This Week in Startups - What investors mean when they are "waiting for a lead" (VC Sunday School) + Seth Bannon of 50 Years | E1395

Episode Date: February 27, 2022

First up is a VC Sunday school where Jason discusses what investors mean when they say "we are interested in investing, but come back when you found a lead" (1:51). Then, we tease Molly's EV review of the Audi e-tron Sportback (20:42). To wrap, Molly does a This Week in Climate Startups segment with Seth Bannon, a founding Partner of Fifty Years, a Venture capital firm investing in climate solutions (34:12). You will learn: 1. The convictions that unpin Fifty Years' investment thesis 2. Why Seth thinks VC has lost his way 3. Why increasing longevity could be a net-positive for climate 4. How Fifty Years measures impact of their investments 5. How Seth evaluates the potential negative externalities of his investments 6. How his PhD to VC program works (recorded on 2/9/22) Show Notes: (00:00) Jason and Molly tee up today’s topics: VC Sunday School, Molly’s EV reviews, and This Week in Climate Startups! (01:51) VC Sunday School: Why some investors wait for founders to “find a lead” (09:59) Odoo - Get your first app free and a $1000 credit at https://odoo.com/twist (11:04) Getting to the root of why VCs wait for leads: nobody likes to turn down founders, LAUNCH role playing (19:36) Revelo - Get 20% off the first 3 months by mentioning TWIST at https://revelo.io/twist (20:42) Molly’s EV Review (check out at https://youtube.com/thisweekin), breaking down the next wave of EVs (32:42) Bubble. Get one month free of a no-code plan at https://bubble.io/twist (34:12) Seth Bannon of Fifty Years, raising their first fund, investment break down (47:11) Seth’s thoughts on the startup ecosystem “losing its way” over the past few years (55:03) Helping climate entrepreneurs Check out Fifty Years: https://fiftyyears.com FOLLOW Seth: https://twitter.com/sethbannon FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood

Hey, everybody. It is another Sunday edition of this week in startups. First up, everybody's favorite new segment, V.C. Sunday School. And we're going to talk about Molly's question for me, which was, what do people mean when they keep saying, hey, we'll invest after you find a lead? Or founders say, hey, we're looking for a lead. We've got a million dollars sitting here, but we need a lead. We need a lead. And then Molly has done her first EV review, something we talked about on earlier podcast that we wanted to do. And so here we go. we're starting our review program of cars. And the first car is the Audi E-Tron Sportsback. Great review up on YouTube right now. You can go to YouTube.com such this weekend. Decarbonization can be sexy. And then finally, on this weekend climate startups,

I interview Seth Bannon, the founder of 50VC, on investing in climate solutions and taking our industry to task. Just a tiny bit. It's going to be a great show. Stick with us. This weekend startups is brought to you by Odo is a fully customizable and fully integrated suite of business apps that lets you build and scale your stack as you build and scale your business. Your first

app is free forever. And right now, Odu is offering $1,000 off your first implementation pack at odu.com slash twist. That's ODO.O.com slash twist. Revello. Looking to affordably scale your product development with global tech talent in the U.S. time zones, hire vetted remote developers in Latin America with Revello. Get 20% off for the first three months at Revello. dot i.io slash twist and bubble bubble empowers people to design and launch their own apps marketplaces or tools without needing coding skills or pricey engineers the first 500 listeners will get one month free on any of bubbles paid plans from $29 a month up to $529 a month at bubble. at bubble dot i.o slash twist all right it's time for vc sunday school it's on your mind molly

what are you wondering about what could you use advice on or mentorship or what do you want to hash out. I am, I mean, I, by the way, can I just say how lucky I am to have this direct pipeline to this basically, I've never really been, I'm not a big believer in the mentor thing, not for any reason exactly, but like this, this direct ability to be like, I don't understand it, is amazing. It's been good for me too. I mean, it's making me, as I said on Twitter, really think through and reflect on my own game, right? Sometimes when you get good at something, you don't actually take the time to reflect on getting better. So I think it's actually making me more considering better. So thank you for the great questions. It's amazing. Plus, I will say that members

of our own staff are like, this is so great, I keep learning so much from this. So, because we have a learning organization where a lot of people are new. It is really, like, hopefully everybody is finding it to be as much benefit as I am. So here's the question that I have today. I have said this to founders now. I have heard founders talking about this phenomenon. I read about it. It seems to be a common phenomenon that a thing that venture capitalists say to founders is we're waiting for you to find a lead.

Right. What's that about? Okay. So when you invest in companies, you want to make sure that somebody has done diligence and that somebody will be minding the store and have so much skin in the game that they will help with the governance of a company

basically shepherd the company. And so there are a lot of smaller investors who put in, if they're syndicate members, $5 to $50,000, if they're Angel investors, $25,000 to $250K,000, but typically 25 to $100, and even seed funds that put in typically, as we heard on Angel season six, first-time funds, those $3 to $10 million funds, typically make $50,000 to $250K bets. They are not designed to lead an investment. So what does it mean to lead an investment? there isn't a technical, you know, a lead does X definition.

But I will make it. So everybody has a definition going forward. I feel like it's like made of honor. Like there are some jobs you do, but yeah. Anyway, yeah, uh-huh. So I'll give a clear definition of what I think a lead does. A lead sets the terms for the round. In other words, they originate the term sheet.

They say, we want to see you raise $2 million at a 10 million post. So 2 million will buy 20% of the company, and we want to be 1.4 million of the 2 million, and we want you to find 600K in other investors who would be strategic or otherwise accretive to the enterprise, the startup. So they set the terms. And then they also, the lead should be doing the diligence

and reviewing the legal documents. In other words, they've got enough skin in the game that spending $2,000, reviewing all the documents and making sure they're tight is no big deal. $2,000 on $1.4 million invested is, you know, less than 1%. In fact, 1% would be $14,000. So if it was a priced round or if it was just any round, then they might spend $1,000, $2,000, $3,000,

reviewing the documents, making sure everything's tight. And they might spend 10, 20, 30 hours on doing due diligence. Is this company incorporated? Do they have, are the founders felons? Background check? Mm-hmm. Have we seen their bank statements? Are there claims in their deck?

Are there claims in their pitch? Actual reality. So broad strokes, term sheet, diligence, legal review, and joining the board in majority of cases is what the lead does. Okay. If you're not the lead, if you're one of those other groups of people I mentioned, from syndicate members to seed funds to angels, you're relying on the lead to do all that work. Because you, as somebody putting in a 7K or 25K check, well, you can't justify doing $5,000 in diligence, $3,000 in legal work, because that might be greater than the

money you're deploying, or it might be 50% of the money you're deploying in the investment if you're putting in 10 to 25K. And you just may not have the time. So founders can do a party round. Party round was very controversial because nobody's in charge. Nobody's reading the documents. Nobody's joining the board. There's no governance. So sophisticated investors would like to see a lead who's going to shepherd this company. And I wouldn't say be the adult in the room because sometimes the investors are younger than the founders,

but generally would act as a fiduciary to the investors in the company. Just somebody to watch the store along with the founder. Does that make sense? My experience, at least at our firm, is that investing in a company that already has a lead doesn't mean we're not going to do diligence, though.

Right? Okay, great follow up. Yeah. We still do that. We would do diligence, but our diligence might have been done for us already if somebody was the lead. So if there is a, let's take a later stage round.

Somebody's putting in 10 million for 20% of the company and we're putting in 750K of the 10 million. And they've done all the diligence. Well, they might give us their diligence so we don't have to do it or they might share with us what they did in diligence. And then we would be relying on their diligence and we might do a little bit of our own,

but we would do an abridged or short a version of the diligence because you don't want to waste the founder's time and you may not want to burn out customers, right? If you're going to call customers, the customer who's their top SaaS, if it was a SaaS company and, you know, they had, I don't know, let's pick a company, Nike as, you know, their lead customer, if they had to talk to two investors last round and now they're talking to three investors this round, like is it really necessary for the sixth investor to say, do you love the product or not?

Yeah. Probably not. So we will sometimes lead an investment. Other times we will call. co-lead and the co-leads would probably be putting in the same amount of money. And the lead usually puts in the majority of the capital. That's another good definition of a lead. And if we or anybody is saying we're waiting for you to find a lead,

is it an indication of, is that an expression of our check size? Like, we're not going to write a big enough check that we are able to lead. Is it an expression of maybe medium confidence? So let's talk about investors writ large. What investors will do to keep optionality, right? Because what if Sequoia decides to lead the round? Then you really want to be in because Sequoia joins the board. Sequoia anoints it.

They have unlimited capital. The company becomes five times more valuable the second Sequoia's names on it. I had this happen with Mahalo now inside. You just all of a sudden become anointed. Everybody assumes you're the next Google or Apple or YouTube or, you know, Twitter or Instagram because they invested in those companies. And so there you have it. What you're trying to do is preserve optionality.

So, hey, circle back around when you have a lead and let's talk. And that's really annoying for founders to be in that situation. But it could be a sign of not enough conviction to lead or the firm doesn't lead investments typically. So we don't typically lead Series B investments. Gotcha. Or Series A. We're a seed fund.

We do early stage. So if somebody's doing a $10 million round, well, the largest round we ever did was $6 million. And we've done three, four, six. You know, and the six was a follow on, the three and four. I think one was a follow on. One was actually, I think the largest direct we ever did was maybe three and a half. So putting that all together, when they get to later stages, we're not going to lead those. We're going to lead a seed round sometimes.

And other times we would want to see co-be, might be co-leads. So it is actually, if the firm has, if you're in the firm's investment window, their Goldilocks zone, as we talked about, then it would be a sign of a lack of conviction. If it's outside of their Goldilog zone and their check size, it would just be, to your point, a function of check size. Listen, when you start scaling revenue quickly, your company needs to be run professionally. And Odu is the software that helps you maintain control of your fast running business. Odo is a suite of business apps where you can run your entire company from just one platform. This means you don't need to keep adding siloed SaaS products.

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A lot of investors don't like to turn down founders. It's really hard to do. And part of the job is, like, you're going to turn down the majority. And we've actually been doing training internally of how to do this properly. And you were in on some of those, and we're going to be doing some role play. I'm going to actually do role playing with people as a little test where I'll be like an angry founder or a founder who's trying to convince you to invest even though you said no. So we'll do a little of that role playing. We might have to record that. People are going to love Jason plays angry founder.

All right. Actually, we can do it right now. I cry. You know, no, I'll be the founder. You turn me down because we don't have our growth is 5% a month. And your reason is you want to see a little more growth and a couple of more customers. to say, hey, listen, we decided not to invest in this round because we're looking for more consistent growth and a little more land and expand for your SaaS products.

So go ahead and say that to me or something like that. So listen, I think you're great. I've enjoyed talking with you. I think we're going to pass this time around. We're a little bit worried about the growth metrics and the rate of growth. And we'd like to see a little bit more than that. Please, you know, keep us updated on what you're doing. Updates at launch.com.

Yeah, but, you know, listen, we're seed company and we've seen. slow down, we're purposely only growing 5, 10% a month because we really want to take our time and focus on the product and making sure we have tight product market fit. So actually, you're wrong. Our growth could be much greater. We've just chosen to slow it down. So you're making a mistake, Molly. I mean, I always have to accept the possibility that I'm making a mistake. I stay humble in this business, but the truth is, these are the benchmarks that we have always followed and believe in. Okay. Great. So not bad, but you can see how it can get a little tense and founders have no problem with a little tension.

I think your answer was pretty good. The Nody's, by the way, would like to see me make you cry. Good luck with that. So I don't think, yeah, I don't think. Unless you're going to play like the last 15 minutes of the Rings return of the king, it's not going to work. But when I see the hobbits going with the elves, that always gets me. Otherwise, there's a way, but this is not that way. There's definitely a way.

If you get me to the final scene of Gladiator or some movie like that or Black Hawk down or some violent movie where some hero dies tragically, yes, I will cry. I'm kind of amazed I haven't cried on the show yet. I'm a crier. Are you really? Oh, my God. Like overly emotional commercials or thinking about my son's, anything. Like just crier.

Totally crying. So if your son graduated and then said, Mom, I couldn't have done this without your support. Been such an amazing mother to me. to me. Wow, now I know how to do it. You would get me too. If you did my daughter saying that exact same thing script to me, you would get me.

My cheeks are all big. I mean, it takes nothing. It's very embarrassing. And everybody in my family is like when there's like, you know, a sad commercial or a movie, they all look over at me. You're crying? Yeah. I'm like, you know I am.

Why do you have to ask me? No, I just pretend I'm yawning. Like, if in the movie there, I'm like, oh, so tired. You know, my eyes tear when I ya ya. My eyes tear when I yawn. So my wife doesn't see me crying at Lord of the rain. or some rom-com. The rom-coms get me every time.

Yeah. Notting Hill, that's the best rom-com ever. No shame for my game. I'm a weeper. It's one more thing. Would you ever see yourself with a... I just love that, Hugh. What's his name?

Hugh Jackman. Hugh Grant. Hugh Grant. That's the best rom-com, period. So anyway, that's what... So, anyway, we're a lot of topic. Okay, so finding a lead, sometimes function of check size, sometimes a function of just like,

you know, I like this. but I'm not sure if the market loves it, right? Sometimes it's testing a market. I would say it's your conviction level, right? And so we might be interested in investing to start the relationship with you as a follow-on, as a follower. We might fill in the round just so we can build the relationship and get to know you, but we're not ready to take a board seat. We're not ready to lead around and give you that time commitment.

And that's reasonable. Some firms only do Series A and only join the board. Like I think benchmark is that way. They won't put in small seed investments. Other firms separate into groups. So Sequoia has a seed group and a Series A group, and other firms have started to split it up like that, or they create scout groups to make the small investments.

And so, you know, people have been trying to figure out ways to make small bets without being a lead and not create what's called signaling risk. So one of the issues in our industry is something called signaling, and you'll start to hear this, it's less of an issue now. When the industry didn't have a lot of players, If Sequoia made a seed investment of 500K and then didn't do your Series A,

everybody would say, what's wrong with this company? They put 500K in for 5%, but they don't want to own 20% or 15% like they did in all the other big winners. So they would taint to the company, Scarlet Letter of the company, and that's why they created the Scouts program. And the Scouts program was, hey,

Sequoia's network makes these investments and it has, we have, we don't decide. Jason gets to make this. Sam Altman was a scout. He famously did Stripe as part of the Scouts program. And so does not reflect on Sequoia was the concept. Interesting. So they just tried to abstract it out a little bit.

Basically, and used their network to make small bets to get to no companies and have skin in the game. Yeah. So what I like about what we do is we have the accelerator where we make that 100K bet and now with Founder University. I met with the top companies and actually became an episode of This Week and Start up, I think it was last week. And I think we're going to place maybe five to 10, 10K bets on the best of those. And that's another experiment for us. We're going to offer people 1% for 10K. Maybe I get to know you bet, a little skin in the game.

But I'm not ready with all of them to put 100K or 250 or 500 in there. They don't even have products in market in some cases or they have one customer beta testing and MVP. It's super nascent. But the earlier you can get to companies and having a little skin in the game does increase your odds of building a position later. And that's really what seed investing or seed funds are about when they're at their best is, hey, we own 1% of the company now. We know it's a breakout. Maybe we can get to 7% ownership. Maybe we get to 12% ownership. And ownership percentage is what

drives returns in venture capital. It's not just how big did the company get in the multiple, but the multiple on what number. So in the early days, you know, 25K, 50K investments I made in Uber's in Robin Hood. Oh my God, they're so dramatic. But nothing like, you know, Saka who put 250K in, I believe, to the Uber seat around 10 times as much as I did. Or, you know, Bill Gurley who put whatever into the Series A and owned 10% of the company. So that's the thing we're doing here at launch is trying to build positions. Well, and what's interesting, what I find actually really interesting about what we do at launch is that we have a lot of more ways to say yes than other firms do.

Like sometimes we might have to say, we're waiting for you to find a lead, a maybe, and sometimes there might be a no, but it sort of feels like we can, we rarely have to give a no because we have a whole funnel. Yeah, so we could say yes to Founder University

if we meet a founder who we think has potential. Yeah. We could say yes to the accelerator. Now, some people might say, I don't want to do the accelerator. So we might, you know, be able to put 100K into, you know, a launch accelerator company, got to know them, own 6%,

and then build from their, So yeah, we want to have ways to say yes and get to know companies. And I think that's good for companies too. You get to know the investor. Are they helpful or not? And if you're successful, you'll have your choice of investors. So you can then pick which ones you want. Yeah.

And it seems like there's a lot of value in being really upfront and saying we rarely lead. I think, yeah, if you tell people how you invest, then it creates efficiency. And that's why you'll see seed fund say, we put 100K in. We don't care about prorata. You'll see other firms. like RSA, we take pro rata, and if we get above 5% or 10% we want to have a board seat, and we want to be more involved with a company and really help you meet other investors, et cetera. And so then somebody who's a founder who's like, I don't want any governance.

I just want blind money at a high price and say, you know what, I've heard Jason, I heard Molly talk. They don't want to do blind investments, you know, pre-product being launched. I can go talk to somebody else about that, right? Yeah. If you're looking for qualified international developers without the crazy time difference, or you just want to scale product velocity without sacrificing quality, well, Revello is the answer. Revello is a talent platform that matches you with vetted full-time remote developers in Latin America. They work in the U.S. time zones, which means your engineers can collaborate in real time.

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Tell us the reviews on YouTube, obviously, but maybe you could tell us a little bit what were your general impressions. Yeah, so, I mean, this is perfect timing because you have been embroiled in some Twitter back and forth about the question of, of like, why haven't people bought EVs? Why are they not buying more fuel efficient cars?

And I think there's a really big knowledge gap about the availability of these cars, what they're like, what they're capable of. There still is a sense that there's sort of only Tesla. And so I kind of set out to find a Tesla killer, but also show people what else is out there as other car makers get in the game. So the first one I got to try was the Audi ETRon Quatro,

which is very similar to the model Y. same price range, kind of that SUV, all-wheel drive, sporty vibe. And it's also like a really good example of a car maker making an electric car versus a real tech company making an electric car, right? So they've nailed the like what one of my friends calls brilliant basics of being a car. And then there are some things that Tesla has really spoiled me about. Like, why do I still have to turn this car on with a button? That's so stupid.

So, yeah, it's got all, yeah, like, the great example would be like those companies, Audi, Mercedes, even Ford. You know, they do great things with their dashboards. They've figured a lot out about human factors, and some of those things go away, and it's a good thing, like the power switch, and then some things go away. And I watched the review already, but the heads-up display that I used to have in my Corvette, that would show you the speed. And you mentioned that explicitly, like, on the Tesla, you do have to, like, glance down to see your speed. I mean, Tesla's got to get that heads up display. It's so delightful.

The fact that that is missing is actually kind of absurd. Are those now standard in most cars? Yeah, the high-end cars have the... In a high-end car, yeah, heads-up display, absolutely. I mean, I had a heads-up display in a 2013 BMW. There's no reason for it to be missing, yeah. I think my Corvette was the C-6 in 2007 or 8, and it was amazing because you could see your gear,

what gear you were in, if you're using the Tiptronic. So, and this is going to be the start of many reviews. We want to kind of build up our review muscle here. Yep. Whether it's cars or gadget. So you'll see some more of these. And they'll be standalone on their own on our YouTube channel,

YouTube.com, this week in. And they'll be embedded in the pod. Great job on the first one. Thank you. I got another car showing up on Monday, the Mustang Mock EGT. Oh, really? Yeah. I am fascinated by that car.

I mean, that's the one that just in Consumer Reports beat out the Tesla Model 3 as the top of a TV. That's fascinating. Yeah, Ellen's going to be interesting to try, I think. I think they made a really bad decision there to make it look so funky. Yeah. I really don't like when they're like, it's an EV, so it has to look crazy. But I have heard that it's a great car in terms of how it drives.

Yeah, very controversial because they gave it the Mustang badging and it does not look like a Mustang. It kind of looks like a futuristic little SUV and maybe that's fine if you didn't call it a Mustang. but now they have to get over that. But I hear great things. I'm excited to try it. If you are, if you work at Hyundai or Kia, like,

you know, I've got connections enough to keep some of these going. But if you are a car maker making an EV, especially the less expensive models, right? Right now, they're all priced.

You know, like every single smartphone was $549. Yes. For you, like the trio, the iPhone, they were all priced the same. And they kind of are still now.

All of these are 50 to $70,000 to $70,000. The high range ones, but they're all price. but they're really 70, which is obviously way, way, way out of reach. But, you know, I'm, I mean, look, we've been through enough tech cycles to see that stuff starts expensive and then it gets affordable. This was the crazy thing, you know, and I just want to touch on gas mileage because we were talking about it vis-a-vis what's going on in the Ukraine and Russian dependence on oil.

In the EU, they are, you know, their fleets are in the 40s and the new cars are hitting standards of 54 on average miles per gallon. Yeah. And I started looking at the U.S. and we're at like 24 and we're hitting like 26. We're literally half of what's happening. And, you know, I basically wrote like $5 gasoline in America has been really good for driving consumer behavior.

And I got ratioed both ways. I had people who were like, go, you're totally right, retweet, give me the quote retweets. But then I had people like, you're out of touch, rich guy. And I was like, okay, perhaps true, but, you know, like I grew up poor. Like, I understand the value of a dollar. And I started looking, just to educate myself. And I started looking and I found. this Hyundai-A-Lantra H-EV, and then I found the Honda Insight.

And I was shocked to find that the Honda Insight is $25,000 and it's 55 miles per gallon. The Hyundai-A-Lantra-H-E-V, which I believe is a hybrid EV. I think that's what H-EV stands for. Somebody can fact-check me. It's not a pure EV, obviously. And that gets 53 miles to the gallon 56 highway and costs $23,000. So this idea that you can't get a five-seater that gets literally three or four times the gas mileage.

And people were fighting me on it. And the confounding thing, Molly, thank you for you gave me a little tweak cover there. But the part that I found very strange for people was, if they're paying four times as much for gas or three times as much for gas in a $25,000 pickup truck or micro-subs, whether they call it like the crossovers or whatever, and they're getting 20 miles per the gallon,

they're going to pay more money ultimately because they're going to spend extra $1,000 a year on gasoline. Yep. So these cars pay for themselves. On bridge tolls in places where you can go, you know, through the bridge crossing for free. Yeah, it's a weird argument. And frankly, I found that a lot of the, I mean, there were, as I tweeted, plenty of people seem to be saying that if even one person cannot afford these cars, that no one should buy them. And there were plenty of people in your comments who I think could probably quit yelling at you and go. buy one of these cars because adoption brings down prices.

Yes. Full stop. That's why Android phones are $100 or Chrome. You can buy a Chrome laptop now for 200, a full on laptop capable of doing anything you need to do at school for $200. Like full stop, $200. Yeah. A laptop.

Yeah. With a great screen. So no excuses, America. There's no excuses. Get to yes. Get to yes. I don't also understand like why. these car companies are not making three-row cars, because that also seems to be the valid,

that was the most valid one. People were like, I have four kids, you know, we're two adults, and sometimes we have a dog, and it's like, okay, yeah, five-seater's not going to work. Where are the third-row cars, station wagons, hybrids, whatever, you know, crossovers, that also get 40 miles to the gallon. That seems to be missing from this, and it seems like it would be possible because they would They would weigh 20% more, maybe, and so therefore they would be 20% less. So if they were 54, they would be down to 43 miles per gallon or something.

So Hyundai get on that. That's a huge market. I mean, it's definitely possible. In the Mazda 5, I think, it's pretty good, relatively good gas mileage. It's just that we haven't made them. We just haven't made them, you know? Yeah. We have not made that a rule.

And Americans love big-ass cars. We do. And we have not done. anything to break that addiction with either gas taxes or mileage requirements or, you know, even just culture. Like, I am so heartbroken to discover that Honda is taking the Honda fit out of the U.S. market. What?

Yep. The Honda fit was like the most affordable car. How could Honda do that? The fit is go. And like people can't, they don't, they don't want these cool, small European hatchbacks, like the Audi A3 hatchback, I think is like one of the coolest, sexiest cars ever, came in an awesome five speed. And they were just like,

Americans don't want that. They either want like a big dump sedan or a big huge Jesse V or truck. So Honda's like all about the CRV. Crazy. It's true. I mean, the Raffor hybrid,

that is the car, actually. That's like the envelope pushing. 35 miles to the gallon, I think. Yeah. But even that is like, for a hybrid is pretty low.

Yeah, this is one of our noties. And yes, Justin, the big cars are all the profit. Ravi Shankar. Ravi Shankar. Ravre.

Ravre. and Prius hybrids get around 50 miles per gallon. Yeah. Yeah. Absolutely a no-brainer. It would be nice if, and by the way, I don't know if you remember when guests hit $5 a gallon. And that's when the Tesla Model S was coming out. And a lot of the discussions around it were, you would save, you know, whatever, $1,200 a year.

And so over seven years, you could take another $7,500 on top of the $7,500 EV credit. Yeah. So people started in their minds doing math. And then Priuses started selling out the Honda Insight, the old one that got 60 miles per gallon. That was a really futuristic looking one. Yeah. Like people really started changing their behavior because I remember had young people working for me and they were all trying to find Priuses, use Priuses and used Honda Insights because of gas mileage in Los Angeles and they were traveling so much.

My uncle in Montana bought a Prius because he was like, I commute and I just don't have the money to be paying for gas. Like, that's why I have a Prius in Montana. it's like when you really I mean there's a reason that just about every Uber on the road like Uber X is a Prius right? I mean it this is a it is a real cost it's not in some for for a certain swath of Americans is not as big a cost as they seem to think it is compared to like their Starbucks or their streaming bill or whatever things you know people pay for but and if gas is $2 a gallon you don't even look at it it's like it's like oh it's two dollars a gallon it's it's it's the same way people look at water you know they don't

Because water coming out of your sink is like a dollar, a penny. Maybe it's a penny. Like if it was five cents, you'd be like, ah, you know, this is adding up. And I think that's why we should have a minimum gas price and then take the difference. And we could do this very slowly. We could just add 25 cents to a gallon of gas for 10 years and then take that money and pour it into subsidies of the lowest end hybrids. So it's not for rich people for model, you know, X and S's and Audi's. They can literally just take that money, Molly, and say, this is going to subsidize only.

under $30,000 EVs and hybrids. Yeah. So we'll give an EV hybrid credit and the gas money will pay for it, which would then mean poor people, middle class people, would get the only beneficiaries of that. Or the majority beneficiary. All right, anyway. Common sense solutions that nobody wants to accept. Nope.

And who's on the show today for Climate Sundays? We've got Seth Bannon, the founder of 50 years BC. What is that? Which is, oh, they're a super interesting. They were small when they first started. I interviewed them way back in the day at Marketplace Tech, they were very early to sort of come in and say, we are doing climate solutions. And it's a husband and wife team and they're just like super duper go getters and has a great thesis in terms of just boiling down climate investing and has kind of taken the industry to task for being a little bit risk averse when it comes to climate solutions. It's a good interview. He's a way to hear it. All right. I like it. There's a lot of people getting into climate investing. and if you want to join us on that adventure, starting in March, I think,

March or April, we'll probably have our first deal in the Climate Syndicate. You go to the syndicate.com slash climate, and Molly is taking the lead on that, and we'll be finding great companies to invest in and take really, hopefully, big risks to try to get big rewards and help the planet at the same time.

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Head to bubble.io slash twist and snag one of those 500 coupons right now. Seth Vannon, founder, co-founder, really. and I assume general partner at 50 years. Welcome to the show. Thanks for having me, Molly. Tell us about, for those who aren't familiar, and I hope that they are if they're listening to this particular segment, tell us about 50 years.

What's your deal? How long have you been around? How big is the fund? Sure, yeah. So 50 years, very simply, is an early stage VC firm. We back companies at the pre-seed and seed stage. So typically it's a few founders of the Jankey prototype. And we like to back teams that are at the intersection

of three circles on a Venn diagram, where one circle is deep tech. It simply means you probably need a PhD on the team to pull things off. Circle number two is path to a billion dollars a year in revenue if things go really well. And circle number three is path to massive positive social or environmental impact if things go really well. So another way of saying that is things that are really hard to build that can make a ton of money and do a lot of good in the world. And we have now been around for about six years and are now supporting over 90 teams. That's great. Congratulations.

How, I mean, you know, that sounds like a lot to me. I'm assuming that's a lot. It's a lot. Tell me about how big is the fund, if you don't mind. Our most recent fund is a $90 million fund. Yep. And is that your second fund? That is our third fund.

Yeah, it's our third fund. And yeah, we're more so than the size we like to talk about the people that contributed to it. So our sort of first core value as a firm is founders first. And we have this joke that we're found. founders all the way down. So we have a bunch of founders on the team. We back founders and now our LPs are founders. So supporting that $90 million are 44 founders of a billion tech companies. So we have the founders of GitHub and Dropbox and Snowflake and Spotify and Skype and Minecraft and SuperSel and Klarna and just a bunch of really, really amazing entrepreneurs.

Full disclosure, I talked to Seth. I talked to you back when I was at Marketplace Tech, which was now several years ago. And I think you had just raised $20 million and we're raising your second fund. I mean, it seems like things have been escalating quickly and tell me how much of that has to do. I mean, obviously, it's got to do with you and Ella and who you are and the choices you're making, but tell me how that gives you, how that validates your premise, you know? Yeah, so our first, our first fund was a $5 million fund under $5 million. And it took us a year and a half to raise. And, you know, it took us a year and a half in part because one of our core thesis, so we have two core thesis. One is that now is a really great time to back a lot of deep tech companies to the

pre-seatern seed stage. We can talk about that if you want. And the second thesis is that is that entrepreneurs that are tackling these big global problems like the climate crisis or disease or malnutrition or connectivity will outperform all else being equal, ones that aren't on a purely financial basis. And I would say neither of those were very popular. There was a lot of skepticism about deep tech because people said, oh, this seems hard and expensive. Why wouldn't you just, you know, back a SaaS company. And there was probably even more skepticism that you could combine doing good with doing well. Mark Andreessen is famous for saying that this kind of investing is like a houseboat. Not a great house, not a great boat. And so obviously a pretty pithy turn of

phrase, but you could say we couldn't disagree more. Back then, we had to make sort of theoretical arguments about why these companies would have an advantage, right? So we could make an argument about a theoretical machine learning engineer that they were both trying to recruit. And we'd say, imagine that there are two companies and they're equal in every way but one. So they literally, the same growth rates, same revenue, same profit margins,

team same are the same size, equally charismatic founders. They're literally headquartered across the street from each other. There's only one difference. One of them is developing app that lets people buy sneakers online, and the other one is curing cancer. And they're both trying to recruit the same machine learning engineer.

Which one do you think has a better chance of recruiting them? And when you put it that way, people go, Oh, obviously, all else being equal, the cancer, you know, curing one. But there was still a lot of skepticism. It was all theoretical. Now, six years in, we like to say our founders have made us look smart. So our first fund is over 10x. So that's pretty good in the venture world.

And so we now have, you know, sort of evidence that we can point to. Our second fund is also doing equally well. And then there has been, I would say, a very general macro shift in the way people think about these things. I think more and more people realize that there are two entire generations of talent that really want to align their careers with their values, you know, millennials and even more extreme Gen Z. And so I think the macro environment has come around to the fact that things like solving the climate crisis or disease or connectivity or inequality, these are excellent places to build businesses that create real economic value in addition to social value. I do want to ask you about investing in deep tech.

but before I do that, you took on several of these sacred principles, if you will. And then the other one is sort of baked into your name, right? Like certainly, you're doing funds, I assume, on a tenure cycle. But talk to me about the theory behind the name because I always thought this was, you're talking about changing the timeframe, right, about thinking about these issues. Yeah. So we do a heuristic we often ask ourselves as if we sort of project 50 years into the future, could we imagine that this company we're thinking about partnering with is one of the most

important companies on Earth. Like, you know, it was fundamentally important company that everyone says, my God, so glad that company exists. That, though, we've sort of adopted, in retrospect, the actual origin of the name is a tip of the hat to a Winston Churchill essay. Winston Churchill wrote an essay in 1931, where he predicted synthetic biology, genetic engineering, satellite telephony, nuclear power, just crazy sort of deep tech insight. And then in the entire second part of the essay, he talks about how because the pace of technology is advancing so rapidly, it's more important than ever that a technologist take a principled approach to their work, because otherwise we might end up accelerating really fast, but in the wrong direction. So he kind of combines

deep tech insight with principle of approach to work. So for the type of things we like to back, it's the perfect essay. That essay is called 50 years hence. And we actually did consider calling the firm 50 years hence, but we thought the hence maybe sounded a bit too old school, so we just dropped it. Yeah. It's kind of a long URL too. Pretty long URL. And also, who knows how to, hence, I wouldn't even know how to spell it. Yeah, I mean, I do, but I'm just being snotty. So let's talk about your investments.

It seems like there's quite a few meet alternatives, meet alternative tech. I know you're not sort of a pure play climate investor, but that's sort of where we're focused this segment. You're on this weekend climate startups. And I think it's been interesting to watch investors over the past few years, not just just broaden their sense of what they should be investing in or what they could be investing in, but also the sense of what is a climate company, right? Like, I don't think that even six years ago, we would have been thinking, oh, meet alternatives are a climate forward investment.

Yeah, climate used to basically be renewable energy. And that was it. And now, I think as the awareness of all the ways in which varying industries are behaviors contribute to the crisis that we're in. And our ability is to basically decarbonize all of those sources. We now realize that there's a myriad of ways of addressing the climate crisis. And so, yeah, I think the food system was not on the top of many people's list. And in part because I think there wasn't a huge awareness, but in part because it didn't feel

tractable, right? You know, we've been making meat and milk the way we are now for 4,000 years, literally 4,000-year-old old production technology. Right for disruption, as they say. Right for disruption. It's kind of crazy. There aren't that many industries that touch our lives in such a big way where we're using 4,000-year-old technology.

Right. So, you know, the Mesopotamians, 4,000 years ago, domesticated goats. And the scale has increased, but the basic formula, like, inseminate a mammal, have that mammal give birth, raise new mammal, you know, take its milk, and then at some point, you know, kill it, cut it up, and take the meat. That is exactly the same as it worked back then. And, you know, now we've realized that, A, there's just a huge amount of inefficiencies in that process because of it's 4,000 years old, right? Like, it requires a huge amount of land, a huge amount of energy, huge amount of feed. You literally have to tend to the medical condition of the mammals that you're using.

And then B, that we can just make the things we want directly using either biology or using plants or mycelium or other approaches, right? So, you know, we were super fortunate to be able to see it a company. that was previous called Memphis Meets, now called Upside Foods. And basically what they realized is that if what you really want is the meat, which is literally specific cells inside of the body of a cow, why are you growing a whole cow just to then go and try and cut up the meat? Why not just grow the meat? And so they've literally taken the exact same biological processes

that happen inside of a cow and brought it outside of a cow. And it turns out it works. And I've had their beef and they make duck and chicken and it's all delicious. We have a company called Nobel Foods, which realized that the reason that plant-based cheeses, I don't know if you ever had plant-based cheeses, but I've been a vegan for now. Maybe? I've had the cashew ones.

You're not missing anything. They're awful. There's just no good plant-based cheeses. And the reason is that the flavor and a lot of the function, the way it melts in the mouth comes from the proteins and cheese. And plant-based cheeses don't have the right proteins. And so they realize that you could literally go into a cow, find the genes that cause a cow to produce casein,

which is the most important protein, put that gene into a plant, and it turns out you can get plants that actually make real milk proteins. And now you can make plant-based cheeses that have the exact same functional and flavor profiles of real cheese. And it's delicious.

It works. We have a company doing this for gelatin and meat and chicken and all these other things. And so this field called cellular agriculture, I definitely think is one of the most exciting ways of attacking the climate crisis. And there's been a lot of life cycle analysis on these companies,

on upside foods in particular, reduces the land use by 99% the energy use by like 60%, the emissions, by huge percentages, the water use by 98%. So this is just a radically more sustainable, radically more humane and likely much more efficient from a cost basis way of making these products that people love. I mean, when you look at impact, that's just staggering, right?

Like those are breathtaking real numbers. And it does make me curious, like what other sectors you're seeing or that we're not thinking of or that you might be investing in that that just don't immediately come to mind as again a climate investment but they can really like if you talk about 59 to zero right in terms of our emissions gigatons they can really make a big dent yeah we're we're super excited to like decarbonize the construction industry which is an industry that many people don't talk about when it comes to climate but there are many elements that go into it. So I think we all know concrete, obviously, really bad.

Shouldn't be made the way it's made if we can figure out a way of decarbonizing that or even better, sequestering carbon in some cement replacement. That'd be really great. But just the general housing industry is also massively wasteful. I don't know if you've ever seen or built a house or seen some of build a house. There's always this giant dumpster out in front with just loads of like wood and waste materials because the entire process is just incredibly wasteful. The materials that we use haven't changed in a really long time. And so we think there's a lot of opportunity across the construction stack to reduce waste and decarbonize materials and also implement sort of smarter solutions at the residential level to radically lower water use, energy use, things like that. We have a company called Cover, which we're really excited about, which is sort of building ADUs, so homes that literally can go in someone's backyard that take this approach.

but I think there's an opportunity to apply techniques like that across the residential construction sector. So, I mean, look, when you say it, obviously you are a charismatic guy with lots of energy. It makes perfect sense the way you're saying it. Should I minimize my energy? Am I using too much? I want to be very sustainable here. Keep it up.

Keep it up. Energy is infinitely renewable with enough sleep in water, apparently. What is so hard about this? Because I do see a lot of people coming into climate tech investing. and saying, like, I'm just going to do the software part. And I see a lot of pitches that are like, we're, you know, a dashboard for emissions and it's a SaaS service. And sure, that's going to make money, probably.

But it's not, it's not a big dent. How do you optimize for the big dent? And why is it so hard to do? Yeah, right? I know. And go. Yeah. So I think, I think the start.

up ecosystem, investing in general, and VC in particular, has really just like completely lost its way over the last few years. You have a lot of super short-term thinking, a lot of speculation, a lot of looking to like, you know, get rich quick, a lot of flipping. You literally have, you know, venture used to be about giving people money to de-risk things that had huge technical risk, but if successful, would just be massively valuable over the long term. these days, you know, you have VCs that are almost acting more like hedge funds

where they want to kind of like take something that kind of sort of works and hope it works a little bit better. You have literally, you have some of the top VC firms investing in NFT collections. And I'm not even talking like NFT technology. I'm talking like NFT collections, right? I was talking to an investor the other day, a smart investor, great track record. And we were talking about a company that he had just invested in. And I couldn't for the life of me figured out like where the value came from. And so I was just trying to ask them much of questions, like, where is the, like, how is this creating value over time? And then at some point he stopped and said, oh, you don't understand it.

It's creating memetic value. Mimetic value. So it's a meme stock. Literal meme. Memean stuff. Memean, like value through memes, mimetic value. It's literally a stand-in. We used to call this speculative value.

That's like literally the name for it. But now it's not speculative value. It's memetic value. And you have literally VCs going on Twitter and it's like, oh, power of memes, memes with a future. And it's like, it's quite horrifying. And so I don't think it's going to, I don't think it's going to end particularly well. I hope when it does not end well, it drives a lot of enthusiasm back towards the sort of roots of venture, the roots of a lot of this entrepreneurship, which is doing the really,

really hard things that derive long-term sustainable value. But I think people, you know, at some point, the hard problems that are still in front of us are in front of us because there are no easy solutions, right? Like, if there were easy SaaS startups to get us. out of this crisis, they would have been built. But these are big, you know, complicated, hard problems. And a lot of solutions that they require are really hard. I'm not saying that like software alone doesn't have a role to play.

It certainly does. There's some great startups that are addressing this. But it's certainly not going to be enough. A lot of the solutions that we need are synthetic biology solutions. They're material science solutions. They're hard mechanical engineering solutions or electrical engineering solutions. And so my concern is that, people have gotten so hooked on the easy win and the easy, like, multiple and growth rates

that the entire sort of ecosystem has been warped in a way that tends to make people shy away from the really, really hard, hard things. And we need to go into the really, really hard things. They're really, really ambitious things. Both VCs, but also entrepreneurs. Is the early stage the place where some of that, can happen more. Like I wonder,

I mean, it's all supposed to be risky capital, right, in theory. And you're clearly saying nobody wants it to be risky anymore because when you win, you win big.

So you don't really want to gamble as much as you used to. But I wonder if there is an opportunity for earlier money to place those seemingly riskier bets. I think earlier and bolder money, earlier and bolder money. It's like,

we don't want to gamble. By the way, what people are doing now, it's more akin to gambling. Like the sort of memeification or everything. That's gambling. It's like early stage venture should be very comfortable with taking huge amounts of risk.

It's not gambling because it's like smart risk, right? But, you know, if you look at the roots of venture capital, you know, back in the days of Silicon, back in the days of Fairchild, the money was meant to take on huge amounts of risk for things that could generate massive financial returns over time. And yes, we absolutely need more of that, right? So, you know, at 50 years, I think we're a bit unique in that when we look at a technology from three PhDs that are spinning out of some

university, we do a deep technical diligence, but then all we want to know, assuming that the market is amazing and the team is amazing and everything else checks out, on the technology side, all we want to know is that there's a 15% chance or greater that they're going to be able to build what they want to build for the amount of money the thing it's going to take, in the amount

of time they think it's going to take. In other words, we're very comfortable taking on a massive amount of technical risk because we think that's the role of venture capital, right? It's to give the founders the money they need to de-risk some of that technology such that they can then bring a really important thing to market. And yes, I do wish that more investors thought that way because I think it is a bottleneck in the ecosystem.

I also think that it's unfortunate in that a lot of investors that are rightly enthusiastic about climate tech have not yet built out the capabilities to do a proper technical diligence, right? Unlike software, in software, if you have really charismatic, energetic, seemingly talented founders, like, they're going to be able to build it. You know, it's not like you don't have to do a big technical diligence. It's like, yes, I know you can build a SaaS app. They can learn it on YouTube.

Yeah, learn on YouTube. Like copy, paste, stack overflow. You're going to be able to get it out there. That's not the case if you're talking about making clean hydrogen using some new technique, right? It might not be doable. And therefore, you do have to work like, you have to develop the ability to do enough of a technical diligence such that you realize, you know, is this a 20% likelihood of success or a 0.2% likelihood? But because the 0.2% ones, yeah, probably venture shouldn't be taking that much risk, right? Maybe that is something that should still be developed a bit in academia and then be brought out into the world.

And I think a lot of firms that are really excited about climate tech and that want to be excited about some of these deeper tech approaches to it, don't feel comfortable backing teams in the space simply because they haven't built out the ability to do those sort of deep technical intelligences. Yep. Okay. So tell me how you do that, right? Let's like see if we can't make this more accessible to everybody. How were the friends you need to make. Come talk to 50 years. So we literally launched, we were so, this was such a common element of frustration for us that we literally launched a program called PhD to VC that literally takes really talented PhDs for 10 weeks, trains them for free on venture, you know,

like hour and a half long lecture assignments, weekend workshops, everything from how do you develop innovation flow to how do you diligence to how do you win to how do you support panel with LPs, panel with founder, panel with VCs, panel with support staff at VCs and then we graduate them and then we introduce them to other firms that might want to hire them. And like literally the reason we're doing this is because we were so tired of having so many of our teams talk to another firm that would that would say, oh man, I love everything about it. Love the team. Love the market.

Love the impact. I don't know how to think about the technology. So we were literally training PhDs and then just helping other VCs hire them. So if you're interested in that, we've got, we literally have PhDs that are that are looking to do that. And we're going to keep doing that. But I think the key is just to build out a network. of people that you can lean on. Unfortunately, you can't fully build the expertise in-house.

So, you know, we have a few PhDs on our team, but they can only do a technical diligence in their very specific area of expertise. And it needs to be very specific. So, for instance, if you're looking at a synthetic biology company, right, so say you're looking at a company that's making cell grown meat versus one that's using enzymes to make carbon negative chemicals versus one that's using some protein engineering or to dissolve plastics. there's no one PhD that can diligence all three of those.

And the first one, you need a PhD cell biologists. And the second one, you need an enzymologist. And the third one, you might need a different type of engineer, right? And so the key is to build out a network of people that you can then bring in and call upon to help you run that kind of technical diligence. And so, yeah, we're happy to help anyone who's interested in this space, like, develop that network because we definitely need more VCs that are able to make sense of the technology so that their capital gets unlocked for these entrepreneurs.

On the other end, how are you thinking about contributing to the ecosystem of entrepreneurs? Because they also have to take those risks. And that's a, I mean, that seems like a million layer deep question all the way down to education in the United States. No big deal. But still, right, there should be some brilliant people that we could direct. Yes. And 80% of what we're thinking about at 50 years is how do we help the entrepreneurs, right? And in particular, I think the type of entrepreneur that we're most excited to help that we're best at helping is the great scientist or great engineer that's trying to become a great entrepreneur.

And it's a very hard transition because the things that you learn that make you a great researcher, that make you a star in academia, make you a terrible founder. You know, literally in academia, for instance, you are taught to communicate with data, data, data, data, data, and then to immediately list. the five ways that your data might be wrong. Right. And if you communicate that way in any other setting, you know, people's eyes glaze over and you've lost them. And so there's this process of almost unlearning a lot of the habits of academia, a lot of the muscle memory first and then learning the habits of entrepreneurship.

And so one of the things we like to say is like helping great scientists become great entrepreneurs. Like, that's our jam. And so we do that one-on-one, obviously, with our own founders that we support. We actually have some programs that are meant to help PhDs that are in academia and thinking about how might I spin this out, spin this out someday, like, figure out how to do that. And so, yeah, so that is incredibly important. I think it's also an area of phenomenal leverage.

And like you said, part of it involves cultural change. To date, if you are a star in academia and you went into industry and starting a startup is going into industry, it was considered kind of dirty. It was considered a failure, right? Like, you know, if you're a PI, one of these labs, primary investigator, person who runs a lab, success for you is if your star PhDs and postdocs also become PI's. And anything else is a failure. And that's unfortunately largely still the case. There are a few labs like the George Church Lab at Harvard,

Francis Arnold's lab at Caltech that are starting to shift the way they think about it, where they say, actually, if one of our star PhDs and postdocs takes the technology they developed and brings it out into the world in a startup, that success too. But there's probably literally six or seven labs like that in that way. And so I think we need a lot of sort of culture change in academia to enable more PHS and postdocs to have an easy off ramp into the world of entrepreneurship. Yep. How are you thinking about metrics? Like as you measure clearly your IR, are you also measuring, I don't know, your gigatons?

Like how are you thinking about impact in the world as you make these investments? Yeah. So we spent a lot of time when we started 50 years to try and figure out a super robust impact measurement. framework. And we looked at all the ones that are out there. We were not super happy with any of them. For us, it's a little bit harder because though, you know, climate is a plurality of what we do. You know, we also back companies addressing health or inequality or connectivity. None of the frameworks were very good. And so then we said, okay, great, we should just build our own. And then we realize that, like, there's a reason none of the frameworks are good. This is a really

hard problem. And then on top of that, because we're backing teams at the precede and seed stage, we always want to be taking things off of our founder's plates, right? Like, nature of being a founder is that every week you have 10 things that have to get done that week and you have enough time to do five of them. You're always behind. You're always underwater. And so as a partner, right, we always want to be making things easier and not adding more things to our founders' plates. And any measurement framework that we could imagine would require input from the company. And so basically what we said is we're going to wait until we get to the stage or some of our companies have VP of operations and those VP of operations have a few direct reports. And then we're

going to work with them to figure out how we can measure what they're doing, both to make sure that they are having the impact that they want because all of our founders really care about that and to make sure that we are able to sort of gut check our thesis of the impact that we're having. The climate companies are just the easiest because you can literally just look at like what are they displacing, you know, if they're sequestering, what are they sequestering? And so, yeah, we're now at the stage where we have a few startups that have sort of grown up to where they have the VPVOPs and the VPVos has a few direct reports. And so now that's a conversation we're starting to have with our more mature companies.

but we're only ever going to do it for companies that have the capabilities to think about those things without it being an existential threat to the founder's time. Yep. I like to refer to time as unobtainium, the most valuable substance in the universe that cannot be created. You can't make more of it. Yeah, it's not renewable. Yeah. Energy is. Personal energy, yes.

Time. No. Yeah, exactly. That's true. Are you in any life extension companies? Because that weirdly seems to be the memetic move of the. Yeah, we are. I mean, we have a couple of companies that are working on ways of extending health span.

So for sure. Yeah. Isn't that potentially also awful for climate? So, I mean, if all that happens, if everything else stays equal and people start living longer, yes. But I think there's an interesting philosophical question here, which is like, why do the people in power not care so much about the impending climate crisis? Right. Like, we have a ton of people in Congress because it's someone else's problem. And I hate to say it, they kind of know that.

Why do the young care a lot, even though the young don't normally care about these things? Because they're like, we're going to face this. This is our problem. Oh, my God. Like, what's the world going to be like in 50 years when we grew up? It might be a disaster. And so I do think that there is something to the argument where if you can go to someone who's in their 60s in the halls of Congress and say, hey, guess what?

Like, you might have another 100 years in front of you. I bet they might start caring. about some of the problems that they don't seem to care that much about right now. All right. It's like a little bit of gymnastics, but I'm going to give it to you. I'm going to give it to you. Because it's true. I mean, nothing else has worked in terms of getting them to care.

But that does raise a question that someone actually asked me when I said I was coming to do this job, which is like, we have seen unintended consequences galore in the tech industry. Now we are going to see money go into synthetic biology and like big bets. and, you know, geoengineering, right, or carbon capture and sequestration, and we don't necessarily know the long-term impacts of sequestration. Like, do you, are you ever kept up at night thinking about creating more problems than you solve? I wouldn't say kept up at night, but yes, it's something we think a lot about.

Literally, and that we have had some teams that we've loved, and we did not partner with them because there were some secondary or potentially even tertiary issues that we either felt very concerned about or didn't have enough clarity on. It's always a concern. I think it's a little bit assuaged when you're working on things that are solving such a massive immediate problem

that you're almost like, wow, the secondary, tritiary impacts would have to be wildly bad and, like, I can hardly even imagine what they could be to make this not worthwhile. You know, if you're developing a social media, whatever, or an NFT, whatever,

it's like, the secondary impact doesn't have to be that bad, to make this thing like a net negative because like the net good is not, you know, it's like maybe you're amusing people a little bit, right? When you're talking about, you know, decarbonizing industry, when you're talking about early detection of cancer, when you're talking about radically driving down the cost of food for people who are malnourished, and you're talking about connecting people don't have access to the internet, like, are there some secondary third?

Like, yes, but like the problem that you're solving is so massive that you don't have to worry that much about those things. So we do think about them. But I think if you back teams that are solving important enough problems, it doesn't play into the calculus as much as it otherwise might. Like, we should be so lucky that we run out of the algae cells that you need to create the, you know, yeah. There's a category of problems.

We talk to our founders about them all the time, the great problems to have, right? It's like, oh, man, wow, it would be such an amazing world if we had that problem. And so like, let's not worry about that too much. Yep, totally. All right. In our remaining time, can we geek out briefly about synthetic biology? because I do think this is like just been bubbling up in the past couple years. There are plenty of people who are not familiar with this field.

Like, what are you seeing and what is the promise? What is the biggest promise that you're seeing? So first, maybe we should say, what is synthetic biology? We definitely should. I think we have a definition that we really like, which is generally synthetic biology is about taking the design, build, test, and then iterate cycle of the design of biological systems and speeding that up, speeding that cycle up using engineering best practices. So it's that simple, right? So making engineering biology faster using engineering

principles. And why is it very exciting? It's very exciting because it feels a lot like the internet in the mid-90s. So why do we see this explosion in internet innovation in the mid-90s? Well, it was because we had, you know, TCPIP, FTP, we had the browser, we had a lot of fibers that were laid. And so these core infrastructural things getting put in place made it radically easier to launch and deploy cool things on the internet. And so we just saw this explosion of innovation. A similar thing is happening right now in synthetic biology. So the core sort of components of synthetic biology are read, write, edit, and design.

Read typically means the genome, but it can mean other things like the proteome or the transcriptome or a bunch of cool different stuff. But if you look at the genome, which is the most important, you know, the first human genome that was sequenced cost $3 billion to do. Research scientists from 22 universities, you can now sequence full human genome for about 500 bucks. You don't need any scientists. That's pretty cool.

So that's on the read side. The right side, right means, you know, typically you're writing DNA. You used to need a team of scientists that are like stitched together, oligo by oligo, your DNA, like literally by hand. Now you can write your DNA in code, click order, and a company like Twist will literally just deliver it to your door. Right. So that's been abstracted away.

Edit. You used to need to, again, get a team of scientists in your own wet lab to carefully try and make a genetic edit. And you wouldn't even be sure that you made the edit that you wanted to make. You'd be kind of a black box. Like, I think, I hope we made it. Now, thanks to CRISPR cast systems for which Jennifer Dunnett won the Nobel Prize, you

can very quickly and easily and accurately make edits to genomes. It's actually so easy that high school students are learning to edit yeast genomes with CRISPR kits that their teachers bought online. Wow. That's pretty cool. Wow. And now on the design side, a lot of what used to be in a medicinal chemist brain or a biologist brain can now be done in silco, can not be done with computers.

We can now take massive amounts of high quality biological data, feed it into these ML algorithms, and derive insight that would take a human hundreds of years to derive. Which is all to say, in the last 10 years, there have been huge advancements that have reduced the cost and complexity of launching synthetic biology products and building synthetic biology tools and products by an order of magnitude or more. And typically in any space, when you reduce the cost by an order of magnitude and the time and the complexity by an order of magnitude, you've seen an explosion. innovation. And that's exactly what we're seeing. And I do mean that, by the way, like, you can, for what it used to take $20 million, a $20 million raise to do, you can now do in a $1 million pre-seed round. They can get to the exact same result. 10 years ago, $20 million, that $1 million, you can get the exact same result. And so we see this as having an impact across, just across every basically industry that you can imagine from food to constructions, to chemicals, obviously,

to health. And so we have companies in our portfolio that are making carbon negative chemicals. We have companies that are that are literally developing mRNA vaccines to prevent cows from emitting methane. Like, there's so many exciting things that synthetic biology can contribute, not only to health where it's sort of, I think, had its heyday so far, but in terms of decarbonizing industry. So yeah, I would say we're super, super excited about synthetic biology. I mean, if I could take away anything, if I could just,

still this entire interview down to one thing. It would just be like, be bold. Be bold. It's not that hard. You can learn it or you, there's somebody out there who can learn it for you. Like, my reporter brain is like, come on. Do better. Yes.

No one ever felt really bad being bold. You know, it's like at the very worst, you have a really great story. So I have a pitch. I'm going to send you because I've been asking this exact question of like, how do I even find out if this is real? The technology. Yeah. The technology.

Yep. Yeah. I think I told you, we're always happy to be the outsourced sort of technical, you know, brain. Well, I love the 15% metric, too. Like, that's so great. It's like, look, it might not work. But if it does, it changes everything.

So what is the baseline for whether it's going to work? Exactly. And every, I think it's important for like you to really, like, define what level of technical risk you're comfortable with, right? Because like for different VCs, it's different. Some say like, you know, some literally have like, oh, they're like, I don't want to take any technical risk. I'm only interested in business model risk, right?

Others say, actually, we don't like business model. risk, but we're very comfortable with technical risk. And so it's important to get a sense of like, what level are you comfortable with? And then you just need to make sure that there are enough known unknowns that you can quantify that. Because the scary thing is when something's a science experiment and not an engineering problem, right? Science experiment, it's like there's so many unknown unknowns that it's impossible to tell the

difference between a five-month, $500,000 problem and a five-year, $50 million problem. Right. Seth Bannon, founding partner at 50 years, an early stage VC firm based in San Francisco, which I'm sure all our listeners already know about. Seth, thank you so much for the time. Thanks, Molly. Hey, everyone. Producer Nick here. I want to tell you about the SaaS Syndicate.

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