First Star Ventures might be Boston’s most interesting early-stage startup investor you’ve never heard of.
The venture firm has flown somewhat under the radar since it launched three years ago as Procyon Ventures. But it’s starting to make more noise.
First Star announced its new moniker last month. “We got tired of people mispronouncing Procyon,” partner Drew Volpe (pictured above) says of the name change.
Meanwhile, the firm appears to be trying to raise $50 million for its second venture fund, according to a document filed with the SEC in March. Volpe declined to comment on how much he and partner Millie Liu have raised. The firm’s debut fund was $10 million, the Boston Globe reported.
So far, First Star has invested in more than a dozen companies developing data and machine learning-based products, such as car sensors, business chatbots, blockchain-enabled cloud data storage, and augmented reality for industrial settings.
First Star’s latest investment, announced today, is in Genialis, which developed cloud-based software to help researchers visualize and interpret genome sequencing data. First Star co-led the $2.3 million seed funding round with Swiss investor Redalpine Venture Partners; Slovenia-based Pikas and several angel investors also contributed to the round.
Genialis is opening a new office in Cambridge, MA, which will be its new headquarters, Volpe says. The company also has operations in Houston and Slovenia, where it was founded, he says.
Genialis isn’t First Star’s first investment in healthcare technology. The firm previously backed Seven Bridges Genomics, and then sold its stake to follow-on investors. (Seven Bridges raised a $45 million Series A round last year.) That was First Star’s third exit, following the acquisitions of portfolio companies Weft (supply chain tracking) and Contastic (natural language processing tech for marketing).
“The more investments I make, the more I try not to overthink it,” Volpe says. “We look for teams that are really smart, have differentiated technology, and are trying to solve a big problem we understand.”
Volpe studied computer science at Harvard University and held key technical roles at Endeca Technologies (acquired by Oracle); Locately (which he co-founded and helped lead to an acquisition by SMG); and Semantic Machines. His First Star partner, Liu, studied math at the University of Toronto and finance at MIT. She co-founded machine learning startup TwiThinks and consulted for Applied Predictive Technologies, an enterprise data analytics startup acquired by MasterCard.
Volpe says he was cautious about investing in life sciences-related companies, but he has found that the challenges of making sense of biological data are similar to those faced by enterprise tech firms like Endeca.
In genetic sequencing, the combination of falling costs and computing advances means there’s tons of available data. “But it’s getting harder and harder to work with” that data, Volpe says. “You need special graph databases and special technologies to do that. It’s not in the wheelhouse of a biologist or a clinician or a doctor. It’s a space we’re pretty excited about.”
Volpe is also bullish on blockchain technologies. On a scale from cautious optimist to zealous fanatic, he says “I’m probably pretty close to zealous fanatic.” Three years ago, Volpe purchased digital tokens in the original crowd sale for Ethereum, the blockchain-based computing network whose cryptocurrency’s value now trails only Bitcoin.
“At least in terms of ratio, that will be the best-performing investment I probably make in my life,” Volpe says. “Now I wish I’d put in a lot more” money.
First Star, meanwhile, has backed two companies working on blockchain tech: Nebulous, the company behind the blockchain-based cloud storage service Sia; and Talla, which is launching a network for blockchain-enabled chatbots for businesses and other organizations.
Volpe has high hopes for blockchain’s potential impact on a range of sectors, from finance to enterprise software, to the distribution of goods. But there’s a “lot of noise” right now, he says. Many companies and individuals have raised large sums of money through the sale of digital tokens—so-called initial coin offerings—but have yet to deploy the product or service promised in those offerings.
“I feel like the money has rushed in ahead of where we are in terms of the technology,” Volpe says.
The most urgent challenge Volpe sees is that many people are underestimating how difficult it is to program the software protocols that govern transactions on blockchain networks.
“If you have a bug, there’s real dollars at stake,” Volpe says. He points to reports last week that about $300 million worth of Ethereum’s cryptocurrency was rendered permanently inaccessible due to an alleged mistake by a developer. “We need better tools, we need better best practices, and we need to figure out how to write smart contracts that we’ll be able to trust will actually work.”
The Boston area has the talent to help shape the blockchain industry, but Volpe says fewer local startups have been launched in this sector than he expected.
“There’s some good companies” in the Boston area, Volpe says. “Hopefully a year from now we’ll have two to three times as many.”
