Behind the Deal: LSK Technologies
By: Jonny Hsu
Tags: VC, Tech, Healthcare, Startup, Funding

Front Row Ventures is Canada’s first student-run venture capital (VC) group. Powered by Real Ventures, we aim to inject the VC mindset into the University ecosystem and back ambitious student founders who are challenging the status quo. LSK Technologies was one of our most recent investments, and I am very excited to share more information about them in this blog. LSK is bringing the power of commercial diagnostic testing (bacterial/viral infections) to the point of care (POC).

Meet the Founders

(Photo credits to Velocity Waterloo)

We first came across the founders in early April 2020 after they had pitched and won the Velocity 100K competition at the University of Waterloo. Seray Çiçek and Livia Guo were two recent graduates who obtained their master’s degrees in Pharmaceutical Science at the University of Toronto. The duo has tremendous technical synergies. Seray had previous founder experience having launched a medical device startup, Xpan. She also worked at Sanofi Pasteur. Seray specializes in hardware, business and molecular biology. Livia, on the other hand, obtained her Honors Bachelor of Science in Pharmaceutical Chemistry at the University of Toronto and specializes in software and analytical chemistry.

LSK was born through their master’s thesis while they were working at Pardee Lab under Keith Pardee, the Canadian Research Chair in Synthetic Biology, at the University of Toronto. Keith provided an additional layer of technical expertise and had a massive network that allowed LSK to test its device, assist LSK in product development, and develop supplier relationships for LSK.

Problem

Traditional diagnostic devices are housed in centralized laboratories for bulk testing. The emergence of COVID-19 has placed tremendous strain around our testing capabilities and we’ve seen governments around the world struggle to keep up with the demand for rapid testing for COVID-19 control. Some of the main problems with centralized diagnostic testing include:

Increased wait times for patients: Individual samples must be consolidated and sent to the central lab before getting tested, which takes time. Patients can expect to wait up to a week before hearing back about their results, preventing staff from being able to make rapid treatment decisions. For time-sensitive illnesses (diseases that spread i.e. COVID-19, STI’s, and other bacterial infections), this problem is magnified.

Additional costs: Transport fees, costs of lab analysis, additional staffing and cost of packaging adds to the cost of commercialized testing. It increases the cost for the end user and can cut into the revenue made by doctors and clinics. Companies such as Abbott have put out reports on their website that quotes a potential $230 USD cost saving per customer with the implementation of POC testing.

Moreover, existing POC devices are limited in their testing capabilities. Typical POC testing devices can only run one sample at a time.

Solution

(Photo credit to LSK Technologies）

LSK has developed PLUM, a diagnostic device which can test 95% of all bacterial/viral infections (including COVID-19) and 80% of immunological tests as well as conduct common lab tests for various research purposes. They are making diverse testing capabilities, high throughput sample processing (up to 47 samples per hour) and extreme portability (~2kg), affordable at the POC. This is achieved through their novel reflected light method that eliminates the need for bulky, expensive hardware, which is replaced by a much cheaper and portable image processing software. A typical commercial plate reader will cost anywhere from $30,000-$100,000, whereas a PLUM device costs only a fraction and will be one of the cheapest on the market.

Our Investment

Our investment thesis focused on a few key points: (1) PLUM is strong product with technical defensibility and a unique value proposition; (2) a very large and growing in-vitro diagnostics market along with great timing; (3) the products impressive traction; and (4) their strong team paired with a solid support network.

Product:

LSK’s unique value proposition is carved out from their ability to bring such a diverse range of testing capabilities along with the power of commercial testing at an affordable price point to the POC. One barrier for POC testing is the need to hire certified lab technicians to operate the devices. LSK also has an exciting future in that they will automate the testing process using their image processing software with spatially labelled samples and scannable barcodes for sample tracking, which will remove the need for certified lab technicians.

Market:

At FRV we want to back ambitious student founders looking to solve huge problems in massive markets and that’s exactly what LSK is doing. The in-vitro diagnostics market is expected to reach a value of $87.93 billion USD by 2023. We have strong convictions that the future of diagnostics is going to lie at the POC, and COVID-19 is only accelerating this trend. In particular, rapid turnaround times, reduced cost for the end user, and the elimination of bottlenecks are some of the things pushing for POC testing. In terms of timing, the emergence of COVID-19 created ample opportunities that will accelerate and benefit LSK’s go to market strategy. Some of these opportunities include:

With the emergency authorization of regulations making it significantly easier to get certified under Health Canada, the average turnaround time is now 40 days. Increased demand for rapid POC testing because of COVID-19. Increased awareness towards the need for rapid POC testing which causes an increase in availability of funding from both private investors and government (grants, tax credits etc.).

The opportunities created by COVID-19 will help with LSK’s go-to-market. However, the true value proposition arises when clinics, workplaces, pharmacies, and other LSK customers realize that PLUM is so much more than just a rapid diagnostic device for COVID-19 testing.

Abbott’s ID NOW Devices: In the News

On September 29, 2020, the Government of Canada announced the purchase of 7.9 million Abbott ID NOW rapid POC testing systems. Abbott’s device is used strictly for COVID-19 testing: it collects samples via nasopharyngeal swabs (you’ve probably seen how uncomfortable it is to get a sample collected this way), and it can only run one sample every 13 minutes. For COVID-19 testing to be effective, it is necessary to get continuously tested and test negative every time. Think about how uncomfortable it would be to have to do nasopharyngeal swabs a few times every week. On the other hand, PLUM has a vast range of diverse testing capabilities and is not restricted solely to COVID-19. Moreover, PLUM can analyze oral fluid or mid-nasal samples (no nasopharyngeal swabbing needed) and can run up to 47 samples per hour.

Traction:

At the time we were talking with LSK, they had a few letters of intents and discussions in place with clinics and workplaces in the Kitchener/Waterloo region. In addition, they were close to solidifying a supplier relationship with New England Biolabs, one of the world’s largest reagent manufacturers.

Team:

(Photo credits to the University of Toronto)

At FRV, we focus a lot on the team and we were very impressed with the LSK team. Not only did the co-founders have the relevant technical expertise and prior start-up experiences, but we also saw tremendous value in the support network that LSK was able to surround themselves with. While working out of Pardee Lab and working closely with Keith Pardee, they built a high-quality technical network to help with product development and build relationships in the industry. Furthermore, with investments from Velocity and Y-Combinator, LSK acquired additional support to assist with their business model, go-to-market strategy, and future rounds of fundraising.

Moving Forward

Post investment, LSK is working in Velocity’s lab space at the University of Waterloo. They’ve also built significant traction. Since we invested, LSK was able to secure 20 pre-orders and also signed 7 letters of intents. LSK has manufactured their first commercial units and is deploying them in Canada, US, Ecuador and Columbia with their early adopters. LSK’s devices will be used to detect COVID-19 in patient samples before the end of 2020.

In terms of support, LSK has raised approximately $350,000 from a mix of angels, small VC’s, and non-dilutive financing and is currently working with Pardee Lab to complete the $500,000 CAD collaborative partnership grant from the Government of Canada.

LSK is currently raising their Seed round in preparation for manufacturing PLUM at scale.

Conclusion

We believe LSK has carved out a unique value proposition through a defensible product which enables them to capture a significant portion of the large and growing in-vitro diagnostic testing market. A strong founding team with technical expertise and a diverse support system made up of Velocity, YC and FRV backing them, will only help them execute on the opportunities presented to them from the positive market timing factors we touched upon earlier. We are incredibly proud of the way LSK has grown even through this pandemic, and we are excited to continue working with the team in the future to challenge the status quo of point of care testing