20VC: Why We Will Continue To See An Explosion In Deep Tech Financing, Why Much of Silicon Valley's Talent Is Going To Waste & How Fund Cycles Need To Be Adjusted To Work With Deep Tech with Seth Bannon, Founding Partner @ Fifty Years

Seth Bannon is a Founding Partner at Fifty Years, a San Francisco seed fund that backs entrepreneurs solving the world's biggest problems with technology. With a proclivity for deep tech, Seth has invested in a range of startups shaping the world for the better -- from a company culturing real meat to eat without animals, to a company building small satellites to cover the earth in internet. A graduate of Y Combinator, Seth was named twice to the Forbes 30 Under 30 list for Social Entrepreneurship. In Today’s Episode You Will Learn: 1.) How Seth made his way from working on Obama's digital campaign to being a YC founder to now, founding Fifty Years? 2.) What is the Friedman Doctrine? Why does Seth think it is the most dangerous doctrine in the world? What leads Seth to believe in the potential for both purpose + profit? What is driving this change in millennial mindsets for the importance of purpose? 3.) Why does Seth believe we have seen a large increase in VC $ moving into deep tech as a space? What are the technical reasons for why seed stage deep tech investing is now such an attractive market segment? Do we have adequate deep tech growth financing? 4.) Why does Seth believe that much of Silicon Valley's talent is going to waste? How would Seth like to see talent redistributed to produce the greatest returns for society? What needs to be done for that to occur? 5.) Why is Seth so bullish in his belief for the need for fund cycles to be extended? How does Seth respond to suggestions that due to long development cycles in deep tech, investors have to carry companies for much longer? How has Seth seen the secondaries market open up over the last few years? Items Mentioned In Today’s Show: Seth’s Fave Book: The Idea Factory Seth’s Fave Blog: Hacker News Seth’s Most Recent Investment: Athelas As always you can follow Harry, The Twenty Minute VC and Seth on Twitter here! Likewise, you can follow Harry on Snapchat here for mojito madness and all things 20VC. WePay helps online platforms increase revenue through integrated payments processing, helping platforms offer ROI-positive integrated payments to their users – within their UX and without taking on fraud & regulatory exposure. WePay also offers award-winning support and can even work with your team thru Slack or Zendesk. Get the payments revenue you want, without getting bogged down every time a user has a payments question. Simply visit wepay.com/harry PipeDrive is the Sales CRM and pipeline management software to use, with the primary view being the pipeline a clear visual interface that prompts you to take action, remain organized and stay in control of a complex sales process. This is why sales pros and deal makers love it (my words, not Pipedrive’s). Plus it easily lets you find the stats you need and is fully customizable. Even better, you can signup for free on here it really is a must.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  Welcome back to another week in the world of the 20 minute VC with me, your host, Harry Stebbings. It'd be great to see you on Snapchat at H Stebbings with two Bs, where you can suggest future guests for the show. It'd be fantastic to hear your thoughts. But today's week on the show, and I'm so excited to be doing a week in the world of all things deep tech. Joining us in the hot seat today, I'm thrilled to welcome Seth Bannon. Seth is a founding partner at 50 years. In my opinion, one of San Francisco's most exciting seed funds, backing entrepreneurs solving the world's biggest problems with technology. Seth has invested in a range of startups, shaping the world for the better. Check this out. From a company culturing real meat to eat without animals, to a company building small satellites to cover the earth in internet. A graduate of Y Combinator, Seth was named twice to the Forbes 30 under 30 list for social entrepreneurship. I do also want to

• 0:44Harry Stebbings?

  say a big thank you to Richard Chen at Vitruvian for the intro to Seth today, without which this episode would not have been possible. But before we dive into the show today, I want to tell you about WePay. WePay helps online platforms increase revenue through integrated payments processing. Constant contact, Equid and GoFundMe use WePay. Why? Because WePay uniquely helps platforms offer ROI positive, integrated payments to their users within their UX and without taking on fraud and regulatory exposure. Others make you trade off between UX fruition or fraud, not WePay. WePay also offers award winning support and can even work with your team through Slack or Zendesk. Get the payments revenue you want without getting bogged down every time a user has a payments question. But don't trust me. Visit wepay.com/harry.

• 1:27Harry Stebbings?

  Oh yes, I have my own URL for a video case study on how Equid grew its revenue while better serving customers with WePay. That's wepay.com/harry. You'll also be made eligible for a year of free premium support on wepay.com/harry. And how could we forget PipeDrive, something we use here every day at the 20 minute VC, to manage the pipeline for guests? PipeDrive is the sales CRM and pipeline management software to use, with the primary view being the pipeline, a clear visual interface that prompts you to take action, remain organized, and stay in control of a complex sales process. This is why sales pros and deal makers love it. My words, not PipeDrives. But it easily lets you find the stats you need. And even better, it's fully customizable. And if you're like me and don't like paying for products upfront without knowing how good they are, this is for you,

• 2:12Harry Stebbings?

  as you can sign up for free on pipedrive.com. It really is a must. But enough from me, so I'm now thrilled to hand over to Seth Bannon, founding partner at 50 years.

• 2:27Speaker 01

  You have now arrived at your destination.

• 2:30Harry Stebbings?

  Seth, it's such a pleasure to have you on the show today. I've heard so many great things from both Richard Chen and Ingvar Helgason. So, thank you so much for joining me today.

• 2:38Speaker 02

  Thank you for having me, Harry. And I just want to say thank you to Morgan Freeman for that lead-in. I don't think he gets enough credit for his consistent performance on this podcast, week by week.

• 2:46Harry Stebbings?

  Well, actually, that's me just doing a Morgan Freeman accent. Yeah, and I'm very, very talented. I want to get started today by discussing you and how you made your entrance into being one of the deep tech investors of the moment with 50 years.

• 2:59Speaker 02

  Sure. My professional career actually started off in electoral politics. I think when you're young and want to make a big impact, that's a sort of natural default place to go. And so I started volunteering in this space since I was 14, started working in it as soon as I legally could, helped run campaigns for people running for senate and governor, worked for President Obama in 2008, his first campaign. And basically, from day one in this space, I was just horrified at the technology and didn't understand why I was 10 years behind the video games that I was playing when I'd go home at night. And thought, you know, given the importance of the two fields, it should probably be reversed. And I coped by whining about it a lot. And that worked fine for me, didn't work so well for the people

• 3:41Speaker 02

  around me. I ended up just annoying everyone in my life, friends, family, coworkers, and started to hear a lot of people say, you know, if you've got so many great ideas, why don't you fix it? And I thought, me fix it? That's an interesting idea. And so teamed up with some other people who were enthusiastic about it, built a product that I always wanted to use. It turned out that some other people also wanted to use that product, surprising to us. And I think, I think our first customers were some city council members in New Haven, Connecticut, and they were paying us like $50 a month. And we thought that that was just unbelievable that someone would pay us for this thing we built. And then, one of their friends was an angel investor who saw the tool, reached out, asked if he could invest in our startup. And we realized, oh, we have a startup. Cool. That somehow turned

• 4:23Speaker 02

  into a $600,000 seed round. We very quickly realized after closing it that we had absolutely no idea what we were doing. Pulled a database of the Yale alumni network, filtered by anyone that had sound. Or co-founder in their title and just emailed all of them, basically saying, please help. We have no idea what we're doing. We just raised all this money. Most people didn't respond. We got one person who was very enthusiastic. What was supposed to be a half hour call turned into a two hour call. That guy's name was Michael Seibert, who is now the president of Y Combinator Core.

• 4:52Harry Stebbings?

  And an ex guest of the show.

• 4:54Speaker 02

  Oh, fantastic. Just incredible guy. He had a background in politics himself. He immediately got what we were trying to solve. He convinced us to come out to Y Combinator or at least apply. We applied, got in, and then at that point, we had some of the biggest nonprofits in the country using our tool. Like every town, a human rights campaign afterwards raised three million dollars more. And through that entrepreneurial adventure, I was always a little frustrated because we had, you know, every intention of building a billion dollar globally dominant company. But we wanted to do it because we thought this idea of civic empowerment was really important. And like, that was the why of what we were doing. And when we talked to investors, we found that they all basically fell into one of two buckets. Either you had the people who really cared about the why, or, you know,

• 5:35Speaker 02

  what are traditionally called impact investors, but who knew basically nothing about technology or startups. Or you had the people who knew a lot about technology and early stage startups. And it could help you build your business and hire and fire and scale, but who probably at the end of the day only cared about the profits. And so we ended up going with the latter group and raised from some really incredible investors like Founders Fund and Ari and I Ventures, but it never felt great. And so instead of launching into the multi-year whining process and annoying everyone and having them tell me to fix it, decided to skip that step. And so founded 50 years and the goal is to sort of be the intersection of that Venn diagram between investors that genuinely care about the why of these companies, but also have some knowledge and experience to at least help them get from nothing to Series A.

• 6:17Harry Stebbings?

  I have to ask, is the fund 50 million just to align with the 50 years?

• 6:21Speaker 02

  It is not. It is not 50 million.

• 6:24Harry Stebbings?

  Too tempting. But you mentioned Morgan Freeman to start. I want to talk about the Friedman doctrine. So I wasn't aware of this, I have to admit, until you explained it to me in our chat prior to the interview. So for those that don't know, what is the Friedman doctrine?

• 6:39Speaker 02

  The Friedman doctrine in a nutshell is this idea that the purpose of business and the sole purpose of business is to Increase profits, or put another way to increase shareholder value. It was popularized by Milton Friedman, Nobel Prize winning economist, and in 1971 op ed in the New York Times called "The Social Responsibility of Business is to Increase Its Profits." And it's actually, that op ed, I highly recommend everyone go and read. It's actually quite absurd. And he says, quote, "You know, the businessmen who say that business is not concerned merely with profits, but also with promoting desirable 'social ends,' and socials in quotes, and take seriously their responsibility for providing employment, eliminating discrimination, avoiding pollution,

• 7:22Speaker 02

  or whatever else may be the catchwords of the contemporary crop of reformers. These businessmen are unwitting puppets of the intellectual forces that are undermining the basis of free society." But unfortunately, this is how people have generally thought about business over the last 50 years, right? The purpose of business is to make money, it's to increase profits. Now, you don't do it while breaking the law, but as long as you're operating within the bounds of the law, that is your sole responsibility. And we think it's actually one of the most wrong-headed and probably dangerous doctrines in the history of the world. And I know it sounds a little strange to say that an economic doctrine is very dangerous, but we think it's allowed a lot of businesses to pursue profit while creating very negative externalities. And it's also really prevented a lot of entrepreneurs

• 8:06Speaker 02

  from seeing or fulfilling the true potential of business, which we believe can be about both generating massive ridiculous profits, but also solving societal or environmental problems.

• 8:16Harry Stebbings?

  Can I ask you a question before we dive into the catalyst driving this change? I'm intrigued, can you really engage in profit maximization to the very max whilst also having the very societal enhancement mindset?

• 8:28Speaker 02

  I believe you can. And so, we get this question a lot. And one of, I think, the analogies that I like to give is, at some point, people thought the transition to the cloud was going to be a really big deal. And that cloud-based companies would have very real advantages in the marketplace versus ones that were not cloud-based. And it would be kind of silly to say, but can you really pursue a cloud-based strategy while also optimizing for profits? And like, the answer, of course, is yes, because the cloud-based strategy gives you very real advantages versus competitors and allows you to take advantage of a lot of sort of systemic things. And so, we believe the same thing about businesses that are solving these big systemic problems in the world.

• 9:07Harry Stebbings?

  Tell me then, with this kind of thesis going forward, what are the real catalysts driving the change to this model?

• 9:13Speaker 02

  I mean, it's largely driven by the attitudes of millennials. And the way millennials view business is just radically different than every other generation that came before them. So there was an open-ended question asked to millennials, and the question was, what is the purpose of business? And forty-seven percent, which was a plurality in the survey, said the purpose of business is to improve society or protect the environment. And this is just absolutely diametrically opposed to what any other generation would have said. Every other generation said, number one, something about making money, number two, maybe something about achieving personal success. And this is a global phenomenon. So Deloitte, for example, did a study of seven thousand seven hundred millennials across twenty-nine countries.

• 9:54Speaker 02

  And eighty-seven percent of the millennials they surveyed said that the success of a business should be measured in terms of more than just its financial performance. And in no country did more than thirty percent of people say that a business should be measured in terms of just financial performance. So it really is a global phenomenon.

• 10:12Harry Stebbings?

  So I have to ask then, with that kind of growing consumer education, particularly within the millennial market, does that mean then that brand is a truly sustainable form of IP, or do you think it still lies fundamentally in the kind of technology stack?

• 10:25Speaker 02

  I think it still lies fundamentally in the technology stack. But I think one of the greatest inhibitors to growth of any startup that's achieving any sort of product-market fit is attracting the best talent, right? So if you ask a CEO of a company that's growing fast, what is preventing you from growing faster? The vast majority of the time, you will hear them say, I cannot hire great people fast enough. And these companies have an incredible advantage in attracting the top talent of tomorrow, right? So very interesting, in the same Deloitte study, even though eighty-seven percent of the people surveyed thought that a business should be measured in terms of more than just financial performance, over half, I think it was fifty-four percent, believed that businesses had no ambition beyond profits. And what that means is that millennials at these companies are planning on leaving.

• 11:09Speaker 02

  So that survey showed twenty-five percent of millennials were planning on leaving in the next year, forty-four percent were planning on leaving in the next two years, and sixty-six percent were planning on leaving. On leaving in the next four years and it wasn't just sort of junior so fifty seven percent of millennials who are in senior management position so this is VP or C level were planning on leaving the place that they worked in the next four years and when they were asked why it was because their values is impact values did not align with their business they thought that their business that they were working for was driven by profits and they wanted something more and it's not just a sort of like goody two shoes so net impact did a study of MBA students and found that eighty three percent would take a fifteen percent pay cut to work for a company that had positive societal or environmental ends and just sort of to give you as an investor I love sort of trend graphs

• 11:54Speaker 02

  so it's eighty three percent last year nine years ago it was twenty six percent and five years before that it was fifteen percent right so this is like continued and sustained growth

• 12:03Harry Stebbings?

  And this is from MBAs the most soulless people in society

• 12:06Speaker 02

  Yeah exactly exactly and so for us that like we see those numbers we see that trend and we say my god if you want to build a truly globally impactful company over the next ten years and you want to attract the the top talent of tomorrow which is going to be millennials then you better bake impact into your business model

• 12:23Harry Stebbings?

  Well I think you've managed to all in one make every HR individual listening truly shake with fear with those churn numbers but I want to ask then if we correlate that to your investment approach how does that evaluation and kind of summarization make you change the lens that you view investing with in terms of it could be ownership valuation reserve finance how does it adopt your investment thesis

• 12:46Speaker 02

  So I really think the lens of sort of profit plus impact doesn't have to shift anything else right so any investor can bring to bear whatever strategy they have in terms of follow on financing in terms of ownership percentage and just say on top of all that we're going to imply this additional lens for instance if you are investing in machine learning technologies you don't have to because you're investing in machine learning technologies change your sort of ownership targets and so I think most of what we do is sort of pretty pretty typical in terms of how early stage CVCs look at valuations and ownership percentages we just apply on top of that this additional lens of we only want to invest in companies that are solving these big systemic problems

• 13:24Harry Stebbings?

  Can I ask, are there any disadvantages to this transition? I always think with every advantage, there's a disadvantage. Are there any drawbacks?

• 13:31Speaker 02

  From an investor's standpoint, certainly it's difficult to tell what we call the goody-two-shoes, the people that are only interested in doing good in the world and really are not interested in building these incredibly valuable businesses, from the people who are interested in doing both. So our very high-level filters are we want founders that are interested in building billion-dollar businesses that have positive impact. Then we want to see ourselves a path to a billion dollars in revenue. And then we want to see ourselves the path to massive impact. And we get deluded with companies that see that we have this mission but are running a cash flow business in sub-Saharan Africa. And so for us as investors, that's certainly a downside.

• 14:13Speaker 02

  I don't think that there are many downsides as a business to choosing something that is impactful. If you don't tie it very closely into your profit model, then you run into problems just because you can't finance your company with only investors that think like us.

• 14:29Harry Stebbings?

  How can you tie it into your profit model?

• 14:31Speaker 02

  You have to find a problem where the more money you make, the more good you do, the more good you do, the more money you make. So we really don't like the one-for-one model companies. So like the Tom's shoe, where for every shoe we sell, we're going to donate shoes to a country in the third world. Because then the good you're doing always has to be defended. When you're going into the board meeting, you have to say, why does this still make sense financially for us to be doing this? We prefer things where for every dollar you make, you're doing one unit of good. So for instance, a company that is figuring out a cheaper, more sustainable way of producing industrial chemicals using synthetic biology. That's a company that they can literally just put the pedal to the metal and go, and they don't have to worry about any divergence between their impact and their profit.

• 15:11Harry Stebbings?

  You mentioned some pretty contrarian and radical elements there in the way I think we view business and have viewed business for so long. I'm intrigued because you've also stated that now is the time to be deep tech investing. So let's stay on this contrarian theme because I love contrarian themes. So what is it about the market conditions now that mean now's the right time to be a deep tech investor?

• 15:31Speaker 02

  I would say there are a couple of things that we're seeing. So first, It seems to be increasingly difficult to compete with the Googles and the Facebooks and the Amazon on sort of pure SaaS plays, right? They have incredible network effects, they have incredible advantages in the marketplace, they have incredible channel advantages that it's just, it seems like it's becoming very difficult to compete with. And then on the flip side, we're seeing the actual costs and complexity of launching a lot of these deep tech businesses drop radically. So one of the areas that we're most excited about is synthetic biology. Five years ago, if you were going to launch a SinBio startup, the very first step would be to raise five million dollars and build out a lab before you did anything else. There have been a number of changes over the last five years

• 16:14Speaker 02

  that actually allow you to get from idea to prototype product on the same amount of money you would need to raise for a seed round if you're raising for a SaaS company, right? So things like shared wet labs or cloud laboratories or things like CRISPR enabling genome editing to be done cheaply and efficiently or things like the cost of sequencing dropping faster than Moore's law. And so a lot of these sort of deep tech areas is now possible to do a lot more with a lot less.

• 16:39Harry Stebbings?

  I'm very interested just in terms of doing a lot more with a lot less and kind of the runway that companies have because sometimes it does take considerably longer for deep tech companies to come into fruition, especially to kind of gain the traction. I'm intrigued, how do you think about then the common occurrence of having to support the company for a much longer lifecycle than you would? How do you kind of think about this when investing?

• 17:00Speaker 02

  Yeah, so especially when you're working with biology, you can't just sort of force progress in the way you can when you're just working with code. And so there definitely is some element of that. We try and only support companies that have a very clear product development timeline. So you know, it can never be as clear and as, you can't be as confident of it as you can be with a pure SaaS company. But we try and avoid, for instance, the companies where they're developing a new therapeutic and if it gets approved by the FDA, the company's worth two billion dollars and if it doesn't, it's worth zero. So that we sort of try and stay away from. We try and back companies that are building actual products so they can sell fairly early in their lifecycle as a company so that they can actually test market demand fairly early. So something like a SinBio company or a small

• 17:44Speaker 02

  Satellite company, things that are still hard and require advanced degrees to pull off, but things that don't necessarily require these very long timelines to at least see if things are working. We also have a strong preference for companies that can grow off of debt financing at some point in their lives. So almost every single deep tech company that we've invested in has a clear path to growing off of equity for maybe three rounds and then growing off of project or debt financing for the rest of their life.

• 18:09Harry Stebbings?

  You men you mentioned that the funding lifecycle, I'm intrigued, I often speak to growth investors interested in, as you can imagine, consumer, fintech, enterprise, SaaS. I don't often come across biotech and deep tech growth investors. Do you think there's a sufficient pool of capital moving forward for this deep tech innovations to really sustain them through their lifecycle?

• 18:27Speaker 02

  I think a lot of money is moving into this space. So right now, this very moment, I think it's a little shaky. But in terms of us as seed investors, you know, we need to see what that landscape will look like two to three to four to five years from now. And when we see what the later stage investors are doing and we see a lot more later stage funds spinning up biotech specific either pools of capital or hiring biotech partners, we think that the transition is definitely heading that way. Even if you look at something early stage like Y Combinator, right, they have invested way more attention and resources into attracting and helping synthetic biology and biotech companies than they did four years ago. Four years ago, they weren't doing it at all.

• 19:03Harry Stebbings?

  So I want you to alleviate two of my concerns because, you know, I'm a warrior personally, so I need you to alleviate some of them. So traditionally, these are pretty heavy IP companies with technology being the kind of core value component. So I'm intrigued, are these not very much acquisition targets for existing incumbents to acquire very early on? If so, does that not make it a kind of acquisitive environment which isn't sustainable for VC returns? And do you think we'll see these billion dollar frontier tech companies come into their own right?

• 19:31Speaker 02

  I am happy to calm you down. I think you're actually you're actually right, right? So like when you develop IP that is a disruptive threat to a larger industry, it only makes sense as a strategy to try and acquire it, just to buy it away, even if you just buy it and bury it. And so a lot of this comes in just screening the founders. You need to figure out the why behind what they're doing. Are they someone who would be super happy founding a company, selling it for forty million dollars? So then going on vacation in Ibiza for a while. If so, they're probably not the best ones to back. But if they are someone, so like, you know, we've invested in a couple of companies that are either using directed evolution of enzymes or synthetic biology to make industrial chemicals. And the founders of these companies are absolutely intent on taking down DuPont,

• 20:12Speaker 02

  taking down Dow and replacing them with chemical production that is completely sustainable and cheaper. Those teams are just not going to sell for a hundred million dollars to the people that they're trying to disrupt. And so I think if you choose wisely, then you can you can push past that and you can absolutely build not just billion dollar companies, but fifty billion dollar companies in deep tech.

• 20:29Harry Stebbings?

  Can I ask, can I double click on that? Because I I see so many founders and I ask them, would you sell for fifty, a hundred billion? And they go, no, no, no, I'm here to build a billion dollar business. And then the offer comes and they take twenty million happens. How do you really tell?

• 20:42Speaker 02

  I hate to use this analogy, but George Bush once said that he, you know, looked into Vladimir Putin's eyes and saw his soul. And to be frank, a lot of it is that, right? You can't ask directly. You can't ask, you know, would you sell for fifty million? Because first of all, a smart founder is going to know that as a as an investor, you have a certain model and that that would not be good for your model. And so they might just say no, because they they really want the money. And so you have to really dive deeply into the why of the business, right? Like, what drive them? Where do they come from? What is their personal story? How did they end up working on this problem? Why is this a problem that they would be incredibly excited to grind out for the next ten years? And through those questions, I think you can really get close to the truth in terms of what sort of tolerance for risk someone has and how how hard someone will push.

• 21:26Speaker 02

  And especially for us, our founders are not just driven by being a startup founder or building a business. These are people who see a fundamental problem in the world that they think needs to be solved and they're out to solve it. I think those founders in particular are the ones that are likely to push the farthest.

• 21:40Harry Stebbings?

  Okay, one more worry, my friend. We spoke about acquisitions there. Exits can also take considerably longer in in deep tech fields. How do you think specifically then with regards to traditional ten year venture fund cycles? Should they be extended?

• 21:53Speaker 02

  I think they should. I mean, I think the biggest opportunity in investing right now might just be a fund that has a fifteen to twenty year lifecycle, right? Because it will it would allow you to make a lot of bets that everyone else sort of. sees as incredibly attractive but can't necessarily make because of their fund lifecycle. Our fund lifecycle is a 10-year plus two, right? So we're also constrained by that. And part of the reason we did that is because we want to inspire a lot of copycat funds that are investing in the same type of companies we are. And so we wanted to sort of model what everyone else is doing. Our feeling is that the sort of secondary's market is maturing really attractively. And that likely this sort of black and white between private and public IPO is going to sort of disappear into shades of gray. And that there are likely going to be a lot of exit opportunities

• 22:36Speaker 02

  throughout a company's lifecycle as everything becomes a bit more liquid. And so even for deep tech companies, as long as they are making strong progress and laying down strong IP and showing market traction, we think that there will be opportunities to exit at great multiples even before the company might be ready to IPO.

• 22:54Harry Stebbings?

  No, it makes sense. I do have one piece of advice then that I need from you before we dive into a quickfire. Investing in tech-heavy environments like you do, how do you look to scale the learning curves on industries like synthetic biology so quickly? Is there a methodology or process around it?

• 23:10Speaker 02

  A lot of hustle. It is definitely harder, right? Like you can't be lazy. So we, one of our portfolio companies is called Memphis Meats. They are culturing meat to eat. So they're basically replicating the same biological processes happening inside of the cow, just outside of the cow to create meat without the animals. And when we were looking into that, you know, we were like, oh my God, this from a first principle standpoint seems interesting, but is this ever going to be economically feasible within the lifecycle of a fund? And so we talked to a lot of smart people. We read literally every paper that was available on cultured meat in academia and on the scaling techniques. You know, I spend a lot of time on SciHub. We're lucky to have some LPs that can sort of help us diligence. So one of our LPs is Yan Talan, the technical co-founder of Skype. So whenever we're looking at a sort of machine learning startup

• 23:55Speaker 02

  and we want to technically diligence, whether or not there's any there, there, he's happy to talk to them and give us his opinion. We have a network of people in labs throughout academia who can help us technically diligence. And then our favorite people to diligence are entrepreneurs who have a PhD in the field, who are two to three years ahead of the entrepreneur that we're looking at, right? Because ideally diligence done right is additive for the entrepreneur. So it's not just a waste of time. And so that formula works really well because the later stage entrepreneurs typically really excited to see what's happening at the cutting edge of their field. So they're happy to take the call. You're introducing the younger entrepreneur to a person that might be a mentor or might be able to help open up some doors and business relationship.

• 24:35Speaker 02

  And then as an investor, you're getting not only a sort of technical diligence, but you're also getting some pragmatic insight that someone purely from academia might not give you. And so we've worked really hard to sort of build out that network and we're very lucky that given our fund's mission, people are willing to help us do that more so than they would be with a traditional fund.

• 24:51Harry Stebbings?

  Well, I'm rather concerned now because I've always struggled with hustle. I'm going to be honest.

• 24:57Speaker 02

  I don't think so.

• 24:57Harry Stebbings?

  I remember seventeen year old Harry emailing Mark Andreessen. That was a very bold move. But anyway, I'd love to move into a quick fire round with you. So I'm going to say a short statement and then you give me your immediate thoughts in sixty seconds or less. How does that sound? I'm very sure, by the way.

• 25:11Speaker 02

  Sounds great. Let's do it.

• 25:12Harry Stebbings?

  So let's start with your favorite book and why. What should I be reading?

• 25:15Speaker 02

  Well, my favorite book is a book called Gödel-Escher-Bach by Douglas Hofstadter that explores the concept of consciousness through Gödel's mathematics, Escher's artwork and Bach's compositions. And the theory behind it has actually largely been discredited by cognitive science research. But for me, it just lit my mind on fire and piqued my interest in math and cognitive science and computer science. And so I'm super grateful for it. But in terms of actionable books, I just read one called The Idea Factory, which is an incredible book. It's the history of Bell Labs. It examines both the organization itself and the people who were there. And Bell Labs, if you don't know, invented the transistor, data networking, cellular technology, satellite telecommunications, the laser, the solar cell, Unix, the C programming language, and just the list goes on. And this book examines how they were able to build an organization that so consistently innovated.

• 25:59Speaker 02

  And I think there's a lot of lessons in there for every investor and every entrepreneur.

• 26:02Harry Stebbings?

  Hmm. It's a contrast from my Fifty Shades of Grey. So I mean, it's one of the best. But okay, a question from Richard Chen. How do you get into such great deals as a new fund?

• 26:12Speaker 02

  So I think a lot of it is the mission alignment that we talked about, right? So the co-investors on some of our last deals were Sequoia, Uniscore Ventures, General Catalyst, Kozla, so, you know, and these are often very competitive rounds. And as a new fund, it's hard to necessarily prove your worth. And so a lot of it, I think, is driven by these entrepreneurs want investors that they can talk to about the entire comprehensive picture of their business. And so they want to be able to talk about their impact mission and how they are not succeeding there, and how they can do better, and they want to talk about how they can just generate more profits. And with a lot of investors, that's hard. With us, it's super easy because that's what we're all about.

• 26:48Harry Stebbings?

  No, fantastic answer. What do you believe that most around you disbelieve?

• 26:53Speaker 02

  Well, I believe, aside from what we talked about in terms of the future of business, I feel like we've beaten that bush. I believe that animal agriculture will be eliminated from the face of the earth within the next hundred years.

• 27:05Harry Stebbings?

  But let's talk about your favorite blog or newsletter, Rainy Day, What's Seth Reading?

• 27:08Speaker 02

  Oh geez, I read way too much Hacker News. I think it does a really great job of pulling together the best insights from across the web for our industry. And I actually find that comment threads are incredibly insightful, considering that it is a comment board on the internet. It's like not often where you can have one of the initial, like, kernel hackers of Linux commenting on some tech thread. So yeah, I spend way too much time on Hacker.

• 27:32Harry Stebbings?

  What would you most like to see change in the world of startups and Silicon Valley itself?

• 27:36Speaker 02

  I think there's just such incredible talent in Silicon Valley, and I think it is largely going to waste. I think that way too many incredibly talented people are working on incredibly trivial things. And I see it around me a lot where people are going through existential crises, and you talk to them and you figure out that they are, you know, spending all their days figuring out how to squeeze a bit more money out of every ad impression. And it's like, you know, of course you're having an existential crisis. You know, you have such potential in the world and this is what you're spending your days doing. So I would love to see people realize that they can make a difference and that they can have everything you want in a career, right? So typically, people want to work on interesting problems with cool people, make money, and do good. And you used to have to choose two to three of those things.

• 28:21Speaker 02

  Now you can have- All four, and I would love people to realise that.

• 28:25Harry Stebbings?

  Absolutely, and I think a career in motivational speaking is also on the cards for you. That's very inspiring, but I want to finish then on your most recent publicly announced investment and why you said yes.

• 28:35Speaker 02

  I think that the company that has announced most recently is a company called Ethelis, founded by two incredible Stanford dropouts. They have built a device that rapidly and accurately gives blood diagnostics with a drop of blood. They're instead of saying, we're going to tell you everything about your blood with one drop, they are just attacking the most common blood test, which is called the complete blood count. Currently, if you want a complete blood count, which is a measure of overall immune health, the devices are called flow cytometry devices. They cost $10,000 each. Each test costs $100 to run and takes several hours. The Ethelis device costs 250 bucks and each test costs $5 and it gives you results in minutes and it works. I actually have one in my house. I've been testing my blood and they achieve this by using some really clever microfluidics

• 29:18Speaker 02

  engineering plus computer vision to actually see cell by cell what's happening in your blood and then they use machine learning on top of that to turn that into a diagnostic. And we invested alongside Sequoia and it was just a super easy yes for us. The founders are incredibly brilliant and passionate and this is one of those things where they can not only reduce the healthcare costs in the developed world substantially while making a ridiculous amount of money, but they can make blood diagnostics available to people who just before were not able to afford it.

• 29:44Harry Stebbings?

  Literally 40x cheaper. That's astonishing, but seriously, I said to you beforehand, I was so excited for the show. It's absolutely been fantastic to have you on and I can't thank you enough for joining me today.

• 29:54Speaker 02

  This has been super fun. Thank you, Harry.

• 29:57Harry Stebbings?

  Again, I'd like to say a huge thank you to Seth for giving up the time today to be on the show. I really do so believe in the mission with 50 years and cannot wait to see the exciting times ahead. And if you'd like to follow him on Twitter, you can at Seth Bannon, B A N N O N. That really is a must. Likewise, it'd be fantastic to see you on Snapchat at H Stebbings with two Bs, where you can suggest future guests for the show. It'd be fantastic to hear your suggestions. But before we leave you today, I want to tell you about WePay. WePay helps online platforms increase revenue through integrated payments processing. Constant Contact, Equid and GoFundMe use WePay. Why? Because WePay uniquely helps platforms. Platforms offer ROI positive, integrated payments to their users within their UX and without taking on fraud and regulatory exposure.

• 30:39Harry Stebbings?

  Others make you trade off between UX fruition or fraud, not WePay. WePay also offers award winning support and can even work with your team through Slack or Zendesk. Get the payments revenue you want without getting bogged down every time a user has a payments question. But don't trust me, visit wepay.com/harry, oh yes, I have my own URL, for a video case study on how Equid grew its revenue while better serving customers with WePay. That's wepay.com/harry. You'll also be made eligible for a year of free premium support on wepay.com/harry. And how could we forget Pipe Drive, something we use here every day at the 20 minute VC to manage the pipeline for guests? Pipe Drive is the sales CRM and pipeline management software to use with the primary view being the pipeline,

• 31:22Harry Stebbings?

  a clear visual interface that prompts you to take action, remain organised and stay in control of a complex sales process. This is why sales pros and deal makers love it, my words, not Pipe Drives. But it easily lets you find the stats you need and even better, it's fully customisable. And if you're like me and don't like paying for products upfront without knowing how good they are, this is for you. As you can sign up for free on pipedrive.com, it really is a must. As always, I so appreciate all your support and I cannot wait to bring you Wednesday's episode with deep tech expert Renata Quintini at Lux Capital.