Where is AI getting us and how deep-tech investing works? By Amit Garg

All right, and today's a guest speaker, we have a need Garg managing partner and Co, founder at towel Ventures.

And today we'll talk about deep tech investing and specifically what is going on in a field right now and what to expect from it in the near future.

And also, we'll talk about how founders in deep tech should test out their ideas really early on when they have little to no funding at all. So, I made a, let's kick it off by you giving us some background on yourself and on Tel Ventures.

Yeah, it's very much embedded into the company, so yeah, let me take a pause here and turn it back to you. Sounds good. Sounds good. So, 1st question actually can be about the robot that's making.

Smithers does just that just caught my attention and I would love to hear more about it. So, when this company came to you, they present you their idea. What were the major things that you looked at in that company before making the investment decision?

Well, I'm glad you asked because it was 1 of the finance diligence processes. I've ever done. 1st question. Can I try this movie?

That was the 1st question, which I did, and I said, well, I think I need to do more diligence going to have a little bit more smoothly, but I'm not so jokes aside.

This is a team that at the time we invested was about 15 people, and the 3 Co founders had been working together for a long time.

They were a very rare breed of entrepreneurs people who knew both software and hardware. Really? Well, and they had built a company that they sold into Barnes and Noble, that eventually became the NOC.

So, this is a, an experienced team and that's obviously a big factor into investing in the seat stage.

You want to see folks that bring something to the table either in terms of experience, in terms of vision in terms of just being very hard workers. Obviously not. Every team is going to have that.

We have taken multiple paths into 1st, time entrepreneurs but we want to see is that they have a deep passion and understanding of what they're doing. And this was plenty obvious to Vincent.

Jane, that's the name of the CIO and his team. The 2nd, part of it at the time of the investment was the actual product. So, this is a big robot.

That is meant not for a home, but for a commercial use so think about it in a university setting in a cafeteria, or in a corporate setting, and a cafeteria, maybe at airports, or any retail shop.

You have this robot that is making smoothies much more efficiently. Much more personalized.

When when you order through your phone, you may have an allergy to certain kinds of nuts, or you may want an extra bit of mangoes, or you may want to just exactly a smoothie. That's that's green.

And has these particular ingredients.

If you go today to any smoothie maker, you can't get that level of personalization not to mention that level of efficiency because a robot can program all those tasks and can get a lot more economies of efficiencies.

Right?

Like,
if they're making 40 smoothies,

they can make all 4 of them in the same batch and they can reuse the ingredients so that they reduce the amount of time that would take to pick up each ingredient from a shelf,

which is very hard for a human being to do a human being is much more of a serial thinker.

I'm going to make this then I'm going to make this then I'm going to make this, but for robots, they can shuffle the tax very quickly.

So, that was very exciting for us that here's a robot that has a mixture of hardware and software and the beauty here is in in the artificial intelligence of how you program the tasks. How you schedule the task, how you get them accomplished much more easily.

And then the 3rd thing here is the business model we, we saw that by making labor more efficient. You can make human beings more efficient.

So, in a in a slightly Pre pandemic world, at least, you might have had 4 people making smoothies.

And now you might have those same for people doing different jobs, which is much more about greeting the customer and, and obviously still handling payments. This robot is not doing that.

But up levels,

the tasks of human beings,

instead of doing the wrote task of cutting vegetables,

chopping mangoes and keeping everything running smoothly robot can do,

all those manual tasks,

much more efficiently mcminn shipping,

getting allow humans to do more higher value,

add a task along the lines of service,

so those were the 3 big reasons why we invested.

This is perfect description and I love the 1st, 2 parts of the due diligence when you were trying some of these stats. I think that seemed like the most important part of it.

But now, now, let's move on and talk a little bit more about the thing that you've mentioned briefly, which is the fact that Ventures is based in Silicon Valley and you've been there for, like, 20 years. What do you think will happen to that place after? They've been demak is over to you.

Are you 1 of those people who believe that everyone will return to the Silicon Valley or.

You do not think that well, Silicon Valley is 1 of many technology centers in the world it is it's the most developed in many metrics ecosystem.

So, roughly speaking about to use 1 metric about a quarter of the venture capital in the US is in Silicon Valley. It's specifically, maybe 3 or 4 parts of Silicon Valley and that is a metric, right?

It's not the only 1. but then you also have another metric, which is the number of folks that are involved in economic activity around tech.

Whether it's companies like Google and Facebook and sales force, all of which are headquartered here in Silicon Valley, or in startups.

And I do think that Silicon Valley is there's many reasons for why Silicon Valley is Silicon Valley. It's perhaps a different question.

Those reasons I'm not going away with or without pandemic and I don't see, I actually wrote an article about this just last week on my LinkedIn.

I don't see the fact that other parts of the world are developing and also becoming more mature startup ecosystems to be a bad thing. It's actually a good thing. It's a great thing. Doesn't mean the Silicon Valley is getting left behind.

It means that other parts are accelerating and also becoming developed.

I do think that Silicon Valley will continue being very much the biggest and most developed ecosystem for long time for any foreseeable future, but other ecosystem.

So we'll are, and we'll continue developing, perhaps at a faster magnitude.

In the US you have New York, you have Boston, you have Austin, you have L. A, where you are based yourself Constantine. So I think that's it. That's a great thing. We want a multi polar world.

We don't want a dependency on a single engine, driving the world economy, or the US economy, or any kind of economy for that matter. The tech economy. So your question, I'm going to modify a little bit.

People have never all been in Silicon Valley. So it's not like people will return to Silicon Valley. We, we have some exodus from Silicon Valley right now, but we also have some exit us from New York and from Boston, and from any major city in the world.

Because people want to live in more socially distance ways, and they want to live in suburbs and rural areas, and you can do that in a remote economy. Do we go back to the same economy were Pre pandemic?

No, we don't, but will we stay in this? Completely virtual economy. Absolutely not either. There are advantages and reasons for clustering their adventures and reasons for people to still want to be offices.

So, a lot of folks have written about the 3 tomorrow and I'm a believer that that will be a reality for a lot of tech, not for all industries. But the 3 to model basically means 3 days from home, 2 days, 3 days from work 2 days.

From home, I think that's a very feasible reality for a lot of us.

Right. And that's just that perfect answer. Absolutely. Love it. And I'll make sure to include the link to your article in the description this episode.

So, if anyone's curious to read more, and that's definitely check out the description of the episode and let's move on to next question is going to be about deep deck again.

So our preacher recall, he mentioned that sometimes you invest in something very complicated cancer research and.

Stuff like that, which is very tough. So, uh, on those.

On those investments, what are the major things that you look at? So, when you cannot see the product already done, so you cannot try this movie that is done by the company. But it has a very long term horizon.

So, what are the major things that you look at in those companies? Yeah,
yeah no,
that's a very meaningful question given the deep tech is,

in my view where a lot of great innovation happens,

and that's what gives us the Leafs of progress and society.

So that's 1 of the reasons we are deep tech investors. The other 1 is because we have done it in our careers. I'm a computer scientist and a biologist by training. That's what I did in my undergrad and I did my masters in healthy.

I, and I've been an operator entrepreneur primarily before becoming an investor, so my partner is a similar background.

He was a computer scientist who did a lot of work around healthcare also, and we can still both code and he worked at Microsoft. I work at Google.

So, we're bringing our own backgrounds to work here and that is very much part of the thesis is that we may not know all the answers, but we know what questions to ask.

And if we don't know how to validate those answers, we have a very strong set of folks around us. We have a strong set of advisors that can help us validate. We have our own investors. We have our own entrepreneurs.

So,

when I'm looking for a company is whatever they're doing there is some kind of differentiation with that's part of our thesis,

maybe they have a proprietary data set,

maybe they're simulating data through synthetic data maybe there access here to to analyze the data 10 times faster.

Right like, I need to see something here that's a technological edge. And what I'm trying to validate here is that this is not a research.

Project that this is a commercially viable company. So,
to your point,
if it's a cancer company,

and I'll give a very specific example,

computer vision for colon cancer,

the company that I mentioned called iterative scopes,

when we invested,

we saw that they had collected 20000 videos from 40 hospitals and they're already trained their algorithms on it,

so that when they were detecting polyps,

they could find almost a 99% accuracy,

whether somebody had a polyp.

That could be dangerous that could become into cancer. That is, by the way much better than any doctor out there. Even the best doctors are able to get to 75% detection. So.

We saw a proof point here. It wasn't approved by the day. At that point. In time they did not have paying customers at that point in time. But we saw that they had been able to collect the data. They had been able to train an algorithm.

They had a working prototype and I think that's the ultimate definition of a seed. It's not how much money you raise, but it's what you use your money for the framework over all that I have.

Is that a Pre seed is a, a seed is a prototype, a mature seed or a seed extension, or or whatever term you want to use for?

It is a pilot you want to see that they are customers that are starting to use it and then a series, a product market fit.

So, I play specially between the seed and the mature seed, and I want to see prototypes and ideally pilots with a line of sight towards the series. A, which is the product market fit.

Nice, I love the description of difference between those series of those rounds sounds very accurate. Actually. So before we move on and talk a little bit more about the, I wanted to ask 1 more question about.

Why you like the regulatory process so, in the beginning you mentioned that he liked to invest in um.

Health care, especially if there is hard tech or some sort of regulatory process. Why is that? I believe that. I don't think I've ever met investors who are like oh, yes, regulatory processes complicate stuff. I love that. I'm gonna I'm going to go in there.

So, what why do you like it?

Oh, absolutely, we are we pride ourselves actually on tackling hard things and look in healthcare. There's maybe a 10% universe of companies. That can go direct to consumers.

And by the way, I'm speaking more about the US, rather than about Europe, or other parts of the world.

But in the US, we have large insurance systems, and people by and large are honestly been overwhelmed in terms of dealing with healthcare.

We feel as a society that we're already paying into healthcare, that's our insurance to take care of it, rather than us paying out of pocket.

So, companies like, Telecom for me are to show how that is a very consumer driven, digital health company. That's an exception to the rule. Most companies and healthcare in the U. S are B to B to C.

so they will sell into payers and providers meaning doctors and into insurances and increasingly we're seeing them paint, selling to pharma.

The framework, incidentally, is the 4 piece of healthcare so, pairs providers, patients pharma, some people call it a 50, which is policymakers, but we want them to be selling into into payers and providers.

And when you're going to be selling into Paris and providers, they have requirements. They want to see that there's been clinical trials. They want to see that. This is real. This is legitimate and there will be an FDA approval process in many cases. Now, the FDA is not a, a.

A model is right it's there are easy regulatory process, and there's complicated regulatory processes for those of folks listening in, at a very high level.

There's class 1 class 2 class 3 class 1 is is much easier and there's fast track for those regulatory processes. There's 1 specific called fast and case, so we look for the low hanging fruit.

I'm not very unlikely to invest in a class 3 device, which is very invasive, but class 2 I'm open to it and class 1 for sure. And 510 case. Absolutely.

I want to see that you you put yourself through some rigor that you did get the approval. That you have something here. That's real.

And the scientific proof, and the scientific credibility will mean that you will go further with the medical community and give it gives me as a patient also much more conviction about using this technology. So.

You know, I say, bring it on company should embrace it if you're going to do something in healthcare, it's it's good news for all of us that there have been proof points around, around validating. We're dealing at the end of the day with people's lives. Right.

You can't get it wrong. True and I love that. I really like that something new something that I have not seen in the past. So that's awesome. Nice approached by Ventures here. So let's move on and talk more about.

And what started as discussion by talking about something fun and interesting, which is, what do you think is the best application that you have seen so far.

Oh, boy, that's like, asking me who's your favorite child right? There's so many applications of, uh, that that gets me really excited.