Transcribed by https://otter.ai
Zack Bogue
It was supposed to be a half hour Get to know your coffee. I thought there’s no way I would, you know, invest in in three hours later, I stumbled out of there. So office space, you know, and I saw that that was was the future became tremendously excited about it. And that’s when we first invested.
Scott McGrew
I’m Scott McGrew. Welcome to Sand Hill Road. Sometimes we when I’m traveling, I’ll tell somebody, I’m from Silicon Valley. And they’ll ask me what’s cool? What’s the next big thing? Well, every time I use Planet Labs as the example, that company is so cool, they can measure how much oil is in an oil tank from space. Is that the next biggest most important company in Silicon Valley? Absolutely. That’s Zach. Bogue venture capitalists who invested in Planet Labs.
Zack Bogue
So Planet Labs, these guys invented the field of nano satellites. And they’ve launched over 200 of them into orbit. And they now have the capability of taking a snapshot of every square inch of the landmass of the planet every day at 10am. And this is a truly novel data set. And what I think is super cool about it is that you know, there’s obviously for a long time there’s been Earth observation satellites. And those satellites, you can point them, you know, somewhere on the planet to see what’s going to happen tomorrow. You sort of send the command up, and then it will point, take a picture. Whereas with Planet Labs, you can roll the tape back and see what happened anywhere on the planet yesterday,
Scott McGrew
bogus managing partner at data collective, abbreviated dcvc. And he’s invested in all kinds of interesting things, many involving the earth, looking at it, growing things from it, saving it. The goal of
Zack Bogue
Planet Labs is to make the world transparent. So basically produce this novel data set and then just give it give access to everyone.
Scott McGrew
I think one of the coolest things about it is even Planet Labs doesn’t necessarily know what it is they’re going to revolutionize and I’ll give you an example of that. And, gosh, it’s got to be 1520 years ago, I was talking with some of the engineers at Garmin, and they had just come out with the handheld GPS receiver, you know, wasn’t in a car it ran on batteries, you could put it on your belt, and they never saw the sport of geocaching coming. It blew them away. They were thrilled. But they couldn’t possibly have known somebody would create something out of, you know, a GPS receiver. And I think Planet Labs is the same way. There will be things, sciences, skill sets that are going to be created, if we can look at everything on the planet, you know, once a day that we don’t even know exist.
Zack Bogue
Absolutely. As this broad coverage and a cool use case of that that you I hadn’t thought of was a few years ago, there was obviously the devastating earthquake in Nepal. And a lot of the aid relief folks called up planet and use their imagery to find off grid villages that no one really the one on the map, but basically that needed aid and recovery. So that is a phenomenal use case that is one of these ones where you just would not envision it before you create the data set.
Scott McGrew
What made you invest? Did you immediately understand how important they’d be?
Zack Bogue
Of course, every VC would say that yes, I was immediately clear to me, but yeah, we we are toured their facility. This was before they had launched any satellites into orbit. It was supposed to be a half hour, get to know your coffee, I thought there’s no way I would, you know, invest in a satellite company. And then three hours later, I stumbled out of their Soma office space, you know, and I saw that that was was the future became tremendously excited about it. And that’s when we data collected first invested.
Scott McGrew
I think there is a skill in venture capital in which you realize this is not a lunatics plan. There are some the if somebody came to me with Uber and said, Hey, here’s an idea. You know, how everybody’s got an iPhone and they walked me through it. I say, Okay, yeah, that’s a good investment. And you were an early angel investor in Uber, I get that. But if somebody said, I am going to launch 200 satellites into space, I would say, you’re a lunatic. It can’t be done. But you have to be able to believe that’s possible.
Zack Bogue
And it’s a really fine line right between being overly ambitious and aggressive and, and being less so. And, you know, this kind of goes to the heart of our deep tech investment thesis where we like to see entrepreneurs solving hard, real world problems computationally. And then you can use these, you know, these technologies to address some thorny, thorny problems faced in the global economy. So yeah, over the past 20 years, the way to look at it is that venture capital has supported the development of this massive compute infrastructure and this is, you know, largely been changed in the IT and internet worlds. Now we feel that that those technologies that they’re mature these foundational technologies, we can apply those to begin taking runs at some of these, these enormous industries that have largely been innovation proof. Give
Scott McGrew
me an example of that. What’s an industry that we wouldn’t have thought Oh, that would really benefit from a lot of computing
Zack Bogue
power. How about pivot bio, which is disrupting the $200 billion synthetic fertilizer? Industry pivot bio is in the agriculture space, obviously. And pivot bio uses microbes to let row crops like corn and wheat fix their own nitrogen. This, this process is more cost effective than putting synthetic fertilizer on and actually boosts yield. So it’s a huge win from the economic standpoint, if you can commercialize this at scale, and they’re, they’re sort of well on their way to doing that. But also, if you think about the synthetic fertilizer industry, you know, soup to nuts that produces about 10% of global greenhouse gas emissions. So it’s also a great, great win for the planet, you know, bringing this type of innovation to agriculture. Think about the just the complexity of the agricultural system. Every day, every every one of the almost 8 billion people on the planet receives food that was grown or produced in agriculture. So there’s this distributed, production is produced sort of around the world. And then also, as distributed consumption. So the way I think about it is, on rough terms. The ag industry is about 10 times larger and 10 times more complex than the financial industry.
Scott McGrew
You just raised a new fund, how much was it?
Zack Bogue
We just raised $725 million for date dcvc. Five, which is our fifth fund in our flagship series, and is our eighth fund overall. What should I read from that? I mean, that’s a tremendous amount of money. Is there something that I can conclude beyond Of course, dcvc is well trusted by the people that given money but that the economy ahead is is solid that venture capital investment is solid? What do I read in that the initial level this is our LPs who are almost entirely institutional at this point, agreeing with us that we feel the biggest opportunity facing us is these is the pursuing this deep tech investment thesis is using novel computational approaches to solve Some of the world’s hardest problems are beginning to tackle some of the world’s hardest problems.
Scott McGrew
Nobody knows what’s ahead in the economy. But what happens to venture capital funding? If the economy falters? Does it? Does more money go into venture capital in the sense that Well, clearly, I’m not going to get the return I wanted on the stock market. I’m going to think ahead and after all, some really big important Silicon Valley companies were created in down times. Have you done this long enough that you understand what the cycle is and what will happen to your invite? You know, your funds six?
Zack Bogue
I feel like historically, yes, things when they call it when the broader economy and the stock market slow down, so does fewer venture dollars flowing around, but as you mentioned, yes, some some phenomenal companies get get started during the downturn. It’s obviously tough to look into a crystal ball and say what the economic environment will be for fun six. But, you know, given that we currently have fun five raised it’s actually a venture capitalists make money in, in times when things are up into the right as well as in the downturn. So we’re very happy to have this pool of capital to go after our deep tech investment thesis. A lot of these thesis areas like agriculture are not as susceptible to recessions. And there are a little bit more recession proof. Nothing is entirely recession proof. But regardless of what’s going on in the broader economy, we’ll just have our heads down, funding our deep tech companies and helping them win.
Scott McGrew
as we explore venture capital on this podcast, we found out who the venture capitalists are, where the money comes from, what they do with the money once they’ve got it. But one listener asks a far more basic question. Where is the money? Like, literally, where is the 720 $5 million visa and Wells Fargo? I mean, is it in a bank account? I brought it with me right here. That’s my question is Where Where is that stack? of money.
Zack Bogue
So the way it works is that we will issue capital calls to our LPs and call small percentage of it at a time. And so the bulk of that capital at the beginning of the fund is with our, our limited partners. And then by the end of the fun, fun deployment, most of that capital is in companies that we’ve invested.
Scott McGrew
Of course, yes, it goes to the companies. But for now, if I’m one of your LPs, I still have the money. I’ve just made a commitment to the commitment. Absolutely. I’m gonna hand it over. Can I can I walk away from that commitment? No, it’s a contractual compel commitment. So even if I think what are you crazy, you’re investing in that I’ve committed to the money?
Zack Bogue
Absolutely. And there are you know, it’s a it’s a very involved legal agreement. 100 page document where there are, you know, means built into that document where they can stop funding if bad things happen. Sure.
Scott McGrew
Yeah. What’s the advantage to me holding on to the money as opposed to it being in an account owned by dcvc at Wells Fargo?
Zack Bogue
Why Why don’t you take money if I promised it to you. So there are two great reasons for this one, just security, I would much rather have our professional LPs manage their own dry powder. But then the more important one is that these guys, you know, as I mentioned, we’re almost entirely institutional investors. And the institutional investors have sound manage cash management practices, they actually will have that money invested in short term securities or wherever, and be driving a return on it. And also, it’s good from IRR perspective. So obviously, our internal rate of return is calculated from the time we call the capital, rather than from the time they make the commitment.
Scott McGrew
You your firm has investments in drugs and nuclear power and agriculture and robots and satellites. that’s a that’s a wide range of things. What’s the common theme there
Zack Bogue
at the beginning, a lot of these companies because, you know, we like to back entrepreneurs who are solving hard, real world problems using novel competence. approaches and these computational approaches have sort of self accreting advantage. So, as you build these companies, you start developing, and you probably already have a proprietary data set. And then we also like to see that coupled with cutting edge machine learning algorithms, and the way to think about it is the self accreting advantage comes about where your data set feeds into the algorithms strengthening them, which then in turn, enriches and makes the data set even more proprietary, and you achieve this virtuous cycle. And I would say that, at the beginning, you know, we’re very early stage investors receiving series A. So at the beginning, a lot of these companies sometimes look more similar than you would expect, because they are sort of iterating on these these novel computational approaches. Then they go off and apply them to this broad spectrum of industries that you just you just listed, and then they start to sort of area gate and look more, more diverse.
Woman’s voice
I can say that we’re very happy with how Android has worked. One of the big staples on the Android ecosystem is openness. And we think that’s one of the things that’s really helped us build an ecosystem that we’re very, very proud of. So we’re excited overall, but we’re androids going but I can’t come enough for to open the share policy issue.
Scott McGrew
That’s Marissa Meyer, the former CEO of Yahoo, one of the earliest engineers at Google on our TV show press here. She’s Bogues decidedly better half
Zack Bogue
hundred meter. We were introduced by the younger sister of my college roommate, and who chose to it was it was pretty mutual, we hit it, head off, right off right off the bat.
Scott McGrew
And I’m going to ask you a couple more personal questions. You let me know if it’s getting too personal. It pissed me off when she went back to work after you’d had your first child. Uh huh. earlier than some people think she should have. We spend so much time saying that women ought to be able to choose what it is they want. Do with their careers, and their motherhood, etc. And then the minute she came back to early in some people’s view
Zack Bogue
I thought that was I thought that was outrageous. That was purely a Zack and Marissa decision. Absolutely. And, you know, ultimately it was it was very much a Marissa decision. And I think, you know, I think it was a it was the right one and, you know, I think there’s always going to be critics of whatever decision you make.
Unknown Speaker
Yahoo CEO Marissa Meyers announcement that she’s expecting twins is triggering both congratulations. She plans to take only a week or two off her critics say she’s making a
Woman’s voice
huge mistake. At this yoga class for pregnant women. The conversations turned from prenatal postnatal now that new Yahoo CEO Marissa Meyer says she’ll only take a few weeks maternity leave.
Scott McGrew
So you didn’t do you didn’t take it personally.
Zack Bogue
I did not take it personally not piss me off.
You know, there’s always going to be detractors. I there and you can’t, you can’t dwell too much on on those folks. And, you know, onward and upward. Fair enough.
Scott McGrew
What was your very first successful investment?
Zack Bogue
So I’ll answer that in two parts. So for dcvc, we actually just had a nice validation of one of our early, very early scale out compute open source search, investments. And this was elastic, which went public last fall, which, you know, sort of returned a nice multiple on the entire fund that it was in. And it was just sort of a great validation. And so the way to think about it is that 10 years ago, we we view that the, the hard deeptech problem of that time was was scale out compute.
Scott McGrew
Zack Bogue
A couple of my early earliest and angel investments were we I invested in the first round of square, which worked out nicely as well as my angel investment in Uber.
Scott McGrew
What did you see in those companies? What What made you with square and Uber, which you said, Oh, this makes sense
Zack Bogue
at that, I mean, those point is really well with square it really was the team because it was, it was very early and we were in a reception and a sort of, I think was a basement, basement reception area at a restaurant. And jack whipped out his phone with the little square thing plugged in. And he said, Give me your credit card, and he took a credit card swiped it and, you know, it worked and it was pretty, pretty, pretty magical. So that was when, you know, I knew I wanted to be in square. And then you know, Uber is is kind of a funny story and it shows you a little bit about my, you know, trying to be a little self deprecating a little bit of my investment document I for Uber I we had the opportunity to invest and I knew My exact thought process was the valuation is outrageous. I don’t know if that will ever be able to support that valuation. But as a company I know I want to be in for bragging rights valuation at the time this was the Series B. And I think it’s pretty pretty broadly publicized the Series B was at $300 million.
Unknown Speaker
At that time,
Zack Bogue
it was a good one. I think that’s also just kind of shows you that, you know, there’s a lot of instinct in investing. And when you sort of perceive excitement, both externally as well as inside yourself, that’s actually a pretty good, pretty good signal.
Scott McGrew
Is there something out there that if somebody walked into your office and said, you know, I’d like to do X, you’d say, Good, I was waiting for somebody.
Zack Bogue
I feel like there could be a lot more innovation in the nuclear energy space. We have one One phenomenal investment there, as well as an in seed investment in another company, neither of which are disclosed. So those are still stealth as far as our investments concerned, but yeah, I think that is that’s an area where we could have a massive amount of additional, additional innovation. And the way I think about it is, we are in a climate crisis as, as you guys are, are covering. And I feel like nuclear energy is a phenomenal source of zero carbon energy, and we need energy to run the run the economy, and we have really no other solution that can provide energy at the scale of nuclear.
Scott McGrew
That goes back to that question I had earlier about thinking really big. I mean, it’s one thing to say I’d like to start an Uber, it’s another Hey, Zach, I’d like you know, a couple hundred million dollars so I can build a nuclear reactor. Absolutely. And yet you said yeah, okay, here we go. Let’s do this.
Zack Bogue
Are we feel that applying these, you know, foundational technologies outside of incremental gains in it is the biggest opportunity out there. And obviously, the energy sector is a is a massive one. And if you get it right and you create sort of one of these multi generational durable juggernauts of a company, that’s where we feel that you can achieve the greatest venture scale returns.
Scott McGrew
Who do you rely on to tell you that your nuclear reactor investment is going? Well? I mean, not the people at the company because they may not tell you I’m sure they would tell you the truth, but they might not. But you are not a nuclear engineer. How are you learning enough to know that your investment is being
Zack Bogue
treated well, we have a variety of ways of evaluating our investments and evaluating prospective investments. We like to say that it dcvc we have more published scientists on our team than MBAs. And we, we also have a broader network of folks that we call Equity Partners. This is really a one of our innovations on the venture model. Our Equity Partners are over 60 deep tech experts in their relative fields that provide tremendous amount of insight for us as we do due diligence as well as providing assistance and insight into our existing companies. And in return, we actually give them a big chunk of the upside of of each fund. And it’s actually not deal by deal carry. So there’s a lot of models out there where you give deal by deal carry two people. For our Equity Partners, we actually like they we actually share they share in the broad upside of the fund. And then also we use outside experts as well.
Scott McGrew
You could not be theranos Exactly. I just made that a verb Zachary Bogue DC VC. For more interviews with Silicon Valley’s most influential entrepreneurs check me out on TV at press here. That’s Sunday mornings on NBC Bay Area and everywhere in the world on iTunes.
No Comments, Be The First!