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MENA-based VC: My 15 favorite startups from Y Combinator W20 Demo Day

Editor’s note: The author is founding partner of Gritegrity Ventures, a MENA-based VC that invests in early-stage startups across the world. He has also invested in some of these startups. The opinions he has shared in this piece are his own and do not necessarily reflect those of MENAbytes. 

I recently attended Y Combinator’s first-ever virtual demo day and had the chance to learn about almost all the startups from different sectors that participated in it. After doing a bit of my research and speaking to some of them, I have put together this list of my 15 favorite startups from the demo day. Even though I wanted to invest in each one of them, I was able to invest in only a few as some had closed their rounds very early.

I have chosen these 15 startups based on the domain expertise of the founding team, market size, how much better the product or service is than current offerings, and how essential the product is within its industry. The list is no particular order.

Healthlane: Healthlane’s presence in the healthcare sector in Africa places it in an extremely good position due to the continent’s poor health services and lack of viable options. The co-founding team worked on scaling Google for Education in Africa as well as in the digital health sector with the Bill & Melinda Gates Foundation, UN, WHO, and World Bank.

The health care sector is huge, with Nigeria alone having over 300 million people making it over a $36 billion market. The startup is already generating over $50K in MRR and has had over %365 growth since joining YC. They also claim to be already profitable. Their comparable is China’s Ping An Good Doctor which is already valued at $8 billion. Healthlane’s patients have to only wait 1 hour before seeing a quality doctor while most patients in Nigeria have to wait 5 hours before seeing a mediocre doctor.

Loop Health: The team of Loop Health has previously scaled a telemedicine solution for 250,000 patients in rural India, and worked with health ministers in Sierra Leone and Uzbekistan on digital health strategies. Loop health offers a modern and comprehensive health insurance for employers. The employees get unlimited primary care visits at their asset-light clinics, alongside traditional hospitalization insurance. Indian employers are dissatisfied with their health benefits today because insurance in India only covers hospital stays, not doctor visits – and only 8% of their employees will ever use the benefit in the year.

They charge employers $15 per employee per year and that apparently leaves them with 70% gross margins. They have 5500 employees as of last March. The market is valued at $8 billion. They are definitely in a space that is extremely essential. And that is why the potential is big.

Postera: The team here is technically very strong. However, they don’t have much business experience which will be their weakness. The Chief Scientific Officer, Dr. Alpha Lee, began university at 15 years old studying Chemistry before completing his Ph.D. in Mathematics at the University of Oxford, his post-doctoral studies at Harvard and now leads a group of 11 researchers at the University of Cambridge. The two other founders, Aaron and Mathew, have studied at Oxford and Cambridge, Mathematics and Machine learning.

Postera offers medicinal chemistry-as-a-service to design and synthesize molecules faster and at a lower cost. Their platform uses machine learning to optimize the entire molecular design process and is more accurate than the best trained human chemists in predicting outcomes of organic reactions — which was validated in a series of academic publications, co-authored with Pfizer. The computational tools can suggest new scaffolds, predict the success of chemical reactions, and design new synthetic routes to challenging molecules. They are claiming that this market alone is $65 billion. Their AI and ML expertise build them a MOAT as they scale.

Pilot: One of the things I really like about Pilot is that it’s a startup that’s over five years old. This really shows the grit and persistence of the founders. They are a building product which helps companies pay remote team members. The founders were already working in this space with a different old business model which was an online talent marketplace which they scaled to $140K MRR.

With their new business model, gusto for remote teams, they already have 39 beta customers and have processed over $10 million in payments to international contractors in over 40 countries. The market in the US is valued at over $2 billion and is expected to keep growing especially post Covid-19. It’s definitely a space one should be in.

Morphle: 99% of microscopes today are analog. Morphle is apparently creating one of the world’s first digital microscopes to enable instant sharing with remote colleagues, AI processing and instant review of samples. Their microscopes use robotic automation to get highest resolution images, comparable to $150K Leica and Philips devices & have fewer failures for sample preparation variation – except their price is only $25K, with 85% gross margin. Because of that, their sales are taking off.

They generated $170k of revenue in the last quarter, growing 5x from the previous quarter. The founders are both very technical with deep expertise working in WalmartLabs ML and building other startups in the AI & ML space. They can build a strong MOAT through their AI and ML and could potentially sell software subscriptions to enable other AI sample processing.

Felix Biotechnology: One of the things I really liked about Felix is that Robert the CEO has ten years of startup experience and Felix is his second startup. He also has a Ph.D. in microbiology. Therefore, he combines business and technical expertise which is rare in the biotech feild. While the team also has Paul Turner who is a tenured professor and a world-renowned synthetic biologist who developed the computational platform at Berkley.

Vivek, the Chief Scientific Officer has a Ph.D. in systems biology and is a phage engineering expert who has 15 years of research experience. They are also advised by Jennifer Doudna, who co-discovered CRISPR. The team is very solid. Felix uses viruses to treat antibiotic-resistant bacterial infections. These infections are a growing global threat, killing more than 700,000 people last year and projected to kill 10 million people annually by 2050. Felix has human data showing their approach works at treating antibiotic-resistant bacterial infections in 10 patients under compassionate use IND’s, de-risking a seed-stage company at the same level as a traditional Series B company.

Fondeadora: When I spoke to the founders of Fondeadora, they told me that they bought their banking charter from farmers in the Mexican countryside for $1 million. As a neobank, your own banking charter in an emerging market like Mexico is quite a MOAT, but to acquire it this way is also an incredible story. As someone from an emerging market, I understand the amount of pain one must go through while dealing with banks.

Fondeadora already has 65,000 active saving accounts and they are doing over $6.5 million monthly transactions. I looked at their PlayStore reviews and it seems that their users love the product. They still have so much more space to grow and with their product 10X better than traditional banks, they could be profitable since they won’t face the competition neobanks face in the more developed countries. The founders have been working together for a long time and have built the largest crowdfunding platform in LATAM before selling it to Kickstarter. This experience definitely tips them to do something with Fondeadora.

Stark Bank: Stark Bank is the first banking API in Brazil with customers such as Rappi, Kovi, Buser, and many other startups. They are building a B2B Bank for tech companies in Brazil. They started with payments, similar to Brex Cash products, but more API driven. They are the first banking API in Brazil. In Jan 2019, their revenue was $0 and they grew it to $12M monthly last month, growing 63% MoM. During YC they increased their revenue 6X since Dec 2019. Brazil is a huge market and the current options aren’t really there. Rafael prior to Stark Bank scaled his own software house from $30K in annual revenue to $3 million in revenue.

Isabl: Isabl has developed software that can analyze the entire genome of cancer patients. Today, when people get cancer, they get a genetic analysis of their tumor that analyzes only a few possible mutations. With Isabl, you run the tumor through an Illumina sequencer and get the whole genome, then their software is able to analyze all the mutations. The test is actively in use at Memorial Sloan Kettering for their pediatric patients.

They’ve had four kids where their test recommended a drug that wouldn’t otherwise have been used, they tried that drug, and it worked. They developed this technology internally at Memorial, which put in more than $8M of R&D funding to develop it. But they realized it should be used by everyone, not just Memorial patients, so they are now spinning it out. The founding team is mostly technical and has never worked on a startup which makes them score low, but when their domain expertise and advisory board should hopefully make up for this weakness. Elli, the CEO runs her own lab in Memorial Sloan Kettering Cancer Center which shows the strength of her background.

API Tracker: There are now countless companies around the world that use at least 10-15 APIs and they need a reliable tool that tracks the performance, reliability, etc. of those APIs. The average developer uses 18 APIs to power their applications and 50% of all B2B collaboration occurs via APIs.

API Tracker has gone after this market at probably the right time and the feedback they got from Hacker News was overwhelmingly positive. The market is valued at $20 billion and they already have paying customers such as Smart Sheet & Expedia. They are growing at 95% MOM. The founding team is mostly technical with years of startup experience including an exit to Groupby.

Electroneek: They are building an easy to use Robotic Process Automation platform. The future of automation is robotics and Electroneek’s product is built to be used by employees and business professionals who don’t have a background in robotics. In six months, they have already closed contracts worth $900,000 with annual contract values worth $50K.

According to the team, this area is worth $5 billion. Comparable companies in this space have raised $billions. The two most notable are UI path which raised $1 billion at $7.5 and Automation Anywhere which is at over $6 billion. Both startups are built for experts in this field while Electroneek is built for a larger number of people which means they could scale faster.

Fitness AI: I really like Jake the founder due to his expertise and focus on this area. He is the type of founder you would consider a unicorn. He has got a strong technical background, but also a great designer and a great product mind. He has been building apps for ten years and fitness apps for five years. Fitness AI is already doing over $100K in MRR and has been profitable.

I like how he started with a narrow focus on weightlifting to incrementally improve the product but has a plan to add other areas of fitness as he builds a stronger user base. Furthermore, he has big IOT plans for Fitness AI to go beyond just being an app. Fitness AI could one day be like Amazon Go, but for Gyms and workouts. With gyms being closed worldwide, Fitness AI proves how important it is. Ryan Hoover of Product Hunt also really liked the product and has joined Fitness AI’s cap table.

Volumetric: Bagrat and Jordan, the cofounders of Volumetric are very solid technically having their work published in major scientific journals. In addition, they have already generated over $1.1 million in 2019 which is the year they launched and they have over $700K already in 2020. They have developed proprietary technology that generates technology that no one else can. Their low res first-gen printer can print tissues unlike anything else and these sales feed into the development of second-generation bioprinters to get them closer to making functional tissues and organs. According to the biotech focused magazine.

FierceBiotech, ultimately, though, Volumetric exists so that organ donation will become a thing of the past. A potential benefit of its technology would be to grow organs for patients using their own cells, resulting in a perfect match and eliminating the need for lifelong immunosuppressive therapy. And creating bespoke organs would solve multiple problems stemming from the shortage of donor organs.

Daedalus: Industrial robots currently have to be manually programmed, which limits what tasks can be automated. Daedalus is building the software stack for industrial robots to run entirely autonomously without any programming by a human. They can do this through ML algorithms which first prototyped at OpenAI to enable robots to learn from the simulation without any real-world data. This enables software-defined manufacturing: instantly switching production capacity to meet changing demand, just like scaling AWS instances.

Their first application is metal machining, which is used to produce metal parts for a variety of sectors including aerospace, medical, and industrial machinery with a $30B US market, where their robot technology can increase productivity by 5x. The founder was technical at Open AI and being from Germany could certainly give him some leverage with some of the already existing manufacturing giants there. Furthermore, he already has Khosla Ventures in his seed stage. We have seen the slow down of production after the Covid-19 outbreak due to layoffs or just reducing the capacity to maintain social distancing inside facilities. If manufacturers have such technology it would certainly keep manufacturing at the same pace if not faster during times of crisis.

Candid Health: Candid Health automates medical billing for healthcare providers. Their first product is an API that healthcare startups use to submit insurance claims – kind of like Stripe for medical billing. Healthcare providers in the US spend $280B a year — 8% of their revenue — on medical billing. Candid already has one company using its product helping them claim over 1K claims in one month. They charge 5% on every transaction.

One of the founders, Nick, spent the last five years leading some of Palantir’s most important healthcare work, including a $100M contract with a large, national health insurance company. This work planted the seed for Candid Health. I love health-tech and this product can’t be more essential for many of the healthcare providers given that it’s much more convenient and should help so many of them save a lot of money. Furthermore, they should probably have very healthy margins. We won’t even talk about the amount of data they have and can leverage in such a crucial sector.

Farouk Kadous

Farouk Kadous

Founder at Gritegrity Ventures
Founder of Gritegrity Ventures, a seed-stage fund with cross borders investments in countries like Egypt, USA, India, Pakistan, Mexico, and Brazil. You can reach him on Twitter.
Farouk Kadous
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