- VCs’ monopoly on early stage tech could be coming to an end
- The secret to regenerative medicine… from a salamander?
- Expect this headline soon: “The First Family to Space”
Dear Reader,
Cybersecurity firm Check Point Software Technologies put out some interesting research on coronavirus “activity.” It is enlightening to see how quickly the bad actors have moved to take advantage of this space.
Since January, there have been more than 4,000 coronavirus-related internet domains registered globally. And out of these, 3% are malicious and another 5% are highly suspicious. That’s at least 320 websites that are likely to lead to some kind of cyberattack if we visit the site. And coronavirus-related websites are 50% more likely to be malicious than other websites.
Another cybersecurity firm, Sophos, has noted the uptick in coronavirus-related phishing emails. These typically claim that information is available about the coronavirus in your local town, and a Microsoft document is attached.
Malicious software is automatically downloaded onto the computer of anyone who clicks on it. Then, cybercriminals try to find information that can provide access to financial accounts and so forth.
Other messages claim that they have a cure to COVID-19… Please, please don’t fall for this.
To be very clear, there is currently no cure or vaccine for COVID-19.
Several candidate therapies and vaccines are readying for clinical trials this year, but they won’t be approved by the FDA anytime in 2020. Put simply, the drug development process takes longer than that to ensure the safety of the therapy.
Please, don’t click on any links claiming there is a cure. Don’t download any files from an unknown sender about coronavirus, and don’t even click on links shared on social media sites like Facebook or Twitter unless you know where the link comes from. There is simply too much risk in doing so.
Good sources of information include the Johns Hopkins Center for Systems Science and Engineering for case tracking, death, and recovery information. And, of course, the websites of the World Health Organization (WHO) and the Centers for Disease Control and Prevention (CDC) are good places for trustworthy information.
Let’s plan on being safe, using a lot of common sense, and keeping the fear-based messages spouted by much of the media in context.
After yesterday’s panic-based bloodbath in the markets, we can hope that cooler heads will prevail and put this virus in context. Yes, it spreads rapidly and is highly infectious, but the data coming out of South Korea shows that the mortality rates are much more similar to the seasonal flu.
I’ll keep monitoring the situation. But now, our insights…
Opening up early stage investments to retail investors…
Big news on the early stage front…
The Securities and Exchange Commission (SEC) just proposed major changes to crowdfunding regulations. These changes would open up private early stage investments to everyday retail investors.
As regular readers know, the best early stage investments have typically been reserved for connected venture capitalists and high-net-worth investors. Everyday investors have been left with the scraps. But a new proposal could change all that…
The proposal would raise the offering limit on Regulation Crowdfunding (Reg CF) deals from $1.07 million to $5 million. That means an early stage company could raise up to $5 million every year. And for companies looking for even more capital, the Tier 2 offerings under Regulation A (Reg A) would see the limit raised from $50 million to $75 million.
Both Reg CF and Reg A deals permit private early stage companies to sell shares directly to all investors, including nonaccredited investors. These regulations were developed under the 2012 JOBS Act as a way to provide normal investors access to the same kind of investments as accredited investors.
But it didn’t work out that way. The regulations, as written, didn’t accomplish their goal. In general, the structure of these offerings simply hasn’t attracted high-quality early stage companies.
That’s because the $1.07 million cap for Reg CF deals just isn’t enough to get an early stage technology company up and running.
The company would have to raise more money again within 12 months or less. An average seed round will raise $2–3 million, and an average Series A round can raise several multiples of that. That’s why we haven’t seen many high-quality companies go the Reg CF route.
And Reg A deals require the company to complete a rigorous filing process with the SEC that’s almost as extensive as the paperwork for an IPO. This takes time and ultimately costs as much as a million dollars, money that most early stage companies simply don’t have.
So the best early stage tech companies have continued to raise money from the venture capitalists and accredited angel investors… locking everyday retail investors out of the best early stage investments.
But if approved, this proposal would change that – especially on the Reg CF side.
A $5 million raise would be considered a healthy early stage venture capital (VC) round. That would be more than enough to get a promising company up and running. If managed well by the founders, $5 million could fund a few years of development, find the product market fit, and generate revenues.
This would allow the company to focus on building and growing its business, not fundraising every year. We will surely see more great tech companies go the Reg CF route if the cap is raised.
And as a bonus, Reg CF deals would be more advantageous for the early stage startups as well. They wouldn’t include the onerous, often one-sided terms that the venture capitalists place in almost all financing agreements.
We are talking about something that would completely transform the industry here. I couldn’t be more excited about this.
I have long wanted to produce a research product focused on private early stage investing. There just haven’t been enough great private deals available to nonaccredited investors due to these regulations.
But that changes if this proposal goes through. I’m hearing that this could happen by the fourth quarter of this year. And that has my gears turning about a new private investment service.
If any of my readers would be interested in this type of service, I’d be curious to hear from you. Send me your thoughts right here.
Unlocking the secret to regenerative medicine…
Scientists at the University of Kentucky just made a huge genomic breakthrough. They announced that they have sequenced the full genome of the axolotl. That’s a salamander only found in a lake near Mexico City.
The Axolotl Salamander
Source: The University of Kentucky
Talking about a salamander may seem odd for a technology letter… but there’s a good reason for it.
When harmed, this creature can regrow body parts – its spinal cord, its eyes, and even its brain. This means that somewhere in the axolotl’s genetic makeup lies the secret to regenerative medicine.
We’ve known about the axolotl for quite some time, but we’ve never been able to sequence its genome before. That’s because its genome is 10 times larger than the human genome. Up to this point, the computation has been too intensive to complete.
So this is a breakthrough from the team at Kentucky.
Now we can analyze the axolotl’s genetics to figure out which parts of its DNA are responsible for its regenerative powers. This information could open the door to some bleeding-edge genetic therapies.
Imagine recovering from a spinal cord industry by regrowing your damaged tissue. Or imagine having your body repair and renew aging or damaged joints after decades of use.
There would be a huge market for this. And these therapies would improve the quality of life for countless people.
The first vacation in space was just booked…
Space tourism is on the rise…
Regular readers will be familiar with Axiom Space. This is the private company that is building the world’s first hotel in space. What’s more, Axiom plans to expand its hotel into a full-scale private space station.
Axiom’s Earth Observatory
Source: Axiom Space
Now, Axiom’s space hotel won’t be launched until 2024. But the company isn’t sitting still…
Axiom just partnered up with SpaceX to launch private missions to the International Space Station (ISS). Their first joint mission will shuttle three space tourists up to the ISS for an eight-day vacation next year!
They will take SpaceX’s Crew Dragon spacecraft. And the mission will be led by a commander from Axiom Space.
That means it’s happening. Space tourism is here.
This first mission will cost the three tourists $55 million each. But technological advances and competition will drive this high price tag down over time. As we have discussed before, consumers now have not one, not two, but three ways to get to space (Blue Origin, Virgin Galactic, and now SpaceX).
In the very near future, we’ll have to decide: Do we take the family to Hawaii this summer? Or to space? It won’t be long before we’ll see headlines like “The First Family to Space.”
There is simply no historical precedent for this. Welcome to the new space age.
Regards,
Jeff Brown
Editor, The Bleeding Edge
P.S. If you’re interested in cryptos, then be sure to check out my friend and colleague Teeka Tiwari’s free crypto training seminar that’s coming up. On March 18 at 8 p.m. ET, he’ll discuss an exciting phenomenon about to happen in the crypto market… and an opportunity that he believes could return as much as $5 million.
One of the things I like most about Teeka’s research is his insistence on risk management. He puts a strong emphasis on proper position sizing and building a basket of quality projects.
So if you’d like to join Teeka at this special event, you can get all the details right here.
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