This past summer we had the pleasure of working with six amazing Fellows. These Fellows represented a diverse set of academic interests, professional goals, and personal backgrounds (fun fact: each of our six of our Fellows hailed from a different country of origin). During their time with HOF, they explored areas including blockchain gaming, the creator economy, BNPL, and computational biology, among other high-growth spaces. Furthermore, Fellows contributed to our reviews of dozens of investment opportunities, including several which became HOF portfolio companies.

Below are brief profiles on the talented Fellows that we had the pleasure of working with during Summer 2021:

Alexa Spagnola

Alexa is a rising senior at Penn studying electrical engineering and entrepreneurship. In addition to her work at HOF, she is currently Managing Partner of Dorm Room Fund’s national summer team. Previously, Alexa has spearheaded a consumer electronics product at Google, developed an NLP project within the National Security Innovation Network, founded a medical device startup, and worked as part of a NASA hardware team. She has frequented the hackathon scene as both a PennApps organizer and MLH competitor, and led a team to build a SaaS platform that won the NYUAD International Hackathon for Social Good. In her free time, Alexa loves skiing, surfing, and playing soccer.

Faris Alwahedi

Faris previously worked as a transformation specialist in Abu Dhabi National Oil Company, where he led cost-saving initiatives and executed value creation strategies. Prior to that, he served as a business planning specialist overseeing strategic investments, budget, and compliance. In 2017, Faris led the business development of a blockchain hospitality startup, before proceeding to create two startups of his own. Faris is a graduate of Penn State, and is an MBA candidate at Harvard Business School.

Haoran Wen

Haoran is a Venture Fellow at HOF Capital. Born in China and raised in New Zealand, Haoran attends the Wharton School of the University of Pennsylvania majoring in Finance and Business Analytics. Previously, he worked at Hendale Capital, a private capital fund investing globally in niche growth tech businesses. Haoran is an avid fan of streetwear fashion, follows the NBA, and enjoys pickup basketball in his free time.

Koki Mashita

Koki is a rising senior at a high school in California (our youngest inten yet!), his business ventures began when he was only 12, and quickly evolved when he first started investing in Bitcoin as a casual hobby in high school and today manages over $1m in AUM as co-founder of the investment firm Lallic Partners, an International student-led investment firm that embraces new investment ideals of Algorithmic Investing and ESG Investing. Koki is originally from Japan and also lived in Singapore for 6 years.In his spare time, Koki enjoys cooking, skiing, swimming, and traveling.

Tahseen Rashid

Tahseen is a senior at Colby College majoring in Economics and Mathematics. He grew up in Australia and Bangladesh and went to boarding school in the Netherlands. Prior to HOF Capital, he advised with Tiger Global, worked with Kormo in Bangladesh and Indonesia, Empowerment Capital in New York and NXTP Ventures in Buenos Aires, Argentina. He is an Arsenal fan :‘’-( who is sometimes caught watching mukbangs at 1am.

Tim Backstrom

Tim is a venture fellow at HOF Capital where he focuses on the fintech industry. Alongside HOF, he is completing his MBA at Harvard Business School where he is a Rock Venture Partner. Originally from Sweden, Tim spent the beginning of his career working in investment banking in London before moving to Visa. Before business school, he also spent 1.5 years building an alternative investment platform for off-grid solar assets in Africa. Outside of work, Tim spends most of his time at the gym or exploring restaurants and cafés around the Boston and New York area. He is also working on launching a fintech podcast together with a fellow HBS alumni.

When Nick, Suze and Emmett decided to close Gin Lane and launch Pattern Brands in 2019, it was immediately clear they’d leverage that very same selectivity and expertise for the family of brands they’ve now launched under the Pattern umbrella — Equal Parts and OpenSpaces. So when we first spoke to them last year, we already knew that this was the ideal team for the multi-brand strategy. Emmett’s contagious energy, enthusiasm, and creativity coupled with Suze and Nick’s calm approach, laser-focused vision, and operational skill sets shined light on how they had come together to consistently build category-leading brands in a notoriously difficult and crowded space.

That’s why today we’re thrilled to announce our investment in Pattern Brands: a family of brands with a shared mission to enjoy daily life at home. We’re investing alongside Kleiner Perkins, RRE Ventures, Victory Park Capital, RSE Ventures, and Primary Ventures. All of whom have been tier-1 partners to some of the most recognizable consumer brands we know today, as well as owners and operators of massive strategic organizations such as RSE /Related. In addition to longer term strategic brand support from the investor base, Pattern will be using the capital to acquire direct-to-consumer brands on Shopify in the home goods space. They’re also announcing their acquisition of GIR (short for “Get It Right”) a kitchen accessories brand that launched eight years ago and has organically grown into a much loved, profitable, multi-million dollar business.

So why would direct-to-consumer businesses look to be acquired? They often seek to sell their entire business when further scaling seems infeasible due to capital constraints or increased operational complexity. Many of them have fundamentally strong products, but are challenged by obstacles such as weathering a liquidity crunch, finding efficient customer acquisition channels, hiring strong talent, or raising capital. The low barrier to entry in the market has also spurred a proliferation of consumer brands which makes traditional CPM and growth strategies less cost-effective. Even business owners who have managed to grow successful direct-to-consumer brands into multi-million dollar businesses still find it difficult to maintain growth.

Shopify’s platform hosts 1.2 million brands, transacts $120bn GMV per year, and is growing at 119% per year. An abundance of new Shopify businesses has led to a highly-fragmented market composition. This fragmentation within a considerably large market has opened the door for a well-resourced and capitalized team to capture significant value via consolidating individual players within industry verticals.

The Pattern team launched the company in 2019 to own a greater equity stake in the brands they built. And now evolving into a roll-up platform will not only empower the team to be even more invested in their family of direct-to-consumer brands, but also offer significantly greater upside on their ability to create value.

The ecommerce business roll-up model has demonstrated impressive results thus far. Consider Thrasio, an acquirer of Amazon third-party FPA brands that’s been called the fastest-growing, profitable $1B+ valuation tech startup in mid-2020. Pattern will be one of the first movers to tap into the Shopify network of consumer home goods. The mechanics of Pattern’s roll-up strategy will involve acquiring Shopify brands and expanding the company’s top-line revenue. This can be achieved by adding new product lines, improving distribution & sales channels, and increasing operational efficiency. Beyond implementing standard operational improvements, Pattern will leverage a decades worth of expertise and success from their days at Gin Lane to grow their portfolio brands. This is Pattern’s unfair advantage.

Nick, Suze and Emmett hadn’t planned on running one of the most successful branding agencies when they started Gin Lane. They started Gin Lane because building brands for their generation, and working with entrepreneurs is what excites them. Pattern has been a natural evolution, and culmination, of this team’s tremendous accomplishments spanning the past decade. That’s why we’re excited to partner with them as they continue their story for the next decade.

If you’re a DTC brand that’s looking for an unfair advantage to scale your business to the next level, get in touch with the team at Pattern.

In fact, more than $1 trillion is spent each year on drugs worldwide (an average of $100+ per person each year), making the drug industry one of the world’s largest in terms of both impact and revenue. It is also one of the industries that is most dependent on a stream of continual innovation, both in its tools and products. In the past few decades, the drug industry has benefitted from increasing adoption of new technologies ranging from vertical-specific software to lab automation to new life sciences tools and techniques such as next-generation sequencing, induced pluripotent stem cell (iPSC) technology, and CRISPR-Cas genome editing.

However, in a seeming paradox given the many advances in relevant technologies, drug discovery has actually become less efficient and more expensive over time, an observation known as Eroom’s Law (Moore’s Law spelled backwards). In fact, a 2012 study found that since 1950 the inflation-adjusted cost to develop each new drug that has made it to market has risen around 80-fold (source), and the average capitalized R&D investment to bring a new drug to market was recently estimated to be $1.3bn+ (source).

This is one of the reasons why many new drugs are so expensive. Drug companies need to earn enough profit on average from each new drug that makes it to market to offset the average cost that it takes to discover, develop, gain regulatory approval for, produce, and commercialize each one. However, the pre-commercialization steps alone cost a fortune and have become increasingly more expensive over time. The rising average cost of drug discovery and development has therefore necessitated a downstream rise in the average price of new drugs, increasing the economic burden of healthcare on society and making many new drugs unaffordable to certain segments of the population.

To solve this problem requires re-thinking the drug discovery and development process from start to finish. In the past few years, we have spoken with hundreds of innovative companies in this space, but very few of them, in our opinion, have had the necessary long-term vision, talent, and capital to successfully pioneer a new approach that could truly solve this problem.

Then we met the brilliant team at insitro, who opened our eyes with their ambitious vision of building the first end-to-end drug company powered from the ground up by big data and machine learning. Rather than default to traditional drug discovery approaches (which produce biological data primarily through bespoke assays for narrow purposes) or train their machine learning models on just the existing data in the public or private domain (which is what many companies at the intersection of drug discovery and machine learning do), insitro is intent on transforming the drug discovery process by using iPSC-based disease modeling, CRISPR-based genetic perturbations, end-to-end lab automation, high-content phenotyping, and other tools and techniques to conduct thousands of experiments in parallel and generate hundreds of terabytes (and eventually petabytes) of proprietary data specifically for training machine learning models that can accurately understand disease biology, identify drug targets, and design drug candidates better than the world’s leading human experts. insitro’s novel approach combines biology with computer science at a fundamental level, hence the name “insitro” which is a portmanteau of in silico (biological experiments performed on the computer) and in vitro (biological experiments performed in the lab).

In order to bring their vision to life, insitro has brought together a unique, world-class team of ~65 people with expertise in both computer and life sciences. This team is led by insitro’s CEO / founder Daphne Koller, a pioneer in machine learning who has spent much of her career advancing the application of machine learning to biomedical sciences and previously co-founded/co-led Coursera (now valued at $1bn+). insitro’s other leadership team members include: (1) CTO Ajamete Kaykas, who previously led an early target discovery team focused on neuroscience at Novartis; (2) CBO / CFO Mary Rozenman, who formerly served as the SVP of Corporate Development & Strategy at Aimmune Therapeutics; and (3) Chief Data Officer Serafim Batzoglou, who most recently served as the VP of Applied & Computational Biology at Illumina.

More broadly, half of insitro’s technical team comprises computer science and machine learning experts, many with PhDs from world-class research institutions such as Stanford University and MIT and/or years of experience at industry-leading technology companies like Google. The other half of insitro’s technical team comprises life science experts, many with PhDs from world-class research institutions such as Harvard University, the University of Cambridge, and MIT and/or years of experience at industry-leading biotech / pharmaceutical companies like Genentech and Novartis. Unlike most other drug companies, insitro has brought together the most talented people from both worlds and enabled them to work together in a single team rather than in silos. Each person is then able to bring his/her own unique perspective on what insitro is doing and come up not only with better answers, but also better questions. By year’s end, insitro plans to expand its team to ~95 people; hence, the company is currently actively recruiting for the best and brightest talent.

In addition, insitro has thoughtfully partnered with some of the best and most long-term-focused investors in the space including Vijay Pande of Andreessen Horowitz, Bob Nelsen of ARCH Venture Partners, Jim Tananbaum of Foresite Capital, Krishna Yeshwant of GV, and Reid Huber of Third Rock Ventures, as well as Bezos Expeditions, BlackRock, Casdin Capital, CPP (Canada Pension Plan) Investments, Mubadala, T. Rowe Price, Two Sigma, Verily, and WuXi AppTec. This backing has enabled insitro to make the significant upfront investment in infrastructure and data generation required to execute its novel, transformative strategy.

insitro has achieved stellar progress in just 2 short years. Beyond bringing together a world-class team and investor base, the company has already built a cutting-edge high-throughput laboratory, established robust and scalable data infrastructure, generated hundreds of terabytes of high-quality data, and trained/validated numerous machine learning models that perform better than human experts and other state-of-the-art models in the public domain. insitro has also made significant progress building data-driven iPSC-derived models for several diseases and has already identified preliminary drug targets for further validation.

Not only has insitro made great strides in validating its technical approach, the company has also achieved strong market validation, including a publicly announced 3-year strategic collaboration with leading drug company Gilead to help discover treatments for patients with non-alcoholic steatohepatitis (NASH). Under the terms of this collaboration, insitro has already received an upfront payment of $15m from Gilead and is eligible to receive more than $1bn of potential milestone payments and royalties. Beyond Gilead, many other leading drug companies have also reached out to insitro and are interested in similar partnerships.

insitro is focusing initially on debilitating and potentially fatal diseases that are influenced by genetics. Its partnership with Gilead is focused on NASH, which afflicts an estimated 15m+ people (i.e., 12% of the general adult population) in the US alone and can lead to a potentially life-threatening condition called cirrhosis (i.e., late-stage scarring of the liver), but still has no FDA-approved medication. insitro is also interested in targeting genetically-influenced central nervous system (CNS) diseases, many of which still have no cure.

In insitro, we had finally found a team that had the long-term vision, talent, and capital needed to succeed in disrupting the drug industry. We believe that if they succeed in their mission, they will ultimately become one of the world’s most important drug companies, bringing to market novel best-in-class interventions for NASH and other genetically-influenced diseases and enhancing the quality of life for tens or hundreds of millions of people worldwide. Hence, we’re excited to partner with them on their journey as they transform the drug discovery and development process and help bring down the cost of healthcare for patients around the world.

– Victor Wang, Paul Quigley, and Hisham Elhaddad

Why We Invested: insitro was originally published in HOF Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

However, despite the obviously negative impact that this pandemic has had on the broader economy, capital markets, and the technology industry in particular, it is not all bad news for startup founders. We believe that now is actually a great time for technology entrepreneurs to lay the foundations for a new generation of category-leading businesses. In fact, many of the most successful technology companies today were started or built during challenging times.

Part of the reason is that challenging times bring new problems that need to be solved, leading to the creation of new market opportunities and the accelerated growth of some existing ones. This certainly holds true for the current COVID-19 pandemic, which for the first time in modern history has caused the majority of people in affected countries to socially isolate themselves, resulting in the accelerated adoption of technologies needed to survive in such a world, such as those enabling or related to remote working, telemedicine, e-commerce, digital payments, and robot-powered delivery. Even after this pandemic has passed, it is likely that many of these resulting changes to society will persist and that many of the organizations and people who started using these technologies for the first time will continue using them. Hence, the startup founders that can quickly adapt to this challenging time and solve the new problems that have arisen will likely find themselves building the next generation of category-leading businesses.

Furthermore, challenging times are typically accompanied by less VC funding, which forces technology entrepreneurs to build strong, self-sustaining businesses early on. During times of prosperity, an over-abundance of available venture capital often compels startups to raise and deploy as much funding as possible too quickly in pursuit of growth at all costs. This typically results in the building of fragile, unsustainable businesses that are highly dependent on VC funding for survival and that have huge liquidation preferences hanging over their capital structures. During challenging times, however, startup founders are rewarded instead for developing sustainable businesses with strong fundamentals that are able to grow efficiently with attractive unit economics. This certainly holds true for the current COVID-19 pandemic. VC funding has tightened, forcing many startup founders to become hyper-focused on reaching profitability. This will likely lead to many of them building strong, self-sustaining businesses that will be exceptionally well-positioned to thrive and become category leaders in the future.

In addition, challenging times also lead to less competition. This is due to less venture capital available to fund new and existing startups, as well as less appetite for risky new initiatives within larger companies. Too much competition in a given market usually leads to market fragmentation, followed by price wars, compressed margins for all players, and dispersion of the best talent among too many companies. In contrast, challenging times usually lead to market consolidation, followed by increased pricing power, stronger financial performance, and higher concentration of the best talent among surviving companies. This certainly seems to be holding true so far for the current COVID-19 pandemic. Many companies have already shut down or been acquired, reducing the number of players in most markets. It is likely that by the time this pandemic finally ends and the global economy begins to recover, most markets will have significantly consolidated. In this post-COVID-19 world, the startups that are able to survive and grow will likely find themselves with greater pricing power than before and an even higher proportion of the best talent in the industry, enabling them to become even more successful than they would have been in a pre-COVID-19 world.

Lastly, many entrepreneurs may find that they have an easier time coming up with innovative ideas during this period, since psychological research shows solitude and social isolation play an important role in the creative process. Many of mankind’s greatest scientific and artistic minds achieved at their highest level while in isolation; for example, during outbreaks of the plague (which brought their own versions of social distancing), Shakespeare wrote many of his most revered plays and poems,and Isaac Newton developed his theory of gravity. Similarly, today’s social distancing measures may give modern entrepreneurs a rare chance to disconnect and formulate their grandest ideas.

For all of the reasons above, we remain as optimistic as ever about the potential for technology startups to change the world and achieve outsized success, and we continue to actively invest in exceptional mission-driven startup founders who are undeterred by current market challenges. Many of the world’s most successful technology companies including Microsoft, Apple, Amazon, Google, and Facebook needed to survive challenging times along their path to success. Likewise, we will continue to be here in good times and bad, partnering with and supporting the next generation of technology entrepreneurs building enduring, category-leading companies.

A New Landscape for Innovators: Entrepreneurship in the COVID-19 Era was originally published in HOF Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

When we first started HOF Capital back in 2015, one of our dreams was to help bring cutting-edge world-class technologies to the 6 billion people living in emerging markets. In particular, as Egyptians, we always dreamt of bringing innovation to our home continent of Africa, a land of more than 1.3 billion people spread across 54 countries in an area larger than the US, Europe, and China combined. By doing so, we hoped to help bring prosperity to all Africans, more than 420 million of whom still live below the global poverty line.

One of the main problems that we identified early on was that Africa needed better digital payment infrastructure and technology. For example, even in the sprawling metropolis of Cairo where we grew up, home to more than 20 million residents, digital payment infrastructure and technology was so unreliable that we used cash to pay for almost everything, even for online purchases. Likewise, due to the lack of high-quality digital payment infrastructure and technology throughout the rest of Africa, most African businesses and consumers were still using cash to make all of their payments.

So when we first learned about African digital payment startup Flutterwave in 2016, we immediately became excited because the company had developed a brilliant solution to this problem — a world-class, easy-to-use, pan-African digital payment platform that supported 150+ currencies and aggregated dozens of different payment methods used throughout the continent, all accessible through a single API. Unlike the leading incumbent solutions in the market, the product was also easy and free to set up and exceptionally reliable with military-grade security. In fact, the experience of using Flutterwave felt as smooth and secure as the digital payment solutions like Stripe and Venmo that we had grown accustomed to using since moving to the US, which was unprecedented for the region. This was a first-of-its-kind product that primarily serviced Nigeria in 2016 (when HOF first invested in the company), but that we had conviction would eventually revolutionize the way that digital payments would be made throughout all of Africa, enabling everyone in Africa to transact seamlessly across the entire continent and around the world.

Moreover, after spending time with GB and the company’s other co-founders, we discovered that they were visionaries who shared our dream of bringing prosperity to all Africans. Furthermore, they were uniquely well-positioned to turn this dream into reality; GB had previously led digital banking and innovation at some of Africa’s largest banks (Access Bank, Standard Bank, etc.), and all 3 co-founders had led successful African startups with international client bases. Along the way, they had developed new payment technologies, helped write payment regulation in Nigeria (Africa’s most populous country), and dealt firsthand with the challenges of using and providing digital payment solutions in the region. Hence, it was an easy decision for us to invest in their seed round and every round since.

Since being founded just 4 years ago, Flutterwave’s products have already enabled more than 86,000 merchants (most of them small business owners, but also global enterprises like Booking.com, Uber, and TransferWise) and more than 100,000 individuals in Africa to make and receive various types of payments. The company’s impact on the African economy has been substantial, having already processed more than $5.4 billion of total payment volume across more than 107 million transactions in 10 countries in just 4 short years. Moreover, countless other African fintech companies have integrated their products with Flutterwave or built upon Flutterwave’s APIs, solidifying Flutterwave’s position as one of the infrastructural cornerstones for fintech in the region. In fact, many of the world’s largest payment companies, including Visa, Mastercard, Alipay, and FIS (Worldpay), have already recognized Flutterwave’s integral position in the African payment landscape and have chosen Flutterwave as one of their primary partners and gateways into the continent. As eloquently summarized by Visa’s former chairman and CEO, Joe Saunders, who now sits on Flutterwave’s board: “GB and his colleagues have not only identified, but continue to successfully and thoughtfully execute upon, a once-in-a-generation opportunity in commerce and payments for the emerging markets of Africa.”

Flutterwave is still early in its journey, and we think the best is yet to come. The company achieved 500%+ year-over-year revenue growth in 2019 and recently raised a $35M Series B round (with participation from Visa and FIS) in order to fuel expansion across Francophone and North Africa, which has given us a great opportunity to deepen our partnership with the Flutterwave by helping them hire top talent, build channel partnerships, work with regulatory leaders and set up operations in Egypt. What gets us most excited about the road ahead for Flutterwave?

1. Flutterwave continuing to launch new innovative products and features that make life substantially better for all Africans, such as Barter for consumers, invoices for professionals, and instant settlement for merchants.
2. Flutterwave ultimately: (1) expanding into every country in Africa, (2) integrating with all of the different digital payment methods in each country, and (3) enabling a truly connected pan-African digital payment system.
3. Flutterwave ultimately integrating with all of the major digital payment platforms around the world, enabling African businesses and consumers to seamlessly transact with anyone anywhere.

There’s no doubt in our minds that Flutterwave will soon become one of the most important tech companies in all of Africa. The ability to seamlessly make and receive digital payments is becoming increasingly important for the success and prosperity of all individuals and businesses, from global tech companies like Uber to local mom-and-pop shops, and Flutterwave is well-positioned to become the most complete solution on the continent. We’re excited to be on this journey with them.

— Hisham Elhaddad, Onsi Sawiris, and Fady Yacoub

Why We Invested: Flutterwave was originally published in HOF Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.