Shahin Farshchi: Investing at Lux Capital and Accelerating a Sci-Fi Future

I believe that there is a scenario where everybody can emerge as a winner.

How do you choose what to work on?

Investors are always inundated with people either asking them for money or asking them for advice. To be able to be successful as a venture capitalist, you need to be a serial entrepreneur.

Tell us more about, like, the journey of trying to start a company. My guest today is Shaheen from Lux Capital, who was a PhD researcher before he became venture capitalist and now he's one of the best deep tech venture capitalists of our time. And he's been doing it way before it was cool. So we sit down with him to talk about whether PhDs make great founders, whether the current education system is still relevant and designed for learning. Can't wait to dive in. Thank you so much for taking out the time. We met at an event with one of your portfolio companies, Varda. Bill was there, who's incredible, and you were kind enough to find us a space in la. This is great. It's our first time in Brentford, so. So thank you so much to Mark at Bonfire and to you for making this happen. So we the builders. I think I was just outside explaining to you the concept. We want to highlight agency and progress and everything that people like yourself are enabling, like the sci fi future. You know that as I came into Silicon Valley four years ago, that's like what I thought Silicon Valley was, right? And then ever since I found firms like Lux or like companies like Warda that, you know, or like figure that is just like inspired me to build an optimistic media, media company on its own. Right. So a thank you so much for doing that and enabling that future. We'll start with who is Shaheen for. For the audience. Tell us what your journey has been like and how did you get here?

Sure, sure. So first of all, huge thank you to Mark Mullen and the Bonfire team for letting us use their beautiful space here in Brentwood. My journey started in the East Bay in Northern California. My father was a student at Cal Berkeley. He was studying mechanical engineering. He was aiming to be a rocket scientist. And I just grew up around a lot of engineering. We had a dumb terminal at home that he'd use to connect to servers and I'd kind of tap in commands and see, you know, make cool printouts with a dot matrix printer. I would run up to the National Lab, the Lawrence National Lab, to play around with the punch cards and computers that were up there. So I grew up around a lot of technology and compute. His first job was at NASA in Cleveland. So we Moved to Cleveland and I firsthand saw a lot of the cool stuff that they were working on. We moved back to California and spent a few years in California. I was working at NASA Ames and always wanted to go into engineering. My aunt was generous enough to give me a computer when I was in the fourth grade, so grew up programming in basic. I don't know if you recall, three to one Contact, but it was a magazine back in the day that had sample code that you would basically, basically used to create little games and little cool computer programs. I got introduced to the precursor of the Internet, which was bulletin board systems back in the late 80s. And I would go on there and download games and communicate with friends and that was a fun adventure. And I actually moved to Iran when I was a teenager. My parents wanted to move back, so I lived there for a few years and, and that was a big challenge. Learning the language and getting around, getting to be able to adapt to society and the norms which were very different. And then I came back for college and so I kind of immigrated twice in my life. I immigrated to another country as a teenager and I immigrated back to the United States as an adult.

So what, what was that experience like and how much time did you spend in Iran?

I spent a few years there, so the experience was very interesting. I went there with the expectation that I would be going to an English speaking school and hang out with English speaking friends. But unfortunately that did not turn out to be the case. And I had to learn how to read and write and learn the language kind of, you know, I was, I was in the flow. And so it's kind of like being thrown in water and learning how to swim.

Yeah.

And so I also was told that I could be held back a grade and just spend an entire year learning the language. But as you know, in the United States, being held back a grade is something that implies very poor academic performance. Performance. And since my plan was to always come back to the United States, the thought of being a year behind my friends from even social perspective was unacceptable. And so I learned, I, I literally memorized the way the script looked and the way things sounded just to be able to answer questions on tests. And I was able to pass and I was able to stay at the grade that I was at. And I came back for college and started college the same time my friends did.

So a, like, how do you feel about cramming? And what did you learn about the education system in Iran? Because I grew up in Pakistan and the system was designed for people who could cram lots of knowledge.

Yes.

Right. And I don't know if Iran's system is similar. Right. What do you think about that system?

Just as a system that feels very traditional, a sense that there is a very large amount of subject matter.

Right.

There is a myth that the sciences are significantly more advanced. I think that if you were to take AP classes in high school in the United States, you'd be learning what you'd be learning what you would be learning in Iran in terms of physics and, and. And math and the sciences. But otherwise there was a lot of other subject matter that was condensed and had to be memorized.

Right.

And I think it was a very, very good exercise in time management and knowing that you're not going to be able to learn everything and. And quizmanship to be able to get the best grade out of the amount of knowledge that you've been able to capture.

So it doesn't actually contribute to learning, it contributes to other things in life possibly, which are also probably critical for your career. Right. Time management. You mentioned one maybe for prioritization, choosing what subject matter to focus on.

Exactly. I'll give you an example. There are things that I just did not understand, and rather than trying to understand them, I just memorized them. And that helped me basically find the time to be able to focus on those other topics that either absolutely needed understanding. Like, for example, physics, you have to understand physics. Calculus, you have to understand. Trigonometry, you have to understand. But there were events in history and in other topics that I didn't fully care for and then fully understand and just found creative ways to memorize, to just answer the questions and move on.

Did that give you a newfound respect or appreciation for the system in America?

It did. I just didn't have a way to compare because I was too young when I left. When you're kind of like elementary school, middle school, it's very different. If I was taking high school and both high school classes in both places, I'd be able to compare. I just didn't have a basis.

Right.

To compare with. However, when I spoke to friends who were taking these AP courses here, it felt like they were doing the same thing, except they weren't doing all of the other topics, the other humanities and the other topics that I was dealing with over there.

Right. What do you, like, how do you think, like, that experience shaped you as a person? And what is a. Like, what would you rate as the most transformational experience in your early teens or twenties that shaped your career? In hindsight?

So that experience was my first experience in something that seemed extremely daunting and almost impossible that I managed to overcome. And so when I first moved there as a young teenager, I thought it would be impossible for me to compete with normal people and be able to pass this grade and stick with my peer level in the US Even though I didn't properly speak the language and barely knew how to read and write. And that experience was proof that if you set your mind to something, if you focus on something, then eventually you may not be the best, but you can be good enough to be dangerous.

Right.

And so, you know, when I, when I moved back to the US There were similar challenges. To be able to basically get back up to speed here and get into a good university and then be able to compete with people at that university who had the benefit of going to high school in the US Outside of just the sciences, but in the humanities and just general cultural aspects as well. And so that was the first experience. And overcoming something that seemed very daunting, very challenging, almost impossible, and realizing that.

You can come out the other end, does it also. Or the cultural experience of being in, like, Iran, does it also make you more street smart?

In many ways, I think it makes you more empathetic. I wouldn't call myself street smart by, by any stretch.

Right.

But I feel like the benefit of not just seeing and interacting with, but actually living with a broader range of people and cultures helps you better empathize with people, better connect with people, and better generate trust.

Right. Okay.

And that's a lot of what's used in this. In this. That's important in this business. This is a people.

True.

Yeah. Business. You have to, you have to. You have to be able to. I'm looking for the right word here. You have to be able to gain and earn the trust of many people, whether it's an employee that you're trying to recruit into one of your companies, whether it's a founder that you're trying to convince to take your money, whether it's another individual that you're trying to recruit into your investment team. All of these require building, you know, earning and building trust with individuals. And I believe that. And for me, being able to empathize and connect has been a major advantage.

Now, it's interesting you point that out, the empathy part and how that levels up your people skills in a way. Okay, so the takeaway is it built. It gave you a tool to tackle any challenge. Right. As you moved back to the U.S. it was just another challenge, and it Gave you a tool. Right. Like you knew if you could do it once, you could do it again.

It made me view challenges as opportunities.

Okay.

So I feel like there's a lot of people who view a challenge as an opportunity. Well, that's one thing they view. There's a lot of people, especially in this business, that tend to be zero sum and look at everything as winning and losing.

Right.

And I am the opposite of that. I believe that there is a scenario where everybody can emerge as a winner. In fact, I was never into professional sports. I was never into politics for that reason, because I do not want to be in a game where my success comes at the expense of. Of somebody else. I wanted to be doing something where my winning comes with everybody around me winning as well.

That is an interesting way to describe. That is an interesting way to describe a way to, I guess, at least scratch rich because a lot of investors relate this to sport. Yeah, right. And as a winner take all game of sorts. But you look at it as a. Increase the size of the pie.

That's right.

And that's what I guess you looked at in this career.

That's right. That's right. That's right. That's right. So going back to your original question, I viewed every challenge as an opportunity. And the earlier experiences that I had as a child or as a teenager taught me that if you put in your best effort, then you will be able to overcome the challenge and ultimately end up in a. In a good place.

During this time, growing up in your teenage, early 20s, did you have. I don't want to use the word mentor, but these people you looked up to, who. I think mentorship just happens through osmosis. People you admire, you spend time with, and you learn through them. That changed the trajectory of your career or your thought process.

Yes, absolutely. So I had many individuals in my life who I viewed as role models as it related to different things. My parents were excellent role models when it came to discipline, when it came to hard work, when it came to honesty, selflessness. Those were the, the, the. The kind of, I would say, fundamental takeaways that I took from. From growing up.

Moral framework for life.

Moral framework for life, Exactly. And then as a young adult, there were professors at Berkeley whose academic achievements and professional achievements and work ethic was something that I greatly and deeply admired. There were people that were very blunt with me during that time. I had a advisor at Berkeley Hotel who told me that I'll never get into a good graduate school, into a good graduate program, because my Grades were good. My activities outside of academics were good, but not great. They did not break out. And that blunt feedback actually did help me up my game because at that time I truly felt like I was performing. And this person said, you know what, sorry to break it to you buddy, but you're not. And that helped me up my game and focus again on what mattered and, and de emphasize what didn't matter. Did not spend time on things that didn't matter. And I took graduate courses. I did research with a couple of very high quality groups and I ended up here in la, actually at ucla.

Which groups? Tell me more. Which groups did you like ended up doing research with and how did you land?

Good question, good question. So I worked with a professor by the name of Bill Oldham and he was working on the, this technology that would displace masks that are used in semiconductor lithography. So today you use these masks that help pattern different layers in semiconductor manufacturing. He was using a technique using MEMS microelectron mechanical systems that would steer light and effectively write a pattern directly onto photoresist. So this technology is actually becoming mainstream. But this is 23 years ago when I got involved with this research. But it was an example of a very senior professor with a very structured research group that I was sort of, you know, part of. And the second group was the opposite. It was a young professor by the name of Ali Najad who was doing cutting edge work in the area of radio frequency circuit design. And I was modeling and simulating different designs. Unfortunately, my time with him was cut short because I was moving over to ucla. But it gave me a flavor of how two different labs work. A more established larger lab and a young lab just, just getting started. A faculty member who's young just getting started. It was, it was, it was a good perspective to be able to see both.

Did it take some convincing to get into?

Oh, absolutely.

Walk us through.

I, I went to both through their students. So I didn't go through to the, to the professors themselves because they had no time and they wouldn't talk to me as an undergrad. But their students were TAs in and courses that I took and I convinced them to give me a shot and let me work in their labs.

Where do you think you get that tenacity from to not take no for an answer? Because even after, like I say, I.

Do not take no for an answer. I get many no's.

Right.

But there are times when going back to the whole empathy conversation that we were having, um, it's having that sense or filter to know which no you can flip into a yes.

Right.

As opposed to not taking a no right. For an answer. And I was very, I was very fortunate that those nos were flipped to.

Yeses, having, I guess, the intellectual honesty to evaluate yourself and see what opportunities to pursue and where you can flip the no's.

That's right.

No, I'm like just following how often you've done that in different points in your life and now it's making sense, like leading up to the lux opportunity and how you got that. Yeah, but actually I want to still talk about those research opportunities. I think there's a big takeaway for anyone. Right. Like young people who are not just like getting in touch with venture capitalists if you starting a company, but for anything you're exploring.

That's right.

Any opportunity you're becoming a part of. Yeah, you. It's sometimes harder to get the person at the top. Yeah. But there are a lot of affiliates that you can get closer to.

Yeah, I feel like that's the way to do it. I feel like going directly. It's, it's, it's. If you oversimplify and assume that the person at the top is the decision maker.

Right.

I think you are more likely to face barriers and issues. And so it's a matter of navigating the process. For example, going back to working at a lab, you know that you're not going to be working directly with the, with the PI anyway. You'll be working for a graduate student. So to go to that graduate student and say, hey, can I help you out? And then that graduate student going to the PI and saying, I want this person to help me out. That's a far, that's, that's a path of far less resistance.

Right.

Than going straight to a PI and saying, give me a job. And the PI saying, I'm too busy, leave me alone.

And that just gets back to people skills.

That's right, right. Understanding and understanding the way and understand the stakeholders and what motivates people.

Right.

And you know, how decisions are made.

What was your degree in at Berkeley? And yeah, both research labs involve like your, the background in your degree. Sure, sure. Electrical engineering. If I'm not.

Yeah.

So.

So undergraduate at Berkeley was electrical engineering, computer science. And both the labs were in the double E department. One of them was more focused on microelectromechanical systems or mems, and the other one was more focused on radio frequency circuit design.

And you pursued these labs in your final year? Yeah.

Okay.

Right.

So Last two years.

Last two years, yeah. Okay. And then you moved over to ucla.

That's right.

Grad school.

That's right.

Okay, tell us more about.

Yeah, that's, that's actually funny because I reached out to two faculty members at ucla, Bezad Razavi and Assad Abidi, and neither of them would even return my calls or emails. And I got a call from a faculty member I'd never heard of, gentleman by the name of Jack Judy.

Can you also answer why them?

Why did I reach out to them?

Why did you choose them?

Oh, absolutely. Because UCLA at the time was the top ranked. Their electrical engineering program, especially in circuit design, was the top ranked program at the time. I think they were a tie for Stanford at the time. And those two faculty members were the lead thinkers in this whole new field of what's called CMOS analog circuit design. So CMOS has traditionally been a technology since the mid-80s that's used for digital circuit design. And these two individuals were the kind of academic thought leaders in applying that technology to analog circuit design design. So back in the day, if you were designing a radio for a cell phone or for radar, you'd be using some exotic process to do that, just like how you would do it in silicon photonics, for example, today.

How would you do it?

You'd use, you'd use a, A, a, a process that's specific to analog circuits. Basically, CMOS was a very common standard technology that was used for digital circuit design, but it has some inherent challenges because it's, it's leaky, it's noisy. It was challenging to make analog circuits that are more sensitive to noise and linearity. And what these two individuals, it was not only propose methods for designing analog circuits in this technology, but also teach it in a way that is very easy to understand and easy to build on. And so I was, I was very intra. I was very attracted to these two individuals, but obviously there was a lot of competition and they just weren't interested in me. And I got a call from this other faculty member, Jack Judy, who was in micro electromechanical systems, who saw my background doing research in that field. And he was a graduate of UC Berkeley. And two of the faculty members who'd written letters for me, letters of recommendations for me, were close friends of his. And he said, hey, I know you didn't apply to my lab, but I saw your application to the department and I saw these letters and would you be interested in joining my lab? And so I said, sure.

Okay. So like the original two professors you were interested in.

So one of them agreed to be on my PhD committee.

Oh, okay.

So Rosavi was. Agreed to do. To be on my PhD committee.

How did you convince him or how did he get convinced?

That was easy. It was basically a request from, from. I basically said, hey, would you, would you agree to do this? And for him, it was like, it wasn't a big deal. It said, sure. Yeah. So he was, he was very kind. But one, One interesting take is that Jack Judy, who recruited me in, did not have funding for my project. So he said, hey, join my lab, but I can't fund you. You should go out and find money. As in write grants, finding other faculty members would be willing to fund your project. Yeah. And so he said, I can fund you for your first year.

Right.

And so during that first year, I was fortunate enough to be able to get grants and, and, and find other sources of funding to be able to ultimately fund my research.

What, what was that process? Like, what path ended up being more successful? Like, was it a faculty.

Yeah, it was a combination. It was a combination of. So my, my PhD research was on a miniature wireless neural recording system for small animals. Right. And basically being able to track the brain signals of, of mice and other small mammals to be able to do brain research for Parkinson's, epilepsy, Lou Gehrig's disease. And I was able to find faculty members in the biology space. The electrophysiology faculty members were willing to fund the project. And I also was able to get an NSF grant, which funded not only myself, but my, my predecessors or my successors as well.

How, how big was the NSF grant and what did you learn about.

I probably wrote, I kid you not, 30 grants to various institutions. And the NSF grant hit, and it was just, it was just a. An exercise of persistence and just not giving up. There were so many grants that were declined, and I just kept on applying until that one ultimately, ultimately was funded.

In many ways. This is what founders of defense tech or frontier tech companies go through. Right. And I'm just mapping that experience. It's a very entrepreneurial experience where you're finding your own money to do the work you're passionate about. That's right. And again, these companies also have to go out and find these very similar grants. Right. They're writing maybe 20s, 20, 30, 40 of these until they, they get.

Right.

So I guess that's one of the experiences that connects back to what, what led you to.

Yeah.

Where you are. Or would you, would you agree with that?

I Think just being, being persistent.

Yeah.

And being relentless and just, just whenever that you get a no or, you know, whenever you get a decline, just try again, try again, keep trying. And then, you know, if you believe in what you're doing and you believe in yourself, then ultimately you'll get that. All you need is one yes. In my scenario, I only needed one yes to fund my entire PhD and I got a yes that funded multiple PhDs. So it was, it was a good outcome.

The. Could you remember how much that ended up being?

I think it was $650,000. That's a lot of money. Yeah, yeah, yeah.

What was your intention? A. How did you choose your research area and where did you want to take it, like at the time? What was your thinking? What were the future plans?

Yeah, my research area ultimately kind of found me. I didn't go in there and define this. What I liked about it was that it brought together various aspects of science that I thought was very compelling. So it was a combination of microelectromechanical systems because ultimately my technology would have been micro machined into a probe that would go into a head stage, that would go into an, into an implant. There was the circuit aspect of it. Obviously there was biology involved because you were working ultimately with the biological system. There was a bunch of software involved. So we're using software that kind of is the great, great grandfather of, of deep neural networks today. Yeah. To be able to classify and filter things in software. So we're able to make the radio. It's not the radio. The circuits were noisy and messy and we're able to extract clean signals from them using these tricks and software. So there was a lot of disciplines that were involved and that made it very exciting for me.

What was the thought process at the time? I guess that leads me to my next theme in our conversation, which is how do you choose what to work on and what have you learned about choosing what to work on in one's life?

So for me it's been mostly about interesting problems, challenging problems, and if you solve the problem, would you feel content and happy about the outcome? And for, for me, for the PhD thesis, I felt very fulfilled because it was ultimately a tool that was used to do even more research. There was a aspect to it that involved creating cures for otherwise incurable diseases. And there was various other technical challenges that were involved with it which were overcome and made me feel very, very excited and very fulfilled to be part of. And I, you know, and a lot of credit goes to a team So I had a team of undergraduate students, so I basically kind of returned the favor, right? And I hired a bunch of young undergraduates who did a lot of the software end of the project. And I also had the benefit of having a more senior graduate student as well as a professor out of NCSU who are very helpful in getting my chip fabricated.

Why eventually leave research?

Why leave research? So I observed my PI and saw that he was very busy and a lot of what he was doing was fundraising for the lab, for us. And I came to the conclusion that if I want to spend so much time fundraising or dealing with the non academic aspects of science, that I'd rather just go into the money of science and focus on the money. Because it just became clear to me that the people that actually do the science are the undergraduates and the graduate students. The faculty members aren't really doing a whole lot of the science. There are a few steps removed. And they're spending all this time dealing with administrative tasks with the school and just writing grants and flying to D.C. and meeting with people that control budgets to get their laps funded. And I just felt like that was a lot. And my, my sense was that if I go into the finance side, I would probably be able to just focus on that aspect of it and maybe be good at what I do.

Is that when you started looking for a role in venture capital?

So that actually was not the original plan. I thought that to be able to be successful as a venture capitalist, you'll need to be a serial entrepreneur. So the first thing I did was start a company commercializing my research. And I learned the hard way that it's one thing to have a spectacular technology and a cool product, and it's another to have a attractive business. And I had the former but not the latter.

Right.

And I got a great piece of advice from a professor at ucla, which was, hey, you should get to know investors when you're not asking for money or advice. Because investors are always inundated with people either asking them for money or asking them for advice. And you should go to investors offering them something. And I didn't have an idea at the time. This is after the first one was unsuccessful. So I thought I'd just, I went back to being a postdoc so I could pay my bills. And I just reached out to a bunch of investors saying, hey, here's the situation. I'm a postdoc, not looking for a job, you know, not looking for a money. But I understand this new buzzwordy field called nanotech Right. And I know semiconductors and I have friends joining small companies, starting companies, and I can bring opportunities your way. I can do diligence for you. And I'm not looking for anything in return. Just want to build a relationship. Yeah. And a lot of firms didn't respond. And I Googled nanotechnology and venture capital. This is in 2007. Six.

Okay.

And the first Google search result was Lux Capital.

Wow. They did SEO before any anyone else.

They did it right. And so I did a cold email to infoluxcapital.com and I got a call back the same day saying, hey, we'd love to have you work with us. And I did that on a part time basis for probably a year and a half. And one day I get a call, hey, you know, you know, we've, we've raised a new fund. We'd love for you to join us full time. And I thought to myself, I'd love to hitch my wagon to this rocket ship. Because I had the benefit of observing what they were building.

Yeah.

And I knew if I joined this firm, I won't go wrong. And so here I am today.

Tell us more about like the journey of trying to start a company and how long did you do that for?

Yeah.

What were some of the biggest takeaways in that process?

Yeah, yeah, yeah, yeah. So, so I started with the customer. So I started talking to. The technology that I had built was focused on research. The product that I was trying to build was focused on hospitals. And so I wanted to build a device that tracks the vital signs of patients when they're being moved around. And I realized that that was a problem for at hospitals at the time because all of their devices, the bedside monitors were, were plugged in.

Right.

And they didn't have a way of being able to capture and monitor the kind of aggregate patient community. And they, and separate from this, they had a challenge with asset tracking this, tracking all the equipment that they had in the hospital. So the big challenge that I learned that a lot of companies face was that just by listening to the customer on what their needs are and what they're willing to pay doesn't necessarily mean that you can build a successful business. What ended up happening to me was that I was maniacally focused on the customer's needs. And what ended up happening was that I had a product that had all these features that cost me more to build than what the customer is willing to spend. And so that was kind of my early lesson in maybe you shouldn't listen to everything the customer says, right, and you should focus on understanding where the biggest pain points are and what they're willing to pay for.

Right.

And then be mindful of what your expenses are going to be and work towards offering something that could be the basis of a profitable business. And you know, being technical, having an academic background, I was focused on that, on that end goal, on that, on that kind of, you know, pot of gold at the end of the rainbow.

Right.

Whereas the reality was that I was meeting some technical spec that ultimately led to a pot of coal at the end of the rainbow from a business perspective because I wasn't making, I wasn't going to make any money.

Right.

So, so that was, and that was probably a two year exercise and I applied to a bunch of Cibber grants, so small business innovative research grants through the National Institutes of Health and through the nsf. And those, none of those stuck because on one hand it was not sciency enough. It was a hard technical problem, but it wasn't as hard a, it wasn't as interesting a scientific problem for them. And on the other hand the business opportunity wasn't clear enough. It was one of those classic problems of there's no market for this. But the reality is that as we've seen, once you offer a certain product, then the market for that develops over time.

How's that, how is Your thinking evolved 20 years later now from that experience on choosing, oh, how much time do you have?

I mean I, that's why you got time. I used to be very focused on capabilities, on technology, on, you know, value proposition, and I've since kind of moved on from these core capabilities and focused more on, on the business, the company that you're trying to build. Because ultimately you can have the best product in the world, but it doesn't necessarily mean that you'll be able to build a great company as a result. And we're in the business of building great companies.

Right.

So focusing on product and assuming that you can build a great company around it is kind of the tail wagging the dog. I think it's absolutely necessary for a great company to have great products.

Right?

It's necessary, but it's not sufficient.

Right, right. So but for a company or like for, for a product to have a business you like, one thing that you touched upon, like one of your learnings from that experience was that sometimes you bring the product to the market and then the market gets created. The market.

That's right.

Right.

Those are the greatest products.

Those are the greatest products. Yeah, but then how you how do you evaluate if this product has a business, if there's, there isn't an existing.

That's the art of this business. So most of the time you're wrong, right? So I think the notion of what's the market for this is over simplistic. I think the question should be that if this product were to exist, right, will there be a big market? And then there's a second question you should be asking is that, which is once this big market comes into existence, will you have a monopolistic position in this market? Because what happens for a lot of startups is that they build a novel product, they create a market and then they make it very easy for copycats to come in and compete with them and they ultimately fail or struggle if they're lucky. And so the question should always be, is twofold. Can you create a market? And in the best case scenario, when you have that market, will you have a monopolistic position in that market? In many cases it's brand. You build a brand, you're the first person to offer a product in that market and it's very hard to in seat you. You become a vertically integrated player. A lot of these space companies, for example, that we've worked with have been very successful in creating these markets and through vertical integration are able to offer the very, very best economics to their customers and become very profitable themselves. There are switchover costs and you see a lot of that in software companies where it's a lot more difficult to rip out and move on to a different software vendor just for a couple of better features or bucks. Exactly, exactly. So the question becomes, okay, when you're successful, what is the moat that will be created as a result?

Right.

So going back to your previous question on like how is your thinking evolved? My thinking has evolved from what's the technology, what's the product, what's the value proposition? Let's move from that to what is your vision? What is your ability to recruit? Are you an individual that can or a founding team that can tell a story, build a narrative that will attract the best people, that will help you punch above your weight, that will help you to attract capital, basically suck all the air out of the room and, and make you the most desirable target for money, for talent, to be able to far outpace any potential competitor? And once you are able to offer a product and create a market, how do you establish yourself as that monopoly in that market? That's what we're looking for.

These I'm going to come back to the monopolistic comment you make because that. I want to tie it back to the winner take take all philosophy that you had.

Yeah.

That you did not want to give into.

Right, right.

Isn't Monopoly by definition winner take all?

Well, I mean, I think if you.

If you understand for business it's critical.

I mean, well, I, I feel like if you don't have that kind of monopolistic effect, then you're a commodity. And I don't know if that's the types, the type of business that we should be in the business of funding, but that's not necessarily a. I think, I think winner implies a game or a scenario where the rules are very well laid out and the problem is very well stated and I, you know, compete with you and I, you know, I. You win at my expense. Right. I think when we're talking about solving an unsolved problem and creating a business that ultimately profits from solving that problem.

Right.

I feel like it's less of the traditional game. If you look at, for example, a lot of, and I mean no disrespect to software companies, but there is how many, you know, human resource management companies, how many revenue cycle management companies? I think, I feel like those types of companies are perhaps fighting the zero sum game. More so than companies that are manufacturing in space, doing orbital transfers, doing novel radios, doing novel compute. Solving problems that have not been solved, I think is very different.

I think that's a, that is like a complete definition to your earlier point. Now. I think I just wanted to tie that together.

Sure. Okay.

The one, I think, pattern you, I guess mentioned was that you're now looking for visionary founders. Yeah. And people who are able to recruit were charismatic or able to form a narrative. Have you noticed something about their backgrounds? Or is it they can come from anywhere, you know, no expertise needed.

Yeah.

You know, sometimes they're just like able to bulldoze through and make things happen. Like, what have you noticed about these kind of people?

Yeah, you know, I know founders that, that fit that profile who come from very privileged, very wealthy backgrounds. And I know founders that have struggled, you know, their entire lives came from nothing. And I feel like there is no recipe going back to the previous conversation. I feel like I, when I, when I talk to founders, I tend to not look for particular kind of elements in their backgrounds. But what I do look for is the tenacity.

Right.

The, the charisma, the, the empathy. I look for those characteristics. And what I've observed after having done this for 17 years is that people from all backgrounds can have those characteristics.

What percentage of these characteristics do you think are inherent in our DNA versus learned? Learned.

Good question. You know, I'm not. I'm. I'm not a believer in, and, you know, some people having it versus not having it. Everybody that I know that has a certain characteristic or personality is someone who's chosen to have that and has worked towards having that.

Is that willpower?

I think a lot of it is, yes. It's willpower. They've had the desire to be the person that they are. And I do not believe that there are people that were born to be leaders, were born to be charismatic, and other people just through the luck of the draw. Yeah. You know, didn't have those. I feel like now. Now, that said, there are people who have struggles, who have other things going on in their lives that prevents them from having this flexibility and this luxury of. Of working on those skills. But those who do have the luxury on. Of working on those skills have tended to succeed in achieving these things. I just wouldn't categorize like that as the people that have it versus the people that don't have it. Maybe that's the case in the arts, you know, in music and dance and movies. I can't opine on that. But at least in what we do here, I feel like there are people who earlier in life were not charismatic, were not very intelligent, were not very curious, and at some point in their lives decided to, you know, they had the curiosity, decided to put in the work, and they ended up becoming leaders.

So on that note, do you think you can create an environment for people and almost inspire, like, you know, willpower or, I think, intentionality? You can relate willpower with intentionality and learning what it can do for you.

Yeah.

And how it compounds over time.

Yeah.

Do you think, like, you can create that environment for people and then people from, like, different backgrounds can sort of catch on? That's right. To varying degrees. But like.

Yes, of course.

Yeah, of course.

Of course. And the people that I know who decide not to do those things are people who have different priorities. They want to sit down and solve hard problems. They want to work in small teams and build great things.

Right.

And they don't want to go out there and deal with people like me and recruit and do those kinds of things. And that's their choice.

Right. I think this debate on born being born to do things and part of it being like, you know, inherent versus learning to do things is. Is a polarizing debate that goes both ways. But I think yeah, yeah.

I don't think it's, I mean I'm, I'm not a binary person. I don't think it's one or the other. I think it's a mixture. It's usually in the middle, I think. Yeah. I think a lot of people grow up in certain environments that's more conducive to certain behaviors later in life. And then there's others who just through sheer willpower and desire achieve things so, you know, at a certain point of their lives and so you can go their way.

I am sure like this specific, specific clip, you know, is going to inspire a lot of people who want to build things.

I hope so.

Yeah.

That's why we're doing this.

I know this is why we're doing this. So I, you know, your research, your I guess, summary of why you left research actually made me think about.

What.

Have you noticed about like basic research over the last 25 years that is changed significantly and if you could reinvent the system, how would you do it?

Good question. So I think basic research is more exciting today than it ever was just by virtue of the tools and the knowledge that are available now. Like ChatGPT, Deep Research, these are incredible tools for researchers because a lot of the best innovations, all the greatest innovations have resulted, resulted from kind of the cross pollination of multiple disciplines. And so if I had the ability to answer very specific questions about a different discipline as it related to my research the way you could today, I think it would have been a game changer.

Right.

For me. And so it's a very exciting time to be a fundamental researcher now. How has fundamental research changed? I wouldn't be able to give you that answer because I'm no longer in the trenches the way I was before. But just the output that I'm seeing from that community to today leads me to believe that it is a very exciting time.

But we also touched upon the ability for PhDs to commercialize technology. And you've seen often undergraduate students or graduate students go on to build things or become entrepreneurs. Entrepreneurs more so than PhD researchers. Yeah. Right. And I guess like in applied research, Bell Labs is like an example of a corporate laboratory. And I guess Google is a modern example. Right. With self driving cars and transformers. They've been doing a lot outside behemoth corporations. Yeah. And you know, the other extreme is like basic research happening at universities. Have you seen a model at the intersection which, like, which could accelerate commercialization?

Sure. So I personally, I don't believe PhDs are very well positioned to Commercialize research just by virtue of them being very focused.

Right.

I had an advisor who would joke that PhDs know everything about nothing and undergraduates know nothing about everything and master's students or graduates are somewhere in between.

Yeah.

And I feel like to be able to commercialize something there needs to be many disciplines involved.

Right.

And I feel like PhDs outside of the life sciences.

Right.

Because that's a different beast, are just not as well equipped.

Right.

As young engineers who graduated with undergraduate degrees, spent a couple years out in industry. They are, they are far less well equipped.

Right.

To take a technology and commercialize it than their younger peers are. So I think if you're building a, a science driven company, I believe that the majority, the minority of the team will be the scientists, the thinkers, the researchers, the explorers, and the majority of the team will be the engineers that have experience in reducing something to practice and making a product that is appealing and desirable.

Now you commented on age in the sense that younger engineers like, I just picked up on that. Do you think, like age matters?

When I say young, I don't mean to be anti old people. I just am making the observation and sharing the experience that people that I've worked with that at first glance maybe lacked experience, but were extremely motivated and curious, outperformed.

Right.

And so part of that comes from their, their willingness to explore, to find ways to solve problems as opposed to somebody who has more experience and has their own views on how to solve problems. For example, you know, me as a longtime resident of Berkeley, may have a certain way to get from, you know, the Berkeley campus to Monterey Market, for example, in North Berkeley, just by virtue of having lived there, you know, for so long. But then you perhaps may be a visitor to Berkeley and you decide to use Waze to go from campus to, to Monterey Market and you get there faster than I do. And so you decide to use Waze because you're just not familiar.

Right.

With the neighborhood. I think I'm familiar with the neighborhood and I think I'm going the fastest way, but I'm not. But in 10 years, in most cases and 10 years, things have changed. In most cases, I probably am not taking the fastest way.

Right.

So, and this applies very much in an engineering. And so that's where the benefit, the, the strength of the people who may seem less experienced comes in. And we've seen it over and over again that these people tend to outperform form.

I really like this analogy, but I'd like for us to make a case. So I guess the Evaluation marker is curiosity. Level of curiosity, I guess, the ability to explore and keep exploring. Where do you rank on that? And then you can probably be in any spectrum between, between maybe 20 to 40 for, for people on the other side of 30.

Yeah.

Right. What actually gives them an advantage if you were to make that case?

Well, I just look at myself, right. I feel like I am, I am disadvantaged in terms of just perhaps surface area, you know, relative to younger people. They're just exploring a bunch more things.

Right.

But I am advantaged in heuristics. And for example, so going back to that Berkeley analogy, if Waze tells you to take for example, Ashby at, you know, five o', clock, you know, you, you don't, you haven't driven on Ashby a bunch of times. You wouldn't know. But I know that Ashby can become gridlock and getting into the freeway.

Right.

And so it, it might be a faster route, but if two of those lights are green or red at the wrong time, then you'll find yourself stuck behind a light, which doesn't happen very often. But if it does happen, then things are just going to be a lot slower. So I'm just going to take for example, Gilman, you know, down, for example. So you know, again, like these are just, just, just, you know, heuristics. Right. That someone who has just seen more and done more and is more familiar takes, you know, into account. And so, and again, like, there's no silver bullet, of course, in anything. Yeah. And ultimately I feel like it's the team dynamic and it's diversity, that diversity in thought, diversity and experiences that ultimately lead to, to team performance.

You also mentioned, right, like when you were starting your company, it was hard to raise money or like get grants.

I didn't even know what venture capital.

Was and you didn't even know what venture capital was. And probably like that changes as you gain more experience.

That's right.

You're in the industry, you have a lot more relationships to leverage.

That's right.

Whether it's for knowledge exploration or, or to build, raise capital. I guess I like that analogy I think we were discussing today. We're not that familiar with la. It's my sixth or seventh time here. Right. So we realized that the highways, the ETA on Google Maps for highways is usually off by 15 to 20 minutes because it almost never accounts for accidents, which almost always happen.

Yeah.

And, and so you're better off taking internal routes almost anywhere instead of taking the highway.

Yes and no. So that's where again, that's where you Know heuristics versus.

Kind of asked an Uber driver.

Exploration. Yeah, exploration. So. So in the event that there is an accident right. On the freeway and the freeway comes to a standstill, then you are better off on certain streets, on surface streets. However, in any other scenari, long as the freeway is moving, even if it's moving at 5 to 10 miles an hour, you're still better off because it's all relative. You're still better off kind of like rolling on the freeway at 10 miles an hour.

Right.

Than taking the. The surface streets. And so you're the driver is correct in that if there is an accident that causes the freeway to stop.

Right.

You are better off on the surface streets. And that's why I look whenever I'm, you know, whenever I'm approaching a freeway, if I see the cars just moving, crawling, I get on the freeway. Okay, but if they're stopped. Yeah. If it's stop and go, then I take the surface streets. But again, these are heuristics.

So we've talked a bit about fundamental research and how the system works and how PhDs are probably not equipped. And we've talked a little bit about, you know, people on both side of 30s, what advantages they have in starting a company. What have you learned about how breakthrough innovation happens?

So breakthrough innovation is not like what we see in the movies. What we see in the movies, what we're used to in popular culture, is somebody, you know, staying up all night and falling asleep at their desk and, you know, a petri dish changes color and something is discovered. What usually happens is an army of people, through relentless effort and creativity, end up solving an interesting problem together. And so the idea or the discovery or that innovation is only the first step is the beginning. And that innovation, if its implications are communicated effectively, can then attract the people and attract the money that ultimately turn it into something that is useful. So that innovation itself is only branding and marketing. It is ultimately what comes after.

Right.

Which normally comes, which always comes as a result of the efforts of all these amazing people that gets you there. But the way you get these amazing people is by using that innovation, that discovery, to be able to raise the money and attract the people.

That's a good articulation, that. And I get very different variations of it. This is a unique variation. The idea or the discovery phase, I think that's a good word you've touched upon. What on average have you seen that period to be in entrepreneurs that work on more complex problems? And you invest in usually really complex entrepreneurs Solving really complex problems.

Yeah. It always takes longer. It always takes longer, right. It always takes longer, it always costs more money. But so long as you truly believe that the impact this is going to have is going to be meaningful, the market is going to be large. And if that market is created, you will have an advantage position in that market. There will be a quote unquote moat around you in the market that is ultimately going to be worth it.

So that's a pattern. Ever since like I've started interviewing deep tech, frontier tech, like founders, CEOs, is what I've noticed anywhere from one to four years. Seems to be that discovery timeline. Sure. And I interviewed one of your portfolio companies, Kasser, at Applied. Yeah, right. He mentioned they thought about it long and hard. That's right. They wanted, they wanted to be sure about what they wanted to spend their time on, what they wanted to work on.

Yeah.

So have you seen that to be true? Like one to four years? The discovery process is long.

I think it takes longer. Yeah, I think it takes longer because what normally happens is that there is a discovery in a lab.

Yeah.

And there is a company that's built around it. And what is realized is that that discovery in itself is not enough. You need to discover all these other things.

Right.

As well. You need to build all these other things as well.

Cross disciplinary discoveries.

Cross disciplinary. To actually make this interesting. And those other discoveries either happen through acquisition or through building up new teams and taking time. And it can take 10 years. What matters ultimately is not running out of money in the process. And so for me, I am less sensitive to how long it takes and more sensitive to investor appetite through the various stages of the company.

That seems to be a contrarian view for VC which happened to run 10 year fund cycles.

So what we're solving for ultimately as VCs is not selling products or even taking companies public. What we're solving for is shareholder demand. Because shareholder demand drives share price.

Right.

You want to buy shares in your company at a dollar and sell those shares in the next 10 years for $100. That's what we're ultimately trying to do now. Whatever it takes for those shares to become $100, whether it's proving a technology, putting a product on the market, taking the company public, whatever it is, we don't discriminate.

Right.

So long as there is demand for these shares, that drives the value up.

Right.

To 100 bucks from a dollar, we're happy.

I see how you separated share price from rate of progress in technology and it's that's a very interesting analysis. Okay, so how you mentioned. I want to go back, you mentioned like once they get money, you know, you don't care like how much money they need, how much time they take. I want to go back to like maybe pre money. Pre they've raised money. Right. Maybe they're still have a full time job. Maybe, maybe they're running another company.

Yeah.

And like nights and weekends or something. They just get an obsession.

Yeah.

How do you evaluate.

Oh, do that all the time. How do we have. We have founders. In fact, there's a company that was founded during the holidays as a result of a founder obsessing over a problem. Nights and weekends for a year.

Yeah.

And so part of our jobs is identifying these people and being the person that they call.

Yeah.

When they're ready to do this. And this, this example, this individual kept telling me, now's not the time. Now's not the time.

Right.

Computers too expensive. The AI models aren't there yet and we can't do anything useful right now. Give me some more time. And then December rolled around. He said, okay, now's the time to do this. Now is the time that we can really make an impact and the rest is history. So we are absolutely all about those individuals that are thinking about something two months, six months, a year, two years from now. We're playing the long game, thinking long.

And hard about what they want to work on.

That's right. We're playing the long game. And I personally am not that kind of investor. Which is, oh, call me when you need money.

Right.

I'm all about building a relationship, being helpful even before.

Right.

There is a company even before we put a dollar to work.

Right.

Because we're playing the long game.

You mentioned identifying these people in, in this time that you're building relationship. These six to six months to one year. How do you evaluate agency and how do you evaluate fashion?

Good question. It is one of those things where you, you know it when you see it. You can have a founder that spends all of their time in their garage tinkering on this problem. And you can have a founder who spends months out of the year playing golf or you know, participating in various activities and hobbies. And I think. But be as passionate or have, or be more passionate or have more agency, if you want to use that word. And so really it just comes down to reading that individual.

What I'm hearing is lifestyle choice does not translate to agency.

Absolutely not. Right, Absolutely.

Which is, I think a very fair point. I think People mix it up that, you know, ATR days in your basement is going to translate into.

Absolutely. Exactly, exactly that. I think that, I think I agree with you on very misleading.

Yeah.

Somebody who has no family, no hobbies, spends all their time tinkering, doesn't necessarily have more agency or more passion or more focus.

Right.

Than someone who has a family and goes on vacations and has hobbies and does things.

It allows. Yeah. It allows their mind to, you know, reset in a way.

That's right.

You could debate like either side of it.

There could be any, there could be any, any benefit or drawback to it.

Right.

But I've, I've met individuals who are very well balanced who did things that maybe at first glance to me, and you may feel like a waste of time, but had that agency, had that passion, had that rigor and folks that were the opposite, that seemed to be very passionate but ultimately weren't.

So how do you, since we're still on the founder and we're still talking about how to evaluate them, how do you evaluate an unsolved problem problem versus like an uncommercialized technology? And Delian has publicly said that in the case of Varda, it's an uncommercialized technology. Right. That NASA has previously published research papers on. It could be any other lab in that case. Right.

Yeah.

And versus you've talked about like earlier in our conversation as well. You're looking for entrepreneurs who are solving that unsolved problems.

That's right.

How do you differentiate the two? A. And then at what point does the unsolved problem fall under, like this is probably not going to make money or this is probably not going to become a business category.

Yeah. So it is like I feel hard.

To, I guess like draw lines around this.

Yeah. And I think it's probably not a good idea to overthink it. I think it is very important to, to stay open minded and hear a founder out. And I feel like the best thing that we can do as investors is get out of the founder's way and allow the founder to express their talents by articulating a vision, by expressing the significance of a problem and the value in a business that's solving that problem. So I think overanalyzing it will lead to false signals, in my opinion.

So you base it more, you make it more action based and like discovery based and let that dictate.

That's right. That's right.

Right.

That's right. So you don't, you don't look for certain attributes while the attributes that I look for have less to do with the problem itself.

Right.

And more to do with the person. With the person.

And the impact makes more sense.

That's, that it's making, that the overall package is making. For example, it's like looking at a car and, and focusing on the size of its brakes.

Right.

And the, the, the, the noise output, the noise, vibration, harshness output of the engine and the, the decibel level, you know, noise of the exhaust. You can look at, look at all those things, but you can also just take a ride in the car and just sense the overall experience. And so if you focus too much on those metrics, then you may get distracted from what you're otherwise underwriting, which is the overall package and how it works together. For me, I look for two things. Can this person hire, can this person raise money? And if they can do those things, even if the problem itself feels maybe not as important or the market less certain if it would, if it's really going to exist and, you know, whether other investors will eventually catch on or believe those become secondary, those become less important. Because in this business we don't have to be right today.

Right.

We need to be right in a couple years.

Right.

We have to be right in a couple years when they are out raising money.

Right.

We can be wrong right now.

Yeah.

Because if we are right right now, there's probably 50 other investors chasing after this.

Right.

And so everything that we see is going to have these uncertainties associated with it. Right. And we have to feel comfortable that those uncertainties can be knocked down.

Yeah.

In the next couple years.

That's fairly good analysis. That makes sense. So, parting sort of couple questions. Do you think the education system at an undergrad level or even a high school level is still. I, I mean, the one case is that the best talent is still going there because it's the only. Yeah. Tool available, you know, to get out into the market. But do you think they are teaching people how to think critically or is it still the best place for top talent to go?

That's a very good question. It's a longer conversation. I feel like the university system does a good job creating communities. 100 of talented people. So the opportunity to work with amazing peers is something that you get out of putting your time and your money into these institutions. In terms of the subject matter, I've always been a greater believer in reducing the volume and increasing the depth. Yeah. So for example, in, in, in physics. Yeah. Trying to go over all of the disciplines in physics.

Yeah.

And going very deep into every single one of them. Having a very, very basic understanding of fluid dynamics, having a very basic understanding of, of, of electricity and, and, and, and chemistry. Like having a basic understanding of how things work instead of going into so much detail and having so much breadth, I think will ultimately benefit students and they will then choose where to go deep on.

I agree. Yeah.

And they will have the opportunity then to go very deep in that area that they want to go super deep on.

And also the other thing is the capping the duration of how long it would take to certify you as a learned individual. Right. Is it four years? Is it two years? It's different for different people, right? Is it six years? Who knows?

I think this whole cookie cutter setup is obviously non ideal. How do you fix it? Boy? I mean, there are many very smart people that have very strong opinions about, about the higher education system.

Tell me more, what are your opinions?

My opinions are I, I question the value that's generated from the amount of time and opportunity cost that goes into higher education. That I question, will you be better off as a junior engineer at Tesla?

Yeah.

Example coming out of college versus spending another, you know, two or three years in or six years getting a PhD.

Right.

So I don't think there is an answer. It's just a question that I raise.

If you go further back to undergrad.

Right.

If like there's some, let's say a batch of people who got that community part done. Right. Within the first year and other like we got everything we needed. How do you think about those individuals?

Just going back to your previous comment, I just wanted to say something before I forget. So I feel like there are individuals who have. Well, actually, you know what, forget it. We'll just ask the question again, if you don't mind. We're editing all this, right?

Yes, we are. My question was going back to undergraduate. You mentioned that, you know, you raised the question that maybe higher education after undergrad.

Yes.

Is it worth being a junior in Tesla, engineer or pursuing, you know, higher education PhD. My question was for an undergraduate student who within the first year gets the community part of university life, right?

Yes.

And their high agency is still worth it to continue the other the next three years, you know, in college. Or do you just.

Probably not.

Probably.

There have been many people that were immersed in those communities, built great networks, learned the tools they needed, and then went off and did great things. And we funded a couple of those individuals.

Yeah.

And so I think it is naive to assume that there is any Single path that makes sense. There are great founders that are junior or sophomore dropouts. There are great founders that graduate, spend a year getting a master's degree, three, four years at SpaceX, Tesla, name your, you know, OpenAI, name your great company, come out and build great companies. There are people that get PhDs postdoc, work at big companies and start great companies in their late 40s.

So my question is not even around like being able to build companies after this. Right. Like in this age, like I guess in this phase of your life it's more around like when you look at the future of education, future of how talent should think about career opportunities, one year in you can still go probably do the exact same things we just discussed.

That's right.

And work at.

That's right. I think we shouldn't be looking at these educational institutions in isolation. We should also be looking at the employers.

Yeah.

So so long as employers put weight on a four year degree then there will be motivation to complete those four year degrees. Now it turns out that in our industry we are open to people that drop out without those degrees so long as they have what we believe it takes, which is the gravitational force for talent and the ability to fundraise. I feel like if other industries think more like we do and focus on what's needed.

Right.

Then maybe over time these four year institutions will rethink the way they, they, they do things. But I feel like a lot of what four year institutions do, a lot of it is driven by, by their customers, 100% which is, which is industry. Because their customers are not only the students, but it's also the industry that hires those students because that's what drives the procedure.

Incentives drive behavior.

Exactly. That's what drives the prestige of the universities.

Do you think the abolishment of Department of Education is going to change incentives or like at least inspire these questions more in the next 10 years?

I think it's going to come as a result of industry and the educational system and regulation. I feel like education. Exactly. I feel like education and health care.

Yeah.

You know, and shelter and real estate are, you know, very, very regulated industries. And a lot of the challenges that we see inside them are the result of regulation. And I think it's going to take a lot of time for these change. But it's, I think it's, it's important to keep all of the stakeholders held accountable.

Right.

And make sure they all work together. And again that's going to take a lot of time.

I hope we're on that 20 year timeline, I hope.

Your timeline. Yeah, exactly.

This was a lot of fun.

Thank you.

Thank you so much.

Loved it. Loved it.

Thank you. When we started, you mentioned. Those are very few questions. It panned out differently.

It did. It did. It was very free flowing. And again, huge thank you to Mark and the Bonfire Ventures team for letting us use their beautiful offices here.

Yeah, Literally. Mark's office. Thank you so much.

Thank you.