jesse cole - synthesis ventures

Welcome to another VC Wisdom podcast. We have Jesse Cole with us today. Jesse's a founder at the Synthesis Ventures, uh, co-founder that is, been running that one since 2 years, invested in a bunch of companies, uh, for example Reflections, Scout AI, Whip. I see a bunch here, uh, and yeah, formerly founder himself, uh, held a bunch of different roles, started out in equity. Jesse, welcome to the podcast. Tell us a bit more about yourself and what you're up to.

Thanks for having me. Thanks for everyone who is joining on this holiday. Yeah, no, it's a pleasure to share some of my experiences. And, you know, anytime I do anyone's podcast, especially when I'm a guest of someone like Charles Cormier, you know, I don't like to only share just the wins. I think it's super critical and super important for everyone to understand that, you know, certainly venture is not for the faint of heart, right? It certainly takes someone with a lot of courage, a lot of grit, but also someone that can manage, you know, sort of the uncertainty and the ups and downs that, you know, this profession and this career choice does, does in fact bring.

How did you start out in life before you were VC?

Well, you know, I graduated from Cornell University and spent, you know, 3 years on Wall Street before I went back to get a graduate degree at Columbia. And I really wanted to go and become an agent in Hollywood, but being from the East Coast, you know, during that time in the, in the mid-'90s, late '90s, wasn't the easiest profession to get a job in coming from the East Coast. It was very sort of LA/Hollywood dominated. Uh, I had been recruited by Ed Hyman, who is now the chairman of Evercore ISI, uh, to come work in his think tank back on Wall Street. Very, very coveted job. And, um, you know, I thought learning from someone of his legacy, someone of his experience, some of his overall know-how, I thought what a great place for me to sort of you know, start, you know, a Wall Street career after I, I had done a couple years prior to going to, to graduate school. Um, you know, after working with, you know, Ed Hyman for 3 or 4 years, I took, I took a couple of different roles, you know, on Wall Street, constantly trying to upgrade my position and my visibility. Um, and I started my own platform in 2006. 6, uh, which was backed by, you know, one of finance's most notorious, you know, uh, entrepreneurs slash investors, a guy by the name of Stephen Schoenfeld. And so I built a broker-dealer for Stephen. We grew that business to somewhere between $40 and $45 million top line, high margin business, and we sold that business to a Sequoia-backed business on the West Coast called Merlin. I joined Merlin as a senior partner, ran their global research sales and trading platform, uh, and we grew that business quite significantly in a short period of time. And within 3 years of me joining, we sold that company to Wells Fargo for $300+ million. Uh, it was quickly thereafter that I, uh, became the CEO, chairman, co-founder of a women's contemporary clothing brand called Haute Hippie. At our peak, we had over 3,500 points of distribution. You know, we grew the top line to about $40, $42 million in sales, and that was a combination of wholesale, retail, um, yeah, and direct. And that was really sort of the beginning of the direct category. You know, we sort of were in that category very, very early. It was very, very, very hard, very, very challenging to understand, you know, how to really build out the direct-to-the-direct category, especially when you were selling, you know, in wholesale and you were selling at retail. You know, it was a, you know, your deliveries are, you know, 12, 13 deliveries a year. Women were becoming much much smarter, much more in line with markdowns and markdown cadences. And, you know, they were able to not have to buy something full price and knew that since you were delivering, you know, several times a year, that they could wait a couple of extra days to a couple of extra weeks and get what they would have normally bought, you know, at full retail. They would have got it at, you know, somewhat of a discount. In any event, we sold that business to private equity in 2017, and that's when I started to invest in early-stage consumer businesses. And, you know, I was more or less at the mercy of social media and the intersection of traditional and non-traditional forms of media. Like a lot of people who are in venture they get caught up in what's trending. Certainly I did, um, and I made my first, first series of investments, smaller to mid-sized check sizes. But frankly, I had no idea how to underwrite an asset. I had no idea how to really qualify a founder, and I really had no idea how big the markets were that these companies were, were sort of entering into. Um, and so, you know, I realized after about a year of making personal investments, this isn't really what I was intending to do. I really wanted to provide and insert myself operationally, organizationally, help early-stage founders, you know, with a variety of different, um, you know, more or less solutions to challenges that they all face. And I found that once I wrote a check into these businesses, information was very, very hard to come by. Getting access to these founders was quite, quite challenging. But I also realized that, you know, a lot of these early-stage businesses got a lot more visibility and a lot more attention than they truly deserved, right? Because of the introductions to, you know, a variety of social accounts the internet and so forth. And so what really, really became, you know, a focus for me was understanding how to spot or identify what was a trend, what would to be, what was to be a trend to, um, I'm sorry, a fad, a fad to a trend, a trend to a sustainable business, you know, a sustainable business into a monetizable asset.

Interesting. And that's what's led to Synthesis, Synthesis, because you were an investor before that. But yeah, Synthesis, you've launched it with another co-founder, I believe.

Tell me a bit more about, uh, prior, prior to Synthesis, you know, in 2019, you know, as I started to become, you know, tired of writing my own personal money into these assets you know, I started a fund called the Seed Lab, and the Seed Lab was, you know, a smaller fund by nature. You know, as we started in 2019, raised a bulk of our money, you know, right in and around the start of COVID And so we launched with about $20 million, and we made about 10 to 15, 10 to 12 different— excuse me— investments. And it was consumer, consumer first. But then we became more of an agnostic platform, uh, just because there were so many opportunities. The world was changing rapidly. We didn't want to go out and raise any more or additional capital because we didn't really know how the world was going to shake out, right? The landscape was changing both from a macro perspective. It was changing every single day. And so, you know, we invested, you know, all, you know, 100% of our capital over 10 or 12 assets in an 18-month period. So, you know, law of averages, 3 or 4 of our assets from first fund are percolating. You know, some are doing better than the others. And then, you know, the, the balance of the portfolio are either write-offs or companies that, you know, probably are sitting in the right category, in the right, you know, space, at the right number that they should. You know, a lesson that I teach people Not every business needs to be the next billion-dollar idea, right? You know, when I was running Haute Hippie, we were doing $20-25 million in top line, right? You know, we were kicking off somewhere between 10 and 15, you know, in a good year, 20% of free cash. But the demand was there. Everyone was coming after us because we had what people were calling the hot woman's contemporary brand. And you all think as a founder that you should swing for the fences. And so we start to expand rapidly, and with that rapid expansion becomes, you know, much bigger personnel footprint where you are hiring people, right? Before you know it, I was running 100 and 120-something people, and that was a combination of retail, wholesale, direct, you know, and all the other different you know, sort of verticals that help, you know, push apparel through, through the pipe. And it was very, very, very challenging, right? Because, you know, when you're a small to midsize apparel company, you're not getting, you know, the best employees. You have to overpay for people, right? And so one of the qualifications I look for when I invest in a founder— does he have the ability to hire and fire? For the right price, right? And does he have the right mechanics to lead teams of people, right, all under one mission? So, so these are things that I look for when I am, you know, building a business, when I am investing in a platform, when I'm building a fund.

The Seed Lab was like more B2C. Uh, it seems that Synthesis also does B2B. I mean, I look at some your last investment, right, with Scout AI, Reflection, Colossal Biosciences. Uh, is your thesis different? Uh, the check size seems to be similar, right? $500K to $2 million.

Well, Charles, you know, it's an interesting thing. When, when I started Synthesis Ventures, which is my second fund, I brought in two new partners. And, you know, I am backed by one of the wealthiest families out of Turkey and we have 2 other investors in the fund, right? And so it's a pretty considerably sized fund. But, you know, I made sure and made certain that my partners knew going out in a very, very challenging market to raise capital when you are 3 founders that do not have a collective track record individually, we all do. One of my partners came from one of the biggest hedge funds where he was a portfolio manager. And then he worked for one of the largest single-family offices running their venture and port private equity portfolios. My other partner is younger in nature, but he worked at Accenture in the private equity group. Then he went to work for a consumer fund, consumer venture fund, having experience as an operating CEO for one of their portfolio companies. And so, you know, we modeled out, you know, $65, $75, and $100 million. And $65, $75 seems to be the right number for Synthesis, right? Because we're writing checks of $1 to $3 million. And in certain assets, we're holding back some money for follow-on capital. But, you know, we are, we have a very, very disciplined approach to what we do. And so, If you have $100 million, A, it's gonna require more personnel to help assist in the scouting process and the diligence process and the financial underwriting and so forth. Now, there just aren't that many great assets out there that fit our thesis that can get through our investment committee, right? Now, if you've got, if you're sitting on, on a large sum of capital, right, and you start to feel the pressure or the stress to deploy that capital, you will start to make some irresponsible choices just to put that money to work. And so, you know, $65, $75 was the right number for the first fund. And what I did was I went out there and I found assets like Reflection AI, like Scout AI, like Colossal, like Pathwater— companies that I believe are going to be some of the biggest companies in the world, companies that, you know, will be some of the most talked about businesses in the world, but are at the intersection of societal good, right? And the ability to capitalize and make money. And so when we sort of put a— drew a hard line in the sand and said, we are gonna capitalize Synthesis at $75 million, instead of me going out there and raising additional capital for the fund, I went out there and found companies like Colossal and Pathwater, you know, and so forth. And I went out and I started raising money for these companies directly, right? And I'm a big believer that, you know, everyone talks about seeing quote unquote deals, right? Everyone says, oh, I have a great deal. I have a great deal. Someone showed me a great deal. Well, it's not a deal. Right, unless there's a deal component to the asset. Otherwise, it's just an opportunity to invest in a private company. And so I establish very, very good relationships with founders, spend a lot of time with these founders, qualifying the founders, right, both personally and professionally. From a personal level, I want to make sure that they've got great, great role models in their life, past and present. Right, I want to make sure that they've run companies or they've worked in operational roles in the past, right? I want to make sure that they've got the right courage, the right grit, right, the right creative mind, you know, to run, to run a business, right? From a professional standpoint, again, I want to make sure that they can hire and fire. I want to make sure that they are frugal with capital. I want to make sure that they can run and manage a team. Right? I want to make sure that they see the world from a macro lens, right? Because they just don't know what's going to happen from a macro perspective tomorrow that may impact their business. So I qualify these founders the best of my ability, okay? And, um, after I decide that this is an asset that I want to continue to pursue, right, Right, then I start to do some of the work, you know, behind the scenes. What is the total addressable market for the asset? What does the competition look like? How much capital will these companies need to get into market and then to exceed at what they're doing or excel at what they're doing? Right, and so I look at a variety of different tangibles and intangibles, you know, prior. And then what I do is I go and I extract a quote-unquote deal from the founders. Everybody loves a deal, right? And so I then go ahead and I propose these opportunities for a whole different variety of investors, right, that I have brought into these assets. And I've raised over $150 million, you know, literally in the last 2 years for private assets that are not in my fund because Now for fund 2, playing the long ball for fund 3, as these great businesses, you know, begin to monetize or get more and more traction, get some marks and, and so forth, it'll be easier for me to go back to this investor base and say, we invested in Colossal, we invested in Pathwater, we invested in a variety of different assets. And they're all trending, they're all sort of accelerating, now it's time for you to take a look at my fund.

Interesting. How did you get access to Colossal? Uh, tell me a bit more about that one because it seems that it's good media, right, on the front end, but do they have like a business model as well? Like, is it scalable? Is it a potential unicorn?

So right now it's— it is, it is a unicorn. It's valued at $10.5 billion. I was first interested—

what's their business model? Like, what— how'd they make money?

So it's, it's, it's, it's a full, you know, sort of flywheel for Colossal. I mean, Colossal is a, a company that was, that was created by a guy, a founder named Ben Lamb. Ben Lamb had 4 previous startups, right? He's a 45, 46-year-old PhD from Baylor. You know, he's a magician at networking, he's a magician at marketing. And more importantly, he's a great leader. And so a scientist by the name of George Church, who's a Harvard-backed scientist, has been championing de-extinction for over 20 years. The problem is, is that, you know, people tend to listen to scientists a lot less, you know, than they really should. Now, if you pair a scientist with an entrepreneur, that will give the scientists a greater give him greater exposure. And if that entrepreneur can go out and raise money for that scientist's initiative, then there's a possibility that people will start to take notice. And when the two of them came together, Ben Lam went out, raised a bunch of money, you know, for Colossal, and he was the champion behind what George Church has been speaking about you know, for, for over 20 years now. It's a conservation company, it's a preservation company, but there are much, much more sort of verticals that are feeding, you know, the growth of this asset. Now the company's got 200 scientists on staff, and a big lesson, you know, my father said to me when I got to Cornell, he said, look, if you're the smartest guy in any room at Cornell, get out, right? And so you bring 200 scientists, you know, under one umbrella at Colossal. The amount of brain power that these people have sort of accumulated, cumulatively come together with— some of the spin-offs from Colossal are, are, are revolutionary, right? They're changing the world. So here's a company that's bringing animals back from extinction They brought back the woolly, woolly mouse. Then preceding the woolly mouse was the woolly— I'm sorry, was the dire wolf. Then came the moa, which is an indigenous bird to New Zealand, you know, a 6-foot-tall flightless bird. But I was introduced to the company through another founding group, you know, out of Point72 Ventures had introduced me to Ben Lamb. I spent 2 or 3, 4 weeks really getting to know Ben Lamb and what he was building and what he was creating, you know, at Colossal. And I said, you know, if we, if we look, you know, if we, if we look a little bit deeper than what meets the eye, if Ben Lamb can prove out the science and actually resurrect animals that have been eliminated from our planet for thousands of years, you know, this could be the gateway to life extension. Right? And we all know that the big money today is all investing in life science and life extension and wellness.

I asked the question though, like, how do they make money, right? Like, is this a 100% bet on like future income, or—

well, no, the company, the company made money in 2025. This year we'll see you know, significant growth. You know, this past week the company, uh, made an announcement where they birthed chickens from an artificial womb. And so not looking at it for face value, look at it— an artificial womb, which is a synthetic womb already producing real DNA, will be the most disruptive thing in the world of fertility. Okay. The company's got several spin-offs that already have valuations that are exceedingly high, but the company will make their money from licensing from IP. They will make their money from government contracts. Okay, they're working in In-Q-Tel, which is an investor in Colossal, which is the CIA's investment arm, and DARPA, which is a defense, you know, a defense division of the U.S. government. They are working on national security. About 3 months ago, the Middle East, who's an investor in Colossal, they announced our first ever bio vault, which is a vault that's a collection of over 10,000 DNA samples from all the animals throughout the Middle East. Now we've got other countries that are looking to, you know, insert bio vaults in and around their countries as well. And that comes at a great cost, right? But when we announced the woolly mouse, which is a derivative of the woolly mammoth and a regular mouse, you know, the attention that was received by the younger generation, you know, this made— it went global viral, and this made science cool again. So now if you think of the applications, from bedsheets to water bottles, right, to wallpaper, to video games, right, to virtual reality, to real life experiences. The Middle East really want to create Econo Lodges throughout, throughout their countries, right? So you can go with your family, instead of going to a zoo, you go and have a safari-like experience living in, in a caliber of a Four Seasons resort in and around woolly mammoths and dodo birds and Tasmanian tigers and moas and dire wolves, right? It's just a new experience for people to enjoy. Yeah, I've been seeing before in the Middle East would really like to bring tourism, they would really like to bring hospitality back to their countries as they spent hundreds and hundreds of billions of dollars making it a place where they want people to come visit and enjoy.

Right, right. Huh, it's interesting though, like, uh, the trends right now could be pointing towards a non-physical environment, like people visiting zoos, and then the investment of creating a zoo.

There's 15,000 zoos in, in, in the world, right? If you go to the Central Park Zoo, you're paying $60, $70 to see polar bears and ant farms. Right? But if they had a license and they had a woolly mammoth, the upsell from a zoo could be enormous, right? So these are becoming the new attraction, right? But as the company starts and continues to establish itself, you know, what the discoveries from the company are putting into market and what they're creating, it could change our lives forever. And that's the kind of moonshot idea I look for. Because, you know, when the company was only 3 or 4 or 5 months old, elephants were on the short list of extinction. They die, and they die early for two reasons. One we can control, and the other we can't. The first is poaching, which is a big— it's a big epidemic, right? The second, they have a genetic malfunction which causes herpes in elephants which kills the species. Colossal Biosciences has already come up with the cure for elephant herpes, which has now eliminated elephants from being on the shortlist of extinction, which is a major breakthrough. And so governments all over the world have been spending millions and millions of dollars trying to find a reason why these elephants have been, you know, dying off. Here comes Colossal and they already have the cure.

Interesting. Yeah, no, the R&D that these companies generate is the same as SpaceX, right? Like, to me, SpaceX is mostly like the, yeah, fanfare of like seeing a rocket go up and the amazement. But I guess it's more than that. It's also like R&D that it generates that can be applied to more on-Earth fields like health and all of that, right? So, uh, but yeah, it's intriguing. So It has like the media headline, the colossal companies. I think their last dire wolf thing has not been viewed favorably by the scientific community. So let's see how that impacts them. But it's certainly a moonshot. It's certainly exciting. It certainly has people turn their heads. And yeah, great team, obviously. Also, the arguments— I think someone commented patents and all that. Well, depends if they have the, the desire and the cash to defend these patents, which they do, I think. But my opinion is the team behind it, right? And the, like you said, 200 scientists, like, could be an acqui-hire of some kind, always in the worst case scenario. So, um, yeah, Jesse, thanks for being on the show. What's, what's next for you? What's, uh, what are your objectives for this year?

Um, you know, it's a really, really good question, Charles. I think, you know, what's most important is, you know, the world is changing so rapidly. And I tell some people, when I was a kid and my father came home with the Sony Walkman, it was like the most major thing I had seen in technological advancement in my entire life. Able to walk around with music in the privacy of myself and bring that music anywhere. And it was 6 months later where he came home with a microwave where you're able to heat your food in 30 seconds. Then it was 3 to 6 months later, he came on with some iteration of the Betamax or the, Betamax or the VHS where you could watch a home movie. Now there's so much innovation in technology every single day that it's very, very, very hard to keep up. And so What I try to do is I spend an enormous amount of time with my founders, right? And if I can't support or help them from an organizational, organizational or operational perspective, I am probably a quarter to a half a degree of separation of someone that can. And so I want to make sure that my founders that have not only my investment, but my community of investors dollars in and around their platform. You know, I'm a big believer 4 eyes are better than 2, and anyone operating as an island is going to get squashed. So I want to make sure that these assets that I have chosen for investment, they have the right support they need, especially at a time when there is so much going on that they need to remain focused, keep their eye on the ball, not get distracted, have enough capital to help him get through these sort of uncertain times. And hopefully we see the bright side— the bright side of the other side.

Love it. So that was Jesse Cole and Charles Cormier for another