Good day. Scientists Benjamin Holmes and Nathan Castro founded Washington D.C.-based Nanochon in 2016 to advance technology they invented at the George Washington University School of Engineering and Applied Science. Nanochon’s implant could be a less-invasive alternative to knee-replacement surgery, which is painful and involves a long recovery.

Since knee replacements have a limited lifespan, they are typically reserved for older patients. Initially, Nanochon intended to serve this population. But after conducting market research, Holmes and Castro found younger people with sports injuries, who aren’t candidates for knee replacement, would be a better near-term opportunity. Sports-medicine physicians, they found, didn’t have enough options.

Nanochon’s implant, designed to replace cartilage and help new cartilage grow, might help patients resume normal activities sooner.

Nanochon recently raised more than $2.8 million in new financing, from venture investors including cultivate(MD), to develop its technology for patients aged 18 to 55. It aims to secure Food and Drug Administration approval in 2027, Holmes said. We spoke with him about Nanochon’s technology and fundraising. This interview has been edited.  

WSJ Pro: When you started Nanochon, you initially planned to apply your technology to older patients. After interviewing surgeons, you chose to target a younger population instead. What did you hear from surgeons that made you change your focus?

Holmes: What we learned very quickly was, when it comes to the surgeons and clinics, knee replacement is very reliable, they can do it really quickly and really well. They can do hundreds of them a year without really having to think about it. We found there wasn’t much incentive to do something other than knee replacement. In sports medicine, it was the opposite.

WSJ Pro: What was the impact of that strategic shift for Nanochon?

Holmes: Once we really gleaned all these insights and focused on sports medicine and a younger population, the company really accelerated. We haven’t deviated from that path really at all since we did that customer discovery.

WSJ Pro: What future opportunities could Nanochon pursue?

Holmes: One direction would be translation into the older population, traditionally thought of as knee-replacement candidates. Once we have FDA approval and go onto the market to treat the younger, pre-knee-replacement population, clinical success there could create demand and allow for translation into an older population. The other would be to go into other joints, applying the existing product to the ankle, shoulder and hip. There’s a lot of opportunity to address all types of skeletal injuries and disease.

And now on to the news...

Extending rounds. Venture capitalists are leaning on relationships with their peers to pull off extension rounds—financing that can help safeguard a startup’s valuation during down markets, WSJ Pro's Marc Vartabedian reports.

• These deals often happen without standard fundraising pitches, meaning venture investors need to hash out terms among themselves. “Relationships have gotten more important than before,” said Dean Hatton, co-founder and co-managing partner at seed-focused Las Olas Venture Capital.
   
• Raising a new round of funding at a higher valuation has gotten harder in today’s slumping venture market. For a startup, accepting a lower valuation is often seen as a black eye because it could signal the business is faltering.

Google lost an antitrust case over the market power of its app store on Monday, a blow to the search giant as it faces other legal challenges to its search dominance and ad tech business, The Wall Street Journal reports. Videogame maker Epic sued the search giant in 2020, alleging it used its dominant position to squeeze excess profits from app developers.

• The San Francisco jury reached a unanimous verdict after deliberating for less than four hours. Google said it would appeal the decision.

Private-equity firm Veritas Capital is close to a deal to sell a stake in Cotiviti to alternative-asset manager KKR in a deal that would value the healthcare-technology company at around $11 billion, WSJ reports. KKR could finalize an agreement to buy a 50% stake in Cotiviti from Veritas as soon as in the coming weeks, people familiar with the matter said, assuming the talks don’t fall apart. If the firms reach an agreement, the transaction’s potential valuation would rank it among the largest U.S. private-equity deals announced in the past year. Private-equity deal making has slowed sharply since the Federal Reserve began raising interest rates last year, which has made it more expensive to finance takeovers.

People

Silicon photonics company Ayar Labs promoted Mark Wade to the post of chief executive officer, succeeding Charles Wuischpard.

SumUp, a provider of financial technology to small businesses, scored a €285 million (about $307 million) investment. Sixth Street Growth led the funding, which included participation from Bain Capital Tech Opportunities.

Armada, a San Francisco-based edge computing startup, exited stealth with more than $55 million in funding from Founders Fund, Lux Capital, Felicis and others.

Aria, a Paris- and London-based provider of deferred payment infrastructure to businesses, landed a €15 million (about $16.1 million) investment led by 13books Capital.

German Bionic, a Germany-based developer of an electric-powered robotic wearable, secured €15 million in Series A extension financing from investors including Benhamou Global Ventures and others.

Origin AI, a Rockville, Md.-based WiFi sensing technology startup, closed a $15.9 million Series B extension round from investors including Verizon Ventures.

Durable, a Vancouver-based website builder and small business platform, snagged $14 million in Series A funding led by Spark Capital.

Helicity Space, a startup developing in-space propulsion and power technology based on fusion power, collected $5 million in seed funding from Airbus Ventures and others.  

CitrusX, a Tel Aviv-based artificial intelligence validation and explainability platform, emerged from stealth with $4.5 million in seed funding led by Awz Ventures.

• New York joins IBM, Micron in $10 billion chip research complex 
   
• SEC probes investment advisers’ use of AI
   
• The biggest winners and losers from the work-from-home revolution
   
• Judge appoints receiver to liquidate GPB Capital holdings

This newsletter was compiled by Marc Vartabedian, Matthew Strozier and Zachary Cole.

WSJ Pro Venture Capital is a premium service of The Wall Street Journal. We cover venture capital and the global startup ecosystem. Share your tips, comments and questions: vcnews@wsj.com

The Team: Matthew Strozier, Yuliya Chernova, Brian Gormley, Angus Loten and Marc Vartabedian.

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