Shahin Farshchi moved from founding a neuroscience startup to joining Lux Capital, after his brain-probe company failed because the research market was too small. He learned to assess market size before building product, educated himself on VC through a UCLA class, and helped establish Lux's Palo Alto office.
Chapters
You should really emphasize on the size of the market and the dynamic of the market before going down the path of developing a product. So many of us think that we're Steve Jobs and we can come up with a great product. Well, the reality is that in most cases, the market probably won't open up to a product unless it can really appreciate the value of that product. I thought I'd share a little bit about my journey And I'm sure all of you in this room have more interesting journeys than mine, but hopefully you'll learn a little bit about what I've gone through to get to where I am and what I've learned, and hopefully that experience will benefit you in each of your journeys. So I grew up in a neighborhood not very far from here called Albany, and it's not Albany, New York, it's Albany, California, which is a town about 30 miles northeast of here. Nestled in Berkeley, which is a college town. And my dad was a graduate student at Berkeley when I was growing up, and he, being an engineer, got me into science fiction. So I watched a lot of Star Trek and Knight Rider growing up, and that got me really excited about cars and computers and space. And so when I was in high school, a lot of my friends' older siblings were getting jobs at dot-com bubble era companies in the late '90s, and were worth millions of dollars on paper by interning for random dot-com bubble era startups. How many of you guys were around during that time? Did you see the dot-com kind of Silicon Valley craze? Okay, not a whole lot, just a couple. So as you could probably remember, it was a very interesting time, and so excitement around being part of that drew me to doing computer science and electrical engineering for undergrad, and I did that at Berkeley, which was the coolest place to be in the area where I grew up. So, went to Berkeley undergrad, and unfortunately I graduated in the dot-com bust. So I graduated past 2001, and at that time, every company here in the Valley was on a hiring freeze, and there were very few startups, and those startups who were hiring were very, very selective and were hiring very few people. So being disenchanted by the whole prospects of getting a job in engineering here in Silicon Valley, I decided to pursue greener pastures and went to Detroit, of all places, to pursue my passion for cars. And so I started working at General Motors, working on reliability physics, and shortly thereafter I chose to come back to California and do a PhD in electrical engineering, as Alex was talking about earlier. And that was really to fulfill my passion for teaching I wanted to at some point in the future be able to teach, and I thought a PhD would preserve that optionality in the long term. And I also wanted to get to understand some scientific field very, very deeply. I wanted to have that experience as a scientist where I can focus very, very narrowly on an area that I was very passionate about at the time, which was microelectromechanical systems and radio circuit design. So how to design the chips that go into your cell phones and laptops. So I spent a lot of time doing that, and during that whole endeavor, I got interested in starting a company around my research. So the project that I was working on was making tiny little probes that would be implanted into mice and rats that would help brain researchers understand how the brain generates and transmits signals within tissue. And that was really interesting science, and as a scientist, I thought this science could translate to a really interesting business. And boy, was I wrong. So I started a company around this, and I quickly realized that you can have a great scientific breakthrough, but it doesn't necessarily translate to an interesting business. So I raised a small amount of money, hired some very, very talented people that are off doing amazing things right now, and we were able to get a product out aiming at the research community. And unfortunately, the research community didn't represent a very large market. So that was sort of an awakening experience for me that taught me that you should really emphasize on the size of the market and the dynamic of the market before going down the path of developing a product. So many of us think that we're Steve Jobs and we can come up with a great product that everyone's going to want and everyone's going to pay for. Well, the reality is that in most cases, the market probably won't open up to a product unless it can really appreciate the value of that product. And a lot of that comes back to clever marketing and the marketing genius that Steve Jobs and his team had in helping everybody appreciate how the iPhone was an amazing product even before there was a lot of penetration of smartphones. In the market even before people really understood what benefits smartphones can really bring to them. So during that time, I got to know what venture capital is. And how many of you are aware of venture capital? And you guys are probably speaking to a few VCs later today, so a lot of you obviously are. At that time, I didn't know a whole lot about venture capital, and so I actually took a class at UCLA on venture capital, and I learned about what VC is, what term sheets are, and what they look for. And I got a great piece of advice, and that was the best time to get to know venture capitalists is when you're not asking them for money. And so I decided to go out to VCs, and I was just doing blind outreach at the time. This is back in 2005. I reached out to VCs saying, hey, I'm a semiconductor guy, And at that time, semiconductor companies were interesting for VCs. There were a lot of fabless semiconductor companies that were getting funded, and there were a few companies that were successful at the time, Atheros being one of them that was making Wi-Fi chips. They went public and they later got acquired by Qualcomm. Broadcom was making a lot of acquisitions for billions of dollars, and so it was an area that venture capitalists were excited about, so I sent emails to, you know, to info@nameyourvc.com, hey, I'm a PhD out of UCLA, I understand semiconductors, and if you're interested in investing in semiconductor companies, I'd be happy to bring opportunities your way, or if you're looking at a company, I can diligence it for you. And many VCs did not respond, and a few VCs did respond and say, hey, sure, send companies our way. And I would do that. And one firm that responded to me was Lux Capital. So at that time, Lux Capital was raising its second fund, and they said, hey, if you see interesting companies on the West Coast, please send them over, and we'll let you know what we're looking at that might be interesting for you, and tell us what you think. And we built a relationship over the course of a year and a half while I was doing a postdoc to pay my bills, and that ended up turning into an offer for me to join as an associate in 2007. At that time, Lux was based in New York. We only had one office in New York, and I moved to New York in April of 2007, and that was right before the financial downturn, so it was an interesting time. And there wasn't really much of a startup community in New York at the time, and since then we've seen a huge kind of explosion of startups and quite a few venture capital firms get built in New York, and since then A few years after I joined Lux, we set up an office in Palo Alto, and I helped build that office in Palo Alto, and now we have a pretty significant team of investors based in Palo Alto. So,
