Speaker Q&A: Building Companies with Longer Time Horizons

May I have your attention please welcome TechCrunch senior writer Roman delay Jean berticeky co-founder and CEO of Sila and Aaron Price Right partner index Ventures Alright thank you all of you for coming If you want to move to the front row you Can move there's not another a few here So don't be shy you can you can move to The front row and if you have questions For Aaron and Gene these QR codes That you can probably See on the screen right here scan this With your phone and then you can ask Your own questions I have a phone here So I can see your questions and ask them To Erin and and Jean maybe some of you Were upstairs at the TechCrunch press Stage at your session that you were just Finishing maybe 10 minutes ago or Something like that and we've got a few Questions from there like so you can ask Questions questions right now but I'm Going to start with some questions that We got earlier Um So there's one question for Gene for Instance how do you know it's the right Time to raise from corporate investors Like Daimler do you lose some autonomy By taking on strategic Investments yeah That's a that's a very Um Important question to ask as a Founder

Um in general it's never the right time To raise from a strategic investor Because in general you always lose some Amount of autonomy and I think it's Really easy to underestimate the option Value of being able to do whatever you Want in the future especially when You're small and you're hoping to get Big you underestimate how important it Is when you're bigger to to have the Freedom to tack left or right the other Thing I think you usually underestimate Is how much big corporate strategies Change and so whoever's making that Investment at the time you know is is Likely gone by the time you're having to Pivot so in general I advise people Against it unless the Strategic is going To let you have the autonomy you need And that depends on the deal and they Better write a very very big check and In the case of Mercedes they you know They they LED our 200 million dollar Financing and 20 that we close was in Early 2019 but it also in 2018 when Frankly nobody else cared And you know the structure of it allows Them to be first to mark your other Technology and they will be but it Doesn't prevent us from working with Anyone else and Um and uh you know we we will have other Customers and have you seen any change Uh since that taking that so we were

Incredibly fortunate Um I I handed the term sheet to the head Of development for all cars uh at Mercedes we signed that term sheet 20 Days later and in that span the CEO of Mercedes stepped down and our sponsor Became the CEO and so I have not seen Any strategic change but in part because We you know we got to a very fortunate Position where basically we were the CEOs first investment yeah maybe I Should have started with a short Introduction with the two of you what You do maybe you can talk about sea Level sure yeah so we're a battery Technology company we make uh kind of The Next Generation chemistry that will Go into Lithium-ion batteries that power Everything from consumer devices to cars Our technology makes the batteries Allows the battery to store a lot more Energy in a smaller volume and that's Critical for small devices you can Imagine it's also very valuable for cars Because you can reduce the physical size Of your battery pack increase the Performance of the vehicle and by using Fewer cells to achieve the same range The battery pack gets cheaper and airing And index Ventures for the YouTube yes I'm a partner at index Ventures focusing Mostly on AI infra and harder Tech index Ventures Is a global multi-stage Venture Capital

Fund so we invest in Founders all the Way from series seed very early stage You know a couple people in their garage Three to kind of larger pre-ipo growth Companies so you know one one to 100 Million dollars and can you mention some Of your Investments yes absolutely so so One of the ones we're very excited about Right now is uh figma we LED their their Seed rounded and did it every single Round since participated um so that's a Big moment for us also investors more in Relevant in this category uh to Aurora Self-driving cars covariant AI empowered Robotics for supply chain manufacturing Cohere large language models among Others Um I had a question for you Erin um So I can't find oh maybe I'll make one Additional point on the Strategic Question I think um one thing to really Keep in mind is you know to be really to Be really careful about the terms you Take in terms of things like information Rights and sharing and are they on your Board and how does that how will that Affect your relationship with other Customers before you necessarily take a Strategic Angel check so it's not Usually just cash what are the other Strings attached that they want and be Really thoughtful about those yeah so I Found the question again uh Erin how do You make sure long-term investments will

Be well funded to ship something do you Have to invest in multiple rounds over Multiple years just like in figma I Guess yes sure so it's generally index's Philosophy that we you know we try to Invest that's why we have multiple funds For multiple stages when I look at our Growth fund for example which is kind of Series B uh to pre-ipo more more than Half of our investments out of our Growth fund our follow-ons from early Stage so we go in with the intention of Doubling down on our winners and have Deep Pockets to be able to do that and It's for for deeper Tech or harder tech Companies I think that that could be a Really valuable asset to make sure that You have an investor that can follow on And participate in later rounds Potentially if you need it and Um Yeah so I think that's that that's a big Consideration and I'd say like having a Big checkbook finding investors with Really big checkbooks is a top two Consideration from the founder Perspective doing hard tech things for a Decade you know there's going to be Moments where some financing doesn't Come together at the 11th hour we we've Had those moments um and we were just so Fortunate to have the investors we've Had and you know in in retrospect they Gotta they got a great benefit out of it

Uh out of those moments were you looking At the size of the films before Accepting Um you know Beggars can't be choosers I'd say in the first like seven years Um we we weren't necessarily so judgy uh We just were very fortunate to end up With those kind of funds that could sort Of back up the truck when needed yeah And I would definitely you know as You're diligencing your investors try to Understand like look at look at the Composition of their growth fund and uh Because there are a lot of investors That also have a growth fund but they're Operated independently so they very Rarely double down and follow on for big Grounds so there's a lot of intricacies Around how Venture Capital funds are Structured that I think a lot of Founders especially first-time Founders Don't don't realize so it's it's Important to to do your homework Have a two-part question which is pretty Good there's one part for for each of You Um how did how did you get an investor To write the first check And what convinces you to write Someone's first check So yeah so so perspective I mean you Know I I I got I was very fortunate I I Met Um our lead investor

Um when I was at Tesla got he got to Know me I got to know him I became an Entrepreneur in Residence at Sutter Hill Ventures Um which certainly isn't a promise to Invest but it's it's a good indication That they're interested and then I spent A year looking for a company that I was Very excited about building uh or Technology I was excited about building A company around and using that firm as Feedback of whether this was a good idea Or not and they have a 50-year track Record of some of the highest returns in All of Silicon Valley so their feedback Was very useful to to pinpointing a Problem and an approach that would be Highly investable Um so I basically you could say I spent A year uh figuring that problem out And this is good timing because I I Can't I won't share who but I just wrote The first check into a company this week So Um uh what what was on my mind when I Did that there are two you know Extremely talented researchers Um with a long track record of building Kind of things that went from sort of Research Inception to production they've The two Founders have known each other For a long time and have a deep working Relationship Um so they were you know this wasn't a

Speed dating situation Um they despite their depth of technical Expertise they have really strong kind Of product and customer empathy so even Though this is going to take a pretty Long time to build they're thinking About the right Primitives Um you know they're not they're not Trying to move too fast like for example With figma this is one thing that really Stood out with Dylan early on you know He took like more than four years to Commercialize the product for a software Company that's you know that's a that's A really long time and so but he had This like long-term Vision strong Product principles and real technical Depth so that's the type of thing I tend To look for and then coupled with a real Change in the world like what are what Are they capitalizing on a rising tide a Big movement like a large change in our Society a large change in the way Technology or software happens and they Just happen to have that perfect Venn Diagram of those three skills so I wrote Their first check nice that's nice Another question how should Hearts take Founders be thinking about raising Dilutive funding in the very early Stages of the journey during the tech Validation phase So I guess how do you make sure you Don't why don't you share too dilated I

Think there's two things I mean it Depends on who you're raising the money From Um you know obviously if you sort of Give away 80 of your company before you Ever got started like it makes it hard For the next investor to invest Um but I you know certainly as you're Building a long time Horizon company you Know one thing to remember is no Companies ever died from dilution Um companies die from running out of Cash and so I think you just have to Figure out what's your position right What's your what's your how you know What what are your Alternatives I think If there's no Alternatives like great Like raise the dilute around and keep Going because you know you can true Things up in the future you can make Sure the founders are taken care of Especially if you're raising from from Good people and then the founders make Sure the employees are taken care of you Know it chews up over time at some in Some respects Um but can you stay motivated if you Know there's been so many Realms that I Think if you're doing you know I mean I Think about it as I'd rather have a Small piece of something insanely large And actually make an impact on the world And I think that's what the motivation Doesn't come from the financial return

You know if I'm having to build some you Know forgive me middleware like SAS Company that nobody but a few people you Know it managers kind of care about like You're gonna have to motivate me with a Lot of money if I have an opportunity to To completely transform the world Doesn't matter if I end up with you know Three percent or thirty percent of the Company it it honestly doesn't at the End of the day now you know I care a lot More that my employees are taken care of I care a lot more that my code you know I care about the people in the company And so I'm going to push for not getting A loot of financing because of the the Team and certainly you know I I I'll I Benefit from that as well but I think if You're truly motivated by making an Impact like that's that's not the thing That should if you're thinking about That you're in the wrong you know hard Text not for you I don't know though Just to play devil's advocate for a Little for a second I do think that you Have to be careful about understanding What options you could be closing off Later you know if you're pre-series a And you're already massively diluted it Definitely limits your options for Investors later on because it's Something that we certainly look at is It it's not like the be all end-all Decision

Um you don't want to have to make the Next investor fix the a problem right Like if you're so I think I think you Know there are Market rates and I think If you're getting started like I said Giving away 80 your company's a really Bad idea because you're not going to get Aaron to write the next check right like I don't know your your series a so what Do you look for like if investors have Over there's no hard and fast rule I'd Say Yeah yeah we pick a number yeah Um but I think that that being really If you do have to take a dilutive early Round early stage first of all there's For especially for harder Tech or deep Deeper tech companies there are a lot of Alternative sources of capital to help Bridge gaps here and there their you Know grants University funding Government things there's a lot of Programs that I think Founders should be Taking advantage of tax incentives the The other thing is if you are going to Take a dilutive round be really careful What the terms of the round are and make Sure that you're protected for future Rounds so sometimes especially across Europe for University spin outs for Example there can be really really Punitive terms from Raising capital from Certain types of venture funds and that Makes it very hard for investors to come

In later on so I would have you know There are founders that I know that I Would have told them earlier stage to Take a more dilutive round from a higher Quality investor that wasn't going to Screw them later with the you know the Terms in the in the term sheet then what Might have looked like a friendlier Around early on that had a lot of Strings attached and I think partly Because great investors right they have Choice and where they put their money And so like while they want to make an Impact the last thing they want is to Have you know To have brain damage from dealing with Some prior investor that's already Turned the cap table upside down so I Think quality over over if you're going To take a dilutive round Uh take to take it from a good investor And that others will follow because that Like they can help like that that's That's much more important Erin a question for you what is your Strategy to identify white spaces and And source such cool deals in general Um really good question so So I don't know if I have one particular Strategy or we certainly don't have one Strategy as a fund Um I would say uh like two things that We do a lot especially in the kind of Deeper Tech space I read a lot like I

Spend you know hours a week reading and Just trying to keep up with the areas That I'm interested in what is the Latest research who's doing that Research what are the conferences are Happening that in the space like what's Coming out and and you know people are Pretty receptive to cold outbound if You're not trying to talk about funding But you actually want to talk about what They're working on to just understand What's going on and that means that when You see a company in this area you're Informed you know you have a clear Thesis you've thought about it you're Not coming up from nothing and it helps Build a relationship with the founder a Lot more quickly that's one thing and Then the second thing is you know a lot Of our investments in this space do come From introductions from other people so You know the the CEO of Aurora Introduces introduces us to someone he Knows that he thinks is really smart and Uh so so using that our founder Network And our operator Network actually really Helps us find things uh before they're Really even things Um so yeah those will be my two Christian fajin how did you go about That year of finding the tech around What which you wanted to build the Company what gave you the conviction how Did I find the technology

Um I mean like I said I spent a year Doing it I probably looked at 50 Different ideas I'd say a dozen I dug in Deeply Um two that I almost started one I Actually committed to start and backed Out of doing the next day because it was You know their own the wrong thing Um you know always sleep on it yeah After I exactly exactly Um and um you know I the what what for Me being very technical it was not hard To sort of wrap my head around like why Technically something might work or not Work or what I could solve but you know Not having that sort of business lens You know I basically spent that year Coming into The partner's offices at Sutter Hill and Saying look I got these ideas and They're great because of this and they Said that one sucks that one sucks that One's mediocre that one sucks that one's Okay it's like okay why right and we Would unpack each one and I'd be like You're wrong about this one and I go Back and get more data Etc and so what Ultimately I've I learned is that the Lens that you look at you know from The Venture side of why something is or Isn't a good investment in particular You never even Venture investors lens is Different but what I looked for is an Idea that was

Technically so insanely hard that very Few people in the world would solve it But from a business go to market Standpoint if you solve it it would be Easy to adopt and easy to deploy and so That's the type of problem that I'm best Suited to solve because I can rally an Insanely great technical team you know And I'm still learning a lot about go to Market and getting that right but turns Out like if you ask people do you want a Better battery in your car they go yeah Yeah I do so Um I think the business lens was Actually the more important part for for Me and I think for a lot of technical Co-founders it should be so every Methodical approach you think your Founders or wannabe Founders they should Evaluate like a dozen ideas before Committing to one yeah I think you know The other thing I did just to kind of Back up even before you know I was very Lucky to be an eir but I actually spent Saved all my money for the first sort of Four years of working to where I like I Could live for a year without working You know ramen noodles and whatnot but I Kind of had this notion in my head that A lot of people try to start a company On their nights and weekends and like Maybe that's a good idea sometimes you Get lucky but the reality is you know I'm committing 10 plus years of my life

Hopefully 20 30 years to an idea like You think about it that way it's kind of Insane not to spend a year figuring out What you're going to do and so you know I basically had a piggy bank that I Broke open and said I'm gonna Use every penny to to you know to find An idea for a year and then you know Luckily I actually you know got a spot And got a got a salary and didn't have To just eat ramen noodles yeah that's That's smart all right we have time for One more question for you Aaron do Venture funds give grants uh with Relaxed term sheets for promising Projects that may take a while to Commercial race Can grants me an option so how do you Venture funds I don't know any Venture funds that give Away grants maybe maybe some do it's Always capital for Equity right yeah Usually it's capital for Equity some Funds will do like what Gene did and do An entrepreneur in Residence so if There's someone really talented maybe They'll Um you know be able to spend some time Thinking about and ideating on something Before that there's a company to invest In Governments give grants and there's also Often you know there sometimes Accelerators give grants amazing

Accelerators right yeah activate which Used to be called cyclotron Road for Hard tech Founders I mean you get a half A million dollars two years in access to All the facilities in like Berkeley National Labs to do science plus a bunch Of mentorship right so they're they're Programs like that if if uh if you're Looking for I would I would consider Non-traditional Venture Um as the best bet for Grants yeah so There you go well thank you for coming Here asking nice questions and we'll see You around under districts thank you


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