But so I'd say this is how we navigate, we're mostly working B2B, we're working with physicians, diagnosis is per definition something that a physician should do, not an algorithm or a machine. We're just helping them make their job better and easier and likewise, with the work we're doing with biotechs environments. So, for now we're staying very far away from those very big, bold claims. And eventually of course, there's a path to full diagnostics that we are also doing in parallel that involves clinical trials, that involves the massive amounts of information that we're collecting. But for now there's a lot of value that we can create in the market and in the whole ecosystem without needing out, say the full FDA or permission as a diagnostic or something like that.
Annaka: There's a difference for me in data privacy, like some algorithm is following me to see what kind of cat litter I should buy. And like I could you all can have my health data if I can help someone out like.
Ethan: Well, especially if your name's not on it.
Luis Valente: Never trace back.
Annaka: Like Facebook probably knows more about me than my own mother and it's like that's data privacy to me.
Luis Valente: Scary.
Annaka: Yes, it's a different beast.
Luis Valente: It's scary, I can give a data point very quickly. I think I'm profiled everywhere as a founder and it's really interesting seeing what Google and Facebook and Amazon thinks that a founder would buy. Because it's really interesting what they sell; coaching services, they sell a lot of services for people that don't have time, like those 10 minute grocery delivery things. And it's really interesting because in a way it's like, "Is this who I am? Like, is this the kind of consumer that I am?" But it is scary and we don't have that in healthcare. We couldn't care less about specific individuals and actually we would respect people's private data too much to do something like that.
Annaka: So, gold star. Going to make a real quick, hard pivot to talk about money, this is Ethan's favorite and then I got this question. So, how is iLoF funded?
Luis Valente: So, we are funded since the start by a mix of let's say private and also public funding, I would say in a proportion of 80%, private, 20% public, let's put it like that. And so we are currently, we raised a couple of funding rounds with investors that we are very happy to have with us. And some of them are corporates like, well, Microsoft and Osram and also very good VCs like, well, Mayfield, Luna Ventures, Favor a couple of others. And I think that this mix between grant funding and equity funding has been working very well for us in healthcare. I actually don't think there's a way for you to really get to the market without using some public funds, because the rule to market's just longer. And as we discussed regulations and all of that just takes longer so for us, it has been working out quite well, of course, we also have some sales and clients. But at this point I'll say in the very startup way, we're not profitable, so we mostly rely on equity funding and grants.
Ethan: So, we're going to go real deep in your funding process because you're not just a person who's raising capital for iLoF, you are also an advisor to other startups who are looking for capital. And so essentially what I'm going to try to do is get a free masterclass out of this and see what we can do. So, you mentioned some big names in your investor pool and I've got some other ones here, like Microsoft and Google and again, you've already mentioned Oxford. Those were some names that people might have recognized in their time. So, in your profile you use the term smart money and that makes me think that you're not just going out there and taking money from anybody who wants to give it to you. So, tell us the story, give us a tour of your mindset when you were making the decisions on which investors were right for iLoF.
Luis Valente: Smart money. So when you, so first of all, being in an investment relationship is like a marriage, okay? So, startups are, especially in healthcare, the average time from inception until exit is seven to nine years in healthcare, that's the average time, okay? So, when you're getting investors at seed stage, let's put it like that, so you're three years in and you're raising around and you have probably four years to go until an exit, right? You need someone that can number one, help your business because otherwise just dumb money, so otherwise, I mean, you're just competing on terms. It's just like, "Okay, who can give me the most money at the cheapest cost, right? At the highest evaluation, whatever." And that normally never goes right. So you need someone that can help your business through connections, through introductions to customers, to partners, to other investors, actually because again, this is a perpetual process. You're raising a seed, 12 months later you're raising A, 12 months later you're raising a B. And a lot of times these intros actually came from the investors that back to you in the beginning, so this is number one.
Number two, there needs to be a fit, right? I mean, when you are in a way dating, right? I mean, a lot of people are super cool, right? But we choose a certain person to live with us and to marry with us or to, well, whatever, share our lives because we feel like there's a fit, okay? I tolerate you, you tolerate me, hopefully we love each other, maybe we don't. But anyway, we can live together, I mean, I can see how we're going to live together for a very long period of time.
So, when I say smart money, you really need to think about number one, is this relationship going to work in the next four years or one year down the line I'm going to be, "I have a call with this guy tomorrow, I really don't want to go." And if this is the case, then just no matter how good the terms of the money are, just don't take it because it will not be worth it, it will go terribly wrong. And number two, can he help you? Because if he can't help you sooner or later, you're just going to start looking at that, that's just money. And this is like, when people, I don't know, choose their partners just based on their bank account. There's always someone who has more money, right? And you'll always going to say, "Okay, why did I choose this one and not the other one?" And so this is why smart money is the right way to go.
So in our case, both the corporates and the pure venture capitalists that we have on board, all of them helped or are helping. Most of them actually are helping the company on a day to day basis, proactively in very different ways. So, I just named two different corporates, one is a photonics physics giant. So, like the selling sensors to Apple and I don't know, half of the global smartphone manufacturer industry. And the other half and Microsoft of course can help a lot on the way we develop our algorithms and the way we develop our platform and our infrastructure. So, basically at this point, it's really important to understand what people can bring to the table. And then also, what are we going to do with the money? Which is also very important.
Ethan: All right. So, you've talked about smart money and you even mentioned, you kind of preempted my next question on how you're going to get those introductions to the other money. But for that first introduction, let's say I've got a startup and I don't know any VCs. Do I just like look in the phone book? Do I look under venture capital and just find the first one and call them up? I mean, is there some sort of like secret handshake that I have to know? Like how do I get that first relationship? How do I get in the room with the first people that can help me get to the next set of people?
Luis Valente: So, it depends on the phase where you're at, right? So, when you're starting is different than right now, so I can tell you how I do it, right now it mostly comes from network with other founders. So for example, so just today, I probably did like three intros to investors. Some of them invested in iLoF, some of them didn't invest are just people that I know. And then eventually we didn't converge either because we didn't want to know, because they didn't want to invest but we remain friends. And I think I actually did three intros for other companies and so intros from other founders are actually a very good way of getting to know investors. Normally this is our very warm intros and investors will actually pay attention if they like the founder, which hopefully they do, so this is number one.
Number two, you can also, so in a way, if you want to see giraffes, you need to go where giraffes are, okay? So, they're hanging there and just go there in a safari and they're all there, right? So going to places where VCs normally go, it's also a very good place to meet them. I think I've actually met half of the investors that have invested in iLoF in conferences or startup events where I just had, "Hey, okay. Hi, I'm Luis." I just introduced myself or I asked someone, "Hey, you know this guy? Okay, can you introduce me?" So, going into conferences like, I don't know, so we have Web Summit in Europe, which is quite a big startup conference. We have the WIRED conference also in Europe but there's well, a ton of them, I mean, there's Collision in Canada. I mean, if you can go, that's also a very good way.
Now, when you're really, really, really starting and when I say starting is literally just created a website, a LinkedIn page, a Twitter, and an Instagram. You just created an email and you are like, I don't know, three co-founders in a garage thinking, "Okay, now what?" I would create a narrative, I would create a pitch deck and what I would do, which is basically what we did is I would apply to every single startup competition out there, okay? And you would go and you would pitch, okay? And you would sell yourself like crazy yourself, like the company.
And then eventually you will get picked up, because this is actually a way that a lot of investors have deal flow. They are juries in this startup company. The words don't mean anything, well, sometimes they give you money. I think we got like $50,000 at a time and one time we got like $30,000 and like that was the maximum, right? But in the big scheme of things, it actually doesn't move the needle but it really helped us, no VCs, no partners, no clients. So I would absolutely advise in the early stages, just do as many startup competitions as possible but of course don't stop building the product, right? So, this is advice to mostly CEOs, right? Okay, not to CTOs that should be helping build a product but at least it worked for us, it worked quite well.
Ethan: All right. So, you're doing my job for me, so now we've got how to find the investors, we've got how to pick the right investors and now we're even going to pitch competitions. So, tell me about those pitches and those pitch decks, tell me what those need to look like in the early stages. Do they need to change as the deal flow moves forward? What do you put into your pitch deck at this point? And how does that differ from those three founders in the garage, how does that differ from theirs?
Luis Valente: So first of all, there's a startup that it's not a competitor of ours but it's working on the same space and the other day I got sent a link for a website. And it was like a beautiful, gorgeous website, like the most gorgeous website I have ever seen. And I was like, "Okay, these guys are huge. How come we miss them? They're awesome." And we dipped further and it was literally three people in a garage. Well, it wasn't three people in a garage but it was two people in a lab in, I don't know, a research group somewhere, which actually wasn't that relevant. But just the impact that I have, it's just, "Okay, these guys are awesome." This is really what you want to do, so right now it's easier for us, right? Okay, we raised a million, we have, I mean, some corporates that in a way vouch for us, right? Okay, we did due diligence on these guys, this guy's a good, you can trust them.
But in the beginning, there's not a lot of social credit that you can actually take and you really need to put yourself out there and in a way, appear more professional than you are, okay? Yes, you are three guys out of a garage but you don't need to seem like three guys out of a garage, okay? And this means website, this means the way you speak and this means pitch deck, just the way you communicate, okay? So, when you go to these competitions, in the beginning you won't have much, okay? So all you're selling is the product, the team and the vision, this is all you're selling, right? I'm sure you still don't have a product, right? This is why you're raising, you're raising to build a product, you're pre-seed, right?
So, you need to sell your team like crazy. Okay, this is why we are the best, this is why we are the best guys in the world to tackle this problem. Because I did this course, because I found the X company, or just because I'm going to work harder than everyone else, because I've always wanted to do this all my life. And people really need to believe, people really need to see. So sometimes I see VC saying, "That founder's spark, it's like it's sparks. Like just you see an aura around him." And you just know, I mean, I don't understand half of what he's saying but I see his going places, right? It's not going to stop, it's really motivated, this really helps.
And sell the team, the vision you really need to pick a big problem. VCs don't invest in markets smaller than 1 billion normally, okay? Normally. Because the way the VC model is structured, 80% of the companies will die, 15% of those companies will exit at cost, so they will now win or lose and then 5% will pay the entire fund. So, those 5% they really need to be moonshots, okay? So, if when you're starting you're selling a problem that's going to have a market of 500 million, just forget it, it's not going to work. They won't invest and they won't tell you why and this is what's frustrating. They won't tell you, you have a great idea, you have a great vision and a great team and I'm not funding you because the market is not big enough. Most times they won't tell you that but that's actually why they're not funding you.
So, you really need to make sure that if you have like a small beheaded market, which you should you say, "Okay, this is where I'm starting, like Italian pharmaceutical companies working on Alzheimer's, okay." I'm starting on this but this is just like the 0.1% on my market, okay? My market is just very large and this is my whole market and then you show your whole market and you see, "Okay, so this is how you're going to grow." So, you sell the vision, you sell the team.
And as much of the pitch goes, I mean, just be confident. There's a lot of courses online, it helps practice, again, the more you go, the better you become, so you just need to get yourself out there. Sometimes it'll go awfully, sometimes it'll go okay, sometimes you'll nail it, you just need to live with it and that's it. Deck wise, in the beginning, we spent some time with the deck, because again, we wanted to look more professional than actually we were at the beginning, it's just the way it is. But I would say these days VCs they kind of don't look so much on the deck and they look more into the person, at least that's my experience. So, I would worry more about having not a good narrative for the vision and not a good narrative for the team than having a very bad pitch, if you can have both then awesome. And you still might not get funded by the way, because again, it's a numbers game.
So in the last round, I can tell you and it was oversubscribed, like literally it was, we had commitments for double the amount that we took in. But I can tell you that we spoke with 150 investors to get to that point, 150. And this was after the Microsoft investment, okay? So there were already, I would say hopefully very good companies vouching for us and helping us. And still fundraising on the right terms and with the right people were also a bit picky because well, smart money but it's a numbers game. It's a numbers game and the same way that 80% of startups fail, 95% of the contacts you do with VCs, they're not going anywhere. So, if you need three VCs to close a 5 million round, you probably need to contact 80. We contacted 150 just to be sure but in the end we have….
Annaka: The more I learn about funding and listen to founders talk about it I'm like, this is exactly like dating. It's like almost exactly like you just got to talk to a bunch of people and like one or two might work out. But like you really just got to talk to a bunch of them that you're like absolutely not, never going to happen but it's just interesting. And I love the perspective that not only are investors picky but founders and companies and startups should be picky too. Like, do you actually want to work with this person long-term? It's such an interesting perspective to think about the other way, so.
Luis Valente: Because there's no, in the startup world, it's not like in relationships where you can have a one night stand, it doesn't work, you can't, right? It's like you go out with this person and if it's for real, then you need to stay with that person for at least five years. And this is why you need to be picky, this is why you really need to be very picky because it can make or break your business. Investors can make or break your business.
So, be confident and be picky. I like it.
Luis Valente: Very picky.
Annaka: Now, I want to go back to how you validated your startup idea because to me it's, I mean, yes, it's very complex. Yes, it tackles a lot of big things. But in reading your company profile and reading about you in the company, it seems like it was a journey. So, tell me more about it.
Luis Valente: So, I can tell you a metric that might be helpful. So, when we were fundraising, we joined a pre-accelerator, let's call it like that, a venture builder, let's put it like that. We joined a venture builder in Germany and they forced us, we were not incorporated, we are not a business yet, they forced us at the time to attend a Boston based program called CRUSH. So CRUSH is, well, a very reputable healthcare organization that just, so it's an association with various members like Harvard Medical School, MIT, and a couple others, that just come together to bring innovation into healthcare, okay? And what they do is they have this six-weeks program where they put potentially new, so this is again, pre-acceleration, this is very early, they put these ideas through a meat-grinder.
And one of the things they do is they force these companies to every week speak with 10 global experts on the area that you're creating your idea and report back the detailed interviews. Over six weeks, we ended up speaking, no eight weeks we ended up speaking with more than 100 global stakeholders in personalized medicine with written interviews, okay? Where we were validating, what is the problem? And we started out by Alzheimer's, okay? What is the problem? Why are these clinical trials not working? Why have for the last 20 years, 400 clinical trials failed and no new treatment was approved? What is the patient problem? Okay, why are patients actually complaining that they don't want to be part of these clinical trials? And the reason in that case is because they're using very invasive techniques and well. So, for example, there's a procedure that involves sticking a very large needle into your back to extract, no one wants to do it, right? No one wants to do that, it's part of a clinical trial.
So, we validated that our business proposition speaking, getting out there, getting out of the lab and having 100 interviews, documented with a hundred global stakeholders. In that process, we ended up getting four letters of intent from four different global pharmaceutical groups that basically said, "If this guys raised their pre-seed funding, we are going to want to work with them." When you really take all of these 100 interviews and you take these letters of intent and this is just, I just told you guys of the intent we had from pharmas. We had actually in total, I think 15 letters of intent from a mix of pharmas, biotech, hospitals that said, "Okay, these guys, they're a good team. They seem to understand very well the problem. If these guys get funded, we really believe in the product they're going to build." And again, at that moment, we don't have a product, it's just an idea, right? It's just in that idea stage, so all you can sell is the team and your vision.
When you go to a VC and you say, okay, it's not like I woke up one morning and say, "It would be great to be a CEO and a founder. Okay, give me money." It's not like that, this guy's been through a meat grinder for eight weeks, getting very harsh feedback, both from mentors in that venture builder program and from the people they are interviewing. Because sometimes people will just say, "Well, you don't have a clue what you're saying. I mean, this is actually not how you should be looking at the problem. No, actually I think you're wrong. I don't think this is how you should solve it." So, when you go to a VC and you actually show him that you've done all of that and you've got those letters of intent, it just reduces a lot of the risk of investing in you. And I actually recommend that everyone goes through this process, speaking with people is the best way of assuring you're not wrong.
Annaka: Well and it's like if you have letters of intent and people saying if you guys give them money, we'll back them up too, that's got to be a big confidence booster.
Luis Valente: For us, it helped us tremendously. And we like to think that the reason and we raised a very, so it was a very significant pre-seed, right? 2 million at the time which, well, in deep tech, now it's more common but at the time it was like quite a big check and it was milestone based but still it was quite a big commitment. And the reason why I believe eventually we got investment was because, well, hopefully they trusted that we wouldn't just be spending money alone. We will be spending money with the help of a lot of very smart people that know the space very well. And I mean, this is why, I guess, in the end everything worked out.
Annaka: And so as far as identifying the problem that you wanted to solve, you've brought up Alzheimer's a couple times. Was that always what you had your sights set on or were there pivots and backtracking involved in that process?
Luis Valente: There were pivots. So our vision was and still is to create a platform where there's like literally masses amounts of data, so the data that we're collecting this spectral, is optical data. This data that we use light to collect is very inexpensive, right? I mean, you probably know those infrared thermometers that people were using during the pandemic to take temperature everywhere, right? Wireless, infrared thermometers. So in a way, I mean, what we're doing is very, it's not at all that but in a way it's similar, right? We're shooting a laser beam and then we're collecting a reflection and we're taking information off that. The beauty of it is that it is very inexpensive, okay? And it opens a lot of avenues to what information you can collect, very quick, very inexpensive.
So the vision was always, we are going to use this very inexpensive source of data. We are going to collect as much data as possible and hopefully these will then be used to develop treatments for, well, hopefully hundreds of very complex diseases. This was the vision, right? But we had to start somewhere and we knew we needed money. We understood that at that moment in time Alzheimer's was a fundable space, it was a big problem, there was a big… I would say social responsibility in trying to help the researchers that are trying to get those medications into the market. And let's say the investor that we were targeting at the time was also looking into investing in something around mental health, which is also something to be interested.
Investors, they don't, their money doesn't grow on trees, they raise money from other people, they get money from other people and they have a thesis. They have an investment thesis, they can only invest in a specific sort of business, right? If you go to a healthcare investor and you present to him, the next Stripe, you won't be able to invest, he literally won't, he doesn't have the mandate. So in that case it was a mix, okay? We actually started out on oncology like before, let's say that Boston program. It was during that Boston program CRUSH, it's called CRUSH that we actually converged speaking with people, no, actually Alzheimer's, it's actually one of the big problems to solve. And then speaking with pharmas, it was clear this is what they wanted us to work, so we pivoted. And we're still pivoting to this day, sometimes bigger pivots, sometimes smaller pivots. It just comes, and there's not two days are equal in startup life and you just need to learn to live with it.
Annaka: Be flexible, be confident, be picky, now I'm going to write a book about it. All right, so y’all are on track now but what is the biggest roadblock you've had to overcome while launching and scaling your startup?
Luis Valente: Getting people to believe that you're the right person to tackle the problem you say you're tackling. There's billions of persons, why you? Why your team?
Annaka: I've never heard that answer before.
Ethan: Short, simple, eloquent.
Annaka: Can you tell me more about that? Now my curiosity is like eating at me.
Luis Valente: So venture capital, it's a lot about people, it's a people business and the kind of business that we are creating, it's a business that it's very hard to bootstrap. When you're talking about deep tech, R&D is expensive, developing is expensive, just very expensive. So you're going to need to raise some funding either private or public, okay? And then, so one thing that one of our board advisors taught me a long time ago is that, the golden rule of finance is that whoever has the gold makes the rules. So, there's like a very different power, like say the difference between the person looking for the money and the person that is getting the money. They can probably at any point find three or four teams with the same vision or similar visions.
And just making them believe that actually you're the one to solve that problem, you're the one that has the most like the highest chance of success, that's a barrier. And this might be again, VCs but it also might be advisors like, why should I advise this company and not that other company it's just knocking on my door? This might be clients, why should I buy from A and not from B? Especially in the early stage when you're working with corporates, corporates know you don't really have a profit, so they're also taking a bet on you. They're also investing their time on you hopefully one day they'll get something back, okay? You'll be big and then you'll partner with them and then they'll get a lot of innovation by osmosis or something. But getting people to believe that, to invest in you, money, time, resources, data, it's a barrier.
Ethan: All right, we're coming close to the end. So I want to hear what's next for iLoF?
Luis Valente: So, we just closed a funding round which is still not announced but we will recently. So, a 5 million funding round, which, well, it's what I would say on the short-term, literally in the next few weeks is going to be announced. And this is going to allow us actually to unlock a lot of let's say possibilities and the possibility to work with a lot of people that at this point we didn't have the bandwidth. So, hiring is at this point, probably on the top of my list of things that I should pay attention to hiring the right people, bringing the right talent in from literally wherever that talent is. I mean, we're bringing people from the States, I don't know, Asia, it's just, wherever talent is so hiring.
And we'll keep working with pharmas and biotechs to cut the time and cost of developing these treatments. We keep working with hospitals and patients associations to make sure that we are developing the right product and solving the right problems. And we expect in 12 months to be at series A stage, which in startup terms means you've proven I would say that you are worth it of going into other markets. And going international and expand, I'll say a footprint in the US, which at this point it's quite modest but we expect it to grow.
Annaka: Good. Well, congratulations on series A status. It's a big deal, so congrats on that. And also I took a look through your jobs board just because it's something I always do. And I was like, that's just a lot of words that I don't understand like I forget what it was but it was a research position. I was like, it's not going to be me.
Ethan: No, we can't let you go from the podcast.
Annaka: What is your number one piece of advice for aspiring entrepreneurs?
Luis Valente: Make sure you are solving a problem that 's worth the effort, really because there's going to be a lot of effort. Make sure you're solving the right problem number one and make sure you are ready to really work for it. All that idea, founder cocktails on the beach, awesome dinners with investors, just it's not like that, that's like 0.001% of your time. I spend most of my time doing very boring things and very unimportant things, well important I'll say for the company but they seem very simple. If you're not solving a problem big enough you'll get bored and you'll quit long before you actually reach your goal. Make sure the problem is worth it.
Ethan: All right. Luis, thank you so much for coming on the show, this has been really great. And I know you're on that Forbes 30 Under 30 but I'm going to put you on the Startup Savant 10 under 30.
Ethan: Because we like you just that much.
Luis Valente: Thank you so much.
Ethan: One more question, where can people find you online and how can our listeners support iLoF?
Luis Valente: So, you can feel free to add me on LinkedIn now, mostly active on LinkedIn. And feel free, please support and follow the company social networks on Twitter, Facebook, LinkedIn and Instagram. At this point, if you are a researcher then and working mostly on the neurodegenerative space, then do please reach out, we'd love to talk with you. For all the others, just reach out to me if there's anything I can do to help you on fundraise or any other thing.
Ethan: Awesome. We're going to put all those links in the show notes and everything else great that was from the show today, you can find those there. But that's going to be it for today's episode of these Startup Savants podcast. Thanks for hanging out with us. All right team, you know what time it is? It's the end of the show, which means it's time for me to pretend that we're in the middle of an NPR donation week and ask you repeatedly for your support. I suppose the big difference here is that we're not even asking for money, we're just asking you to click a couple of buttons. So, grab that phone, head over to Apple podcasts or even Spotify and leave us a five-star rating. If you feel like we're doing an extra good job, feel free to leave us some words in a review as well. And as always, we appreciate you for spending your time with us. For tools, guides, videos, startup stories and so much more head over to truic.com, that's truic.com. See you folks.
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