The Complected Bird

I saw Bill Janeway speak at Columbia the other night. One of the things he said was “pessimists don’t make good VCs.” A truism.

This Summer, talking to a younger colleague about the pace and direction of technological innovation I said there was less potentially society-changing technology today than at any other point in the last fifty years. And that this drought was likely to last a while. That we are stuck in an era of small changes, of gradual improvement, of fine-tuning processes, of reacting to change, of head-to-head competition. He replied, tartly, “maybe you’re in the wrong business.”

This week, I was having coffee with a European investor I see once a year or so. He asked what I was looking for. I don’t know, I replied. “Haven’t you been investing?” he asked.

I’ve made five new investments in the last twelve months. I am more excited by these companies than by almost any other company in my career. They have the potential to radically change their industries. NeMedIO could dramatically reduce the upfront cost of developing new medical robots and devices, causing a proliferation of high-quality new tools for doctors. Sila could provide the underlying infrastructure that unbundles the banking industry. Edmit‘s higher-ed pricing transparency could cause the industry and its customers to refocus on education.

And these companies are using new technologies. Sila is using the blockchain. Unsupervised is using topological data analysis, a new form of unsupervised machine learning, Lately is using AI. These are valuable and groundbreaking innovations.

But they are not the same as the new technologies of twenty years ago or thirty years ago or forty years ago. In the tree of information and communications technology where semiconductor logic and TCP/IP are near the root, these technologies are closer to the leaf. They are not less technically valuable, but their value lies in their application itself, not in their ability to enable further technologies. The market application is to the end-user, the person solving existing business problems; not as components of further technologies. This means that the commercialization focus has to move from the technology itself to the user-problem the technology solves. The market for each company is thus relatively smaller and not subject to the same kind of decade or longer evolution that provides the runway for scores of startups.

Blockchain, for instance, is a sweet technology. As an engineer I consider it beautiful. But in Sila I didn’t invest in a blockchain company, I invested in a company using the blockchain as a chisel to cut the current banking oligopoly into hundreds of innovative companies.

This may seem like semantics, but it’s not. I no longer believe in investing in technologies. I don’t think it’s any longer sustainable to be a blockchain investor, or an AI investor, or a ____ investor. If you ask me about exciting new technology trends I will sound like a pessimist. But I am optimistic about companies. Even while saying there is nothing interesting I run across insanely interesting companies every month.

This makes it hard to do my job. It would be easier to say I invest in autonomous drones in the home automation space. You would then know exactly which companies I would be interested in seeing. I would also see all the companies competing in that space, so I would be better at picking. This is why VCs choose specific theses. If I had a thesis I regarded as a viable strategy, I would be happy. Instead I have arrived, finally, where Michael Moritz did long ago: “The business is like bird spotting. I don’t try to pick out the flock. Each one is different and I try to find an interestingly complected bird…”1

The project now is to operationalize this as a strategy. How do you pick companies that fit no previous pattern?

  1. https://web.archive.org/web/20070715123315/http://vcratings.thedealblogs.com:80/2007/07/mike_moritz_of_sequoia_capital.php