How big is your market? Is it big enough?

August 23, 2013

One of my partners and I were discussing our need to invest time and money in companies building solutions for large market opportunities. He paraphrased someone important: “Are we sitting at the right poker table?”. How do we know a particular industry or space is large enough that if our hard work eventually leads to success, it has a chance to be a super success?

How big is your market size is a question VCs often ask entrepreneurs. The answer they are generally looking for varies primarily by the size of their funds and the kinds of spaces they invest in. Typical VC firms like to fund startups that can some day be worth hundreds of millions of dollars, if not billions of dollars. If an addressable market is too small, it can’t support a large company. The math they are likely doing in their mind is: (a) if market size is $1B, this company can likely capture 5-10% market share, (b) if the industry can support 5-7x revenue multiple then $50-100m of revenue will result in a $250-700m in exit value, (c) if a VC owns 20% of the company, they get $50-140m back to their fund.

So how big is big enough? Is a market size of $1B big enough? $10B? While a $10B market opportunity is almost always better than $1B one, there is no one-size-fits-all answer. However, in my (humble) opinion there are few things that can be helpful for entrepreneurs to keep in mind when thinking about market size for their offering:

  1. Products are not built for markets, they are built for customers. It is important to focus on solving real problems. Staying close to the customers and hearing what they are saying and building a product that at least your core customer base really really wants, likes to use, and agrees to pay for the use. Many entrepreneurs are unfortunately also often too optimistic about the difficulty they will face in acquiring and retaining customers, and get caught up in how awesome their technology or product is. While the tech world has come to glorify visionary founders, we haven’t done enough to promote this focus on execution chops.
  2. Proliferating on product roadmap too early to increase available market opportunity can result in a loss of focus that can be lethal to a company. I have seen quite a few companies find themselves lost in large markets because they ended up building too many products too early, or tried to stretch across several steps in the value chain.
  3. Initial market size for the core product should be large enough to sustain fast growth for at least a few years. Once a company is able to build strong momentum, revenues and profitability with product finding traction, then the company can start thinking of itself as a platform for further products as well.  Additionally, if you are selling over $100m+ in revenue with 20%+ ebitda margins you are doing something right. And will find yourself with access to currency to diversify in related spaces via new development or acquisition.
  4. What may be too small a market size for a large VC fund may still be an incredibly exciting market to build product(s) for, and may result in great financial success entrepreneurs and investors. Besides, what might appear small-ish today could be a much bigger opportunity tomorrow as more people come to realize the potential and build on top or around your offering. It is no surprise that some of the biggest tech companies today were addressing much smaller (but still interesting) problems when they first began (e.g. Amazon, Ebay, Facebook, Twitter). How big do you think the market size was for personal computers when Apple was founded? Did Rovio think they would be making more than 50% of their revenues by selling merchandise around the world based around characters of a mobile game?
  5. When pitching VCs it can be helpful to describe what your competitors and incumbents have been able to achieve in the market you are planning to enter, but don’t let them walk away thinking of your product as just a replacement product for an existing one. That hardly ever ends well. Help them understand how this is your wedge into the market to wow your initial customer base and to build a strong business with a core audience, and then you plan to expand your offering from a position of commercial strength.
  6. Visionary entrepreneurs don’t just look 10 years out and imagine how the world could look in the future. They also try to imagine, and then create, a path leading to that future. So don’t just focus on “one day we will change the world”, but start solving problems that actually change the world one shipped product at a time.

Solve real problems. Hire great teams. Build to scale. Win.


The Hardware Tsunami Is Here. Know What It Takes To Build A Great Hardware Company.

August 8, 2013

One of my partners often quotes Henry Truman: “There is nothing new in the world except the history you do not know.” And this quote is more true in the history of venture capital than perhaps anywhere else.

The year is 2013…and hardware is cool again. Software might be eating the world, but its finishing dessert. Creative entrepreneurs are flocking to the hardware sector en masse, with hardware accelerators and incubators popping up all over the country and overflowing with eager applicants. The mainstream media is brimming with videos of cool new gadgets, and VCs are taking off their hoodies to blog about hardware (myself included). Hipsters are now proud to show off not the coolest app they downloaded, but the latest gizmo they backed on Kickstarter, or the newest bracelet that emerged from a 3D printer.

But that’s just noise. Here’s what important: (a) solving most interesting problems is what drives the best entrepreneurs, (b) a hardware component is often the most important element to solving meaningful problems in the world, and (c) investors flock to sectors where the best entrepreneurs go. The emerging hardware revolution is partly based on a realization by entrepreneurs (not investors) that we can’t just tweet our way out of the important problems that face humanity (with all due respect to Twitter).

KymetaHaving been involved in hardware startups as an entrepreneur and an investor for 10+ years, it is fantastic to see this attention return to the sector. VCs have made bushels of profits in the past from investing in hardware startups (from Apple to the semiconductor revolution and the telecom bubble of late ‘90s), and the future should not be any different. I welcome and love the focus on this sector and think it will result in major breakthroughs and great, lasting companies getting built over the next 5-10 years. This sector has felt a bit deprived of attention, especially since 2008. But now with some of the smartest people in the startup world focused on the space, many companies will reach bigger milestones faster.

Hardware startups can be both enterprise focused or consumer oriented. Major infrastructure, electromechanical tools, power generation/transmission/storage devices, robotics, medical devices, etc would all be classified as hardware companies. The renewed interest from today’s entrepreneurs comes from the belief that the confluence of distributed computing power, open source hardware and additive manufacturing have reduced the cost of building hardware so much that industrial grade solutions can now be built with consumer quality aesthetics and UI. What was once deemed possible only with expensive custom built machinery, can now be done with much simpler devices by taking advantage of the available computational resources. And not only that, when the hardware/software resurgence meets a socially connected and networked ecosystem, new solutions emerge that otherwise were not possible.

Excitement aside, in the world of building and backing companies, there is such a thing as being too early – or bringing too little to the party. Investors often want to be cheerleaders, but we can be more valuable pointing out challenges that others faced in advance so you can avoid them.

Below are some observations from my experience with hardware startups. Successful founders have been aware of that and managed through them artfully:

Teams – The heart and soul of any startup. Hardware startups tend to be highly interdisciplinary. A single MBA won’t cut it. More than likely you need to hire a mechanical engineer, an electrical engineer, a design engineer, and production specialist on your team to get even the most simple electromechanical devices off the ground. Hardware engineers don’t jump from firm to firm easily and hence top talent can be more difficult to recruit. The best teams I’ve seen in action usually had a handful of people with backgrounds in industry on the core team. Great CEOs surround themselves with amazing people, and that is especially true in hardware startups. It is a lesser known fact that scientific advisors can also play an important role in attracting strong talent. Entrepreneurs can use all the help they get. For example Naimish Patel at Gridco (disclosure: a Lux Capital portfolio company) has assembled a veteran team that boasts the credibility but not the culture from a multi-billion dollar electric grid industry that hasn’t changed much in 100 years.

Technologies – Hardware technologies are hard, interdisciplinary, and often filled with surprises. Hiccups, delays, and supply chain challenges are fairly common, and mistakes can be costly. Unless the hardware is really just a simple widget, an investor will be carrying technical risk in the company alongside any business vulnerabilities that always exist. New ventures need to remove technical risks upfront so the task of building a business becomes unhinged from “will this even work?”.

MatterportDesign – People have come to expect brilliant and well thought through design not just in software, but also in hardware. Maybe Steve Jobs is to blame for raising the bar so high, but it’s a fantastic thing to have happened in the hardware world. Even a mass spectrometer designer now has to remember that the user is likely carrying a beautifully design smart phone in his/her pocket. Design philosophies can be fundamental to how a hardware product is engineered, built, manufactured, and expected to be used by customers. And design is very hard to get right, and extremely hard to change when the gears are already in motion. Design for the right customer, with the right usage patterns in mind, and plan refresh cycles that make sense for the industry. Tesla, Nest, Fitbit are some examples of hardware products where design was a key factor in early customer purchase decisions. For the upstarts, hardware accelerators like Lemnos Labs, GreenStart, Highway 1, Bolt.io, Lab IX, Y-Combinator and others are providing much needed design advice to hardware engineers.

Data – Barely a day goes by without meeting a hardware entrepreneur who is convinced they are building a big data company and the hardware is just necessary evil to be dealt with. While I could not emphasize the importance of data and analytics to drive actionable intelligence for long term value creation in a business, such a negative attitude towards hardware development can hurt the design and development of world class products. Hardware products tend to lead with one or a very select few killer apps, and data/analytics often enable evolution of a product into a platform for future revenue streams. Don’t try to be everything to everyone, but be a perfect solution for your target customer.

Incumbents – In many sectors, incumbents have deployed Porter’s Five Forces excessively to build fences to keep entrants out. Hardware incumbents move slowly, but are self-aware, often building protective provisions in customer engagements to also reduce the pace of change. Longer term contracts, supply chain bottlenecks, technology cross-licenses, and global salesforces allow them to “own” middle management in large corporations. In such situations, seek out  customers looking for an edge to differentiate themselves in the field, and working with them to bring innovations to market faster. For example Toyota, Ford, GM may be big customers, but I would look towards smaller manufacturers from developing countries if I wanted to introduce new automotive-related technologies.

Intellectual property – Perhaps unlike software, hardware IP is not only easier to identify, but it’s built in multiple layers which can get quite confusing (often by design) quite fast. Large companies often cross-license hundreds (if not thousands) of patents and can frequently use IP to prevent innovation from taking their cheese. The best recourse is to take IP seriously, protect it aggressively, and to provide your customer with such a great and unique product that they are motivated to help protect you. For example Kymeta (disclosure: a Lux Capital portfolio company) is aggressively protecting its IP in novel satellite communications hardware because their technical innovation is a fundamental disruption in the market.

Regulatory barriers – Depending on the product, this could be a major issue to be dealt with even before your product’s beta-launch. I have seen at least one promising company’s life come to an early end because they mismanaged a nuanced regulatory landscape. Hire experts, drill them to get them outside of their comfort zone, and while remaining willing to bend rules, proceed with caution. Again, some of the most successful CEOs have always shown me a Plan B, C, and D when it came to regulatory matters. For example, as an investor Board member at UAV innovator CyPhy, I kept a very close eye on the regulatory changes affecting UAVs and flying robots, because they had a major impact on commercial opportunities available to the company. Of course, taking calculated risks on the regulatory landscape changing a particular way can sometimes be a very successful strategy. Or you can hope to be very lucky.

shapewaysManufacturing – A few decades ago the buzzword was “economies of scale”. You produced something once and replicated millions of times at scale to continuously squeeze inefficiencies out of the system and reduce costs. A former colleague termed the current phenomenon we see around us as “economies of un-scale”. Things can be produced at small quantities (using 3D printing for example) and then scaled in lower cost manufacturing centers. That said, manufacturing remains a major barrier to most hardware companies. Its expensive, mistakes are costly, doing it abroad could compromise technology and IP. While design cycles can be rapid, manufacturing supply chains are not as agile as we want them to be. I am not aware of successful hardware companies that did not have a credible plan of developing manufacturing capabilities close to home before embarking on a foreign adventure. Shapeways (disclosure: a Lux Capital portfolio company) is serving a global market for 3D printed products with distributed manufacturing centers. A single low-cost manufacturing plant wasn’t the right answer.

Value-chain/Distribution – Before making a hardware-related investment, I always lay out the value chain to understand who controls pinch points and can capture margin. In hardware startups, distribution is tricky and hard to do right when you have little leverage. Are there vendors in the supply chain who can truly obliterate a company’s best laid plans? One of my portfolio companies once burned through 3 months of cash (millions of dollars) because a certain specialized testing facility was just not available to test and certify their product. Whether the hardware is enterprise or consumer focused, direct marketing and direct contact with the end customer is incredibly important. A company must be able to identify exactly who benefits from their product and get buy-in at the highest levels. Fortunately for consumer devices, new channels are becoming available to provide initial customer feedback, quickly. Kickstarter, Indiegogo, Etsy, Ebay, others provide unique opportunities for early customer engagement that did not exist a few years ago.

Margins – Hardware margins are generally lower than those found in software. Sometimes these margins can be incredibly low, especially when producing in low volumes. Managing capital requirements through the optimal scale-up plans is critical to survive the growth phase. Not to mention the increased cash needs if you start getting returns and building up inventory. Hardware businesses must have strong VPs of Engineering and CFOs who are not just winging it.

Fundraising – Hardware startups may be in vogue now, but times and preferences change. Investors will need to have more patience and a stronger gut to deal with the ebbs and flows of the hardware business. These are not “bets” and “plays” – hardware startups need investors who understand why and how a company can manage through difficult circumstances, and bring strategic relationships to help in the process. VCs of all shape and sizes are right now seeding and investing hardware startups, but smart investors would be wise to partner with investors who live and breathe the hardware ecosystem. I advise hardware startups to always be ready to raise capital, if it is available at a good price – not only to prepare for hard times, but to also be prepared to run fast when opportunity presents itself. At Lux Capital, we focus primarily on hard technologies, but frequently partner with non-hardware firms that bring complimentary knowledge and networks to the table.

Exits – While entrepreneurs get teary-eyed thinking of the success Steve Jobs, Elon Musk and Tony Fadell have had in the hardware world, the cold, hard reality is that exits take longer, are more often evaluated on EBITDA multiples, and typical buyers lack the equity currency to pay Instagram-like premiums. Expect to hear the infamous “exit” question from investors. Even when they don’t ask, you should assume it’s something they’re considering. So you might as well give it some thought. Know the comps, understand what drove value creation, and be on top of relevant metrics that to your company. The upside? Because hardware startups in any space are harder to build, there is less competition and fewer me-too products. If your product solves a meaningful problem, expect a valuable return on time and capital for financial investors and entrepreneurs.

Looking at my notes from the last few weeks alone, I have met companies in following spaces: UAVs, satellites, high throughput DNA production, terrestrial robotics, hardware for retail analytics, personal health, quantified self, smart phone accessories, hardware/software toys for 21st century children, Internet of Things, computational imaging, 3D scanning and printing, virtual reality hardware, hardware for retail analytics, healthcare accessories, low cost diagnostics, remote sensing, portable medical devices/analyzers, open source hardware and others…this is just the beginning. The hardware tsunami is now upon us. My partners and I at Lux Capital are eager to help great entrepreneurs build their visions into successful companies.


Some thoughts on VCs hiring journalists/PR/media staffers on their teams

July 18, 2013

Dan Primack wrote an int’g article yesterday on Fortune titled “VCs and entrepreneurial ego“, to discuss his views on why a growing numbers of VCs are getting so active in the media/PR/journalism game, and in fact spending millions of dollars (over the life of a fund) to bring on-board specialists hired to do the same for them.

Below are my ramblings on the topic. Obviously opinions don’t hold true for all investors, all entrepreneurs, or all media as well. There will always be exceptions, quite a few of them actually, in a highly dynamic ecosystem.

VCs sometimes think entrepreneurs know a lot about fundraising and investors, or that they spend a lot of time thinking about investors. I somehow doubt that.

Reality is that entrepreneurs, esp first time entrepreneurs  and those that we consider to be awesome product guys starting companies, are often too busy thinking about their own ideas, the spaces they want to build businesses in, competition, next generation technologies, recruitment/hiring etc; and spend little time thinking about VCs, angels, investment dynamics and the like on a day to day basis. In my humble opinion when time comes for them to raise capital, their thought process likely goes as follows:

Priority 1: I want the most connected investors to invest in my company. After all, I want people who can connect me to customers, partners, buyers at the highest levels

Priority 2: I want the smartest people on my Board. Those who can help me with strategy, and also educate me about trends they are observing because I will likely have have less time for that

Priority 3: I want people who can help attract great talent. How can I hire that SVP out of Ebay or Google or Facebook

Priority 4: I want people whose name being associated with me, and whose networks, can prevent dilution for me in future rounds by getting me higher pre- money valuations (at least in early rounds where cost of capital remains high)

For many entrepreneurs some names are no-brainers, e.g. Mike Moritz, John Doer, Vinod Khosla etc. But that elite list is relatively short because those guys have consistently delivered billion dollar companies over decades (and in recognition some also sit on big public company boards they didn’t even invest in). After that elite list, there is a relatively sharp drop off after that. There are investors I know who may have returned hundreds of millions of dollars to their LPs in the past few years but young student entrepreneurs building the next Facebook have never really heard of them – unless of course they hover around TechCrunch all the time, and even then its doubtful.

So how do VCs get entrepreneurs to believe that we can do all of the above for them? There are a few ways:

  1. Do great deals so you get coronated as a king in the spaces you invest in. Unfortunately a bit of a chicken and egg problem for most new investors, though some get lucky early in their careers.
  2. Be a part of an already super well-known firm so your biz card goes further than you. This might be one reason why some big name firms have revolving doors for great people going in and out as investors.
  3. Be so present in media that you have the equivalent of a high SEO/SEM/Klout score (choose your favorite – you know what I mean). And we know how much harder it is to get attention now than it was in 2000. Just as an example, banner ads may have worked well to advertise your company in circa 2000 but have much less impact now. Occasional appearances in major publications like WSJ/Forbes etc may have worked 5-10 years ago but don’t have as much impact any more given how much noise exists in the media. Sensing above, VCs started occasional blogging in the middle of last decade to share their views a bit more publicly but now even that gets lost in the clutter. So now, in order to create a large enough (and persistent) signal amidst all the media clutter/noise, you have to be more social, subtle, indirect, personable, etc. You have to use Twitter, Tumbler, Facebook, Snapchat, show up in news feeds, get on Hackernews etc. But all that takes a lot of work and while 140 chars on twitter may be easy to write a few times a week, the rest starts to look like a lot of work. Hence, IMHO, VCs are increasingly bringing on-board full-time media folk to create more and higher frequency signal, to get themselves placed at the center of every article written about spaces they invest in, and to have their companies listed as examples whenever a space gets discussed. It is to do work that many VCs are actually not very good at, and probably don’t really find very interesting, but needs to be done to win at their actual day jobs. Result: they outsource it to the best person they can find for the job.

Anyways…at least thats what I think. And I also think there is nothing wrong with it. Its good for the entrepreneurs and for the startup ecosystem to have more thoughtful views out there, to have more transparency, and for investors to be more ‘approachable’. Entrepreneurs will hopefully develop a nose to sniff out the truth from the bullshit that aggressive PR sometimes brings with it.

Reality is that at least for now VCs are as much in the marketing/sales business as any other business. Several ex-VCs tell me what they were most surprised by (and often hated) most about their jobs was that sales-y aspect of it. I actually don’t mind that part of my job. In fact, I like it. Marketing to entrepreneurs, marketing to other VCs & potential investors for our portfolio companies, marketing to corporate partners & buyers of our companies, marketing to LPs, even marketing to our families/friends when we are less present than ideal. If it helps my portfolio companies, I am game. That’s just how it goes, and we all roll with it. And compete.


A new chapter in my life – investing in our future.

May 9, 2013

New-BeginningsI spent much of the day yesterday with Salman Khan of Khan Academy, walking around the MIT campus and at events geared towards raising awareness and funds for his amazing effort to democratize education for all people of the world.  It was nice for both of us to walk around the campus where we not only got educated and ‘grew up’, but also found our spouses and some life-long friends. At one point in his talk at MIT Sal said “I am having the time of my life. I am pursuing my passions”. I could not agree with him more. As an entrepreneur and an investor, I have been privileged to be able to do the same for the last 10 years of my life. A new chapter in that life begins today as I announce starting June I will join Lux Capital as a partner in their Palo Alto office to continue to do what I am passionate about: investing in our future.

Lux Capital is a NYC and Palo Alto based venture capital firm focused on founding, seeding and making early stage investments in emerging technologies. I have known Lux for many years, we have co-invested together in the past, and have spent a lot of time learning from each other about ideas, innovations and themes that would be considered extra-ordinary even for our innovative times. My partners at Lux – Josh, Peter, Rob and Adam – are entrepreneurs at heart who share my mission to partner with great entrepreneurs early to help them build great companies. As friends I have found them to be humble and genuinely nice people, and as professional colleagues I find them intellectually curious, rigorous and honest – ready to roll up their sleeves and do what it takes to help entrepreneurs achieve their successes. I am excited that with their help, and with the help of the rest of the awesome Lux team, I will be able to focus on identifying and leading early stage investments across Energy, Technology and Healthcare sectors.

We are living in extra-ordinary times where innovation is happening at an unbelievable pace across so many different disciplines. During the last 15 years that I have spent on academic campuses and then in the startup world I have witnessed ground-breaking work happening in areas such as genetics/genomics, synthetic biology, materials science, data analytics, informatics, communication and energy/climate sciences. As stated above, I want to invest in and build our future, utilizing breakthroughs across science/engineering disciplines, and not just software engineering, and coupling with business and marketplace innovations. I want to partner with entrepreneurs that are tackling big problems in commercially interesting ways. New materials, 3D printing, robotics, internet of things, sensing/imaging, big data, genomics, personal health, security, wearable computing, energy/cleantech and other areas…possibilities are endless. And Lux has a proven track record to think differently and invest in unconventional areas. With a new $245m fund, and now with a new partner, we are ready to double-down.

I have spent the last 15 years of my life in Boston and the transition to California will not be easy. But I also know I will keep coming back here to invest time and again. I continue to believe Boston is one of the most fertile grounds for innovation and startup talent. It has some of the world best universities, a self-replenishing student cohort that is unparalleled anywhere else in the world, and a thriving startup ecosystem in IT, energy and healthcare. General Catalyst is a great bi-coastal firm and I am sure we will continue to partner together on ambitious projects in the future as well. I want to thank GC for teaching me what I know of the VC business, and especially Hemant, Joel, David, Larry and others who have been great mentors and friends. Most importantly, I want to thank all the founders, CEOs, CTOs and other people in GC companies that I have invested in and been a part of at GC. You are heroes and no doubt will change the world! I will also stay involved as a co-founder and advisor to the ‘baller’ students at RoughDraft.vc and StartLabs. They make me proud.

I am humbly embarking on this journey of investing in big, bold ideas, and backing great entrepreneurs who are not shy to take on challenges worth committing 10+ years of their lives to. I am not looking to make momentum investments, but as my partners say, we want to invest in spaces where when we win, we win big!  I grew up in a middle class family in a relatively poor country. If anything I do can impact those billions of people who have even less than people around me growing up had, I will feel I did a good job. I have lots to learn and I look forward to this new chapter…


Roughdraft.vc — Students catalyzing student startups

December 12, 2012

Roughdraft.vcBoston is a very special place with approximately 60+ colleges and universities, 300,000+ students, and a long history of significant companies started by students or student drop-outs from Boston area universities. If there is one thing everyone agrees on is the sheer wealth of student talent that comes from across the country to reside in this short few square mile radius region. Boston is proud of its students founding Microsoft, Facebook, Hubspot, Stripe, iRobot and so many others.

Over the last few years, Boston has seen a renaissance in startup activity, thanks to the efforts of players in the local startup ecosystem: entrepreneurs, angels, VCs, incubators, accelerators etc. But given how many universities and colleges we have in Boston, we should be seeing even more amazing student startups form and prosper than we have seen. We asked students from MIT, Harvard, BU, Northeastern, Tufts, BC, Babson etc, what would be most beneficial to students who were thinking about startups.  And we consistently heard that in addition to continued mentorship, what student community here was really needing was a way to secure early initial investment to get their ideas launched into real world products. At General Catalyst, we were a bit surprised that in spite of the increase in the number of investors, students were having a hard time finding early support. But it is clear to us now that for student entrepreneurs, especially in Boston, finding the first few thousand dollars is even more challenging than raising the next $500k-1 million seed round, and while students hackers are able to turn their ideas into rough product drafts while still enrolled in school, most of them run out of the steam (read: dollars) needed to implement them in a form where they can be tested in the real world. Even the scrappiest of students need money to buy some IPADs for development, running design competitions, hiring part-time expert help, and paying rent during vacation periods. Seemingly trivial barriers can sometimes seem overwhelming for students with a full class load and attractive internship & job offers from other companies.

I can also personally empathize with that need. My first startup business plan (ed-tech for global higher education) died inside a power-point presentation because as a student I did not have the initial few thousand dollars it would have taken to develop a pilot to test in a university I had been working with. But my second startup (materials science) was able to get off the ground because I was able to secure $20k to pay back to my management consulting employer that had given me a signing bonus. A small investment changed my life. Given that history I really wanted to help bring to students what they were so clearly asking us to provide.

I am proud to announce today that my firm General Catalyst Partners has decided to fund and support RoughDraft.vc, a student partnership from across the Greater Boston area colleges, that will fund student startups at the earliest stages to turn students’ rough projects into products and companies. The investment committee is composed of dynamic students from several local colleges and universities, and these are highly networked, passionate and driven individuals that have already demonstrated an ability to catalyze startup ecosystems in their own college environments. This partnership will identify student entrepreneurs they would like to fund and will make the investment decisions. The investment will be made on simplest possible terms, and there will be no follow-on funding from RoughDraft.vc.

This team has already enlisted an amazing set of Advisors and a group of experienced engineering, design, business, sales/marketing, legal & other mentors to provide support to student entrepreneurs. I really believe that this group can catalyze the next generation of great Boston student startups to build products and grow their businesses regardless of their eventual geographical location. While I am proud to also serve on the investment committee, my primary role will be to guide, advise, and mentor these young investors, rather than influence the investment decisions.

Many of my partners at General Catalyst also started their first businesses when they were still in college, and as a firm, we have invested in many student startups that have been among some of our best investments, e.g. HubSpot, Stripe, WarbyParker, Visible Measures, Locu, etc. This is near and dear to our hearts. We are proud of our long association with the Boston area college/university eco-system, and we look forward to continuing our support of the next generation of student entrepreneurs, now also via RoughDraft.vc. If you are a student or a student team, working on a rough draft of a product, I hope you will reach out to the partnership at RoughDraft.vc, and find yourself a great first investor and partner.

Roughdraft.vc team photo below:

Team


The EnergyMakers Show

September 20, 2012

Paul Dickerson, former COO of Department of Energy’s EERE program, is a friend and a strong supporter of advanced energy for the USA. Paul has been active in this field for a long time and I am glad that his voice has been heard all the way from Texas to Washington D.C.

Paul has been hosting a regular local TV show called The EnergyMakers. I was recently in Houston for a Cleantech conference and Paul asked if I would be able to join him for a few minutes to be interviewed on the show. It was a pleasure to join Paul, to do the recording, and to just catch up on what exciting stuff each of us was seeing in our respective circles.

Here is that show’s recording. You can watch me talking about General Catalyst’s background as an entrepreneur focused firm, some of our global energy related investments, how we see ourselves as partners to early stage entrepreneurs, and some themes that I am currently most interested in. The edited version appears to be some what of a commercial for us, but maybe of interest to you.


Why I still focus on cleantech?

May 31, 2012

Green EnergySomebody I know well recently asked me why I still focused on cleantech investments? Had I not been dissuaded by all the rather public failures of cleantech startups? Was the political climate not anti-cleantech almost everywhere, and was this really solving the biggest problem faced by humanity today?

These were well meaning questions and came from someone I trust to be smart and thoughtful. I think he wasn’t trying to tell me I am crazy, but as a friend who knows me well, was just wondering if this was the best thing I could be doing with my limited time in this world?

And the answer back to him was “I couldn’t think of a bigger challenge than this to take on, and such an important one at that.” So far I have loved working in cleantech despite the down cycles and the spate of negative news that have hit the industry.

Don’t get me wrong, I get it that it kinda sucks as far as cleantech successes are concerned. There are few of them, and seen from 30,000 ft they look like tiny specks instead of inspiring feats. And it gets tougher when your colleagues discuss billion dollar exits in 15 months. But we are just in the 3rd inning of this game and those who give up now may be should not have played at all.

This is not meant to be a long philosophical post. But I apologize in advance. Just wanted to expand on some thoughts I shared with my friend. I don’t think I convinced him, but that’s OK. We have always loved that we can agree to disagree. It pushes us to think harder about our positions. So here are some reasons why I still focus on cleantech:

  • Long term trends are secular and not changing no matter what some might like to believe. Global warming is happening, fossil fuel supplies are limited and geopolitically troubled, much of the world is just coming up the development curve and is hungry for energy/water, and people around are more conscious about their ecological footprint than ever before in modern times. Just imagine when all of China gets to travel the average 12000-15000 miles per person per annum that average Americans travel. We may not have enough cars, fuel, or roads to support that. How do we solve that problem? And what’s the commercial opportunity? This is a resource-constrained world no matter how we look at it, and therein lies the opportunity to optimize and build the next generation companies.
  • I would never bet against technology, and cleaner, more efficient technologies are not science fiction but already mainstream and important part of our lives. Reverse Osmosis is not expensive technology that Arabs or Israelis use to produce fresh water, but Coca Cola uses it as well to produce Dasani water bottles. Apple, Facebook, and Google are buying solid oxide fuel cells to power energy hungry data centers, I no longer have to remember to shut lights off at work because every room in the building is equipped with advanced proximity sensors, and I can download apps on my cellphone that would give me turn-by-turn driving instructions optimized for fuel efficiency. Let’s be clear that technological breakthroughs have allowed shale gas found in the US and elsewhere in significant quantities to be extracted in economically viable ways. Don’t bet against technology.
  • Today’s generation of adults have grown up in a networked, globalized world and are more aware of the disasters that can result from extreme weather and climate change. They have a more personal understanding of the impact of drought in sub-Saharan Africa or floods in Bangladesh that the generation before them did reading National Geographic. Our children are growing up knowing about happenings in Syria and Japan faster than their parents who watch cable news. How this world works and is at risk is ever more present in their conscience, and they want to make it better.
  • Einstein once said “God does not play dice with the universe”. In the same vein, I believe we have a one-shot at this experiment we call life on earth. I don’t want to play dice and see if all ends up well on the other side of this great human experiment. Lets correct our course as we go and to improve our collective lives while preserving the future. Our predecessors used wood, coal, oil and gas. What will we use going forward? All of the above plus solar, wind, biofuels, nuclear? Just like we went from large digital computers to personal computers to iPads, why won’t we make the switch from incandescent to fluorescent to LED light bulbs? Batteries twenty years ago barely powered hand-held radios for a few hours. Now they power powerful computers for hours. Why would the same not happen in electric vehicles that could drive 300+ miles without recharging?
  • Solar, wind etc are variable sources, and inherently there is uncertainty in their availability. But if you take a long term view (5-10-20 years), I woud wager that perhaps even the most variable natural resource like wind or solar is more predictable in availability and pricing than fossil fuel that remains at the whim of dictators and other idiots, and on yet-to-be-developed extraction techniques. Unfortunately our financial system just hasn’t developed ways to monetize clean energy well. Can that change and unleash capital that is otherwise tied up?
  • Cleantech is not a single industry but so many different industries. From the renewable power sources such as solar, wind, biofuels, hydro, automotive to lighting, energy efficiency and energy IT, to devices, sensors, robotics, behavior psychology, big data analytics, cloud computing to gaming. There are cleantech opportunities abound, and there is no shortage of buzz words if cleantech is now a four-letter word. A rose by any other name is still a rose, right? 🙂
  • The quality of entrepreneurs I see entering cleantech fields today is impressive. They are ten times better than my peers from 10 years ago when I started my cleantech company. They understand the challenges they are taking on and are determined to succeed. They understand that their markets are large and real (not virtual), lifecycle of their products & companies would be decades (not months), and acceptance of their products if economically viable would be nearly universal.  It’s just that they have to usually build stuff, and building real stuff at scale is tough and takes time/money. Not only that, they are sometimes also dealing with unfair business practices from their competitors in other parts of the world. So be it. Creative entrepreneurs will always win in the end. Generations of entrepreneurs before them built the electric grids, railroad systems, highway systems, aircrafts, and nuclear power stations. So they know who their ideals are and are aiming high.
  • Great entrepreneurs and good investors build companies that last, not exits. Exits come when companies reach a certain level of maturity, or when luck shines upon them. I hate to see investors chasing dreams of exits when they really should be building companies in large markets, solving real problems, and building products that customers truly need and want. And such companies are being built today. Let’s just have some patience. The entire freaking country of Greece melted away in less than 2 years, so please cut these entrepreneurs some slack! They will rebound with better products and more robust businesses.

While I am hopeful that I am not totally wrong, that is perhaps besides the point. At the end of the day I am just a cog in the wheel; but a wheel that is on an important journey. I am an entrepreneur at heart and entrepreneurs want to solve problems they see before themselves. And I see this as a great challenge. And in every challenge lies an opportunity that would pay plenty if successful.