How This Shampoo Company Is Using Algorithms to Give You Perfect Hair

Why buy any old product when you get one that’s made just for you?

That’s the premise of a growing breed of companies using technology to make better shampoos, makeup accessories, and perfume. Powered by advances in machine learning and industrial automation, they’re now able to create customized grooming products formulated specifically for each individual customer.

The opportunity is large: Deloitte estimated in 2017 that the size of the prestige beauty market was $78 billion and growing, noting that “digital channels have become the primary arena for consumer decision-making.” Beauty is one of the few luxury categories with burgeoning demand.

One buzzy startup riding this wave is New York City-based Function of Beauty, founded in 2015. The company, which developed a hair quiz that has been taken 1.5 million times, has raised $12.2 million from venture capitalists, including Y Combinator and GGV Capital. Function of Beauty has general blueprints for its shampoos and conditioners, but the exact components in each bottle are determined by a customer’s quiz responses, which provide information on texture and other hair traits. The company’s ever-more-refined machine-learning algorithms factor in all the variables and concoct the most effective recipe.

Function of Beauty founder and CEO Zahir Dossa.

CREDIT: Courtesy Function of Beauty

Founder and CEO Zahir Dossa came up with the idea for Function of Beauty while pursuing his PhD in computer science at MIT. He then teamed up with engineer Joshua Maciejewski, also from MIT, and Hien Nguyen, a cosmetics chemist. Less than a week after beginning their discussions, the three formally started the company. Within half a year, they had started initial product testing and sales.

While most beauty companies contract with factories to do the final manufacturing, Function of Beauty is vertically integrated. Given that every product it ships is made for an individual consumer, the company was practically required to build and run its own labs. “There are no off-the-shelf components to really do what we’re doing,” according to Dossa. The process is “a logistical nightmare,” he says half-jokingly. “It’s not like we have a silver bullet, by any means.”

No two bottles are alike.

The majority of Function of Beauty’s 67 employees are focused on production, including 10 formulation specialists and their assistants, even though nearly the entire process is automated. Some aspects aren’t worth automating yet, or still require a human touch, like making sure that every package is beautifully assembled. But machines handle the final delicate customization work.

“We come up with all the different blends and bases that a customer could possibly want or need in their formulations,” Dossa says. “We source from 500 different ingredients that include most things you can imagine.” A robotic system dispenses specific amounts of each component, using anywhere from 20 to 50 inputs per bottle. 

The company, which sells exclusively through its website, takes its promise of individualized formulas seriously: The chance of answering the 12-question hair quiz exactly the same as another person is 1 in 24 billion. But if it were to happen, the formulating algorithm is designed to randomly vary a component, even by a gram, so that no two bottles are identical.

Another benefit of Function of Beauty’s approach is that it’s able to constantly test formulas and then iterate based on customer feedback. The company is not designed to have perfectly consistent predefined product lines, so improvements can be launched immediately.

Dossa says he dislikes the traditional beauty approach of segmenting customers into different types–those looking for curl definition, or those looking for increased volume–because it ignores each person’s unique needs. Function of Beauty usually focuses its marketing on its products rather than on people to avoid defining who and what is beautiful, because of the stereotypes and self-esteem problems that can create. Dossa calls conventional beauty-industry marketing imagery “super dangerous and even toxic to our society.”

The real question around Function of Beauty is just how big the demand is for personalized products. Prestige beauty is a healthy market overall, but how much are people willing to pay for the promise of a unique formula? Currently, the brand’s prices are roughly on par with what you’d find at a cosmetics retailer like Sephora or a department store. (Function of Beauty declined to share its financial metrics.)

The company also is facing a growing number of competitors. A new entrant called Prose, which has a similar concept, raised $5.2 million in late 2017. Joe Segel, founder of QVC, last year co-founded dual customized hair care brands: HairRx, aimed at middle-aged women, and Millennial-oriented Cloud 10. (Function of Beauty’s customers mostly fall in the 18- to 34-year-old range.) “Customization in the beauty space is really something that is growing,” says Ellen Langas, co-CEO of HairRx and Cloud 10.

Personal care products have long been considered relatively affordable luxuries. You may not be able to frequent a high-end salon or spa, but technology has made it possible to buy shampoo and conditioner mixed to satisfy your exact hair preferences. In fact, anyone can do it, if she’s willing to spend $30 or more for a bottle. That is how Function of Beauty sees the future: A world of scalable uniqueness.

This Founder Studied Fighter Pilots and Navy SEALs to Help Gamers Perform Better

Amine Issa graduated high school at 15 and earned a PhD in biomedical engineering at 26. But when he really wanted a challenge, he says, he powered up his Super Nintendo for a round of Donkey Kong or Final Fantasy. 

“To be honest,” Issa says, “I feel like I’ve learned most of the stuff in my life through playing video games competitively.”

Mobalytics co-founder Amine Issa.

CREDIT: Courtesy Company

Issa’s passion for eSports–the rapidly growing industry that’s developed around competition-based, multiplayer video games–led him to found Mobalytics, along with fellows gamer Nikolay Lobanov and Bogdan Suchyk, in 2016. The startup’s analytics software studies a person’s gameplay and, with an assist from artificial intelligence, advises them to be more aggressive, for example, or offers tips to improve their fighting skills.

Mobalytics is targeting anyone “semi-serious about gaming” who’s seeking an edge in competition, Issa says. It’s a huge market to tap: Gaming industry researcher Newzoo estimates there are currently 165 million eSports enthusiasts worldwide.The firm calculates that eSports was a $696 million global industry in 2017, and it expects that number to double by 2020.  

Mobalytics’ open beta, which launched in September, is focused on one game: the wildly popular League of Legends. More than 600,000 people have signed up so far. In June, the startup will move to a subscription model, charging customers between $5 and $10 per month. Issa says the company will soon move into other popular games like Counter-Strike, Dota 2, and Overwatch, and “plans to cover all major titles in next two years.” 

CREDIT: Courtesy Company

Matt Zimmerman, assistant professor of sports media at Mississippi State University who has been studying the growth of the gaming industry in recent years, sees the potential in a company meant to help eSports devotees improve. “Even if you have no illusions about going professional, it’s still more fun to win than it is to not win,” he says. “When an industry gets to a certain point, you can no longer dismiss it. I would never use the word addiction, but it’s a strong hobby. And unlike traditional sports, you can still play it when you’re 65.”

All gaming, all the time.

Issa’s road to entrepreneurship was a somewhat circuitous one. “I have traditional Arabic parents,” he says. “They were bullish on education and studying. As long as I got A’s, I could play all the video games I wanted.”

Issa finished high school two years early, then went to his parents’ home country of Lebanon for college. Following that he enrolled at the Mayo Clinic in Minnesota. While there, he says, he played World of Warcraft for 14 hours a day. “I would work at the lab at night after class and hand in my results,” he says, “and then go to sleep and basically play the whole day.”

Issa earned his PhD in 2010, then enrolled in a post-doctoral physiology program at the Mayo Clinic. All the while, he continued gaming in his free time, much to the chagrin of his parents. Eventually, he became good enough to earn a sponsorship from U.K.-based eSports organization Fnatic, but the family tension came to a head and he decided to refocus on his studies. As part of his postdoc program, he examined Air Force pilots, Navy SEALs, and deep-sea divers, analyzing how they make decisions under pressure.

“What I realized was an Air Force pilot is not that much different from a video game player playing at high level,” Issa says. “You’ve got a cockpit, you’re looking at incoming inputs, there’s heads-up display that you need to watch.” He started reaching out to professional eSports teams, asking if he could study them while they played to look for differences between good players and great ones. He traveled during weekends on his own dime, sleeping on couches and dragging the lab’s equipment along with him.

In 2015, Issa met Suchyk at a conference for gamers. The pair, along with Lobanov, started talking about what a company focused on the intersection of analytics and gaming might look like. They soon wrote up a business plan, entered TechCrunch’s Disrupt SF competition, and finished in first place. Within two weeks, the newly formed Mobalytics had closed a $2.6 million funding round.

An AI-powered gaming coach.

“To create its analyses, Mobalytics generally starts with raw data on gamers’ fighting, awareness, and other skills, which anyone can access by creating an account on the game maker’s website. But, Issa says, “imagine your doctor did a bunch of tests and said your heart rate is X, your blood pressure is Y, your sugar is Z–and you have to interpret that on your own. That’s the way the industry currently is. What we do is diagnose and then recommend a plan.” The company applies its AI to a user’s gameplay data, then, in an app, provides actionable advice in easy-to-understand language. Users can log in before a matchup to receive coaching, and they can track their progress over time.

Mobalytics team.

CREDIT: Courtesy Company

Mobalytics is one of several gaming analytics startups to spring up in recent years, though none have yet taken a significant market share. Berlin-based Dojo Madness, founded in late 2014, has raised a reported $12.8 million in funding. Others, like Gosu.AI, have launched in the past year. To be successful, Mobalytics will have to establish itself in an increasingly crowded field–and hope that game makers themselves don’t start offering comparable services.

For Issa, finally being able to make a living in the field he loves is a lifelong dream fulfilled. And he doesn’t see it as being all that different from being a doctor, even if his parents–or much of the world–don’t agree. 

“At the end of the day, we’re providing a service,” he says. “We’re really passionate about this ecosystem.”

The Hottest Sectors for Launching a Business in 2018

If only a good idea and a bit of luck were all you needed to launch a successful startup. The reality is that it takes a whole lot more than that. Timing, competition, and future market conditions can make or break a business. So if you want yours to still be around in a year–or 10 years–it’s vital to know which industries are ripe for innovation and new entrants.

Here’s Inc.’s annual breakdown of the best industries for starting a business. The list is based on data on the fast-growing sectors and interviews with industry experts, investors, and entrepreneurs. Read on to find learn which industries could give rise to the next billion-dollar companies.

Canned wine

CREDIT: Getty Images

Popping open a can of wine might not sound as satisfying as pulling the cork out of a bottle, but the popularity of canned wine has grown rapidly in the last several years. The industry comprises both established brands that have begun packaging their wine in cans and startups that exclusively sell canned varietals.

Why it’s hot: While the product inside hasn’t changed, the new packaging is attracting young consumers to the wine scene. The convenience of canned wine particularly appeals to Millennial buyers who want a single-serve beverage they can take on the go. Cans are lighter than bottles and easier to disguise when drinking in public settings. What’s more, outdoor spaces like music festivals tend to prohibit glass bottles for safety reasons.

Skills needed: Entrepreneurs entering this business would be wise to fully understand the alcoholic beverage industry, including how to navigate regulations and the intricacies of distribution, says Danny Brager, senior vice president of the beverage alcohol practice at Nielsen, a provider of market-research information based in New York City.

Barriers to entry: Getting shelf space at retail outlets could be a large obstacle for startups. Because the industry is new, canned wine companies have a formidable challenge making their products stand out and gaining acceptance from wine enthusiasts who are used to buying bottles.

The downside: With so much attention on canned wine, Brager expects an increasing number of legacy brands will begin selling their wine in cans to capitalize on the trend.

Competition: Nielsen estimates there are currently more than 60 brands in the U.S. that sell canned wine. About 90 percent are exclusively canned wine companies, with the remaining 10 percent preexisting brands that offer a canned option.

Major players: Francis Ford Coppola Winery began selling its blanc de blanc in mini cans, dubbed Sofia, in 2004 and added canned Chardonnay, pinot grigio, and sauvignon blanc to its collection last year. Union Wine Co.’s Underwood wine is another prominent label, with seven varietals ranging from a sparkling rosé to a pinot noir.

Growth: Total U.S. sales for canned wine jumped to $32.3 million last year from $3.3 million in 2014, according to Nielsen.

Look inside the Canned Wine industry: Why This Millennial Founder Says Wine in a Can Is the Next Big Thing

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Disaster relief

CREDIT: Getty Images

Startups are finding innovative ways to bring food, shelter, and transportation to victims of the hurricanes, wildfires, and tornados that ravaged parts of the U.S. last year, as well as improve safety for those caught in many other types of disasters and emergency situations. From bulletproofing technology that can be applied to backpacks or desks, to connecting survivors and organizing transportation, these startups are trying to solve some of the nation’s most urgent problems.

Why it’s hot: Natural disasters have increased the demand for industry services and boosted funding, according to IBISWorld, which provides industry market research reports. What’s more, the rise in manmade emergency situations, like school shootings and terrorist attacks, has also created a need for innovative solutions.

Skills needed: Entrepreneurs in this area should have technical skills if they are building mobile-based solutions. Additionally, it is useful to have an understanding of the regulatory systems in place.

Barriers to entry: Establishing a reputation in the field is difficult, but crucial for developing partnerships with agencies that handle disaster situations, and for getting funding. Additionally, founders must understand the regulatory environment and obtain any legally mandated licensing.

The downside: Every crisis is different, creating a wide range of challenges that startups in the industry will have to face in real time. The stakes are extremely high since these companies are often dealing with people’s lives and property.

Competition: Younger startups will be competing against long-established and government-funded agencies that have operated in the sector for decades. These giants will scoop up millions in funding.

Major players: The American Red Cross is the largest nonprofit emergency response organization in the U.S. and generated $2.7 billion in revenue in 2015, according to IBISWorld. In the for-profit space, large companies such as Walmart, Home Depot, and Starbucks have pledged sizable monetary donations in the wake of disasters or tragedies, but few are dedicated to developing disaster-relief solutions. Meanwhile, there is no one startup that dominates the industry, as most startups focus on narrower areas within it such as transportation, housing, and communications.

Growth: U.S. revenue for the disaster relief industry is expected jump to $11.2 billion in 2022 from $10.1 billion in 2017, according to IBISWorld.

Look inside the Disaster Relief industry:  This App Helps Teachers at 14,000 Schools Stay Connected During Emergencies

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Beauty tech

CREDIT: Getty Images

The integration of technology and the beauty business is creating an opportunity for startups to innovate both the products consumers buy and how they buy them. The industry is getting a makeover with new offerings like “camera-ready” cosmetics that look great in photos and items that are highly customized–based on machine learning algorithms–for individual consumers.

Why it’s hot: Advancements in technology make it easier for companies to create products specifically tailored to consumers’ preferences, from foundation that perfectly matches a client’s skin to shampoo that will treat her specific hair needs. Additionally, the growth of niche markets within the beauty industry gives startups an edge over mass beauty brands.

Skills needed: Strong marketing skills and an expertise in social media are essential in the beauty industry. Most cosmetics companies advertise their products on social media, through beauty tutorials or modeled on brand reps. That knowledge will help rein in advertising costs, which is crucial for entrepreneurs competing with beauty giants.

Barriers to entry: Startups that rely on traditional advertising channels will need to pay steep costs to compete with the beauty behemoths in the industry, according to IBISWorld. On a similar note, companies will have to spend big to develop a large amount of inventory.

The downside: Many startups are launching in this industry and using the same social media tactics to reach audiences. Capital costs can make staying in the business difficult over the long term.

Competition: With beauty giants like Sephora and Ulta capturing a large share of the market, smaller companies that aren’t selling their own products–but offering skin consultancy services or product recommendations–could struggle to attract customers. However, niche markets like organics afford some opportunities for smaller retailers, according to IBISWorld.

Major players: L.A.-based Seed Beauty has incubated two wildly popular and trendy cosmetic companies that primarily sell online: Colourpop and Kylie Cosmetics, launched by the youngest member of the Kardashian-Jenner family. Meanwhile, Glossier has made a name for itself selling items that promote a “barely there” makeup look.

Growth: While IBIS doesn’t track the tech-specific side of the beauty market, the firm expects the U.S. industry as a whole to jump to $27.8 billion in 2022 from $22.1 billion in 2017.

Look inside the Beauty Tech industry:  How This Shampoo Company Is Using Algorithms to Give You Perfect Hair

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eSports

CREDIT: Getty Images

If watching people compete in videogame tournaments sounds a bit odd to you, you’re not the only one. But that’s the premise of eSports, an industry that’s growing rapidly and creating many opportunities for startups, especially those focused on in-game analytics, player data, and scouting.

Why it’s hot: The popularity of competitive online gaming has grown astronomically in the last several years. Nearly three years ago, Amazon paid $970 million for Twitch, a network that broadcasts live videogame events. Since then, the NCAA has announced it would formally analyze the collegiate eSports landscape to determine if it should have a supporting role in the space, and major professional sports leagues have planned eSports tie-ins.

Skills needed: Entrepreneurs must have a strong understanding of international markets because China and Europe will make up 68 percent of the estimated total revenue for the eSports industry in 2018, according to SuperData Research, a market researcher in New York City. Startups also will need to react and adapt to audiences’ demands for quality content and community engagement.

Barriers to entry: New companies will have to find opportunities to partner with the large incumbent eSports leagues and provide ancillary services for players, before other startups do.

The downside: eSports startups can’t afford to blink when it comes to the popularity of games. If companies aren’t nimble and don’t react when audience taste changes, it could be game over.

Competition: The industry is already crowded with new startups that include new platforms, teams, event hosts, and organizers, according to SuperData Research. Additionally, the start of franchised leagues will make it difficult for new organizers and platforms to enter the market.

Major players: Riot Games, which was Inc.’s company of the year in 2016, is one of the biggest names in eSports. It released the widely popular game League of Legends nearly a decade ago, but more than 100 million gamers still play it every month. Interactive entertainment company Activation Blizzard, which makes the beloved Overwatch game, is also a heavyweight in the industry.

Growth: SuperData Research forecasts the U.S. eSports industry to grow to $1.7 billion in 2020 from $1.1 billion in 2018. The U.S. eSports audience also is expected to increase by 41 million between 2017 and 2018.

Look inside the eSports industry: This Founder Studied Fighter Pilots and Navy SEALs to Help Gamers Perform Better

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Influencer agents

CREDIT: Getty Images

Think of Jerry Maguire, if, instead of athletes, he represented Instagram stars. Influencer agents negotiate deals for prominent individuals seeking to turn their loyal followings on social media into cash.

Why it’s hot: The popularity of social media platforms continues to be a powerful source of revenue for influencers–and for agents in search of a cut.

Skills needed: A powerful network of contacts, the first step toward signing clients and finding endorsement opportunities, is essential to the industry.Being able to spot rising stars is also a necessity, along with developing the celebrity’s brand identity and reaching new audiences.

Barriers to entry: While an agent’s license is required by a state’s labor commissioner, the amount of capital needed to launch a startup in the space is low.

The downside: Larger agencies with established reputations can make it difficult for newcomers to the industry to nab A-listers. What’s more, the revelation that some companies pay for bots to spread their social media content has heightened the scrutiny around these businesses. Startups in this space also must educate their clients on disclosing ties with brands and adhering to Federal Trade Commission guidelines.

Competition: The field is extremely competitive, with larger agencies poaching clients from smaller companies or each other, according to IBISWorld.

Major players: Talent agency WME IMG is one of the big players in the industry, representing actors, musicians, and directors. Creative Artists Agency LLC also works with high-profile entertainers, as well as athletes.

Growth: U.S. revenue for this industry is expected to jump to $10.8 billion in 2022, an increase of 2.2 percent from 2017, according to IBISWorld.

Look inside the Influencer Agents industry:  When Apple and Microsoft Want to Advertise on Social Media, They Turn to These 2 Guys From Canada

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Women’s reproductive health care

CREDIT: Getty Images

There are more opportunities for women’s reproductive health startups as women are waiting longer to have children and want more consumer-facing health solutions, according to First Round Capital. New businesses are now offering services such as at-home fertility testing, birth control tracking, and smart menstruation tracking devices.

Why it’s hot: More and more women are taking their reproductive health care into their own hands by using apps to track their fertility and shop from companies that sell organic feminine products. The increased number of reproductive-focused startups, and their acceptance by female users, is boosting the industry’s profile.

Skills needed: Founders should have a robust knowledge of the medical industry. They must also have a strong understanding of customers’ needs and empathy for patients.

Barriers to entry: As with most medical fields, regulatory issues can be a challenge for young companies. Startups also have to build trust and credibility with users and providers.

The downside: New companies will have to answer questions about their efficacy and change consumer behavior, especially if they are introducing new methods of health care that take consumers away from in-person treatment, according to First Round Capital partner Phineas Barnes.

Competition: Startups in this industry must compete against all the existing reproductive health care options available, such as primary care physicians and alternative telemedicine solutions. Competition in this space ranges depending on the type of reproductive health women are seeking. For example, telemedicine solutions will have to contend with Maven, which offers quick diagnoses and prescriptions. Meanwhile, Lola and Cora are some of the top organic feminine hygiene producers in the industry.

Major players: At-home fertility testing company Modern Fertility and digital clinic Maven Health are the two major players in this industry, according to First Round Capital.

Growth: The U.S. fertility market, which includes medications and reproductive technology, was estimated to be between $3 and $4 billion, according to the 2015 Harris Williams study. It is expected to grow at a compound annual growth rate of 4 percent through 2020, according to a 2016 report from market research firm Technavio.

Look inside the Women’s Reproductive Health Care industry:  This Startup’s First-of-Its-Kind Test Helps Women Understand Why They Can’t Get Pregnant

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Elderly care

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As the Baby Boomers age into their golden years, there’s a growing need to care for them. Between adult day care facilities and products and services for at-home providers, the industry is seeing a rise in options.

Why it’s hot: The Pew Research Center estimates there are about 74 million Baby Boomers that will require some level of elderly care soon, and companies are trying new–and in many cases high-tech–ways to provide it. For example, a startup called ElliQ is developing a robot that can carry on conversations with elderly patients and play them videos, while E-VONE makes shoes packed with sensors that alert loved ones if the patient falls.

Skills needed: An understanding of the medical field and at-home care are a must for entrepreneurs in this sector. Founders and their employees must be compassionate and able to build trust with patients and families.

Barriers to entry: New companies must demonstrate they are doing things differently to separate themselves from the major players in the field. They also need to get required approval from regional oversight organizations.

The downside: No matter the size of the population, startups will have to contend with family caregivers who may be reluctant to pass off responsibility for their loved ones to a stranger. Additionally, the generation after the Baby Boomers is smaller and could eventually result in a downturn for businesses.

Competition: Older nonprofit agencies focused on at-home care have a competitive edge over new companies as their brands have more name recognition and trust. New solutions like Honor Technology and Hometeam connect seniors and their families with caregivers.

Major players: Home Instead Senior Care, which employs about 65,000 staffers and provides nonmedical home care, is one of the biggest businesses in the market. Comfort Keepers, which provides nonmedical care and light housework, also has a large presence.

Growth: The industry generated more than $50.7 billion in U.S. revenue in 2017. That figure is expected to increase more than 42 percent by 2022, according to IBISWorld.

Look inside the Eldery Care industry:  Why the Next Big Opportunity in Health Care Isn’t Caring for Sick People. It’s Caring for Caregivers

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Alternative-protein food products

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Does the idea of biting into a juicy hamburger make your mouth water? Now you can get one without any meat in it. Thanks to improving technology, alternative protein foods have been making a splash in the food world. Whether it’s a vegan milk substitute made from peas, cricket protein, or meat-like products made from plants, customers have more options for their nutritional needs.

Why it’s hot: Consumers are looking to introduce more proteins into their meals thanks to dietary trends like the paleo and ketogenic diets. Additionally, technology has caught up to allow for great-tasting and visually pleasing products that appeal to a wider consumer base.

Skills needed: Founders need the technical know-how to develop the foods, or must collaborate with others who do. Alternative protein entrepreneurs also must be able break through the noise of better-known brands to get a clear message and good product to consumers.

Barriers to entry: Consumers need to become more open to trying alternative protein products for startups in this sector to thrive, says Dries Zender, the principal of brand growth solutions for the consumer insights firm SPINS. Additionally, an availability of supply could be a difficult hurdle for startups in the alternative protein space. Relatively little U.S. cropland is dedicated to new and emerging protein sources and companies could experience shortages as a result of drought or insect infestation.

The downside: Entrepreneurs must be able to break through the market with an innovative product and, just as importantly, keep up with technology so they’re not surpassed by other companies, says Zender.

Competition: There is a large amount of competition in the field with more brands launching into the space, according to SPINS. The category also is expanding to include more than just milk and meat–for example, California-based startup Ripple Foods, which makes products out of pea protein, recently launched a Greek yogurt and half-and-half.

Major players: Impossible Foods, known for its bleeding meatless burger, is one of the popular brands in the industry, according to SPINS. Beyond Meat, which makes plant-based sausages, burgers, and chicken dishes, has also gotten traction with consumers.

Growth: Alternative protein startups have raised hundreds of millions of dollars in funding as entrepreneurs try to find a healthier and more environmentally friendly way to provide protein-rich foods. The global market for alternative proteins was valued at $4.2 billion in 2016, and is expected to grow 6.8 percent between 2017 and 2022, according to Research and Markets.

Look inside the Alternative Proteins industry: The Dairy Industry Has a New, Trendy Competitor: Pea Milk

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This Startup’s First-of-Its-Kind Test Helps Women Understand Why They Can’t Get Pregnant

As a PhD candidate at Weill Cornell Medical School, Piraye Beim spent much of her time trying to figure out why a particular cancer drug was lifesaving for some patients but useless–or worse–for most. She had no idea what she was up against until a visiting professor said to her, “Do you realize you’re competing with the three largest pharmaceutical companies in the world?”

Eventually, Beim moved into the genetics of reproduction. She did her postdoctoral work in the U.K., and realized the challenges in this field were similar to the ones in oncology: Some women, who would have expected to be fertile, were having great difficulty having babies, even with in vitro fertilization. Others, for no known reasons, responded very well to treatments. Beim, given her background, couldn’t help but ask: Who is looking at the genetic differences between the women who carry healthy pregnancies to term and those who don’t?

“It was like crickets,” Beim says. “It was not a thing.”

Beim decided to make it a thing, and believed that a startup would be her fastest route to success. Rather than competing with the largest pharma companies in the world, she’d be competing with only a few academic groups.

That quest has landed Beim and Celmatix, the New York City-based company she founded in 2009, in an exploding field that seemed sleepy just a few years ago. Genomics and sequencing companies raised nearly $600 million in U.S.-based funding in 2017, up from only about $50 million in 2011, according to venture fund Rock Health. Phin Barnes, a partner at First Round Capital and an investor in startup Modern Fertility, says that the number of pitches he sees from companies addressing women’s health care has increased about 10 times in the past five years.

“Women have a worse experience in the health care system than men,” Barnes says, and  their most intense experiences often occur in between their post-college years and their mid-30s, when he sees many of them found startups. Meanwhile, women are waiting longer to have children, increasing the demand for technological advances that can help them do so.

Many of the new women’s health care startups, such as Modern Fertility and Future Family, let women order hormone-based fertility tests without having to see a doctor first and then deliver the results to directly to them. Other startups, such as Eve by Glow, offer apps allowing women to better track their own fertility. One app maker, Kindara, even sells a Bluetooth-compatible thermometer, making it easier for women to track their basal body temperature every day.

Beim is eager to applaud startups that are making data more accessible, but Celmatix is going well beyond that step. The company has isolated 32 genetic markers that provide otherwise undiscoverable insight into various conditions affecting women’s fertility.  

A long road to a developed product. 

For the first two years of Celmatix’s history, Beim slept mostly on friends’ couches. That’s not because she was broke, says early investor Cory Ondrejka–it’s more that she was so obsessed with her company that she “didn’t problem-solve around her housing situation.”

Beim was touring lab space in New York, aghast at how expensive it was, when she realized she didn’t actually need her own lab–she could outsource the genetic sequencing and use Amazon Web Services as her server farm. Beim’s lawyers did her first patent application on spec, assuring her she could pay once she’d gotten funding. She raised an angel round in 2010, and her first institutional round a year later. She’s now raised more than $56 million and has about 110 employees.

At the end of 2017, Celmatix’s first genetic test, called Fertilome, became widely available. Primarily offered through fertility clinics, the $950 test requires a blood or saliva sample and indicates risk factors for women who may be struggling with their fertility. It could show that a patient has twice the baseline risk of endometriosis, for example, or a threefold risk for early menopause.

The baseline risks for some conditions are very low, and some say that just knowing someone has an elevated risk isn’t that useful. Beim couldn’t disagree more. “We think women find this empowering,” she says, noting that there are plenty of practical steps women can take if they discover they might have difficulty conceiving. For example, they might make different lifestyle choices, seek out an employer who offers generous fertility benefits, or investigate egg freezing. 

Aimee Eyvazzadeh, a reproductive endocrinologist, has ordered more than 100 Fertilome tests, although she says she is careful about using the test with the small percentage of her patients who have severe anxiety disorders. When she gets the results, she says, she has always been able to tweak the treatment in some way. (Eyvazzadeh is not affiliated with Fertilome.)

“Let’s say I see someone is at elevated risk for recurrent pregnancy loss,” she says. “Well, there is something I can do. There is a protocol to decrease the risk of recurrent pregnancy loss.” She says the protocols are just tweaks to what her team is already doing, but without the test, they would have a tougher time knowing which tweaks to make. Although no test can guarantee success, Eyvazzadeh nonetheless offers what is perhaps the ultimate recommendation: “I have had many cases where patients have struggled, they don’t know why, I do the test, and they have a baby.”

The Next Big Opportunity in Health Care Isn’t Caring for Sick People. It’s Caring for Caregivers

Within the elder care market, Alzheimer’s disease and other forms of dementia are a problem squared. The vast majority of the 5.5 million Americans suffering from dementia are over 65. And since most live at home, their unpaid caretakers–typically spouses–often are aging as well, their health eroded by long hours and stress. With the number of dementia cases expected to triple by 2050, the demand to improve the lives and health of both patients and their loved ones is immense.

Ceresti Health, a 10-employee startup based in Carlsbad, California, aims to boost caregivers’ confidence and skills through digital education, monitoring tools, and human support. The business focuses on dementia patients also living with chronic conditions. (More than a third of dementia patients have coronary artery disease or diabetes, for example, according to the Alzheimer’s Association.) That’s where medical costs are highest. It is also where caregivers with no nursing experience face the gravest challenges, because they are managing the health of people who are unable to express their symptoms.

Dirk Soenksen.

CREDIT: Courtesy Company

Ceresti is the second act of Dirk Soenksen, whose first company, Aperio, created digital slides used by pathologists to view tissue samples. Soenksen, an engineer by training, raised more than $50 million for Aperio and sold it for an undisclosed sum to Leica Biosystems in 2012. He stayed on for six months to oversee the transition and, in his free time, mulled his next move in the shadow of a long-term noncompete agreement.

Kevin Liang.

CREDIT: Courtesy Company

On the day Soenksen left Leica, a former colleague invited him for coffee. Kevin Liang, a neuroscientist, explained to Soenksen that the brain is key to health, and so diseases that attack the brain offer a promising target for business and scientific innovators. He also described his own experience growing up with grandparents who suffered from dementia. Soenksen was persuaded. Together with Mark Wrenn, another Aperio veteran, they raised $4 million from friends and family to start Ceresti in 2013.

Mark Wrenn.

CREDIT: Courtesy Company

Initially, the founders took the obvious route: Treat the patient. They developed digital versions of cognitive therapies for delivery over tablets and tested them in a memory-care facility. The products worked so well that Soenksen filed for a patent. Then they tested the product in homes, where more than 80 percent of dementia patients live.

Outside a professional setting, the founders encountered family members who were overwhelmed and unprepared. “We observed caregivers getting into an argument with the patient because the patient could not remember their name,” says Soenksen. “We thought, this is not going to work if we cannot make the caregiver part of the solution.”

The practical pivot toward caregivers accompanied an economics-driven pivot toward dementia patients with chronic conditions. The founders planned to sell to Medicare Advantage health plans and at-risk medical providers, which meant they had to reduce costs as well as improve care. A study of insurance claims revealed that Alzheimer’s alone is not all that expensive, because there are few medications or tests. But costs mount fast for patients who also suffer from diabetes, cancer, or heart disease, or who are recovering from surgery.

“If you have dementia, you can’t articulate your symptoms,” Soenksen says. “You cannot follow a care plan. Something will happen, and events go out of control.” Patients with chronic conditions are 20 percent more likely to be readmitted to the hospital if they also have dementia, according to medical journal studies. They have three times as many transfers among care facilities after leaving the hospital and experience far more falls and urinary tract infections, a huge medical cost.

A tailored program

Ceresti offers a 12-week program of videos, tutorials, and other tools delivered via a tablet. The interface is stripped down and intuitive. It’s designed, says Soenksen, for a caretaker “who could be 85 years old and has never used a smartphone.” In addition to the curriculum, which is served up in weekly chunks, the program asks simple daily questions about the physical and psychological status of both patient and caretaker. Users respond via a basic messaging feature.

Caregivers click a button to initiate daily calls with their dedicated coaches, full-time Ceresti employees who typically have worked in assisted living or retirement communities. “When we have made more progress, we will build a Ceresti Academy to train them,” says Soenksen. “The most challenging area and where we will carve out the most IP is the ability to scale this coaching piece.”

Some of the educational material applies to all dementia sufferers–for example, how to approach a patient displaying unexpected behavior such as brushing her teeth with a hairbrush. Other parts are customized for each patient based on her physician’s prescribed regimen. Ceresti also tailors the program according to caregivers’ individual strengths and preferences. 

Ceresti Health Station.

CREDIT: Courtesy Company

Ceresti’s toughest challenge is the classic “chicken and egg situation,” says Soenksen. The company needs early adopters to prove it works and provide the empirical evidence customers in this industry require. “If I walk in to a payer and say, ‘Look, I can save you $5 million a year and I can even guarantee it,’ then you will do business with me,” he says. “If I walk in and say, ‘I have got some data that suggests that you can save money,’ not everyone is going to give it a shot.” Ceresti charges roughly $750 per patient per year and expects to reduce costs by twice that amount.

Ceresti’s first pilot is with Landmark Health, a home-based medical care provider that will soon be operating in 10 states. The trial has gone so well that Landmark plans to roll Ceresti’s product out to potentially thousands of patients, according to Landmark’s chief behavioral officer, Christopher Dennis.

“They brought an elegant tech solution to the table, which led to greater efficiency and ability to disseminate support across multiple caregivers,” Dennis says. “The caregivers have become more aware of the impact of what they do, and they’ve become better caregivers. For this medically complex population, it’s another arrow in the quiver.”

Payment from Landmark is Ceresti’s first revenue; additional pilots are in the works. Soenksen believes the results will support the company’s A round six to eight months down the road. “Who the heck else can reach a senior with multiple chronic conditions who can’t self-manage?” asks Soenksen. “Anybody who takes responsibility for health care costs should find us super interesting.”

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