With Selina Wang �Lizette Chapman, Innovation Shape-changing Fabric

① ② Next Steps Yao says the biologic team is testing waterproof glues and other materials to make the fabric more durable, with an eye for it to be used at the Tokyo Summer Olympics in 2020. It’s also considering spinning off a startup to commercialize i

harsh terms. Both raised down rounds, meaning they took fresh money at lower valuations than in the past. Among other things, this diminished the value of shares owned by employees and earlier investors. Both Foursquare and Jawbone declined to comment.

Even growing startups are scaling back their ambitions. In September jobs-listings site Thumbtack settled for a $125 million round of financing valuing the company at $1.3 billion, roughly 40 percent less than the original asking price. In November online retailer Jet.com closed new funding at a valuation of $1.4 billion, down from $3 billion in a summer sales pitch. In January used-car marketplace Beepi said it raised $70 million, valuing the company at about $500 million—a fraction of the $300 million and $2 billion that CEO Ale Resnik predicted last year. “What happened to us happened to a lot of companies as they were trying to raise in the latter part of 2015,” Resnik told Bloomberg TV in February.

Of course, there are always exceptions. Last month, Chinese ride-hailing app Didi Kuaidi closed on an oversubscribed round of at least $1 billion, raising its valuation above $20 billion. Messaging startup Slack is expected to close a significant funding round at much better terms than the $2.8 billion valuation it commanded last year. And Uber continues to raise money at better and better terms. “When you have a fund, there’s a real pressure to put the money to work,” says Steve Kaplan, a professor at the Chicago Booth School of Business who specializes in VC and entrepreneurship.

For smaller companies VCS are preaching caution and urging them to build revenue models sooner rather than later. “There is no making up on volume when you lose money on every transaction,” says Ben Narasin, a partner at Canvas Ventures. “Growth at any cost is not a valid model. There was a time when it was rewarded, but that time is gone.”

Edited by Jeff Muskus Bloomberg.com

1.

Form and function

A new material called biologic alters its shape with changes in humidity, so an athlete’s shirt, say, can open ventilation ducts in the back when its wearer starts sweating.

Material The biologic team grows a strain of noninfectious bacillus bacteria in a solution and uses a custom machine to print it onto both sides of a piece of latex. The bottom line Many venture firms are waiting for cash-hungry startups to offer better terms than both sides have been used to of late. Origin Ishii and his student team, led by PH.D. candidate Lining Yao, have been working on the material for about two years. Innovator Hiroshi Ishii Age Title Professor and associate director of MIT Media Lab, an interdisciplinary research group Partners The Media Lab group is working with MIT’S chemical engineering department, London’s Royal College of Art, and sportswear maker New Balance to refine biologic.

The bacteria expand or contract the fabric as much as 15 percent in response to rising or falling humidity, which enables the ventilation ducts to open or close. Market Beyond sportswear, the technology could be used in everything from lampshades to tea bags to toys, Yao says.