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Deep Tech Investing · Oxide and Friends

• 0:00
  Speaker 1: Can you hear me?
• 0:00
  Speaker 2: Yes. I can.
• 0:01
  Speaker 3: Yes. We can hear you, Seth. Alright. Good. Oh.
• 0:05
  And, and can we go for the trifecta? Ian, you there?
• 0:10
  Speaker 4: Yeah.
• 0:10
  Speaker 3: I'm here. Oh, look at that. That's great. No. I it was this is, like, loaded with bad omens.
• 0:14
  And on the one hand, like, look, it's very on brand for us to always start the space complaining about Twitter spaces. But I started the space, and the app immediately crashed. And I'm like, oh god. Like, it literally lasted not a second. So I I mean, I for the first time, I had to reconnect to the space before I could even make you a cohost.
• 0:31
  And then I go to, like, start Twitter again, and it's doing one of these things. Can I just may I complain about something for a moment? Oh, the whole Wait. Please. Sorry.
• 0:39
  Fine. If you missed. Right. This whole, like, oh, we've added this new feature of Deepgram that we wanna explain to you right now, And then you got, like, got it? You I've gotta, like, click on got it.
• 0:50
  It's like you got me to I don't get it. No. I don't have it right now because I'm not bothering to read this right now because your app just crashed. I need to restart it. I'm not interested in your new feature right now.
• 0:59
  Twitter? Not now. You
• 1:01
  Speaker 2: sound like you're a 1000 years old.
• 1:03
  Speaker 3: Do I sound like I'm a 1000 years old?
• 1:05
  Speaker 1: Yeah. It's also so it's also so odd to hear you complain about something. I feel like this is a first
• 1:10
  Speaker 4: first for me.
• 1:11
  Speaker 3: Okay. Look. Look. Look. Starting off with the bag.
• 1:14
  Let's take a look. Alright. Well, then let let let us let us not let me stop complaining about the the price of toothpaste and inflation, and, instead, welcome, Stephanie. And, so I'm super excited to have you both. I so, Adam, did you I I don't know if you had seen Seth's piece.
• 1:34
  I'm not sure if you'd,
• 1:37
  Speaker 2: no. I know I hadn't.
• 1:39
  Speaker 3: But I I mean, I love this piece. So, I mean, first of all, just to get the get the I mean, we're a private company. I feel like no disclosures are actually required. But just in the interest of full transparency, Seth, you are, you and Eclipse obviously are, the the we're the lead on our seed and have been investors in oxide, huge believers in oxide. Oxide.
• 1:59
  So, on the one hand, we are entirely biased because, obviously, you are terrific venture capitalists. I think you you have exquisite taste in companies, clearly. But on the other hand, I I I think that the, you know, Ian is not an investor in oxide and, you know, Ian
• 2:20
  Speaker 1: No. I can say it
• 2:20
  Speaker 4: for sure.
• 2:21
  Speaker 3: Exactly. You can say it for sure. It's like yeah. He's like, I know. I'm here to explain why I passed on your company and why I saw countless red flags when, but, I I think that, you know, there's a reason why Eclipse is an investor in oxide because I think one of the things you know, one of the myths that entrepreneurs are told is that when you are raising you know, you're raising from VCs, VCs and you're gonna go out to Sand Hill and you wanna, you know, kinda keep everyone in this moving at the same pace in your process, and it totally factors out the fact that's, like, actually, some investors are gonna be more interested in you than others.
• 3:01
  And the investors that are interested are going to move much faster than the investors that are disinterested, and, because there are gonna be investors that have been kind of waiting for a company like yours or for whom you hit the thesis. And I think it's fair to say that that's true of Eclipse and Oxide. Certainly, when when we came to you, it felt like it felt like someone let oxygen into the room. It's like we were finally talking to a venture capitalist who really understood hard tech. So I was really happy to see this blog entry.
• 3:32
  I think it's a terrific blog entry, and there are a bunch of things that that I like about it. One of them that I liked about it actually is that you sent me the Ian's blog entry, which I also really, really love. And before we get into it, Seth, just one thing I wanna hit off the jump that I love is that I because I think that Steve, you know, Steve's here and, again, you know, we can obviously can speak for himself in this regard. But I feel that well, first of all and, Adam, you you were an entrepreneur. Did you know you wanted to start a company before you knew what you wanted to do?
• 4:08
  I feel that that's, like, common. Right?
• 4:10
  Speaker 2: Yeah. Yeah. No. For sure. Yeah.
• 4:12
  I mean, I I think well, I mean, I think they were very much intertwined. I I think I knew I wanted to start a company if I figured out what I wanted to do.
• 4:19
  Speaker 3: Yeah. Yeah. Exactly.
• 4:20
  Speaker 2: I think they're I think they're those entrepreneurs who who, who, you know, I I I've met plenty of folks who want to be at the head of the line, want to start a company kind of, irrespective of what it
• 4:31
  Speaker 3: is, that was definitely not Right. And I think that, like, we Steve and I knew we wanted to start a company together, but didn't know what we wanted to go do. And I don't think that this is that uncommon where it's like, I know, like, who I wanna do it with, or I I think the time is right in in my life, or this is what I wanna go do. But I'm kind of, like, looking I'm trying to think about ideas. And, you know, Steve and I were really you know, Steve, I I hope that neither of us will ever say aloud some of the dumbass ideas that we had when, they were not hard tech ideas.
• 5:04
  They were
• 5:05
  Speaker 5: They were not. They were they were embarrassingly off off thesis ideas and but I think in our case, it was like, no. We want to start a company, do it together, and the kind of company that we wanted to build that did not necessitate the explicit product that company was gonna go make. And to your point, thank god we did not, move forward with any of those early ideas.
• 5:25
  Speaker 1: And but I think but I think, though, I just to interject here. Like, you know, you talked about this recently on a podcast. Right? There was a moment where somebody, you know, he who shall not be named, freed you guys up in your creative process to, like, dream big.
• 5:38
  Speaker 3: That that's exactly it.
• 5:39
  Speaker 1: Be like, hey. Hey. If capital isn't an issue or, you know, we could remove interest from an investor or a set of investors off the table, what should we go build?
• 5:48
  Speaker 3: Yes.
• 5:49
  Speaker 1: And I feel like that was a useful exercise for you guys to go pencil in on, you know, what what then became oxide, but more importantly, what what what kicked off is like, hey. This is something of significance. Right? That's what I'm trying to speak to and and kinda pay homage to in this, you know, from this talk from from Richard Hammy is like, people should work on the hard things because the hard things are meaningful and important and inspire others to come along on the journey. And, ultimately, you know, if you work on those things and whether or not you're successful or not, those are the things that you look back on as being, you know, the singular moments or singular, you know, period in your life that you're most proud of.
• 6:26
  And, you know, that's correct if I'm wrong. That's kind of like where you guys were at when you said, shit. Should we go do this wild Oxide Computer Company?
• 6:36
  Speaker 3: Totally. And part of it, Seth, what I love about your blog entry is it says exactly that. That, like, you, perspective enter the entrepreneur, don't be afraid to dream big. Don't be afraid to take on the hard problems. And, you know, what would you do?
• 6:50
  And I remember and I don't even know like, the actually, I do know, unfortunately, because I looked it up. I thought Adam,
• 6:57
  Speaker 4: do you have
• 6:57
  Speaker 3: this thing where, like, you think you you take a single person and kind of every piece of cult, like, aphorism you attribute to that person? Do you have this? My my Like like Ben Franklin or Ben It's Ben Franklin, Mark Twain, and Eleanor Roosevelt. Isn't that like isn't that like the trifecta of, like, at and so in particular, like, what would you do if you were unafraid of failing, which I thought was Eleanor Roosevelt. As it turns out, it's it was a televangelist who said that.
• 7:28
  So I it's like and I would like that. Oh, and I like going deep into his Wikipedia page to see if this guy got caught up in any scandal before, like, am I, like, even allowed to hold on to this? But I do think it's really useful instead of kind of, like, I feel like part of your blog entry, part of the emotional tone of it is, what is the hard problem that you would solve if you were unafraid of your ability to raise? Like, let's assume you could raise capital. What hard problem would you guys solve?
• 7:53
  And that is super liberating. But and this is, again, that this is where I wanna get into kind of the meat of your piece. It doesn't mean that, like, every hard problem is a venture business. And, you you know, there are certain kinds of hard problems that are going to be so maybe this will you know, I I I love your, obviously, peer quote, Seth. So I don't know if you wanna kinda start there as opposed to the the the the important rubric that you use when looking at at hard tech.
• 8:22
  Speaker 1: Well, yeah. I mean, I think, you know, typically and, Ian, Ian, you know, I'll give a shout out to Ian. One of the reasons why, you know, I love Ian is because, you know, we're we've been kind of on this lonely decade or more at this point investing in this type of company. It's sometimes together, sometimes not, but I think you and I are are can Kantos and Eclipse are are, you know, brother brother and sister companies, so to speak.
• 8:45
  Speaker 6: You're true.
• 8:45
  Speaker 1: You know, it's not to say that like the companies, these hard tech companies aren't going to require a significant amount of capital. In fact, I think most companies to get to a place where they really are breakout and have significant scale and have the ability to be a generational company do require 100 of 1,000,000 of dollars of capital. And so, like, people shouldn't be afraid of that. What I think we're trying to get to with the crux of this piece is like, hey. How do we go shed some light on, you know, the noncommercial SaaS metrics, you know, oriented companies and give kind of a better framework for how do you create inflection points of value through the early stages of development for some of these more challenging, you know, full stack oriented technical solutions so that you have focus, you know, clarity of focus.
• 9:31
  You can you can orient the, you know, the resources that you have in the balance sheet as efficiently as possible to hit those next inflection points. And, you know, oftentimes, that that endeavor, that journey starts off with a keen understanding of, like, hey, this is a big problem, but it's also an unbelievable market opportunity. Right? There are a broad swath of customers that if I solve this problem for them, are willing to pay me a premium for the solution that I'm providing. And so, you know, when I talk about, you know, Pierre and like the, you know, the the way he's pounded many lessons and to me over the years, you know, this this is a key one.
• 10:06
  It's right. It's like, and it seems obvious in
• 10:19
  Speaker 3: Okay. Interesting. It
• 10:22
  Speaker 6: it it it sounds novel, but, it's it it sort of is. I mean, I'm not gonna ring. I know. But, you know, what what I what I what I, tried to do in in my financial argument for Deep Tech piece, was articulate sort of how how we invest at Kantos today, which is really an attempt. Maybe I should give a little background.
• 10:47
  I didn't have, like, a hardware background like Seth. You know, he he was coming from GE to GE Ventures to Eclipse. I came at DeepTech from Fintech. I was an early employee at SoFi and have always just been fascinated with how we solve big problems as a species and and and and, you know, sci fi, like cutting edge tech. And over time, I sort of had had a greater onus to justify moving from investing originally in Fintech and sort of SaaS or I was making angel investments and where, you know, we were a little more broad when I got Cantos off the ground 6 years ago, and was sort of, like, 1 by 1 dispelling these, like, myths about deep tech.
• 11:31
  I mean, I didn't know that much about investing, so I was just listening to other well known investors, and and they were all saying things like, you know, hardware is hard. It's really hard. You know, longer timelines, longer sales cycles. It's gonna take a lot more capital. The upside maybe isn't as big.
• 11:46
  And I was like, oh, yeah. You know, taking notes. You you're a really good investor. You must be right about all these things. So I'm I'm gonna, you know, not invest in hardware.
• 11:53
  And then I was like, well, wait a second. If all of you are, like, categorically saying you're not investing in these areas and there's any opportunity to be had there, then maybe it's a differentiated approach to investing. And in fact, there can be more, you know, return on investment. And, and, I think all those are myths, but approached in a certain way. So so what I came to understand that led a lot of VCs to not be investing in hardware and bio was that for 20 years, the asset class has been punch drunk on software, which is really amazing in a lot of ways.
• 12:31
  I mean, it can scale fast, really high gross margins. You can build strong network effects such you have enduring modes. Like, there's a reason why it it attracted so much capital. But venture capital got started investing in hardware and then sort of took a detour through software for so long that people forgot how to do hardware because all those people are retired. And so we're sort of rediscovering it.
• 12:52
  And and that pendulum swinging was once described in an interview with Tom Perkins where he said, look. Throughout the history of funding technology, you sort of have this pendulum swinging between predominantly taking market risk and predominantly taking technical risk. Well, with things like developer tools, cloud cloud computing, you know, it became so easy to build software. The question for most startups wasn't, can you build the product? It was, does anybody want this?
• 13:21
  Yeah. And so Sandhill Road for 20 years, optimized around taking predominantly market risk and almost no technical risk. DeepTech, I think, because you are taking a lot more technical risk, the more responsible way to approach it is to attempt to invest in companies where you are minimizing market risk to offset that technical risk. You can definitely take both, but I think what what Seth, sort of described there. He, like, glossed over, I think, a lot of assumptions that get made today.
• 13:57
  But anyway Yeah.
• 13:58
  Speaker 3: Well, totally. And I think, actually, technical risk is so foreign to most venture that they don't actually even understand where it exists. I mean, one of the things that was frustrating to us when we were initially raising is people didn't think that there was any technical risk in oxide. And I'm like, am I not explaining this properly? I mean, and on the one hand, you know, if Aviso says, oh, there's no technical risk.
• 14:17
  You don't wanna be like, wait. Let me stop you right there, pal. There is unbounded technical risk in this thing. I mean, you don't wanna be like, let me give you many more reasons to be concerned. But the reality was there was enormous technical risk in oxide, and so I think, Ian, I think you're right.
• 14:32
  I think that they they are so unaccustomed to technical risk. I mean, on the bio side, Silicon Valley understands technical risk. But I think on the kind of the old school technical side
• 14:42
  Speaker 6: Well, more like Cambridge.
• 14:43
  Speaker 3: Yeah. Fair. Yeah. Yeah. Yeah.
• 14:44
  That's fair. That's fair. The yeah. Yeah. Easy for me to say, so I'm not raising around.
• 14:48
  It's a bio company. But the, they do not understand technical risk, and it is really frustrating especially because and I also like hardware is hard. It's like, can we stop saying that, please? I mean, yes. On the one hand, hardware is hard.
• 15:00
  Software is hard too. Also, is software soft? I mean, that's also true, I guess. But, like, this kind of, like, this parroting back of hardware is hard because the other thing that has happened is hardware is easier than it has ever been.
• 15:13
  Speaker 1: Abs absolutely. And this is the thing I think that, like, was the key insight. One of the one of the insights of how much Eclipse is founded is, like the, you know, it's easier and more capital capital efficient to build these these full stack hardware software companies than it ever has been in human history. You know, you we get ex you get excited about, you know, off the shelf, you know, component performance to cost, you know, inverse correlation is unbelievable. Right?
• 15:38
  You look at the drop in cost of every single off the shelf sensor, computer architecture that you ever wanted to use in an integrated system, the rapid prototyping tools
• 15:47
  Speaker 3: Totally.
• 15:47
  Speaker 1: And the ability to leverage open source software Pretty printing. Of, like, see it And and they coming down stat to, like, work with earlier stage companies. Like, it's ease it's still not easy. Right? But there'll be anything that's consequence
• 16:00
  Speaker 3: is Right. Exactly. So Right.
• 16:01
  Speaker 1: And the other thing I think is, like like, is ridiculous is, like, to say that these are, you know, hard just hardware companies. Just companies are, like, one time widget sales for 20% gross margin is an absolute misnomer as well. I mean, what an insult to Sean at Oxide who's building some of the best software, you know, for this industry or how, you know, along with the team, you're building some of the best software for this industry that we've seen in the last 10 years. Right? So these two kind of, like, areas of the stack need to work in harmony to deliver value to the end customer.
• 16:29
  Right? And when you get it right, you have more control over the development cycle. You have a a greater ability to provide value to that customer. And, ultimately, you've got more defensibility around the business model than if you were just slicing off a piece of
• 16:42
  Speaker 3: Totally. Totally. And so that was so funny because I and, Steve, I know you remember this incredibly vividly as well. I mean, I know exactly where I was when we were first presenting to Eclipse, and we are kind of starting to make this case. And you and the partners at Eclipse are, like, interrupting us to, like, finish the sentence.
• 16:59
  And I just remember the line that that that that I think it was Greg had. It was someone who was like, yeah. You know, we did we've looked at the you know, 18 of the 20 largest companies ever built have had a hardware and a software component. Like, this is not
• 17:12
  Speaker 4: I mean,
• 17:13
  Speaker 3: I mean, the thing that the thing
• 17:14
  Speaker 1: that we like the the thing that we talk about, right, is, like, 75% of global GDP exists in the physical world industries. How are you gonna touch those without a physical layer? Right? How are you gonna really get into the bowels of supply chain and manufacturing and next generation compute and better medical device, all this kind of stuff without, you know, cinching your belt tight and figuring out how to navigate hardware design cycles and procurement and supply chain and manufacturing. Right.
• 17:40
  Speaker 3: And these are all Oh, it drives me.
• 17:42
  Speaker 5: Remember not that we we left that meeting saying, thank god we just found our people, and also we need to get that slide.
• 17:49
  Speaker 3: Yeah.
• 17:50
  Speaker 5: That slide those 18 to 25 companies.
• 17:54
  Speaker 3: I mean, it's just crazy
• 17:55
  Speaker 6: that all all the funds that say, you know, we don't we don't invest in hardware. Hardware is hard. We don't do that. They're like, you know, all the quotes on their website are from Steve Jobs.
• 18:05
  Speaker 3: Oh, thank you, Ian. Thank you, Ian. I'm nuts.
• 18:09
  Speaker 1: Oh. It's time to build.
• 18:10
  Speaker 3: The it's time to build. It's and I was it's a moon shot. It's a moon shot. No. It's a moon shot.
• 18:14
  Okay. Can we have, like, an Apollo program historical review, please? I mean, I know. You know, I I love it. It's like you and I almost feel like you you may if you are not going to fund hardware, you may never quote Steve Jobs and Elon Musk.
• 18:28
  I'm sorry. I mean, it's like it's like, you know, I don't make up the rules. These are the these are the new VC rules. And as as long as I'm on this particular rant, software's eating the world. The software companies that are held up as the, this is the future.
• 18:42
  Adam, I know you Adam, do you know the companies that are in that essay if you read to the bottom of that essay?
• 18:48
  Speaker 2: Oh, I remember it's some it's, it's like the it's like Groupon or or something
• 18:53
  Speaker 3: like that. Yeah. It's Groupon, it's Foursquare, and I mean, it's it's these companies, it's Zynga. It Yeah. And it's like
• 19:01
  Speaker 2: It's like all companies you're needing to look up on Wikipedia to remember what
• 19:04
  Speaker 3: they're doing. And and not that they didn't build big businesses, and not that they weren't important or what have you, but the but it it's it's hard to argue that you've built things that are really lasting. And, obviously, software is incredibly important, but it's incredibly important, Seth, as you say. It's incredibly important when you made it with the physical world, and it just feel it it it's you know, and, Ian, I think you did a very good job of, like because it is super frustrating to us. It's obviously frustrating to you as well.
• 19:29
  Although, actually, I guess it sounds to you, but, like, it's not frustrating. It's, like, no. It's not frustrating to me at all because I get to go into this like, it's great to me that no one else is going to invest because I'm able to come in. It's like, I don't have to compete with all these folks. But the you know, you you highlighted a couple of things that I thought were really interesting about what you I think it's 4 factors.
• 19:50
  Do you wanna elaborate on this a little bit? Because I thought that was really interesting in terms of, like, why why it is so important, and also kind of explaining also why effectively Sandhill is not investing in hard tech.
• 20:05
  Speaker 6: Yeah. And I do I mean, to be clear, I do need other people to be invested in companies. You know, we're we we haven't announced it yet, but we're investing out of our 3rd fund, which is 50,000,000. So, like, we we we need someone else to do series a and b and c. So I desperately want more people to be investing in this.
• 20:22
  And besides, you know, it's good for the world. And so, okay. To to the the four points, you mean in in the
• 20:33
  Speaker 3: in the Yes. The your four arguments, because all of those really resonated with with me, or I should say 3 of the 4s. But I'll let you elaborate, and then we can talk about
• 20:42
  Speaker 6: them. As to, like, why it's an opportunity, one is what I got out earlier, which is that Sand Hill Road sort of has a blind spot here just because they've been specializing around software for so long. The craft of of mastering technical risk rather than market risk has, like, sort of been lost. The, you know, the the next, I think, is, was, diversification, like, and and by that, I mean, not just within your portfolio, but if you look through to the end customers, a lot of software looks a heck of a lot like a house of cards built on Ventra dollars. And if you have a contraction like you did in early 2000 or in the past 6 months in software, then it all sort of, like, cascades because, you know, there's a correction in ecom, and then all the ecom startups are correcting and then their cloud providers are correcting.
• 21:43
  It just all sort of cascades. Whereas in hard tech, a lot of times and maybe this isn't as acquittal applicable to Oxide that you will serve, you know, industrial customers, not just information technology. You know, our portfolio, they serve deep tech, quote, unquote, is thought of as a specialty. But, like, I don't feel like that because at any given moment, I'm looking into how we make cement or steel or how you generate power for, you know, commercial real estate or mining or it's like all these different different areas. And so your end customer diversification is real.
• 22:17
  And, you
• 22:17
  Speaker 3: know, I love the fact that you are, like, you have a tweet from, like, January something. I can't remember the exact date. But you're like, look, I'm not saying it is April 2000, but what if it is? Like, what if this is the top? And I'm, like, looking back and I'm like, wait a minute.
• 22:29
  Was that the top? Did you actually call the top? I think you might have. I think yeah. I you're very present.
• 22:36
  Speaker 6: Things have started go you know, going going, sideways in, I think mid mid November. Keith Raboy probably called called the top as much as I hate.
• 22:43
  Speaker 3: There you go. And so I so so you but but very important, you've got diversification, super important. Then you've got a third factor that really resonates with oxide.
• 22:55
  Speaker 4: Yeah.
• 22:55
  Speaker 6: I think I I've heard of this as as talent of recruiting, any of those metrics. But it certainly feels in our portfolio like they have an easier time recruiting talent because, you know, you you're some combination of working on more interesting technical problems, which engineers tend to prefer spending their time on, and a a, let's call it world positive mission, that you know, if it's if it's something doing something really cool that is better for the world versus, like, I don't know, just another SaaS company, then, you know, the cool company tends win that talent. Yeah.
• 23:41
  Speaker 3: Yeah. And
• 23:41
  Speaker 6: so and sometimes can even pay less.
• 23:43
  Speaker 3: Yeah. And I think that I mean, not so much on the Payless front, but more on the the I mean, we I mean, it's as we you know, we talked about our compensation model a lot. We wanna make sure that that people are compensated fairly and uniformly and at Oxide. We got to obviously gone into that a lot. But what we have found at Oxide is that the the the talent that we've been I mean, we're unusual, I guess, if you compare certainly the SaaS companies and that we're very oversubscribed.
• 24:05
  We got a lot more people. The the hardest thing about Oxide has been that we've got more people who want to work at oxide, who would succeed at oxide than we can possibly accommodate. And that's not common for startups writ large, but I don't think it's as uncommon for hard tech startups. I think that a hard tech startups, you can really make a pitch. And, also, I think the kind of technologist you're attracting is someone who's seasoned.
• 24:31
  It's someone who has got you know, who's done certain that these is for me. Seth, is that hold true for do you see that across your portfolio? I mean, I not to say that it's easy to hire, of course.
• 24:40
  Speaker 1: Yeah. I mean I mean, in in this, like, framework that we put out some of these less quantitative things, we talk about, you know, cultural mission. You know, the the the mission of the organization and the cultural competitive advantage began to take shape. I think that, like, you have to be super intentional and thoughtful about how you set that up from the beginning. But if, you know, 2 ish years into the journey, you've got a very clearly articulated mission that inspires, that the intention behind that mission is to go solve a big problem.
• 25:08
  It's, you know, category categorically can be defined as, like, a lucrative market opportunity, and it's one that attracts people that wanna come there and do the best work of their career with other like minded intentional values oriented folks. Yeah. You can begin to build build a foundation that creates a huge tailwind for hiring through the next few stages of the business. Right? And you can you can say, hey, look, come here and be a part of this journey.
• 25:33
  Come here and be a part of this AT and you begin to start punching above your weight class with regard to the executives and the technical and commercial and and and, you know, operations talent you're able to bring on board. And it creates this, you know, kind of organizational momentum that can help you get through some of the some of the more challenging times.
• 25:52
  Speaker 3: Totally. And I think that, you know, the famous, you know, Steve Jobs landing John Sculley at Apple. Like, do you wanna sell sugar water for the rest of your career? Amen. And it's like Amen.
• 26:01
  And sugar I'm sorry. Sugar water right now, it says crypto, like, that is the sugar water that we have now.
• 26:07
  Speaker 1: You wanna, you wanna optimize ad clicks or, like,
• 26:10
  Speaker 3: get dog walking more efficiently to your house, like, go
• 26:13
  Speaker 1: for it. You wanna, like, solve modern day supply chain crises that we're seeing play out in front of us right now? Like, come join us. Absolutely.
• 26:20
  Speaker 3: Absolutely. And I think that, you know, you look, and I also feel it's like it's you know, you've got kind of the right firm that you're talking to when you're looking across a portfolio. It's certainly true for for Eclipse and Kantos, where you look across a portfolio and you're like, wow. I think I like, I wanna go, like, talk to these companies. Like, these companies are all if I you know, obviously, I'm not looking for a job rep.
• 26:38
  But if I were, like, I would actually start by going to some of these hard tech, VC firms and walking the portfolio because the portfolio is really exciting and uplifting.
• 26:50
  Speaker 1: But I think
• 26:50
  Speaker 4: but but
• 26:50
  Speaker 1: I think what's lost in that or not lost, but we what what you need to mention, right, is, like, you gotta build a great business
• 26:55
  Speaker 4: too.
• 26:56
  Speaker 1: Right? And so Yeah. You know, it turns out some of these ad quick businesses are like a some of the SaaS businesses.
• 27:01
  Speaker 3: These are businesses.
• 27:02
  Speaker 1: Right? There's a phenomenal business out there. So so we we in many ways have you know, we gotta not not get on our soapbox too much. We need to go out and grill build a great enduring, you know, business model with strong unit unit economics and and strong expansion through within customers and, you know, the ability to reduce the cost over time, you know, wink, wink, wink, nod, nod.
• 27:26
  Speaker 3: Wait a minute. Is this are we in a board meeting? This is not like it's it's if care shows up here, I'm gonna be very upset.
• 27:32
  Speaker 1: But, like, these types of things. And so, you know, it the great thing about it is, like, that's not, you know, there is a playbook. There's a set of methodologies that you can run that enables you to build that type of business. And while the last 20 years of venture may have gotten too addicted to the application layer, the software application layer, there's 50, 50, 60 years Yes. Of execution in early stage invent and and early stage startups and early stage venture, that gives us great examples historically of how to go through this effectively.
• 28:04
  And so, like, you know, that's, you know, one of the privileges my career is to work with a guy like Pierre, but also my partner, Greg Raico, and kind of, like, I love that, you know, late 19 eighties, early nineties, you know, semiconductor networking, those types of companies because, man, they were just ruthless in their execution and along the way built wonderful business models.
• 28:22
  Speaker 3: Right. Yeah. And I think that the immediate so to someone just starting out who's like, you know, I I've got the ability to solve a hard tech problem. I'm interested in this. What guidance do you give about, like, how you know, and I think just the the PR quote, right, of markets, markets, markets.
• 28:36
  I mean, is is that would that be the guidance that you would give to a would be entrepreneur?
• 28:43
  Speaker 1: Yeah. I mean, I think I think you wanna start by, like, what's what's, you know, similar to what you guys did. Right? Like, if we if if we could do anything, what would we go work on? Right?
• 28:51
  And then once you've kind of, like, centered in on, hey. This is, you know, this is something that we can build. It's not, you know, research oriented or we have
• 28:59
  Speaker 2: a little bit more of
• 29:00
  Speaker 1: a a bias towards engineering execution versus research research execution. I'm happy to go into, you know, kinda how we think about that. But once you say, hey. This is something that we could build, then you wanna lean into the market. You wanna go talk to customers.
• 29:11
  Like, hey. What's is this a problem for you today? How cute is that problem? How many customers out there are experiencing that problem? If I were to solve that problem with a solution that looks like x, y, z, you know, what might you be willing to to pay for that?
• 29:26
  And so you through that exploration, you can start to do the deep work on the market side to understand kind of that MRD to PRD process, right, that market requirements to product requirements process. That's exactly what, you know, you you guys did. Right? And now you guys also have the experience of 2020 years building in this category. Right?
• 29:43
  But if you guys were were fresh off the boat, right, you you probably start with a similar kind of design council oriented methodology.
• 29:49
  Speaker 3: Yeah. But, you know, one of the things that was really frustrating to us and frankly still frustrating us that I don't quite get because, you know, I we obviously totally believe in your emphasis on on on the markets, peers, markets, markets, markets. We know that we're tacking towards a huge market, and the number of VCs that we've encountered, they're like, I don't think that market exists. And you're like, what? And I think it's you know, it actually was funny because we had one VC, very famous VC, call us, that that was felt like an unbelievable long shot for Oxide.
• 30:20
  And he called us somewhat early. He's like, hey. Look. I you know, I wanna talk to your customers, you know, because we're interested. And I'm like, you guys are such a long shot.
• 30:27
  And I, you know, ultimately, they didn't get over the line, so we're right on that. But I'm like, look. I you know, we indeed, our customers are, you know, kinda we we don't wanna have, you know, 20 BC stocking though. So if we know if that's, like, your last hurdle, fine. Otherwise and he, like, kinda cut me off.
• 30:41
  He's obviously a great venture capitalist. He's like, no. No. No. Nope.
• 30:44
  You're right. You're right. You know what? I shouldn't have even asked. You're totally right.
• 30:48
  I will go do my own research. I something, Seth, I have to say that you do, and, Ian, I'm gonna presume that you do and this venture capitalist does, but these are not words that come out of a venture capitalist now that frequently, unfortunately. Maybe I'm am I being overly cynical, Ian? Maybe I'm being too cynical.
• 31:07
  Speaker 6: No. I think
• 31:09
  Speaker 4: I don't
• 31:10
  Speaker 1: know. I don't I don't wanna I don't wanna bash too much.
• 31:12
  Speaker 3: I know. Listen. Okay. Listen. I know.
• 31:15
  Speaker 1: I'm I'm certainly not perfect.
• 31:16
  Speaker 3: Okay. Listen. I know you both need follow on capital. You both need syndicates. So you don't need to say it.
• 31:21
  Listen. For the record, Ian and Seth hold all of their colleagues in the highest possible esteem, and they know that every venture capitalist does all of the homework that they should do. From our experience to entrepreneurs exactly. Our experience to entrepreneurs often VCs don't do their homework, and they but but this one did. He's like, I'm gonna do my homework.
• 31:38
  And then he came back and, you know, came back a week later. He's like, wow. Got total conviction on the market. Boy, jeez. Wow.
• 31:44
  Big market. Like, okay. This is great. But we the number of self fulfilling prophecy where because Sand Hill is not investing in it, people are like, if this is such a big market, why is no one investing in it? And it's like, no.
• 32:06
  But this is the is that an opportunity? Wait a minute. What? Man, it's tough. I know you see that in a bunch of your big industrial markets where it's like there there aren't necessarily VC funded companies in those markets, but there probably should be.
• 32:21
  Speaker 1: Yeah. I mean, listen. What you guys are doing, what other companies in our portfolio are doing is hard. Like, let's not get it twisted. It's not it's not an easy path.
• 32:30
  And, you know, I've had a front row seat to the last three years for you guys and and and many other companies in our portfolio and it's it's just not easy. That doesn't mean it's not possible. And so, what you have to get comfortable with is, like, hey. How do I structure a development plan that's focused on very, very critical understand critical feedback that we've gleaned from the market that says, hey. If we get through this, you know, as efficiently as possible, there is an awesome opportunity on the other side.
• 32:59
  And then you get to work. Right? You bring on, you know, the the folks, you know, similar to the high quality folks that you brought on, and you endeavor to persevere through all of these really hard challenges to get to that place. And, you know, we might be plus or minus off by a few quarters, but if we've structured the capitalization, you know, in in the right way, we're gonna get there. Right?
• 33:20
  And so part of what it means to be an early an early stage investor in these types of companies is to, like, make the investment, get on the same side of the table, and operate with the utmost conviction knowing full well that there's gonna be headwinds along the way.
• 33:34
  Speaker 3: Totally. So, great to get Adam in here. So for those who don't know Adam Jacob, founder of Chef, current founder of the System Initiative. I mean, Adam, you've been on, obviously, the entrepreneur side of the table. You've raised a ton of capital, for infrastructural software, kind of increasingly hard tech.
• 33:52
  I mean, what what have you seen out there, and what what's your perspective on on Hard Tech VC?
• 34:00
  Speaker 7: Well, I was actually mostly just thinking about your your your comment that you had so many folks who were, like, if everybody if there's such a big market here, like, why isn't there more investment in it? Or why isn't there
• 34:11
  Speaker 6: kind of
• 34:12
  Speaker 3: more
• 34:13
  Speaker 7: of that stuff happening? And, like, I really think that it's a little bit because people are just really bad at asking questions about what people want. Like, you know, if you think about taking something like oxide and you go ask, you know, someone in the Fortune 500 if what they want is a rack scale computer that deploys fast, they say no. Right? But if you ask them, do you want your data center to operate like a public cloud?
• 34:40
  They say yes.
• 34:41
  Speaker 3: Right. Yeah. That's a really interesting point. And how do you so I mean and, I mean, obviously, people are bad at at asking questions. So but you both presumably, you mean both entrepreneurs and investors that are not asking necessarily the right questions.
• 34:55
  Speaker 7: I mean, sort of, but investors usually are worse
• 34:58
  Speaker 3: than a screener. Of course. Because I mean, I'm obviously a big deal.
• 35:01
  Speaker 4: And I I
• 35:01
  Speaker 7: mean, I say that with with so much love in my heart for all of my investors and so many others. But, like, you know, because you're not your your job your job is gain conviction, you know, inside of what an entrepreneur sees. So, you know, an entrepreneur sees the opportunity. They see the market. They see those things.
• 35:21
  Investors need to then gain conviction in those things, get on the same side of the table, I think, as Seth said. And then, you know, push toward that conviction. And I think anytime what you're building is is hard tech, whether it's hardware or software, if it's actually new and it's actually different and it's therefore, also has the potential to be massive. Not that not that it has to be those things to be massive. It doesn't.
• 35:45
  Right? You can you can sometimes figure out how to do something just better than something did it before. Right? But, like, then, ultimately, that process of getting to that conviction usually can't happen by going and asking the customer, the prospective customer, whether or not they want it. Because they don't know if they want it because it doesn't exist.
• 36:09
  Speaker 3: Yeah.
• 36:10
  Speaker 7: And so, like, you have to gain that conviction because you gain enough expertise about what it is, what the actual problems are that people are experiencing. What what is the suffering that exists inside of the Fortune 3 the Global 3,000 that sucks about running no data centers. And the number of investors who are in data centers in the Global 3,000 talking to people who run them or build them or manage them is pretty small. And and yet, like, we ask them to judge whether or not these markets are are big enough. And that's why, like, it's kind of amazing that venture capital exists at all.
• 36:47
  But, like, it's amazing that that you can find people who are willing to sort of jump off that metaphorical clip with you.
• 36:55
  Speaker 1: Well, like, conviction can't be built in 40 gig hours by, you know, by chasing growth metrics. Right? The conviction is built from, like, digging in deeply deeply and experiencing the problem firsthand. And so, you know, I it's it's I don't think it's fair to the venture asset class to or the venture capital asset class to frame venture capital and its execution in the last 20 years because historically, institutional venture capital was a couple of debts per year. Right?
• 37:21
  Couple investments per year, high conviction, high ownership, join the boards early, and help shape the pathway to success because those institutions had a thesis about the problem that these founders were were were, you know, going out to solve. Right? And so very much, it was like, hey. A meeting of the minds, right, in the moment of that pitch like, oh, yeah. I get it.
• 37:41
  I worked on this problem too, or I've seen this experience in other, you know, companies or whatever it was. And so and, you know, we got so caught up in the last few years of this cycle. We tried to squeeze so much juice out so quickly that, frankly, I think a lot venture capital firms forgot that diligence is a prerequisite.
• 37:57
  Speaker 7: Yeah. I think that's I think that's super true. And I think but and and anytime anytime you're or have the luxury as an entrepreneur of choice about who should whose money you should take. Like, my advice is consistently, like, go with thesis. Like, you need to find people whose thesis for the fund and whose thesis for everything aligns with the thesis of what it is you're
• 38:23
  Speaker 4: trying to build, and they want to build that thesis with you.
• 38:23
  Speaker 7: Because if you mess it up, like, you need somebody who, like, believes that that thesis should come true. You know? That's what gets you through the flat spots and the weird bits is that you're like, yeah. Yeah. No.
• 38:34
  We all agree this should exist. Right? And, like, let's go make it exist.
• 38:39
  Speaker 3: Exist. Yeah. I mean, a lot of interesting things to go pull on there. I mean, Seth, one one thing you mentioned is diligence. And, you know, kind of the the the nature of raising is that VCs don't necessarily see the questions that other VCs are asking, or that's how it feels.
• 38:53
  Maybe this isn't true. But the, I mean, the there is a, to me, shocking disparity in the quality of questions that are asked, And, you know, you kinda know when and and, obviously, Steve, you and I have seen this any number of times when, you know, like, the the the kind of the with those first questions, you kinda know, like, okay. This is gonna be a thoughtful process. This is not gonna be a thoughtful process. And certainly, when we hit Eclipse and then and the the diligence that that, I mean, you, Eclipse, are doing, but you personally were doing, I mean, you are immediately asking all of the right questions about the market and digging in in all of the right ways.
• 39:31
  And I, I, you know, I I don't know, like, how do we get better? Like, how does one learn how to do diligence? Because I feel like the feedback that you get on the investment cycle is so long. I mean, is there any way we can help Safa, are you gonna have that diligent school that you can have to do? I learned a lot
• 39:48
  Speaker 1: from Ian. Right? Like, Ian is one of the more thesis driven investors. I mean, I he's been looking at the nuclear space. He didn't jump in here for years.
• 39:57
  Right? And all of a sudden, it's little bit in vogue. And so when I caught up finally to his thesis, he had pages and pages that he and he and, I think one of his one of his, partners had put together. And so My
• 40:09
  Speaker 6: analyst Andrew was listening up. Yeah. And shout out Andrew.
• 40:12
  Speaker 1: Put together put together wonderful work
• 40:14
  Speaker 4: there.
• 40:14
  Speaker 1: Right? That I was able to kind of, you know, learn from. And so I think it's, there are no shortcuts, right? You have to be trying to chew on a problem for some time to really be in a position where you can sit down with an entrepreneur who has gone all in, who's like burnt the lifeboats behind them, had the conversation with the spouse, said we're gonna go do this, and feel like you can actually have a intelligent conversation. And that's why, like, the last few years of this, like, no diligence effort.
• 40:41
  It's just kind of like, you know, it's a it's a fluke. Right? It's the signal of the of the peak.
• 40:47
  Speaker 3: Yeah. That you know, I I appreciate your words of solace, Seth. Because you're saying that, like, this will get that that I could just, like, settle down and that what I've what we've seen in the last couple of years is an aberration and that diligent VC will return in in the coming years. You know, I that that's what I used to believe.
• 41:06
  Speaker 6: I'm try I'm trying to decide which I like more. I rather I rather like the time when are just throwing around money with no no diligence.
• 41:15
  Speaker 5: And and ask them questions like, hey. When you're raising your seed, could you raise less money and just build 1 rack? Which was a legitimate question.
• 41:25
  Speaker 3: Oh my gosh.
• 41:26
  Speaker 5: To which we obviously had to say, like, well, by the way, like, the first rack is nearly all the cost.
• 41:32
  Speaker 4: Mhmm.
• 41:33
  Speaker 5: Getting to that first rack. But yeah. Though I I I don't know if they maybe it will just just improve with time. But
• 41:40
  Speaker 7: Okay. So here here's I I wanna be
• 41:42
  Speaker 6: you know, I I I like to you know, one of my principles is is assume good good intent. Assume people aren't totally stupid. But, whether or not that may be the case, I like to live my life with it that way. So let's be let's give us a credit to these, thank you, to to the, sort of high velocity investors. The way I see it is that it was possible to do very quick diligence on, let's say, SaaS companies, Fintech, consumer companies, where there there are metrics to look at.
• 42:16
  And you can sort of, like, plug in some variables and output evaluation and, you know, your conviction was a bit more algorithmic or deterministic. And I think that that is actually what happened to a lot of these firms. It's a you know, what's your ARR? What's your growth rate? What's your retention look like?
• 42:34
  You know? And ascribe some multiple to your your AR run rate based on that. That is harder to do when, let's say, you're predominantly taking technical risk and there's a few years of building before you go to market. It's not you can't there's no equation. Like, there's no variables to plug into your equation.
• 42:54
  Speaker 1: Yeah. So you you
• 42:55
  Speaker 6: have to do more diligence because you gotta really understand what you're getting yourself into.
• 43:00
  Speaker 3: And I'm glad you mentioned that because this brings us to a graph that I love that you did. And, Seth, you obviously loved it too because you quoted it in in in your blog entry. Yeah. Totally. Where you have the and, you know, we'll we'll certainly get the graph up there in the notes, but this is like I don't know if you saw if you saw this in Seth's blog entry.
• 43:17
  This is like revenue 0 for, you know, the amount of time you're taking on that technical risk, have 6 people each paying, you know, a dollar 99 a month. It's like, no. No. No. That's not the model for hard tech.
• 43:38
  It's gonna look different from that.
• 43:39
  Speaker 7: I mean, I'll I'll I'll add one more, like, minor defense of the, like, fast capital deployment venture capitalists. I didn't have a ton of meetings with them, but I have had a few. And at least one of them, I felt like was as clear about their conviction as any, like, high diligence conviction investor I've ever seen. Like like, 5 minutes in the meeting, he was like, look, here's the deal. I've got money and I've got, like, a fuckload of it.
• 44:04
  And what I do is I give you money. And if it wins, I give you more. And if it gets bad
• 44:09
  Speaker 3: on I'm gonna hit you up later for an intro, if you don't mind. I mean, you don't mind.
• 44:12
  Speaker 4: And he would
• 44:13
  Speaker 7: and then and then they were like, and then if it doesn't work out, I don't. And, and but you don't do is call me. Like like, if it works, more money comes. If it doesn't
• 44:24
  Speaker 3: work, don't call me.
• 44:25
  Speaker 7: If you need help figuring out what to do or you need somebody to sit on your side of the table or whatever, I'm not your guy. I'm I'm the money guy.
• 44:34
  Speaker 3: And and, you know,
• 44:36
  Speaker 7: God bless him. Like, that was real clear. You know? Like, I understood
• 44:40
  Speaker 2: that thesis. That's that's the honest thesis that a lot of people are applying and and just not with that level of candor. But but instead, tricking themselves into thinking that they're gonna add value along the way that isn't, like, monetary value.
• 44:52
  Speaker 7: I mean, I'm gonna tell you, I liked them.
• 44:55
  Speaker 3: Oh, great. Oh, I I I want an intro. I want an intro. I think Ian wants an intro. Ian wants this kinda yeah.
• 45:00
  Like, what's the
• 45:01
  Speaker 6: the new hardware?
• 45:02
  Speaker 3: Yeah. Exactly. Right? The tell you the
• 45:05
  Speaker 7: I don't know if he does. Yeah. You know who I'm talking about, though.
• 45:08
  Speaker 3: Well, but but we've seen the also the polar opposite. I mean, literally had a VC say, look. You know, boy. Like, I I love the fact that this is technically derisked. We don't see market risk.
• 45:17
  You know, you don't see team risk. Honestly, the thing we're most concerned about oxide is is capital risk. And I'm like, you're wait a minute. You're the venture cap. What?
• 45:26
  Wait a minute. You're the capital. You're the capital.
• 45:29
  Speaker 2: That's the biggest risk.
• 45:30
  Speaker 3: Take that risk. That's the one you control. So, I mean, kind of at the at the opposite end, it can be very frustrating. But, yeah, I mean, that, like, that that step function, I think, gives rise to, like, some weirdness in terms of the way these things are funded, especially early because it does require more diligence, more conviction early on because you gotta be and more patience.
• 45:51
  Speaker 6: Yeah. Absolutely. And there's, you know, you know, where I may be a little more cynical is I I don't think that I'm equipped as well as, let's say, Seth and his his partners at Eclipse to come in and really figure out what the market wants, what they're gonna pay, how much. I want there to be basically no market risk. Almost everything I invest in today falls into 1 of 2 categories.
• 46:18
  Either you're making a commodity cheaper and usually greener or you're improving the standard of care. Like, I know if you do one of those 2 things, you would sell it. Like, the you know, I want the question to be, do you want cancer or not? Would you like to pay double or half for your, you know, energy or commodities or whatever it is? Like, I I wanna know that it is very clear on the other side of the technical risk the market is defined, rather than, you know, things where, like, you have to make a couple of jumps or you have to know the market better.
• 46:52
  Because because I feel like I have to don't with the breadth of industry that we invest in.
• 46:56
  Speaker 3: Yeah. And so I actually, you know, on that note, I've got kind of a stage specific question for you because you and there are you're not the only one who ventures a couple of these. You do seed stage hard tech at which is pretty interesting to me because it's like the actual dollar figures. I mean, they they are traditional kind of seed rounds, and oxide was unusual because we had a large MBV.
• 47:16
  Speaker 6: Well, traditional seed rounds, which today get called precede. But
• 47:19
  Speaker 3: But yeah. Oh, okay. But we're gonna stop it at pre seed. Right? We're not gonna allow pre seed.
• 47:24
  Is that right? Are we all gonna kinda hold the line on that?
• 47:28
  Speaker 7: Hell no. There's definitely gonna be a
• 47:29
  Speaker 1: pre seed. You can proceed. Pre seed.
• 47:32
  Speaker 2: Like a femtoseed. Yeah.
• 47:34
  Speaker 3: Femtoseed. Yeah. It's like, what what where does it end? We it it it has I
• 47:38
  Speaker 6: did I did recently hear a pitch for a post pre seed.
• 47:41
  Speaker 3: Oh my god. Oh my god. Oh my god. Did you I mean, how do you I mean, Ed, do you have to you have to assume that, like look. I assume you, entrepreneur, did not invent this term.
• 47:52
  I assume. I I hope. I hope. Learned who taught you that?
• 47:55
  Speaker 5: Let's just let's
• 47:56
  Speaker 6: just say, you know, first
• 47:57
  Speaker 4: money in ish in the range of, like, you know, 1
• 47:57
  Speaker 6: to 5,000,000. Yes. Right. It's
• 48:08
  Speaker 3: swing, you know, nuclear power or curing cancer. How do you kind of what's your rubric? Because, I mean, part of the reason we didn't do that is because we knew it was gonna take a lot more than that to get the MVP to market. Mhmm. And we wanted to be sure that we, at the outset, derisked technically.
• 48:32
  How I mean, but that foresee that that must be a very kind of different calculus. I mean, you must have what are the are the milestones that you're looking for for a hard tech company at the end of that investment? Because, surely, it's not revenue.
• 48:44
  Speaker 6: Well, I can tell you sort of, like, inception to, like, seed in series a, and then and then Seth and and, SGB GB actually released something that I think is really helpful here. But, oftentimes, I'm I'm investing in, like, 2 founders. Maybe they've recently finished their PhD or something. And they're like, hey. We, we think we can heat up iron ore much more efficiently such that we could, create steel at at least cost parity and, with lot less carbon emissions, and maybe we capture the CO 2 that we do create.
• 49:22
  So we get green steel that's cost parity, maybe potentially cheaper down the road. I'm like, okay. Great. That that plant eventually is gonna cost you probably 9 figures to build. But on the first million you raised, let's make sure that you've got that, like, core, you know, laser or whatever you're using to heat up the thing, built and sort of the experimental risks taken off that.
• 49:45
  Once we prove that based on which the cost reduction and and carbon emissions reduction is coming down, then we can go raise a few million to maybe build, like, a pilot thing so you can make some initial steel powder or something that you can not necessarily steal or sell, but you can put in front of a customer and and get them to say, yep. This is the stuff we're looking for. If it's x price, then, you know, we'll we'll buy a bunch, and here's a here's a purchase order for it. And then you take that purchase order, and you go out and you raise a series a to hopefully build your first plant. I I because we're relatively small investors, I do have some tolerances, an upper bound for how much capital is required before you can get meaningful revenue.
• 50:24
  For me, it's sort of in the, like, 50 to a $100,000,000 range.
• 50:28
  Speaker 3: Okay. Yeah. Right. But I've seen
• 50:30
  Speaker 6: that done enough that I'm, you know, I'm I'm I'm comfortable taking that kind of risk. And then, you know, series a and beyond, I'd let Seth comment on that.
• 50:42
  Speaker 1: Yeah. I mean, listen, you know, this this graph from I love Ian's post. This graph from his post is kinda what inspired me to do the work on our side to kind of write this companion piece alongside SVB. You know, you look at that, you know, once you get over the gap on on having a product out there and a revenue opportunity, it's true. It's it it it can be massive.
• 51:00
  The, you know, metrics around these business businesses can be fantastic in terms of the size of the opportunity, the net revenue retention, the lifetime value of the solution and market, all this kind of stuff. But what inspired me to write this piece was, hey. How do entrepreneurs that are building in these categories understand that they're on the right track ahead of having commercial capability or a product in market. And so, you know, we we think that we're okay at underwriting those types of of companies and think we have a a framework for for how to go do that in a cogent manner. And so this is this is what we tried to put together and and put out to the to the ecosystem.
• 51:37
  I think the ecosystem in many ways is devoid of that type of, you know, framework because one of the more common questions I get from entrepreneurs is, hey. What do you think, you know, my milestones need to look like? Right? What do you think I need to hit in order to unlock a seed or a series a or a series b or series c? And, you know, this this piece and this framework that we put together is our attempt to try to bring that love level of clarity.
• 52:00
  Speaker 3: Yeah. And I I loved the rubric. Except the part where you wanna, like, get the founders out and bring in professional management. I swear that was on there somewhere. I just, like,
• 52:06
  Speaker 1: I just like, I'm
• 52:07
  Speaker 3: I'm I'm gonna I'm gonna look to ask that one.
• 52:10
  Speaker 1: It's it certainly wasn't, but
• 52:12
  Speaker 3: Okay. Alright. Alright. Maybe, you know, I've been, you know, I'm twitchy. I've been I I I too twitchy.
• 52:17
  But can you talk a little bit about the rubric? Because I actually really like that rubric a lot.
• 52:20
  Speaker 1: You know, it's it's I don't think it's like a clear cut as, you know, clear cut and prescriptive as, like, you know, your rule of 40 or your growth rate. And and, frankly, a lot of the the commercial metrics applied these businesses as well. But, you know, I kind of think it across, like, 3 different vertices. Right? Proof of concept, proof of demonstration, proof of value, and then kind of the core structural components of the organization encapsulated within, you know, milestones related to team and product and and and market, your understanding of the market.
• 52:48
  And so I won't go hit all the bullet points, right? I think it's there for anybody who's curious to go to go look at but, you know, proof of concept to proof of demonstration is very much around. Hey, do we build something? You know, it it works in in in its totality. It may not work at the performance level or the throughput level.
• 53:05
  It may not have the cost that we ultimately wanna have. You know, we may not have as many systems or the volume might not be there from a from a deployment perspective, but we got happy comp customers. They're etcetera. And we're headed in the right direction. And so, you know, again, I won't get into all these things, but, you know, it's it's there for anybody who wants to go check it out.
• 53:32
  Speaker 3: Well, and that's valuable because, I mean, that so the so proof of concept, proof of demonstration, proof of value, am I getting that the ordering correct? And so, I mean, Ian, you're gonna be coming in in that kind of proof of concept or pre that that kind of the earliest bits of turning this almost sounds like you're turning this to a certain degree from science and engineering in in those earliest stages. Is that is that a fair fine. Okay. And then I I also gather yeah.
• 53:58
  Sorry.
• 53:59
  Speaker 1: Well, I said in in, you know, Eclipse Eclipse does as well, and we co invest with the end often as well as, taking some of these these larger capital capital required swings a la Oxide.
• 54:11
  Speaker 3: Well, it so the other thing that I think that I, you know, I admire about both of you and indeed the all the hard tech VCs that I've encountered is I mean, there's, like, some common traits, especially around curiosity. And, you know, not this I think it's a bit of a myth that everyone is curious. And, yes, you know, there are plenty of very curious people, but there are also people who are kind of incurious. And, you know, you both I mean, even clearly, like, curiosity is a very important part of the your own thesis because you've you've investigated a bunch of these things such that if a you know, someone coming to you talking about nuclear power or talking to you about some of these domains, you're like, okay. Actually, I've already investigated some of these things.
• 54:50
  I know some of these things, and I'm curious to learn more. I mean, is it is that what you see as well in terms of your fellow hard tech investors?
• 54:59
  Speaker 6: Yeah. And I'm I'm probably because we do bio probably a little, broader than some of our peers. But, yeah, I am if anyone's familiar with the Enneagram, I am a hard five, which is sort of defined by, pathological curiosity.
• 55:20
  Speaker 3: So yeah. I I just love, yeah, I love pathological curiosity. You're gonna give me to give you a moment on that one. I definitely it's yeah. Right.
• 55:27
  I feel I maybe I've had pathological curiosity. You're actually you're beginning to explain some of my freight relationships in my life, I think. Yeah. Well, go look up the Enneagram. Yeah.
• 55:40
  Speaker 6: People listening, don't know me already, I I have a bachelor's in international relations. Like, I I didn't I don't have any technical background. I'm just fascinated by all these different fields, and and I I tend to, it it does limit the things that I look at. They're sort of even within, climate tech, aerospace, tech bio, our 3 focus areas. There are things that I know enough about to ask decent questions and and those that I it sort of requires enough work that I'm I'm just saying, like, you
• 56:11
  Speaker 1: know, I'm not gonna be
• 56:12
  Speaker 6: the right investor for you. And then a a founder, their answer to those initial questions can help guide our diligence to make, we think, an informed decision on the company. So it is I'm I'm definitely you know, I love this job because I get to talk to the smartest people in the world and learn from them, but, you know, certainly, have bandwidth issues.
• 56:36
  Speaker 3: Yeah. Interesting. And, Steph, how about for you? Because, I mean, I think I mean, it felt like I'm not sure if this was true or not, but it felt like part of the reason that Eclipse was able to move so quickly and proceed, so diligently with respect to oxide. It felt like you were waiting for oxide that someone at the partnership, whether it's you or someone else, like, I I feel like there's a company waiting out here, but maybe not.
• 56:58
  Speaker 1: A 100 a 100%.
• 57:00
  Speaker 3: Is that it's like yeah. Yeah.
• 57:01
  Speaker 1: That's, you know, the that's our only I mean, everybody's money is green. Right? So our only competitive advantage when meeting with wonderful entrepreneurs like you and Steve, you know, is is solidarity. Right? And the understanding of what you're doing and the ability to, like, actually genuinely, you know, look at you and say, hey.
• 57:17
  I think we can help improve your odds of success here. And so we take the thesis development part of our job extremely seriously. And I mean, say no, say no to a lot of areas. Right? And so, you know, I I was very familiar with what the drop drop box folks did, the challenges they face there.
• 57:34
  You know, we followed Facebook's open compute project. We knew Amir. Right?
• 57:38
  Speaker 3: And Yeah. Right. When you
• 57:40
  Speaker 1: guys came in, it was like, you know, we're like, hell, yeah. This company has to exist. And I think that's a huge litmus test for us and has been since the inception of Eclipse. It's like, you know, I only wanna work on things that I'm excited to get out of bed and go, you know, really scrap for. Right?
• 57:55
  Yeah. It's been the next 10 to 15 years working on. And so there's a lot of great businesses and great people that we pass on because, you know, we we don't have the same level of conviction that we think is required to go partner, you know, genuinely with those types of founders.
• 58:11
  Speaker 3: Yeah. That's that's that's really interesting. And certainly, I mean and I think it mean it does highlight, first of all, that you you know, as a hard tech, not all hard tech investors are interested in all hard tech companies.
• 58:22
  Speaker 1: And No. Some might not.
• 58:24
  Speaker 3: And you're gonna need to that's why you'd but I also I've also found, honestly and I feel this is true. There's an analog here in the actual technology itself. I mean, Adam, I I I I think it's fair to say that these the kind of these hardware or software interface kinda communities tend to be very tend to be much more supportive than than many other kinds of communities I found. I don't know if you found the same way.
• 58:46
  Speaker 2: No. Absolutely. I think I it is it has been a welcome surprise how how, you know, how friendly and supportive and how much camaraderie there is, kind of in this broader ecosystem.
• 58:57
  Speaker 3: Right. And I feel like I see the same thing on the capital side where hard tech VCs are really excited to be like, look. You're not a fit for me, but I wanna help you out. I actually I earnestly wanna help you out as opposed to, like, you know, how could I be harmful? It it it that's like active
• 59:12
  Speaker 1: You know, it takes a village and there's not there aren't enough of us. I mean, you you look at They're not. Yeah. Yeah. You know, there's never been a better time to go build these companies, and and not enough people and investors are setting up and endeavoring to go build these companies to go solve the hard hard problems of our of our era.
• 59:28
  And the hard problems are out there. Right? There is an abundance of of of problems that exist in our in our country and in our world that need to be solved. And so, you know, what everybody on this this space right right now is in a privileged position to be sitting here on Twitter talking about these things. And, you know, whenever I you know, that's that's why folks like Ian and myself and some of the other, you know, groups out there, we work together to try to go help help support the entrepreneurs that are building these types of solutions.
• 59:56
  Speaker 3: Yeah. Well and it's honestly that has been, I mean, I think I feel like entrepreneurs are are often very helpful to entrepreneurs, or we try to be. And and, you know, many of my fellow entrepreneurs have been super, super helpful, and we try to return in kind. But I do find that, like, hard tech VCs tend to just be and I I, you know, I loved your blog entry in particular. It's like, hey.
• 1:00:17
  By the way, like, here are, you know, 9 of the firms that are that are you know, that we look to coinvest with. And I feel like you don't see that all the time. And I I feel like that it was really genuinely, earnestly helpful, which is great as an entrepreneur.
• 1:00:33
  Speaker 6: Well, I I I have to give a shout out to, you know, the the the, firm that focuses on sort of the same areas and and is pre seed or one of the small handful, that we get compared to a lot are our friends over 50 years. And, you know, we Seth and I, when we were raising our latest funds, sometimes LPs would be familiar enough that they'd be like, hey. You know, what do you consider yourself competitive with, or how do you compete with Cantos for 50 years? And, you know, Seth and I were, like, having breakfast together one morning and laughing about this. And he was like, you know how I've started responding?
• 1:01:09
  It's pronounced colaborator. Right. What? What? Very rarely, very rarely in in zero sum games.
• 1:01:19
  Like, we we need we need more funding for these types of companies. And and yeah. I mean, I don't know. I mean, a satellite company that we invested in last year, I was introduced to by Seth, and he said, hey. You know, I like the founders.
• 1:01:34
  We don't necessarily have a have a very strong thesis on, like, this this area of orbital infrastructure, but it seems like something you'd like. And he was totally right. Ended up investing, in in the process of investing more now in in their series a. And, you know, as you as you mentioned, I'm Kentos is not an investor in oxide. I'm just a fan of what you guys are doing, and, you know, I've been have been friends.
• 1:01:56
  So, no. It's it definitely is is a lot of fun, but I would encourage others to jump in because the water's warm, and we need more funding.
• 1:02:04
  Speaker 3: We need more and we and I think and you we I think you mean that. And, Seth, you touched on this earlier. Like, you mean that in the broadest sense. Like, we, humanity, need more funding. I mean, the the the reality is that that venture capital has played a a critical role in innovation, commercial innovation in the in the latter half of the 20th century and into the 21st century.
• 1:02:25
  It's like it it plays a pivotal role. We need it, and we need it to step up and actually be through venture capital. It's it it is not like, if you wanna like, if if if you are interested in a pure financial instrument, this is probably not the right asset class for you. And I so, Seth, on that note, what do you look for in someone who is like you know, let's say, Eclipse is is gonna expand, is gonna add someone to the team. What do you look for actually in someone who is like, this person's gonna have what it takes to be a hard deck venture capitalist?
• 1:03:00
  Speaker 1: Well, I think I think it's public that
• 1:03:04
  Speaker 3: Oh, god. He just muted himself right out of his face.
• 1:03:07
  Speaker 1: I was just I was just
• 1:03:08
  Speaker 3: Oh, no. It's like no. No. My
• 1:03:09
  Speaker 1: my finger.
• 1:03:10
  Speaker 3: No. No. Yeah. My heart races because Twitter Space has so many problems.
• 1:03:13
  Speaker 1: You're good. No. We just so we just, we're we're bringing on a new partner at Eclipse. We do it every every few years. This guy's name is Charlie.
• 1:03:20
  He's, fantastic.
• 1:03:21
  Speaker 4: If you haven't met him, you should. I'd be
• 1:03:21
  Speaker 1: happy to introduce you. He's, like, you know, came grew up in in Kenya originally, you know, had a bunch of experience operating through automotive OEMs, Nissan, and I think Toyota and a few other places. Joined Tesla and actually worked for my partner, Greg Ryko. So cut his teeth kind of, you know, in the in the epicenter of that crazy time from about 2012 to 2017 or 18. You know, along the way, you know, was advising startups.
• 1:03:55
  Traditionally, companies are building these types of, you know, hard tech oriented solutions. Did a tour of duty at Cloud Kitchens, you know, was a part of growing that and scaling that, and and more more recently was the VP of engineering at Rivian for the last 3 years.
• 1:04:09
  Speaker 3: Oh, wow. You know? And What a hire. That's a that's a good get.
• 1:04:12
  Speaker 1: He's a good guy. So what I like to say about this guy, right, is is, you know, on his in his spare time, he likes to, you know, analyze deeply curious individual as well as being, like, a consummate operator who's, like, battle tested through some really challenging, you know, efforts to ship complex products. And so, you know, you should have you should want people we wanna bring people to eclipse that have strong opinions on the world, that aren't afraid to operate with conviction, that know what they don't know, and are willing to admit admit what don't know. But most importantly, have the utmost desire to get on the same side of the table, like I said before, with people that are trying to solve hard significant problems and and dig in deeply to go help them be successful.
• 1:04:58
  Speaker 3: Yeah. That's interesting. So you are I mean, part of what you're looking for then, and it yeah. That's exciting. What a what a great hire for Eclipse.
• 1:05:04
  I hadn't heard about it. It seems like seems like a a a perfect add to the team. But someone who, especially at Rivian, I mean, but I've added a bunch of those tops, but has solved real hard problems. And, I mean, that's someone as as an entrepreneur solving a hard problem. Yeah.
• 1:05:19
  Like, that kind of voice on the other side of the table is one you're gonna pay really sharp attention to to someone who's been there who's actually dealt with setbacks and disappointment and persisted and so on. I mean, that that's, that experience seems like it's extraordinarily valuable. And certainly, we see that where you people don't have that experience. It it they have a hard time understanding what it means. And, actually, you know what?
• 1:05:40
  Honestly, the the folks that don't have that experience are actually more afraid than they should be.
• 1:05:45
  Speaker 4: This is
• 1:05:45
  Speaker 3: where you get the hardware's hard people. You know? Where it's like, actually, if you had if you had more experience in this, you'd be less afraid of it.
• 1:05:53
  Speaker 1: And you know that, like, unless you're trying to do net new invention, right, which kind of, like, I'm not smart enough to predict when lightning's gonna strike in that area that, like, these were solvable problems. Right? We can focus with the right people to go, you know, solve through a lot of these technical issues. Right? Yeah.
• 1:06:08
  I mean, I've been had a front row seat to the wonderful work that you and your team have done over the last 12 to 18 months. You guys tackled some hairy problems.
• 1:06:15
  Speaker 3: Right? So there's gonna be more going forward. Oh, god. Oh, if that right people. I know.
• 1:06:21
  Speaker 1: That care care deeply about what they're doing. And I'm a firm believer in, you know, human ingenuity and great teams coming together to go do things of of significance.
• 1:06:31
  Speaker 3: You know, and I I just I I love that, like, fundamental optimism. And, again, you hit it on on your piece that, like, I think it is the the coupled with that curiosity, that optimism that, like and, Ian, you know, you got to it too in terms of, like, these taking these big problems, being a force for good, curing, you know, curing your literal cancer. I I think that that is because I I I you know, I'm such a I'm so long on humanity, and sometimes it feels like it be a lonely voice. People get very pessimistic, and it's like, we're really we've got great ingenuity. So I think it's great to hear, Seth.
• 1:07:06
  Speaker 6: I wanna give people some hope, that there is light at the end of the the financing tunnel. If you if you manage to derisk the technology and then prove revenue and positive unit economics, there there is capital out there. It's it's, I think, the, you know, series a, b, if if you don't have meaningful revenue yet, the series c. It's that range that is the hardest. But, we were sort of
• 1:07:39
  Speaker 3: We know, Ian. We know. Right here.
• 1:07:42
  Speaker 4: Well, let's
• 1:07:42
  Speaker 3: see. I can hear you.
• 1:07:43
  Speaker 6: In general terms.
• 1:07:45
  Speaker 3: Oh, sorry. No. No. Pricing company excluded.
• 1:07:49
  Speaker 6: But, you know, companies that would get you know, I started investing not not too too long ago. The first companies that would get to that to that service b c c stage when they began to have at least firm purchase orders, to the tune of a 100,000,000 plus. We we were having trouble raising from, you know, quote, unquote West Coast VCs, and then we sort of, like, start tearing our hair out. And they're like, well, you know, I got this trip to New York, plan to visit some customer, whatever. Why don't I try and set up some meetings with Wall Street and see how it goes?
• 1:08:19
  And to our surprise, they were like, wait. What the heck is DeepTech? I've never heard of that. This is, you know, this is chemicals. This is aerospace.
• 1:08:28
  This is, you know, this industry that we've got a whole groups that cover. We know how this works. We you know, this this is great. Let's do it. You know, we'll invest tens, sometimes 100 of 1,000,000 of dollars.
• 1:08:37
  And you're like, wait. What? It's so true. At first that Wall Street understood it better than Sand Hill did, but then you remember Absolutely. You know, you're you're you have revenue in industrials.
• 1:08:50
  They have more experience there than Santel Road does.
• 1:08:52
  Speaker 3: Yeah. Absolutely, Eddie. And it's so funny you should say this because we have definitely seen the same thing and and even if and we've seen it over and over and over again. And I wonder so I gotta kind of something I wanna bounce off both of you because we have seen it. Steve and I have seen it so many times that and, in fact, when we most recently saw it, it's like it's coming from folks that have a a that are ultimately, like, were born on the public equity side.
• 1:09:18
  So these were public equity, hedge funds, what have you, and they have as you say, Ian, they've got teams on aerospace. They've got teams on all these dimensions. So when those folks begin to go on to the private side, it's like, yeah. We've like, we understand these industries. Like, we've got whole folks that work on it.
• 1:09:35
  And the questions being asked, the conviction that they have just seems, so, yeah, we've seen the exact same thing. Is it did you think that having that that public equities kind of origin story helps them understand these industries a little bit better?
• 1:09:51
  Speaker 7: Once you get
• 1:09:51
  Speaker 6: to the point where you've you've got, you know, at least finding purchase orders or or revenue. Totally.
• 1:09:57
  Speaker 3: I mean, obviously, like, once you cross the chasm but I feel like they they are ready for you to cross the chasm, unlike some San Diego folks. Like, like, I don't think there is another side of the chasm. Fuck.
• 1:10:07
  Speaker 4: Okay. Yeah.
• 1:10:07
  Speaker 1: I mean, they're ready and waiting. I mean, you could talk to I mean, there are smart people covering these types of categories that Bailey Gifford and Fidelity and, you know, Capital Group and these types of areas that, you know, if they see something that they're interested in, they have the capacity to go right 100 to $500,000,000 kinda like exploration bets. Right? And and pre IPO companies that have that have crossed the chasm. So and they do deep work, and they're well informed, and they take a 20 year view, and they're part you know, very partnership oriented.
• 1:10:35
  So the capital's out there for sure. And, you know, I would say, you know, there's a there's there's capital, you know, from seed to series c, certainly from from us, from your friends, from your neighbor neighborhood friendly VCs of your eclipse.
• 1:10:49
  Speaker 3: Right.
• 1:10:49
  Speaker 1: But but also from other folks as well. And so, you know, I think, you know, what Ian and I are really trying to do with some of these, you know, posts we're putting out is, like, help bring more clarity and more focus to what's required so that entrepreneurs in these spaces can use their capital efficiently, not overly dilute themselves and get across that chasm in an expeditious manner.
• 1:11:10
  Speaker 3: Yeah. Well, and it was it's Seth, again, the piece I thought was great. Ian, I loved your piece as well. Just terrific to read. I think it's it's inspiring for hard tech entrepreneurs to know that there absolutely are venture capitalists, and they're gonna ask you to have questions.
• 1:11:24
  It doesn't mean that, like, again, not every you know, there are plenty of science projects out there that that are probably not venture businesses. But, I think it's really, really helpful for folks to know, that the these firms very much do exist. The and I love your disposition of, like, hey. We want more people to invest in the sector. Like, on the one hand, I love you.
• 1:11:43
  You're just like, I'll look. I'm willing to, like I like being contrarian and all, but, like, I could use some company over here, actually.
• 1:11:49
  Speaker 2: Totally.
• 1:11:51
  Speaker 3: Which is great. So, you know, we we try to keep you for about an hour. I'm not sure if other folks wanna jump in with with with questions for this this crew. I mean, obviously, you've got 2 terrific venture capitalists here, but at at albeit at slightly different stages, but who love to co invest. But the the this is, it's honestly been, great to have you both here.
• 1:12:10
  So, I don't know, Seth, have you any any closing thoughts from from you or from Ian? Or, Adam, you wanna jump here? Yeah.
• 1:12:21
  Speaker 1: Thanks thanks for having us. Appreciate what you guys do with this space. And, you know, anybody ever wants to chat, feel free to reach out.
• 1:12:29
  Speaker 3: Yeah. And I would say that also, if I can just give a plug for both Eclipse, and and, and Kantos have podcasts, that like, I I I've actually love them both. I know that the, I love these because I you're talking to generally, if you're talking to your portfolio companies, and I I mean, I, you know, obviously, we view, Cerebraseth as kind of a sibling company in the Eclipse portfolio. There's a great episode that you all have, talking to Andrew Feldman, that I loved. Very inspiring stuff.
• 1:13:05
  I know you've got a a bunch on that series. I would incur Seth, I hope you guys are are gonna keep making those. Ian, I hope you're gonna continue doing your podcast because, I know that there are listeners out there that really enjoy them, entrepreneurs that are inspired by them. Ian, I love the one on Dusty Robotics I listened to recently. I thought that was super interesting.
• 1:13:24
  Speaker 6: Oh, it's good. Tess is amazing. I'd strongly recommend any hardware founders listen to to that interview.
• 1:13:30
  Speaker 3: Yeah. I I said and I don't know. I don't know. I mean, I Adam, I can't if you I don't know if you you can No.
• 1:13:34
  Speaker 2: No. I mean, I'm rapidly subscribing right now.
• 1:13:37
  Speaker 3: Right. They are
• 1:13:38
  Speaker 6: There's this industrial evolution, a a ClubCentre's podcast. Ours is Near Frontier. You can
• 1:13:43
  Speaker 3: go to near frontier.com. And, you know, I just like I said, I I hope that you continue to make them because I know that, like, the the the listenership for this doesn't always feel large, but it's important. And I think it's it it it those are the kinds of things. It's the kind of content that people it's so valuable to hear from hard tech investors and hard tech entrepreneurs. So thank you for that, Seth.
• 1:14:07
  Thanks for the content. I, you know, I I'm looking forward to seeing the it's the first of a series, apparently. I can't wait to see the rest. So, Yeah.
• 1:14:15
  Speaker 1: Yeah. I mean but, you know, I should say, like, we're we're trying to bring a little bit more, you know, structural operational thinking to to kind of this this series. We're calling it the industrial tech tactic series. And there's a bunch of stuff, you know, on the on the horizon that you should keep an eye out for.
• 1:14:31
  Speaker 3: Awesome. Can't wait. Ian, Seth, thank you both so much for for being here. This has been a really fun conversation, and, hopefully, the first of a couple will be be be great. Yeah.
• 1:14:43
  Yeah. Well, I mean, with with let's go get, you know, get a a bunch more hard tech VCs out here and, that this is an asset class that we all think that more people should be investing in. So Amen. All right. Thanks, guys.
• 1:14:55
  Thanks, everyone. And we'll talk to you next time.
• 1:14:58
  Speaker 2: Thanks.
• 1:14:59
  Speaker 1: Bye, guys. Thanks. Thanks. Thanks. Bye.
• 1:15:00
  Bye, all.