The wild ride of Toronto-based Meta Inc.
Funny how the world changes when you have kids.
Soon after the birth of their daughter 14 months ago, Facebook co- founder Mark Zuckerberg and his wife, Priscilla Chan, launched the multibillion-dollar Chan Zuckerberg Initiative. Over time, the CZI will receive 99 per cent of the couple’s Facebook stock to fund social and philanthropic causes, because, as they said in a letter to newborn Max, “Like all parents, we want you to grow up in a world better than ours today.”
While the couple’s first investments focused on education, last September the initiative unveiled a breathtaking new mission: to “cure, prevent or manage all disease by the end of this century.” Did anyone suspect that journey would begin in Canada?
Step one, Zuckerberg said, is to develop transformative medical technologies that would enable researchers to view old problems new ways — just as microscopes helped scientists understand infectious diseases. In late January, the CZI announced the first phase of this effort — the acquisition of Toronto-based Meta Inc., a six- year- old, 22-person company committed to making medical research more accessible for researchers around the world.
But Meta’s bright f uture shouldn’t obscure its troubled history, which demonstrates that in business, neither success nor failure is ever inevitable.
Founded in a bedroom in their parents’ house by cancer-genomics researcher Sam Molyneux and his technologist sister, Amy Molyneux, Meta has seen highs and l ows: l earning business through an accelerator program, forging partnerships with publishing giants, seeking investors, surviving sales droughts. Nine months ago, when the company suffered a cash-flow crunch, Meta’s investors had to decide whether to pony up more capital.
The company’s longestserving investor group, iGan Partners, reinvested to give Meta more time to boost revenues — putting it in better shape to receive visitors when Zuckerberg’s team came calling last fall.
Meta started with an ambitious premise: that scientific knowledge has outgrown humans’ ability to track it. In biomedicine alone, researchers publish 4,000 papers every day — most of which will never be seen by the scientists who need them. Sam Molyneux encountered this “broken ecosystem” when he spent three years on a research paper only to learn similar findings had been published six months earlier. He founded Meta to fix the problem, first by doing deals with publishers to index all scientific papers, going back to the 1800s.
Working with Silicon Valley-based SRI International, Meta also commercialized artificial intelligence that can read millions of papers and analyze their potential, flagging important discoveries long before they might otherwise come to light. The company also developed an additional revenue model, helping vendors of scientific products understand who reads which journals, thus planning their ad spends more effectively.
“It’s not about a better search engine. It’s about organizing and delivering insight,” says Sam Ifergan, a board member and president of iGan Partners, the Torontobased venture-capital firm.
iGan, with its sister fund, Rowanwood Ventures, has a unique philosophy. It specializes in early-stage investments, between $ 2 million and $5 million. And it works with just a handful of local companies in only two sectors: digital health and B2B software. By getting in early and really knowing those companies, Ifergan says he and his partners can help firms overcome hard times.
“We know everything takes two times longer than you expect and costs twice as much,” he says. “We don’t just walk away.”
Which, last spring, took courage. Meta had raised more than $10 million. But by the second quarter of 2016, it needed cash again.
“We didn’t have enough money to pay salaries,” says Ifergan. (Due to a CZI edict, Sam Molyneux was not available to comment.)
When another institutional investor proposed an emergency sale of the company, Ifergan and his team had two days to decide what to do.
“Traditional VCs tend to say, ‘ You didn’t meet your milestones? We’re out,’ ” he says. “We still believed in the team and the vision. But we realized it was going to take longer than we thought.”
Fortunately, iGan had recently closed a new, $60-million fund. It also tapped its investor network of angels and family offices to raise $2 million in bridge financing, giving Meta time to close key contracts. With sales on track, Ifergan’s forecasts had Meta exceeding $ 20 million in revenue in 2018, and approaching $ 150 million by 2020.
So with the Zuckerberg deal expected to close shortly, did Meta fall victim to the old Canadian disease of selling too soon? No, says Ifergan.
“Maybe we could have negotiated harder — in fact, we tried. But it’s a meaningful exit, everyone got good returns, so it’s absolutely not too early.”
Besides, he says: “CZI is the perfect home for the company. There’s nobody else out there who’s going to put resources behind Meta’s platform, and then give it to the world for free.”
Spoken like a proud papa.