Material Impact cofounders Carmichael Roberts (left) and Adam Sharkawy at their Boston headquarters
Boston Globe via Getty Images
Venture firm Material Impact, which focuses on investing in materials innovation, raised $200 million for a second fund as more money flows to deep tech, a shift that had begun before the coronavirus pandemic and has continued over the past few months. Both Harvard University’s endowment and Princeton University’s endowment were among the investors in the fund, which was oversubscribed despite fundraising being done virtually.
“Pandemic aside, it was the perfect time to raise funds,” says Material Impact cofounder Carmichael Roberts. “People were very receptive to hear what we were working on.”
Material Impact’s first $110 million fund has invested in 11 startups to date, many of which were created from academic research and spun out of universities, including Harvard, MIT, Arizona State and Case Western. The Boston-based fund’s focus on innovation in materials science led it to areas like robotics, water and advanced manufacturing that have proven resilient to Covid-19. Its early investments include Soft Robotics, a maker of hand-like grippers that eliminates the need for human contact during food handling, and Zero Mass Water, which has technology that decentralizes access to clean drinking water. “These solutions need to be robust,” Roberts says. “Whatever your solution is, it can’t blow up in the middle of a pandemic or an earthquake or a man-made problem.”
With the new fund, Roberts and his cofounder Adam Sharkawy plan to maintain the same investment strategy, but figure they’ll be able to write larger checks to a similar number of companies as from their first fund. To buttress its investments, the firm also brought on two new partners who had been members of its entrepreneur advisory committee: Corinna Chen, who previously worked at Medeor Therapeutics, and Sidney McLaurin, former general manager at Lime. The team is already looking at potential investments, including a few possibilities in synthetic biology, an increasingly active space and one that Roberts figures could account for its first investment. The firm is also going through the process of evaluating all of its portfolio companies on impact, using metrics developed by B Lab, the non-profit organization behind the B Corp certification, something that its partners say investors have begun to request.
“The amount of money that has been going into areas in the deep-tech domain has enjoyed 20% year-on-year growth. Compared to other sectors it is growing very aggressively,” Sharkawy says. “This is a very ripe environment. I like to think we were on the front end of that wave before it became more visible to the likes of the Andreessens and the Sequoias.”
Roberts, 52, and Sharkawy, 56, met more than 20 years ago when they were serving together on an advisory board for the engineering department of Duke University. Roberts received his Ph.D. in organic chemistry from Duke (he also has an MBA from MIT), while Sharkawy got his Ph.D. from Duke in biomedical engineering. “We felt we were the misfits [on the advisory board],” Sharkawy recalls. “The other nine members were, like, CXO of Medtronic and J&J, and Carmichael and I were the entrepreneurs.”
Roberts was a cofounder and early CEO of Arsenal Medical, a therapeutic materials company cofounded with Harvard’s George Whitesides and MIT’s Robert Langer, and a general partner at North Bridge Venture Partners. Sharkawy, meanwhile worked in senior executive roles in research and product development for Abbott Vascular, Smith+Nephew and the Medicines Co. “We would get together and talk about what we were working on entrepreneurially,” Roberts says. “Adam showed me this video of technology that repaired the heart, and then I would tell him, ‘Look what I am building over here.’ We became fast friends.”
In 2016, they teamed up to start Material Impact with the idea that materials innovation was the foundation for numerous critical technologies. One of their first investments: Soft Robotics, a robotics company that Roberts had helped commercialize from Whitesides’ lab. Before even starting Material Impact, Roberts recalls, “we were tag-teaming this on weekends and weekday nights.” Today, Soft Robotics has raised a total of $54 million at a valuation of $115 million, according to venture-capital database PitchBook.
Creating companies out of university research is hard and takes time to do well. Roberts figures that Material Impact’s difference is not only its experience doing multiple spinouts over the years, but also that it picks an area and researches it deeply to figure out a solution rather than simply plowing through a university’s patents. In researching water, for example, Material Impact invested not just in Zero Water, but also in Infinite Cooling, an MIT spinout that uses technology to capture and recycle water plumes leaving industrial cooling towers, and Fusion Coolant Systems, a University of Michigan spinout that developed a carbon dioxide lubrication system for use in factory machining operations that can eliminate wastewater (and the respiratory illnesses it can cause workers).
“We’ll find technologies that are extremely advanced in their stage of development,” Sarkawy says. “ hey are derisked. They have been in a university lab setting for three-to-five years.”
Five years ago, Roberts says, “the question wasn’t about competition, it was about companies. Who’s doing these things and can you tell us why it matters?” Today, deep tech, whether robotics or synthetic biology, is getting more of its due. As Roberts says: “Lots of folks are coming to the party now.”