From Bioplastics to Regenerative Agriculture: Impact Investing Trends

CHART OF THE WEEK 📈

By Léa Bouhelier-Gautreau | Read

The holiday season is when Americans donate the most, but did you know you can do good and make money all year long? At Kingscrowd, we distinguish two types of companies raising via ECF that help investors align their values with financial growth:

1) ESG Initiative Startups
These companies may not directly improve the world through their products but strive to reduce negative externalities through Environmental, Social, and Governance (ESG) policies. For example, an employee-owned brewery (e.g. Left Hand Brewing Company), a tea company applying regenerative agriculture practices, or a golf t-shirt brand donating a portion of profits to charity fits this category.

2) Impact Startups
These companies directly address environmental or social challenges through their products. Environmental Impact startups develop solutions like biobased plastics (e.g. Timeplast), vegan meat alternatives (e.g. Blackbird Foods), or clean energy storage (e.g. Qnetic). Social Impact startups focus on innovations such as making schools safer (e.g. Ajai Robotics), supporting recovered alcoholics (e.g. Loosid), or helping low-income students access scholarships.

This holiday season, we analyzed how these startups performed throughout the year:

• Funding Performance: Startups with ESG initiatives and impact-focused products consistently raised more funds than their non-impact peers when comparing medians. However, the average amounts raised favor non-impact companies due to a few outliers securing tens of millions. Overall, impact startups have higher chances of attracting significant investor interest.

• Investor Participation: ESG and Impact startups typically attract more individual investors, with higher median counts than non-impact startups.

• Revenue and Valuation: ESG startups report median revenues twice as high as those without ESG initiatives, suggesting they tend to adopt these policies at more advanced stages. Interestingly, their valuations remain lower, making them potentially better value investments.

• Environmental Impact Multiples: Environmental Impact startups often show higher revenue multiples because they operate in deep-tech industries, requiring substantial capital investment over many years before generating revenue.

INVESTMENT ROUNDTABLE

By Sam Fiske / Watch

In this week’s Investment Roundtable, we’re diving into BitterBrains, a growing EdTech company raising on Republic.

🎓 Key Highlights:

• Vue & React certifications: How they’re driving revenue and growth.

• A new certification platform: Scalable innovation in EdTech.

• Competitive landscape and exit opportunities.

PITCH REVIEW 💸

By Teddy Lyons \ Deal Report

Brief: Sorting Robotics is a company specializing in automation solutions for the cannabis industry, leveraging advanced technologies such as robotics, computer vision, and AI. They offer a range of innovative products, including the Jiko and Jiko+ robots for infusing pre-rolls, the Omni-Filler for filling vape cartridges, and the Stardust robot for automated pre-roll dusting. These solutions aim to enhance quality, reduce waste, and lower labor costs. The company has been growing incredibly quickly, growing from $1.3M in 2021 to $6.4M in 2023 and projecting $12M in 2024. The company has a clear product-market fit and has been profitable for the past two years, pulling in $1.1M in net profit last year.

Key People: Nohtal Partansky is the Founder and CEO of Sorting Robotics, where he has been enhancing the cannabis wholesale market with robotics and computer vision since 2018. He previously founded and led Rise Co-Packing from 2020 to 2022, providing cannabis white label services, and was the CEO of Roca Robotics Inc., which he sold after developing an inventory management system for the trading card market. Partansky also worked as a Mechanical Systems Engineer at NASA's Jet Propulsion Laboratory from 2015 to 2018, leading the SOXE Assembly for the Mars 2020 mission and receiving a Discovery Award. He has additionally founded companies like The Plant Burger and Lathon, a 3D printer manufacturer, and holds degrees in Mechanical and Aerospace Engineering from UC Davis and Georgia Tech.

Cassio E. Santos Jr. (CTO) holds a Bachelor's and Master's degree in Computer Science from Universidade Federal de Minas Gerais. Cassio has extensive research experience, having worked as a research assistant at various institutions, including the Smart Sense Laboratory and the University of California, Riverside, where he was awarded a Dean's Distinguished Fellowship and worked at VisLab. In 2016, he founded Delver Lab, a company focused on developing tools like the Delver Lens for organizing Magic: The Gathering card collections.

Summary

Here's what we like: The equity crowdfunding market has seen countless robotics startups fail to bring a product to market despite raising tens of millions of dollars. Sorting Robotics stands alone in commercializing multiple robotics products and growing revenue profitably. The company has remarkably been profitable since 2021, generating $1.1M in net income in 2023 and $220k in 2022. If the company can continue to grow its presence in cannabis and eventually move into other sectors, Sorting Robotics could be a major success story and a leader in robotics. Finally, the company is backed by well-known VC firms Y Combinator, Splash Capital, and Night Owl Ventures, de-risking the investment slightly given the intense due diligence that traditional venture firms conduct prior to investing.

Here's what we don't: Firstly, Sorting Robotics operates in an industry that is still illegal in 11 states. There is no telling when the regulatory landscape may change in a way that could significantly impact the company's business model. Additionally, robotics is a notoriously capital-intensive industry with long and complex manufacturing processes. Therefore, Sorting Robotics will need to continue managing its manufacturing costs, particularly as the company scales into other industries with different technological requirements. Finally, the U.S. Cannabis Technology market is relatively small at $1.8B. While the market is growing at 25.3%, it is still considered an emerging industry that will likely take a long time to grow and expand.

LAST WEEK’S POLL RESULTS

Would you invest in Lodestone Biomedical?

🟨🟨🟨🟨🟨⬜️ 👍 (13)

🟩🟩🟩🟩🟩🟩 👎 (14)

27 Votes

INSIDE STARTUP INVESTING

Chris Lustrino talks with Dr. Arup Roy-Burman, founder of Elemeno Health. Discover how Elemeno Health tackles the urgent need for up-to-date training in healthcare settings with their innovative microlearning platform. Designed to provide immediate, actionable information, Elemeno Health aids healthcare professionals in making critical decisions swiftly and accurately. Dr. Roy-Burman shares his journey from an ICU physician to tech entrepreneur, emphasizing the impact of Elemeno on operational efficiency and patient care.

STAFF PICKS 🌶️

Cleverman

Cleverman creates innovative male hair and beard grooming products designed to promote scalp health, hair regrowth, and overall hair vitality using natural ingredients and advanced technology. With an $85% customer retention rate and a $4 million revenue run rate, the company has established strong loyalty in the market.

• Valuation Cap: $15 million

• Minimum Investment: $200

ROSE Diagnostics

ROSE Diagnostics is transforming cancer biopsies with its point-of-care solution that verifies biopsy samples within five minutes. By providing on-site pathology review, the company aims to reduce patient stress, diagnostic delays, and costs. Having completed over 3,000 lab tests and achieved a positive FDA pre-submission, ROSE Diagnostics is set for clinical trials in 2025, with FDA submission planned for later that year. The company focuses on product development and clinical studies to advance its innovative cancer diagnostic technology.

• Pre-Money Valuation: $15 million

• Minimum Investment: $490

You Got Natural

You Go Natural is an award-winning hair accessories brand revolutionizing the natural haircare market with versatile, stylish, and health-focused headwear solutions. Founded by Monique Little in April 2021, the company has served over 250,000 customers, generated $25 million in lifetime revenue, and gained recognition, including being featured in Oprah’s Favorite Things 2023. With a strong focus on combining fashion and functionality, You Go Natural is transforming how individuals care for and style natural hair.

• Valuation Cap: $10 million

• Minimum Investment: $100

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