49. Shahin Farshchi Ph.D, General Partner at Lux Capital

Foreign.

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Episode 49 of Tech Cars Machines. As you know, this is your host, Ali Tabibian. We have a great guest for you today. We already had a quick back and forth with him, Shaheen Farshchi of Lux Capital where he's had a number of great wins from the semiconductor level through autonomy and space systems even. There are two things I'm particularly looking forward to for this session. First, I'm a big fan of people who use really nuts and bolts initiative to shape their careers. An initiative is really what it's all about, in my opinion. And how Shaheen got into Lux is a great example of that that I'm looking forward to getting into. Second, Lux Capital, which today has 5 billion under management and about 30 professionals, has held my fascination for a long time due to their sincerely contrarian stance and I'm quoting from their website, converting sci fi to sci fact. Their otherwise encouragement of deep tech, not shying away from hardware or capital intensive initiatives. A patriotic narrative that's always run through the firm. These were very unique several years ago and even today, sort of the intensity and the combination still stands out. When I was preparing, for example, it's sincerely nerdy to put an acronym for Knight Industries 2020on a partner's bio. The partner being Shaheen here. And we'll get into that a little bit now. In my experience, when institutions or people have long held convictions that have frequently been different from the conventional wisdom, they've developed a lot of nuance around those beliefs. As such, I'm going to skip a lot of the data driven usual introductory summary and let the story speak for itself. So let's get to it. Shaheen, welcome. Welcome back again. Did I get anything wrong on that introduction?

You did it better than I would have.

Okay, great. I just, and I meant that sincerely because there's so much that's different about Lux Capital that normally I'll do a couple minutes on. Okay, here's what they've done, investments, etc. But there is a real, real difference. The way you guys have always looked at the market that at least I perceive. Shaheen, tell us a little bit about the story of Lux, where it came from and how you joined and where it is today.

Absolutely. So Ali, great to be here and thank you for inviting me. Really an honor to be part of this cohort of fantastic interviewees. So Lux was created in the ashes of the dot com bust by two guys, Peter A. And Josh Wolf, who came up with the thesis that the next wave in great company creation is going to be rooted in innovations in the basic sciences or nanotech. And if you recall, in the early 2000s, most investors were chasing after ad tech and more traditional software. Obvious this is before SAS and Pete and Josh took it upon themselves to build an institution that specializes in funding companies built by postdocs and professors at universities, labs that were really trying to make a difference. A lot of the early investments that we made were in areas relating to basic material science, in applying basic material science to drug discovery. And over time as a firm, as we grew, we introduced new disciplines into the mix. So when I joined in 2007, we started investing in semiconductors, we started investing in healthcare more broadly. So not just therapeutics, but also medical devices, surgical, robotics. With the addition of Bilal, who has a physical chemistry background, we did a lot more in energy and renewables. And with the addition of some of our more recent team members, we started doing a lot more in software, basically culminating into the firm the way it is today, which is investing in the physical sciences, the life sciences and computational sciences broadly. And so what we typically look for are world class founding teams that are solving hard problems. Now, if those hard problems may have been rooted in nanotech in the early days of the firm, the disciplines that those hard problems are in are now spanning across everything ranging from basic materials, basic sciences, all the way to software systems and even broader societal challenges. And we're very honored and very fortunate to be tasked with a multidisciplinary approach to investing here.

You know, a great example of that multidisciplinary approach. Our last podcast was with the CTO of amd, and on the AI side, Hugging Face came up, which is, if you will, the GitHub for AI. And I believe that's one of your, one of Lux's investments, portfolio companies as well. And then on the defense side, yes, Anduril, I think, is another one you may want to just point out to our listeners, which is getting a lot of attention these days.

So it's interesting that you mentioned these. Both of these investments were very much team investments. So my partner Brandon had the fortune of meeting Clem when he was in the process of pivoting Hugging Face from its earlier business model to what it is today as a repository for large language models and AI models broadly. And it was really just a bet on Clem and building a monster business. And we're very fortunate to have been part of his journey there. In the case of Anduril, it was also a bet on, on Trey Stevens at Founders Fund who has a relationship with my partner Josh. And when he presented the opportunity to be part of his journey early on, we obviously jumped on that. And again, like these are examples and we'll keep on coming back to this where ultimately we are investing in people that have great ambitions to solve hard problems and strike us as individuals who have that magnetic force to be able to att amazing talent on that journey.

That's right. It's amazing the people you invest in, how much of it is actually their ability to sell other employees on the concept rather than sell the next investor on the concept. It's very fascinating. So, Shane, I'm in San Francisco and your background is a pretty local one, right? You grew up right around here. Maybe take us back to there because at least looking at your bios online, it was a early found, very early love for what you've been doing for your whole career.

That's right. That's right. So my passion for science and engineering goes back to growing up in the Bay Area. So I was born in Berkeley because my father was at UC Berkeley getting his graduate degree in mechanical engineering. And I just grew up around punch cards and computers and dialing into bulletin board systems. My, my aunt owned a computer store and I would help her assemble PCs. A lot of the old broken PCs would end up in my room that I would fix and put together and play games on them. I would log into bulletin board systems to download games that I otherwise couldn't afford to buy. And it was a good time as a kid. And that created this hunger and curiosity to learn more about technology. And so I spent probably the first 14 years of my life in the Bay Area. We actually moved to Iran when I was in high school. And that posed a different challenge, having to learn the language. Although during that time I spent a lot more time pursuing my. My passion and fascination for cars. There were a lot of older cars there that needed fixing and needed maintaining and my uncle owned a mechanic shop. So I would go in there and get my hands greasy and, and help fix up a lot of these old cars. So fixing old computers and fixing old cars is kind of rooted in my DNA. I came back to the US for college. I went to UC Berkeley and did electrical engineering, computer science out of greed because a lot of my friends and their older siblings were getting jobs in Silicon Valley Working for Random.com era startups and getting paid good amounts of money and being worth many millions of dollars on paper until obviously that bubble burst. And so I actually did quite a few interviews in the Valley after graduating. And it was very depressing to see parking lots empty, office spaces empty from all the people that had been laid off. And it was so grim that I decided to move to Detroit in pursuit of greener pastures, believe it or not, to pursue my passion for cars. So I worked for General Motors, briefly realized that I'm not one to work for a large company after having interned at, you know, small startups during my time at Berkeley doing software engineering. And so I packed up, came back to California. I applied to, you know, Stanford, Berkeley, San Diego, Irvine, and I got into UCLA to do electrical engineering. And to your earlier question, I'm based in our Menlo park office, so I.

Think our listeners would consider me remiss if I didn't go back and say, I think you said you went. Went back to Iran.

Tuck that in there somewhere.

That's right. That's not Iran in some state. That's not a name of a city in some state in the US we don't know about what brought that. Was that because your father, presumably Iranian, had finished his studies here and went and took the family back? Is that why?

Actually, it wasn't his idea. It was mostly my mom that wanted to move back and it was my dad playing along basically to keep the family together. She was the one that spearheaded the movement. And my dad basically packed up our stuff and put his fantastic job in Mountain View to, To keep the family together and move to Iran, because that's what my mom wanted.

And did they wind up staying there with you, coming here for college, or did they reverse their decision post the revolution?

So our move out there was post revolution, so we went out there actually post war. So it was in the 90s when we moved there. My, my gray hairs might be aging me here, but.

No, no, that's right. I was going off my own clocks, which is. Wow. Okay.

Okay, totally. No problem. So. So we went out there after the revolution and in fact after the war, and I came back in the late 90s and it was, it was quite a. It was quite an interesting experience. And they've been going back and forth since me and my brother came back for college. And in fact, they're here right now.

Oh, nice. That's. I'm happy for you. It's always nice. My, both of my parents have passed away and it's just such a pleasure.

God bless.

Have them around and to be able to really learn from them. You never stop learning from your parents. That's for sure. Well, and so that's quite a story. But you got there at the right time because there was a little bit of a renaissance in the country post war, and then after the nuclear agreement about 10 years ago, and now it's a very different place. But so look, you were at Cal for electrical engineering, is that right? What a tremendous place for doing anything related to semiconductors, especially on the processor side. Right. What people don't realize often is so much of what goes on in the world of instruction sets comes out of calculation. And that's. And then, as our listeners may know from the episode we did with Mavandi, which is a former founder of a company that of Newport. That was it. Newport. No, excuse me.

Anyway, the founder of Innovent. Innovent, with broadcom, acquired for $450 million probably 18 months into its existence.

Exactly. And Broadcom itself is a UCLA spinoff. And really because of that, RF design and communications design as it's implemented in semiconductors is very much almost globally a UCLA born phenomenon. All these communications shifts, the WI fi, even I think the Bluetooth standards, they all came out of there.

It's interesting that you say that because Berkeley and UCLA at the time, the late 90s, early 2000s, were truly leaders in electrical engineering broadly and more specifically circuit design. And what was going on in Berkeley was some very interesting innovations on the VLSI side, the very large integrated circuit side. And there was some very interesting work going on at UCLA leveraging cmos, which is complementary metal oxide semiconductors used traditionally for digital circuits in analog circuits. And the significance of that is that being able to use CMOS means you can rapidly reduce the cost of radios, which is why post, say 2000s, you have probably 20 radios on your body, whereas in the 90s any one individual had to be wealthy to have a radio. That was made possible by the CMOS application, the CMOS revolution in analog and RF circuit design. And UCLA was very much a pioneer there, which is why Broadcom was obviously rooted in UCLA and many UCLA companies were leaders in that general movement. In fact, I believe it was Innovent, which was the firm that the Movandi founders started, which pioneered cmos, Bluetooth, and was the reason why they were ultimately acquired by Broadcom and that became basis of their consumer wireless effort.

After your PhD, I guess you were doing there was. I'm not quite clear on the time, but you were doing a postdoc and. Or a startup, I can't remember which came first and which came second. Take me through that.

Yeah.

And you know where I said what I said in my introduction, which was absolutely fascinating, is the way you started establishing a relationship with VCs and especially Lux Capital. I'm really fascinated by that degree of initiative that you've showed.

Sure. So let's rewind back to 2005. And my PhD research was a very low power amplifier to be able to record neural signals from small animals. So an implantable chip, basically similar to what neuralink is doing, but circa 2005, to be able to do neural recordings over a long period of time without tethering your subject. So an entire wireless interface for that. And so after building that, I realized I have to build a whole software back end so that people could actually make use of these signals. So I was applying what you made today called ghetto machine learning to be able to organize and to be able to create insights from the raw neural signals that were being generated from these electrodes. And that software became very useful to be able to just capture and process biological signals broadly. So I had the crazy idea to start a company that builds portable vital sign monitors that hospitals could be able to, that hospitals would use to be able to track patients while they were being moved around. And so hospitals actually very much embraced this idea. The problem was that smartphones weren't widespread at that time and that computational kind of substrate was not available to me. And so I had to build that kind of machine from scratch. A computer and WI fi, Bluetooth, all the connectivity, I had to build that from scratch. And I learned the hard way that it's one thing to have a really interesting product, another to have a real business. And in my case, the product that the hospitals wanted to buy was something that they were willing to pay a few hundred bucks for. But it cost me almost $1,000 to build this device. So it was a very interesting research endeavor. And we managed to raise some National Science foundation money to further the research, but it was not a viable business. And after shutting the company down, I spoke to a few business folks and they said, hey, you should have raised venture capital for this, because ultimately what would have happened was that your cost of goods would have come down and you would have had a couple of great customer relationships and ultimately you would have made money over the long term. You just needed a way to bridge that gap. And I said, I have no relationships with venture capitalists. And my view of venture capital was one of a club where there is a small handful of executives, you know, at the time out of companies like hp, Microsoft that play golf on the same golf club as a handful of venture capitalists and they fund each other's companies. I didn't know that a guy like me would have access to that kind of funding. And so, so, so to build that network, I decided to, to find a way to get in front of VCs. And I got a great piece of advice, which was get to know venture capitalists before you are asking them for anything. Because VCs are accustomed to people coming to them for money or for advice or both, right? And go to them offering them something. And I asked myself, what on earth do I have to offer a venture capitalist? And it was around that time, 2006 time frame, that I became aware of this whole buzzy trend called nanotech that was capturing investor attention. So I reached out to any VC that I even suspected would have an interest in nanotech and I said, hey, I understand semiconductors and MEMS and nano. If you're interested in companies, be happy to send deals your way. I'd be happy to do diligence for you. And I'm not looking for money, I just want to build a relationship. And a lot of VCs just simply didn't respond. Some of them said, yeah, sure, send us deals. I happened to Google nanotechnology and venture capital and the first Google search result was for this company I'd never heard of, this firm I'd never heard of in New York called Lux, which with a bunch of founders that seemed like they were in their 20s. And so I, I reached out and I said, hey St. Spiel. And they called me same day and they said, hey, you know, we'd love for you to send us deals. We'd love for you to come by and visit us in New York. And so I did that. I actually would apply to, to present the conferences in New York so I could get the school to, to send me out as a postdoc to present at conferences in New York. And I would just use that to hang out with the Lux guys. And so, you know, this relationship actually spanned a good year, year and a half, which was just one. An informal relationship where opportunities I would jump on calls with prospective LPs. And they were actually raising their first institutional fund at the time. And when that fund was closed, they said, hey, do you want to join us as an associate? And I had no idea what that meant. But I was just so impressed by Pete and Josh and their ambition and their intellect and, and their persistence that I knew this firm is going somewhere. And I decided to hitch my wagon to this rocket ship and here I am today.

So that's very impressive. Let me ask you this, when you said I reached out to them, was it leaving voicemails, was it finding their email somehow? What did that mean?

There was an email on their website. Contact us at, you know, infoxcapital.com and I just emailed infoluxcapital.com and thankfully somebody saw that email.

I'm amazed. You must be the only one of the few people I know who actually have used that email on that website.

It works sometimes there's people on the other end. Today it's machines probably, but back then it was a human.

Incredible. And just out of curiosity, was it sort of a non investing person that typically got back to you or did you actually hear that?

It was one of the co founders that reached out to me.

As one of the co founders that.

Reached out to me and said yeah, it was, it was a co founder that reached out and said, hey, saddle up, let's do this.

Wow. Wow. That's. See that, that's the kind of initiative that I think is really differentiating amongst people because we can talk about hard work, we can talk about smarts, but you got to show it, right? You got to get what you know out there and interact with people and good things happen. And that's really. We have a surprising number of people who are, who are younger now, recent graduates, et cetera, that listen to the show. And I just really want to haven't really rewind and listen to this again just how strange it would seem for a lot of people to just send out cold emails and have that actually go somewhere.

But one detail that shouldn't be overlooked is the timeline. It was a probably an 18 month relationship that resulted in a job that, that started off with just a, an opportunity to just build a relationship. So I didn't reach out asking for anything. And that was the goal. The goal was you should reach out offering something. You should not reach out asking for anything. You offer something and ask for nothing. And that was the tone that I set from the very beginning. And without probably ever having to ask for anything, I ended up getting a job offer. And the goal wasn't even to get a job from the very beginning. The goal was to build a relationship and get in to this community to be able to ultimately raise money for my next startup. And so it was very, very serendipitous.

So nanotech back then would have been considered a hard technology. Right? Kind of a hard thing to do. Hard thing to do. And if I, if I'm not misrepresenting anything, I think that a suitable degree of hardness is still what you guys look for at Lux. Is that accurate? And if so, what, what does hard mean? Like, how do you stay on the frontier without being in the wilderness?

The typical question we ask ourselves, is there something this company can do that nobody else can do? And that is the question that's on the top of our minds as we're talking to these companies. And back in our early days when we were focused on nano, it was very much some kind of a problem that they solved in the realm of chemistry or in the realm of physics or materials that has underpinned the company. Today those innovations can be around software, it could be around systems, it could be around strategies even. And so we are still very much looking for some kind of a hard problem that the team has overcome that is non trivial to replicate, that stays in our DNA to this very day.

I think I saw Josh one time say something to the effect of risk taking. Rare but rational is the way he kind of summarized what. But I think that's a nice way of doing it. And I also heard you say something that was pretty interesting, which is, while you've always encouraged me to look for just really great teams and refer them to you, you also generally don't want to bet on a team creating, creating a product or an offering where there's not some evidence that the market is ready for it. In other words, that's one of the ways you differentiate the frontier from the wilderness is market readiness.

So it's very easy to wander into the wilderness. And a lot of companies actually meander in wilderness for many years until they come out with something really interesting. And I feel like it's very challenging as an early stage investor, especially an early stage investor in deep tech, to be able to underwrite to a particular market with a particular product. I think those who at least think they do are either pretending or are fooling themselves. When you're investing at this stage, you are very likely betting on a technology that's not proven, that's selling into a market that doesn't exist. Because if you think about it for a second, if there truly was a market, then that would imply that some kind of product already exists that serves that market. So unless you're purely competing on cost, which is something that a lot of VCs shy away from, you are likely offering some kind of capability that that doesn't exist. Which means that you are making an assumption that if this capability existed, that would manifest in a certain product, then as a result there will be a market. We are typically getting into these things extremely early. And here's where the founding team comes in. We come in extremely early, ultimately underwriting the entrepreneur and their ability to recruit and have the best people around them not only solve the technological problem, but also build a product around it and also be able to move quickly and execute on that market opportunity that comes about as a result. So there's, there's several steps here. It's not just about building a widget, it's about being able to build a market and be able to sell into that market and be able to dominate that market. We can unpack all of this. But when people look at investing in deep tech as purely solving technical problems, they've only gotten maybe to the whatever 30th yard line or whatever analogy you want to use, first base. And they're not even close to building a real business that can ultimately become a great investment for the firm.

If you take a look at what, what you just described and map it into some of the your and your firm's big wins and the lessons learned, which investments would you point out and what lessons would you, would you say have driven the evolution of the firm?

Wow. How much time do you have? So I can tell you that. One, one, sorry, one observation is that you don't know. In the early days, in the early days you can look at a company and the company may seem like it's on a tear and ultimately it may not become a value driver for the firm. And there are other companies that may seem like they're meandering and ultimately become a giant outcome for the firm. I'll give you an example. My partner Josh came up with the idea around nuclear waste remediation and attracted some very high quality scientists and a great operator to ultimately run the company. And the business was challenged in its early days because a lot of VCs didn't want to touch the company. The joke that, that Josh likes to give is they would treat the company like it was radioactive and they didn't want to touch it. But ultimately what happened was that the team was able to jump on an opportunity when it presented itself. And that opportunity was the Fukushima disaster. So the earthquake hits, the tsunami hits, the reactors are flooded and they issue a press release. This the startup curion that, hey, you know tepco, which was the entity that was organizing the cleanup effort, that hey, we can come in there and, and effectively take out the radioactive elements from the flooded Reactor, store them on site and pump the water, you know, the decontaminated water back into the ocean. And they by virtue of having hustle and again you're, you're ultimately underwriting a team, they were able to jump on this opportunity when it presented itself. And the company overnight went from almost zero to a triple digit million dollar business and was ultimately AC acquired by Veolia for close to $400 million a few years later. And that was a giant returner for us. So do we know this early? No. Were we confident in the team? Yes. Did they execute when the opportunity presented itself? They absolutely did and they beat our wildest expectations. And so that gives, that's a great example of how ultimately this is a people business and you are betting on people that can put themselves in a position to get lucky.

Your companies just need to be able to hang around the hoop a little longer as their sort of their sights and the target oscillate around each other and hopefully then intersect eventually.

That's right, that's right. These deep tech companies, the gestation period for the technology is one thing, but the gestation period for the business and the market is another. And usually what ends up happening is that the time that it takes to build a foothold in the market can take longer than the time it takes to actually build the technology. Another example, Mosaic ML. We were fortunate to have funded Naveen in his previous company Nirvana. I actually met NAVEEN Back in 2007 when I was postdoc and transitioning to Lux to have him take over my, my research project at ucla. And he turned me down and he promised to return the favor in the future and he did when he gave us an opportunity to invest in nirvana back in 2014.

So that was right one of the early AI intel. That's right, that's right.

Is one of the first or perhaps even the first AI chip exit. Fast forward to 2020. Naveen assembled a phenomenal group of scientists scientists to build tooling and algorithms for doing AI inference and making AI training more efficient and fine tuning. And he built all this capability. But then large language models were still in their nascency at the time. And when the whole field became mature, he was able to position the company, offer these products to those companies that needed them very, very quickly. And the business suddenly took off and ultimately got an acquisition offer that the team couldn't refuse by Databricks in 2023. And so that's another example of where you build a capability but building the capability itself is not enough. You have to build products around it and execute on the market opportunity that's put in front of you. There were many other companies that were doing, you know, know some things in that area, interest similar things in that area. But Naveen was very quickly able to execute and build a product around a unfolding market need and establish himself as a leader. So again, you know, I just want to keep emphasizing that it's not just technology that gets you there, it's the people that get you there. And technology is just an element of it.

Very good, a very good insight and you know, it's one of those things where no matter how many times you say it, at least in the course of my career, in retrospect, when you do a post, post mortem you still think to yourself wow, I was sensitive enough to the people that I was working with or investing in or, or co investing with. It's really, it's a lesson you constantly have to stay relearn basically.

That's right Natalie. People ask me, especially like folks that don't know much about venture capital, they ask me so, so what do you really do? What's your job on a day to day basis? Because we're not really building anything, we're not really selling. Tell them that we're glorified recruiters. We are trying to recruit amazing people to come take money from us. We're trying to recruit amazing people into our companies. We are constantly trying to attract people and we're in the people business.

What about the, the sizes, the, the valuations of the rounds that you'd like to invest in? I know again the, the public information is from a little to a lot and maybe the sweet spot is 25 million in your case I think but help somebody who's listening to this develop a little better understanding. Under what circumstances is it a good investment for them and you to, to get together?

I hope to be their first call. Yeah, we can cut checks from a hundred $thousand dollars to $100 million.

Right.

We have the flexibility to do that. Our sweet spot is seed in series A and so it could be within that $100,000 to $100 million range or sweet spot can be say 5 to $25 million as first institutional check into what we expect to be a generational company. Valuations, I think you said it best Ali could be extremely varied and it really depends on our expectations as to what the outcome could be and what the capital requirements of the business are. And so I think it's unfair to say that oh, we look for 10%. Oh, we don't want to pay more than $25 million. We don't set those kinds of artificial constraints because we know having been around for a long time, that those generational outcomes are very few and far in between. And we want to be able to capture every single one of those. And the way you do that is by being open minded and by underwriting each one on a case by case basis.

Gotcha. And, but, but you are still looking to be first institutional capital, generally speaking, stats your preference. That's right. Okay.

That's right.

Okay. And so that means a lot of early connections with, with the entrepreneurs. How do you. I'm sure there are some inbounds, but what do you do to make sure you are in front of people who really frequently have only just started thinking about their outreach?

So the first thing, tell us all your tricks, stay very close. Yeah, I'm happy to show you all the tricks in the bag.

So just email them too and we'll.

Post the first thing. The first thing we do, we can just talk about it now. The first thing we do which has been been extremely beneficial to us is stay very close to our existing investments. We have the benefit of having done this for so long and have been close to so many rockstar teams that a lot of the investments that we make now are people that either came directly from one of our prior portfolio companies or someone that was referred to us by someone that was at one of our prior companies. So that has been a tremendous resource for us. Another thing we do very heavily at Lux is spend a lot of time with campuses and just the undergraduate community because a lot of founders can drop out of school and go out and start companies. And so we spend a very large amount of time on campuses with student run groups and just stay close to the community there. And so when opportunities arise, we'd be able to jump on them very quickly. I have a partner, Lan Zhang, she's amazing and she's been spending a lot of time on campuses from Harvard to nmit, all the way to Stanford and Berkeley to San Diego and ucla, just organizing student groups and running hackathons and just being very close to that younger community. And also it's just being out there. It's being out there, it's making yourself shining the beacon, the bat signal that we're open for business, that we're very intellectually curious about a number of spaces or many spaces and we have the ability to move quickly and we very much working closely with founders that are solving hard problems and we're very patient capital. We can wait obviously for a decade for something to plus for something to evolve. And ultimately we are here to serve the founder with the expectation that we can hopefully be part of a generational company.

What's the, what's the record, if you will, for how long you've been with a company invested in a company.

I have to go back and look at my notes, but there are companies that we've invested in from our. Because when I joined it was Lux2 and that was a 2007 vintage fund. And so even there's companies that we still work with today from that era. We, we very much pride ourselves with looking to build long term relationships with founders. And many founders like Naveen is a great example who took early money from us for nirvana and then came back to us for his next company. Hopefully he'll come back to us for the third one. But, but we are, we're very much. If you look back at my own journey with Lux, it was a year and a half that culminated to a job offer and we are very much all playing the long game and very much emphasizing process with the expectation that if we take on the right process and the right outcomes or the desired outcomes will result. If you look at, if you look at our culture, Ali like we, not just our culture but also the way our brains work. Like our brains like to simplify things. We like to simplify and reduce things to one person discovering something giant revolutionary events happening overnight that is easy for us to understand. But in reality things take a long time and they are delivered by many teams of people working together. And so one must appreciate that. And there's obviously a lot of emphasis on the founder. But ultimately that founder's job is to recruit and to raise money for those recruits to be able to go out there and execute.

And a great example of that type to tie to your own portfolio a little bit is your successful investments in Zoox that Amazon acquired for I think 8 or 900 million. That was Autonomy Co. And then AVA, which is now public and has a nice lidar relationship with Torc, which is Daimler's, a self driving truck subsidiary, I guess, or captive entity we're talking about almost 10 years ago at least with, with Zoox, when you probably first invested in it. But what's strange is now that it's actually happening, it's hard to convince people that it's happening. Like people can't still believe when I tell them, listen, in San Francisco, I really don't take Ubers very Very much anymore. I just call away Mo.

It's fascinating. It's fascinating how that technology went from science fiction to science fact almost overnight.

Right?

It's a widespread. Autonomous cars or autonomous rides are now a commodity consumer product that anybody can access. Although, you know, you need to be in San Francisco or Los Angeles or I think they're launching in Austin or they probably have launched in Austin. But yeah, it may be rather geographically limited, but it's still widely available to those geographies. And it's absolutely magical. And I expect the same to happen for a lot of other kind of fields in technology where it's science fiction until it's not. And that's what we're going for at Lux.

Exactly. Let me ask you, in what sectors are in favor for you that you want people to come to you? They listen to this and go, oh, wait a minute, I should talk to Shaheen for sure. Are there particular sectors, maybe even geographic locations, business models, end markets, whatever, however you slice and dice it. What's. What's hot, if you will, in your mind.

So to your question, Ali. On, on, on, on, on. What's hot? So I don't like categorizing opportunities because in my experience, when something becomes a category, it is probably at that point overdone. I Remember back in 2015, 2016, autonomous vehicles becoming a category and becoming a big deal. But at that point, I feel like if you weren't already in Zoox or Cruise or I don't even know of, or maybe even Newtonomy, because Newtonomy was an early acquisition, you'd probably miss that window. And so what I prefer to do is think of the universe in terms of founders. Where are the best founders going? What are they thinking about? What are they working on? And then going after them accordingly. There's areas that I have a personal curiosity and passion for, and that's in computation, broadly, in communications, broadly, in automation, in mobility, and creating a magical technology that would give us our time back so we can spend more time with our loved ones. And that comes through automation. That comes through a lot of what AI is doing that would make us a lot more efficient. And so those are areas that. Those are broad areas that I'm very excited about. And ultimately I'm looking at looking to founders that are going to create that next category. And so when I invested in Naveen, for example, AI chips weren't even a thing. He actually told me that he is starting a company that's going to build accelerators for convolutional neural networks. And I said, wait a minute, are you making AI chips? And he said, yes, but I prefer not to say it that way because back in 2013, 2014 timeframe AI was a bad word and chips were a bad word. And so he had to come up with some fancy way of describing it without using those words. And then after the nirvana acquisition, then suddenly like everybody was looking to invest in AI chips and AI chips became a category. So I know this might sound a little bit cliche, but what I like to do is invest in people that are inventing the next theme. But I am in general just intellectually curious about all hard problems relating to commute, relating to compute and automation and mobility broadly.

In some ways you're willing to take direction from that exceptional entrepreneur on what is is. That's right, right now. Excellent. Let's switch to maybe the longer term outlook on what sectors to you seem to be either promising, making a comeback or are less appreciated in terms of what's coming out in the future. What we'll be looking back at in, in 10 years. And my picks would be Autonomy Space, which I know you have some experience in AI applications, of course, and I'm going to add applications to make it a little less trite than usual of the above.

Ali, I think you should have been the one being interviewed here and not me me. But you said it so people want real information. I'm very excited about space. I feel like we're still in the early innings when space was thought about as recently as perhaps 15 years ago, the market was quantified as launch, as military and government level Earth observation and telecommunications. And that is now probably a fraction of where the space economy is going. There are so many other use cases and applications that are now being discussed and that will likely be implemented. That will likely be implemented. That would vastly increase the size of that market. For example, when one talked about launch, it was only about getting a payload from the surface to some orbit. But that is the equivalent of taking a train from Washington D.C. to New York and that being limited to the market for transportation. There is obviously last mile, there is, there's transportation from the airport to final destinations. And that could be the bulk of the market for transportation. It's the same thing that applies to space. Once you get dropped off at an orbit that, let's say, for example a SpaceX would drop you off at, there is many other orbits that that would be highly desirable for an operator of a spacecraft. And we are invested in impulse space, which is basically taking those payloads from where they get dropped off by SpaceX to other orbits in low Earth orbit and also taking them to higher energy orbits like LEO and geo, like MEO and geo, and also perhaps even to the Moon and Mars and beyond. And so the logistics in space, the market for logistics in space is in its nascency today and is likely going to increase dramatically from here. There's also all kinds of other modalities that are being discussed in space, not just Earth observation and communications. There's companies that are doing compute in space, so taking advantage of the low temperatures in space to do AI compute. There are companies that are trying to harvest the energy that's ambient in space, the solar and other types of radiation in space, to be able to harvest energy not just for use in space, but also to beam that energy back to the ground. And there's also discussions around being able to harvest fuels and resources from space, not just for use in space, but also for use on the ground. And we've also invested in varda, which had successfully landed a capsule a few days ago for the second time and has many launches planned. But to do manufacturing in space and to bring the, the products of that manufacturing or the products of whatever you do in space and to bring that back to Earth. So that infrastructure is being built today. And I believe that the market for space that we tend to quantify today is only a fraction of what we expect it to be in the future.

Thank you for that. I really wasn't aware that there was so much more than communications and observation. And I guess I should remind our listeners that Planet Lab is one of your investments as well. And that's one of the premier Earth observation. And that's right.

Planet Labs had a very interesting value proposition which was if we reduce the price of satellite imagery, then we will disproportionately increase the market for satellite imagery. And that's exactly what they did. Satellite images used to cost $50,000. They're only available to select entities, mostly government entities. And they created the largest constellation of Earth observing satellites that were able to or are able to capture images at a very high cadence, even daily, in some instances, in some orbits, to give you a real time understanding of what's going on Earth and also vastly reduce the price. And so entities that until then were unable to even access this resource are now running their businesses on high frequenc satellite imaging. And as a result of that, the market for that has exploded. And there are many more companies attempting to enter this market.

There is a string of recent robotics Financings again. And so I'm wondering, as a person who seems to have had an interest in the space for a long time, what's your read on what's happening recently?

Ali, I'm very excited about the recent activity in robotics. I was early on a skeptic when it came to physical robots because my sense or expectation was that China will probably dominate there with low cost manufacturing. My expectation was that a lot of the technology will become commoditized, a lot of the chips or the mechanical drives or encoders will be mass manufactured and ultimately it will come down to the cost of labor and, and there will be very little margin to be captured there. My expectation was and continues to be it is going to be the actual implementation of robots which will be able to derive value. So Ali, if you go to a Ford, a GM or a Tesla, you'll see a ton of robots because they spend tens of millions of dollars on consultants that go in there and design their automation. If you go to a middle of America, smaller factory or warehouse, you don't see any robots. And the real opportunity there is to take a lot of these low cost robots and a lot of the recent work in AI and be able to very inexpensively automate them. And we actually have one company, Formic, that we're very excited about that's actually going into these small and medium sized manufacturers and warehouses and is bringing state of the art low cost robots and automating them in a way that they had never even dreamed before. In fact, the vast majority of their customers until now had not benefited from any kind of automation whatsoever. So I'm very excited about the deployment of robots in, into these more mainstream use cases. I'm also very excited about all of the investment that's going into humanoid robots. I still can't fully understand why you would need a humanoid robot because I feel like there's a lot of other form factors that probably would be better suited to a specific task. For example, would a humanoid robot be more effective at washing dishes or a dishwasher? Or would a humanoid robot be more effective at washing clothes or a laundry machine? So those use cases on the domestic side don't fully make sense to me yet, but I think the vast amount of investment that's going into it, the billions of dollars of people are investing in these humanoid robotics companies, will ultimately end up in something good happening and all of us benefiting. So I'm very optimistic about that. But would I invest personally in a humanoid robotics company? I've struggled, but who knows that can change.

As you may recall when we were both at Cesar, I think Jensen Huang, what did he say? 10 million robots by 2030. Humanoid robots. That was some prediction he was making. And honestly back then I thought if he's spending a lot of time on that, it means the, the boom in the AI chips, the data center side of the boom is waning. He must, that's why he's doing it. You know, don't look over here, look over there.

For large companies, Ali, it makes a lot of sense because as a large company you have your cash cow business, your Nvidia, you're selling GPUs, your Samsung, you're selling, selling flat panel TVs, your Tesla, you're selling your electric cars. And then on the side you can invest many billions of dollars into an effort that may or may not amount to anything. I feel it's very difficult for a startup to make that kind of investment in that kind of a very broad endeavor. And so again, very excited. Couldn't quite get there for a lot of these humanoid robotics companies early on. But I'm optimistic.

That's great to hear and I think, and I share your optimism. And it's the dishwasher and washing machine example are really bring back a lot of memories for me. When I was a young engineering student, one of my professors said, if you're given a task to complete, don't try to replicate the way a human would complete it. You know, airplanes don't flap their wings. They fly using a very different principle than flapping your wings necessarily would.

That's a very good analogy. I like that.

Yeah, exactly. And, and I think part of the humanoid, part of it is probably to attract a retail investor. Quite honestly, there's a fascination that, that brings in, especially if you're a public company. Highly valued public companies really depend a lot on the retail investor. Maybe not directly investing in them, but generating demands for, for insight at the fidelities and the Schwabs of the world results in institutional buying a capacity for, for those larger companies. That's really one of the things I've really discovered in my 30 some years in finance. How much pricing is driven by the. Ultimately the individual being interested and fascinated by a company. Yeah, yeah. So that's one of it. And a part of it is a humanoid robot. The world is built for humans, so making it able to navigate that world a little bit can make things that.

Like makes a ton of sense.

Yeah, but just like automation that we've talked about adapting the world a little bit to the way the machine can behave will have tremendous efficiencies for how efficacious that robot can be. I'm just getting excited because I heard you being excited. I think the world around us will look reasonably physically different if these robots actually get to the point where a little bit of accommodation will allow them to make a big difference for us.

Agreed.

So when I was looking through the deluxe website, one of the things that struck me was I think you have a your own podcast that at least you sponsor someone to do it for you. I don't know if you do it yourselves. However, I noticed the podcast really ventures quite wide, talks about geopolitics, health trends, social trends, et cetera. So I don't want to lose that flavor of Lux capital. To the extent that you guys have internal discussions and insights, let me just finish here by saying any predictions, hope outcomes, you have freeform discussion. Whatever you'd like to talk about about, let's talk about it. And then if you'd like to pitch for people to come join you guys on your journey, we can do that too.

Ali, I feel like we're living in a very interesting time. I feel like this whole. This might sound cliche, but I feel like what we're seeing in terms of the advancements that we're seeing in AI, I think Deep Seek struck fear for a lot of people, but it struck a lot of optimism or created a lot of optimism for me just how, how a company can come across and use significantly less resources to put out a better product in this space. And so I feel like we're still in the early innings. I feel like there are vast technological shifts that are going to occur. Everything from, with implications and everything from driverless cars to what we talked about in automation, to the way we go about doing our jobs, I think the impact will be far greater than the impact that we experience with the Internet.

That.

And it's going to affect everybody for the better. It's going to help us live more comfortable lives, help us be more productive, help promote more peace, help everyone in the world be more educated and more informed and help us be more sustainable. I'm just. All these things might sound, for sound cliche, but I'm very excited for all of this and I feel very fortunate to be working at Lux, where my job day in and day out is to meet people that are performing at the forefront of this and want to move it along faster. And so if this is what excites you, if you have infinite curiosity, then I'd love to talk to you and would love to bring you onto our team.

Excellent. You know what? Let's. Let's wrap it up there, because that's a very positive note, and it's really about the people you meet, the people you finance, the people you help be successful. And that's really the greatest. The greatest thing that my career has ever done for me. I constantly meet with. No, I'm not blowing smoke here. My job is to meet with people like you and with people in this ecosystem.

Oh, please. Oh, please. I'm at the bottom of that list.

No, I am. I'm really serious. Because when you work in tech and when you work in finance, you're just surrounded by people who've got ambition and are thoughtful and are trying to make a, as Steve Jobs would say, a dent in the universe. And that's really energizing. Way to spend the time. So thank you so much for spending all this time with us. Yes. Great. Thank you.

Thank you. Thank you, Ellie. Tech Cars, Machines. Subscribe here or@gtk partners.com.