The Exchanges

Q And then let's finish today on the most recent publicly announced investment. And why did you say yes, Sal?

A This one, I would say Solugen. We led their seed round and really couldn't be more excited. They're an example of one of these non-human applications of genomics that I get personally very excited about. What Solugen's done, they've created an ultra safe, ultra pure version of hydrogen peroxide, which is one of the most commonly used compounds in all consumer products. It's literally in every cleaning product in your home or office. And it's even used in higher concentrations and purity levels for rocket fuel, for example. And so Soligen figured out how to eliminate petroleum for the production of hydrogen peroxide using only air, water, and plant starch. And they used CRISPR-Cas-Nine processes in their optimized bioreactor to do so. And so this was actually a perfect example of scientist founders who knew exactly how they were going to commercialize their product, even at real sales before our investment. And frankly, these were just fantastic storytellers.

AI assessment note: “scientist founders who knew exactly how they were going to commercialize their product”

Q And then I do have to ask, I mean, subsequently from that, Andrew is an incredible institution. What were the biggest learnings that you've maybe taken from that experience to now with the experience with Refactor?

A Yeah, you know, so a few things come to mind. Number one, the way VCs should treat founders. I mean, we are only in the graces of this wonderful profession because of them. And one way we measured that at A-Six-Z was NPS, Net Promoter Scores. So all founders that interacted with A-Six-Z in a pitch setting, so regardless of us investing or not, would receive a short survey with one important question. Would you recommend A-Six-Z to friends and colleagues based on the interactions you had with this particular partner? And so we'd all get scores, Mark, Ben, the other GPs, And I thought that was a great tool to measure and improve ourselves in the short term. So we adopted it at Refactor, and we actually used this really great, inexpensive tool called Delighted to do all that. So that's one. And then the second thing I learned at A-Six-Z is how to be an insanely curious person, and why that's the most important thing about investing. So Mark Andreessen had this great philosophy, strong convictions, weakly held. And so he had this on his Twitter bio for a while when he was tweeting. But having strong opinions about how you see the world, it's pretty crucial in making But as investors get more data and learn from those around them, they should be constantly editing those positions, making them even stronger. So it's that constant learning cycle that makes insanely curious and humble …

AI assessment note: “Number one, the way VCs should treat founders.”

Q Absolutely. And what was the transition to venture?

A Yeah. My last operator role was at LinkedIn, where I was helping start the sales solutions business, which is the premium product for salespeople. And so while I was working there, funnily enough, Andreessen Horowitz cold emailed me asking if I was interested in learning more about roles on the investment team. You know, I wasn't actively pursuing jobs in VC, but at the time they were Specifically looking for PMs to come source, evaluate, and work with GPs on investments. What I loved about A-Six-Z is that everyone had operating experiences of different kinds, especially on the investment team, which was mostly made up of PMs at the time. So basically, they were just looking for junior versions of Ben Horowitz. So I, I jumped at the chance to join the team back in, in 2013.

AI assessment note: “Andreessen Horowitz cold emailed me asking if I was interested in learning more about roles”

Q Absolutely. And what was the transition to venture?

A Yeah. My last operator role was at LinkedIn, where I was helping start the sales solutions business, which is the premium product for salespeople. And so while I was working there, funnily enough, Andreessen Horowitz cold emailed me asking if I was interested in learning more about roles on the investment team. You know, I wasn't actively pursuing jobs in VC, but at the time they were Specifically looking for PMs to come source, evaluate, and work with GPs on investments. What I loved about A-Six-Z is that everyone had operating experiences of different kinds, especially on the investment team, which was mostly made up of PMs at the time. So basically, they were just looking for junior versions of Ben Horowitz. So I, I jumped at the chance to join the team back in, in 2013.

AI assessment note: “Andreessen Horowitz cold emailed me asking if I was interested in learning more”

Q With kind of the tiny likelihood of success of all startups, But even more so when they're fundamental human problems that they're solving, how does that affect loss ratio and thinking around loss ratio, and then the amount of lines in the portfolio to really kind of get that one pop?

A So the, the idea here is you have to be able to believe that every single investment you make can return the fund, especially our core investments where we're trying to strive for a meaningful ownership and be the largest checking around and be that investor that founders can rely on, on that daily guidance that we spoke about earlier. The important thing to understand here is if we're going to invest in 40 to 50 companies in this fund, one of them has to be the breakout winner, and a few of them have to be able to, you know, cobble together another one X, let's say. And so you're trying to put together a fund that really kind of creates value with a small set of companies, and you have to assume that more than half of your companies are going to go to zero, and that's no different when it comes to biology and other harder science companies. A lot of these are going to be very tough to commercialize, very tough to scale. There'll be all kinds of risks in terms of building a really enduring, valuable entity, and so we have to be ready and willing to kind of take that risk in order to get that return in that small handset of a handful of companies down the line.

AI assessment note: “if we're going to invest in 40 to 50 companies in this fund”

Q I mean, Zal, I am so excited because you've given me so many subsequent questions. The first is you mentioned the MPS there, and I spoke to your wonderful partner, David, before, and he said that when referencing you, you have the highest MPS there. He'd ever seen, so he wanted to know, how would you characterize your style in working with founders?

A That's pretty kind of him to mention. In these nearly five years as an investor, I've come to believe that there's probably three most important traits that VCs should have. You know, number one would be, you need to have the highest degree of empathy, and this essentially is just top-notch listening skills and respect for the crazy journey that founders are on when meeting you. Number two, you've got to be super responsive. Fast email responses, quick phone call returns. It's just a must in the VC industry, because there's nothing more anxious for a founder that when they have to wait to hear from a VC on a decision, or if they really need your help and need to get ahold of you. And then three, that insane level of curiosity that I mentioned around Mark Andreessen's philosophy around strong convictions, weekly help. Those are the three things really, I think, have guided me, and I'm still learning in this business here.

AI assessment note: “Those are the three things really, I think, have guided me”

Q With kind of the tiny likelihood of success of all startups, But even more so when they're fundamental human problems that they're solving, how does that affect loss ratio and thinking around loss ratio, and then the amount of lines in the portfolio to really kind of get that one pop?

A So the, the idea here is you have to be able to believe that every single investment you make can return the fund, especially our core investments where we're trying to strive for a meaningful ownership and be the largest checking around and be that investor that founders can rely on, on that daily guidance that we spoke about earlier. The important thing to understand here is if we're going to invest in 40 to 50 companies in this fund, one of them has to be the breakout winner, and a few of them have to be able to, you know, cobble together another one X, let's say. And so you're trying to put together a fund that really kind of creates value with a small set of companies, and you have to assume that more than half of your companies are going to go to zero, and that's no different when it comes to biology and other harder science companies. A lot of these are going to be very tough to commercialize, very tough to scale. There'll be all kinds of risks in terms of building a really enduring, valuable entity, and so we have to be ready and willing to kind of take that risk in order to get that return in that small handset of a handful of companies down the line.

AI assessment note: “you have to assume that more than half of your companies are going to go to zero”

Q And then I do have to ask, I mean, subsequently from that, Andrew is an incredible institution. What were the biggest learnings that you've maybe taken from that experience to now with the experience with Refactor?

A Yeah, you know, so a few things come to mind. Number one, the way VCs should treat founders. I mean, we are only in the graces of this wonderful profession because of them. And one way we measured that at A-Six-Z was NPS, Net Promoter Scores. So all founders that interacted with A-Six-Z in a pitch setting, so regardless of us investing or not, would receive a short survey with one important question. Would you recommend A-Six-Z to friends and colleagues based on the interactions you had with this particular partner? And so we'd all get scores, Mark, Ben, the other GPs, And I thought that was a great tool to measure and improve ourselves in the short term. So we adopted it at Refactor, and we actually used this really great, inexpensive tool called Delighted to do all that. So that's one. And then the second thing I learned at A-Six-Z is how to be an insanely curious person, and why that's the most important thing about investing. So Mark Andreessen had this great philosophy, strong convictions, weakly held. And so he had this on his Twitter bio for a while when he was tweeting. But having strong opinions about how you see the world, it's pretty crucial in making But as investors get more data and learn from those around them, they should be constantly editing those positions, making them even stronger. So it's that constant learning cycle that makes insanely curious and humble …

AI assessment note: “a few things come to mind. Number one, the way VCs should treat founders.”

Q Can I ask, you mentioned that again, the NPS, and you mentioned the NPS with Andreessen, with founders that come in, whether they back you or don't, and kind of their engagement with the investing team. Post-investment, where do you find founders most draw you in and most need your help and attention?

A We spend the most time in go-to-market, so we realize that with just two million dollars of seed capital, founders can actually take their product, commercialize it, Get some sales going and get to a point where some of these larger series A's as, as we've been seeing, um, really do require quite a bit of commercial traction nowadays versus maybe even five or seven years ago. And so our journey with the founders is to help them try to figure out what types of commercial partnerships, what kind of sales opportunities, what types of enterprise sales cycles are going to allow them to move as quickly as possible to get to the fastest revenue opportunities in front of them. And so Our job is to help them close those opportunities and, and, and get them there in terms of their series A, and so we spend a lot of time thinking about go to market with these founders.

AI assessment note: “We spend the most time in go-to-market”

Q I mean, you just continue to set me up with brilliant questions. Fundamentally human problems you mentioned there, the thesis for Refractor. So starting from the top, how would you define fundamental human problems?

A Sure. You know, it may sound a little altruistic, but These fundamental humor problems are those that typically reside within traditionally regulated industries. So think about healthcare, biology, genomics, crypto, agriculture, industrial applications, things like that. And optimistically, these founders are building products that allow people to lead what I like to call healthier, happier, and heroic lives, which mean they themselves are healthy and happy enough to help others. So David and I were attracted to these areas due to our own interests, But also because we saw that the very best founders are starting businesses in these areas. They're looking to make an impact on society. But they also have the requisite experiences in academia and or operating roles to do so.

AI assessment note: “These fundamental humor problems are those that typically reside within traditionally regulated industries.”

Q Well, I'm so pleased you then touched on finally that the strong opinions weekly help, because my next big question to you was, How do you balance when assessing startups that you've maybe invested in or analyzed between vision and reality, and how do you kind of analyze the balance between the two, and maybe when something's not working?

A Yeah, you know, I think that's the right question. I think if you're coming to us and raising a three or four million dollar seed round, we're looking to not only understand, you know, do you have a strong grasp of the science and the technology, but do you also have a product that can be sold to a specific set of customers? That leap from science to product An actual product that can be sold is critical. So we ask questions like, have you spent time with customers? Do you know what they are willing to pay for this? What do those sales cycles look like? Why are you better positioned than your competition, either in the form of other startups or incumbents? So these founders who are scientists, especially that we, we spend time with in biology, especially need to have strong answers on these go to market questions. We of course help our founders in these areas as well, but we'd much rather see founders go from one to a hundred on go to market rather than trying to struggle going from zero to one.

AI assessment note: “understand... the science and the technology, but do you also have a product”

Q I mean, you just continue to set me up with brilliant questions. Fundamentally human problems you mentioned there, the thesis for Refractor. So starting from the top, how would you define fundamental human problems?

A Sure. You know, it may sound a little altruistic, but These fundamental humor problems are those that typically reside within traditionally regulated industries. So think about healthcare, biology, genomics, crypto, agriculture, industrial applications, things like that. And optimistically, these founders are building products that allow people to lead what I like to call healthier, happier, and heroic lives, which mean they themselves are healthy and happy enough to help others. So David and I were attracted to these areas due to our own interests, But also because we saw that the very best founders are starting businesses in these areas. They're looking to make an impact on society. But they also have the requisite experiences in academia and or operating roles to do so.

AI assessment note: “fundamental humor problems are those that typically reside within traditionally regulated industries.”

Q In terms of that return and the liquidity events, how does that look for companies solving fundamental human problems? Is it the traditional seven to, say, twelve-year IPO window that often VCs look For all kind of acquisition by the mega tech companies of today, or is it a different kind of a path to liquidity?

A So I think it varies depending on the types of companies that we're talking about, even within the sphere of biology. I think the therapeutics companies sometimes definitely do take a long time to get to market, to go through their clinical trials, to really establish great data, to show a low levels of toxicity and safety among humans. First, obviously, animals, then humans, and so the idea there might be it might take a lot longer, and, and some of these startups are not able to kind of take that all the way to market launch, and so in many ways, they're, they're developing relationships with pharma companies earlier on, and with that, they're able to potentially have other acquisition opportunities with that, and then there's other types of companies that are in the biology sphere that are helping kind of re-engineer all the things that are around us, whether it's industrial materials, the Plastics in your phone. Hydrogen peroxide, we have another company that I'll talk about later, but the idea of being able to actually create value in these companies can actually be much more rapid. They have the ability to launch products within the first few years after receiving seed funding versus a therapeutics company, which might take much longer.

AI assessment note: “it varies depending on the types of companies that we're talking about”

Q Can I ask, you mentioned that again, the NPS, and you mentioned the NPS with Andreessen, with founders that come in, whether they back you or don't, and kind of their engagement with the investing team. Post-investment, where do you find founders most draw you in and most need your help and attention?

A We spend the most time in go-to-market, so we realize that with just two million dollars of seed capital, founders can actually take their product, commercialize it, Get some sales going and get to a point where some of these larger series A's as, as we've been seeing, um, really do require quite a bit of commercial traction nowadays versus maybe even five or seven years ago. And so our journey with the founders is to help them try to figure out what types of commercial partnerships, what kind of sales opportunities, what types of enterprise sales cycles are going to allow them to move as quickly as possible to get to the fastest revenue opportunities in front of them. And so Our job is to help them close those opportunities and, and, and get them there in terms of their series A, and so we spend a lot of time thinking about go to market with these founders.

AI assessment note: “We spend the most time in go-to-market”

Q I mean, Zal, I am so excited because you've given me so many subsequent questions. The first is you mentioned the MPS there, and I spoke to your wonderful partner, David, before, and he said that when referencing you, you have the highest MPS there. He'd ever seen, so he wanted to know, how would you characterize your style in working with founders?

A That's pretty kind of him to mention. In these nearly five years as an investor, I've come to believe that there's probably three most important traits that VCs should have. You know, number one would be, you need to have the highest degree of empathy, and this essentially is just top-notch listening skills and respect for the crazy journey that founders are on when meeting you. Number two, you've got to be super responsive. Fast email responses, quick phone call returns. It's just a must in the VC industry, because there's nothing more anxious for a founder that when they have to wait to hear from a VC on a decision, or if they really need your help and need to get ahold of you. And then three, that insane level of curiosity that I mentioned around Mark Andreessen's philosophy around strong convictions, weekly help. Those are the three things really, I think, have guided me, and I'm still learning in this business here.

AI assessment note: “Those are the three things really, I think, have guided me”

Q Well, I'm so pleased you then touched on finally that the strong opinions weekly help, because my next big question to you was, How do you balance when assessing startups that you've maybe invested in or analyzed between vision and reality, and how do you kind of analyze the balance between the two, and maybe when something's not working?

A Yeah, you know, I think that's the right question. I think if you're coming to us and raising a three or four million dollar seed round, we're looking to not only understand, you know, do you have a strong grasp of the science and the technology, but do you also have a product that can be sold to a specific set of customers? That leap from science to product An actual product that can be sold is critical. So we ask questions like, have you spent time with customers? Do you know what they are willing to pay for this? What do those sales cycles look like? Why are you better positioned than your competition, either in the form of other startups or incumbents? So these founders who are scientists, especially that we, we spend time with in biology, especially need to have strong answers on these go to market questions. We of course help our founders in these areas as well, but we'd much rather see founders go from one to a hundred on go to market rather than trying to struggle going from zero to one.

AI assessment note: “That leap from science to product An actual product that can be sold is critical.”

Q In terms of that return and the liquidity events, how does that look for companies solving fundamental human problems? Is it the traditional seven to, say, twelve-year IPO window that often VCs look For all kind of acquisition by the mega tech companies of today, or is it a different kind of a path to liquidity?

A So I think it varies depending on the types of companies that we're talking about, even within the sphere of biology. I think the therapeutics companies sometimes definitely do take a long time to get to market, to go through their clinical trials, to really establish great data, to show a low levels of toxicity and safety among humans. First, obviously, animals, then humans, and so the idea there might be it might take a lot longer, and, and some of these startups are not able to kind of take that all the way to market launch, and so in many ways, they're, they're developing relationships with pharma companies earlier on, and with that, they're able to potentially have other acquisition opportunities with that, and then there's other types of companies that are in the biology sphere that are helping kind of re-engineer all the things that are around us, whether it's industrial materials, the Plastics in your phone. Hydrogen peroxide, we have another company that I'll talk about later, but the idea of being able to actually create value in these companies can actually be much more rapid. They have the ability to launch products within the first few years after receiving seed funding versus a therapeutics company, which might take much longer.

AI assessment note: “they're able to potentially have other acquisition opportunities with that”

Q And you said we there multiple times. How can we not finish on, on David? Because we spoke before, and you've described him as your mentor in life. I'd love to hear what's been your biggest learnings from working with David first. Let's start with that.

A We have a very special partnership. To have David kind of choose me as his partner was a mind-numbingly awesome experience. You know, I couldn't be more blessed When I was leaving Andreessen Horowitz two years ago, we were thinking about healthcare and biology deal flow and decided to really dive in deep together. Both of us wanted to focus on seed stage, which was the origins of us co-founding Refactor together a couple of years ago. David has just an incredible reputation among founders. It's primarily due to his ability to really listen and empathize with people. He's authentically just a very relatable person, and it comes across every time he interacts with people, as those listening here who've met him probably could attest And, you know, we're, we're pretty different people, of course. And I think that's what makes our partnership so successful. But David loves this great quote from Maya Angelou. I have to squeeze it in because he often uses it. Maya Angelou said, at the end of the day, people won't remember what you said or did. They'll remember how you made them feel. And he actually has a slight alteration to the quote. People will forget what you said. They'll forget what you did, but they'll never forget how you made them feel. So maybe that's a bit absolutist, but usually if you keep those things in mind, you end up saying and doing the right things anyway.

AI assessment note: “David loves this great quote from Maya Angelou... People will forget what you said”

Q Can I ask, what are the biggest challenges when assessing this class of maybe scientist founder and their plasticity to move between science and business?

A That's also another interesting question, because they need to be able to understand that what they are building actually has real potential as a business. They often are in labs, in academia, thinking about ideas. Maybe they've developed some IP or have filed some patents with the help of their university, and they're thinking about starting a company, and it's never been easier to start a company. I mean, wonderful podcasts like this one are really creating a lot of transparency around how you start a business, how you get funding, and how you kind of take this and build a large, successful business out of it, and I think that's wonderful because we're seeing so many more scientists that are eager to start companies in these industries that we're looking at, these fundamental human problems. But it's important for us to be able to understand, are they willing to build a company? Are they willing to recruit a team? Are they able to speak with customers? Are they able to engage with a large, diverse group of people to make their vision reality?

AI assessment note: “are they willing to build a company? Are they willing to recruit a team?”

Q And you said we there multiple times. How can we not finish on, on David? Because we spoke before, and you've described him as your mentor in life. I'd love to hear what's been your biggest learnings from working with David first. Let's start with that.

A We have a very special partnership. To have David kind of choose me as his partner was a mind-numbingly awesome experience. You know, I couldn't be more blessed When I was leaving Andreessen Horowitz two years ago, we were thinking about healthcare and biology deal flow and decided to really dive in deep together. Both of us wanted to focus on seed stage, which was the origins of us co-founding Refactor together a couple of years ago. David has just an incredible reputation among founders. It's primarily due to his ability to really listen and empathize with people. He's authentically just a very relatable person, and it comes across every time he interacts with people, as those listening here who've met him probably could attest And, you know, we're, we're pretty different people, of course. And I think that's what makes our partnership so successful. But David loves this great quote from Maya Angelou. I have to squeeze it in because he often uses it. Maya Angelou said, at the end of the day, people won't remember what you said or did. They'll remember how you made them feel. And he actually has a slight alteration to the quote. People will forget what you said. They'll forget what you did, but they'll never forget how you made them feel. So maybe that's a bit absolutist, but usually if you keep those things in mind, you end up saying and doing the right things anyway.

AI assessment note: “usually if you keep those things in mind, you end up saying and doing”

Q dollars going into it. I'm intrigued. Over the last few years, we've seen an immense rise in the amount of VC dollars going into deep tech. Elad Gill said on the show, it reminds him of 2007 with clean tech. Would you agree with this, and do you kind of share the concern about maybe more traditional VCs diversifying into such kind of fundamentally challenging VCs? Domain knowledge, expertise areas.

A Yeah, there's certainly a lot more capital and deep tech at the venture and the growth stages of investing. So let's say series a and beyond, which is really fantastic news for us at refactor, but we haven't seen many dedicated seed funds in these areas, especially those like us who want to be that largest check in the seed round and be that investor founders can rely on day to day. You know, a lot of folks are in C that are dabbling in these areas are spending maybe 20% of their time in it, or they're, they're writing smaller checks. And that's great, but we really do feel like it takes a community to create these companies, and so we're not going to be the only investor in these rounds, but as far as the largest check and really kind of taking the lead, we really feel like we're unique in that perspective.

AI assessment note: “Yeah, there's certainly a lot more capital and deep tech at the venture”

Q dollars going into it. I'm intrigued. Over the last few years, we've seen an immense rise in the amount of VC dollars going into deep tech. Elad Gill said on the show, it reminds him of 2007 with clean tech. Would you agree with this, and do you kind of share the concern about maybe more traditional VCs diversifying into such kind of fundamentally challenging VCs? Domain knowledge, expertise areas.

A Yeah, there's certainly a lot more capital and deep tech at the venture and the growth stages of investing. So let's say series a and beyond, which is really fantastic news for us at refactor, but we haven't seen many dedicated seed funds in these areas, especially those like us who want to be that largest check in the seed round and be that investor founders can rely on day to day. You know, a lot of folks are in C that are dabbling in these areas are spending maybe 20% of their time in it, or they're, they're writing smaller checks. And that's great, but we really do feel like it takes a community to create these companies, and so we're not going to be the only investor in these rounds, but as far as the largest check and really kind of taking the lead, we really feel like we're unique in that perspective.

AI assessment note: “which is really fantastic news for us at refactor, but we haven't seen”

Q Can I ask, what are the biggest challenges when assessing this class of maybe scientist founder and their plasticity to move between science and business?

A That's also another interesting question, because they need to be able to understand that what they are building actually has real potential as a business. They often are in labs, in academia, thinking about ideas. Maybe they've developed some IP or have filed some patents with the help of their university, and they're thinking about starting a company, and it's never been easier to start a company. I mean, wonderful podcasts like this one are really creating a lot of transparency around how you start a business, how you get funding, and how you kind of take this and build a large, successful business out of it, and I think that's wonderful because we're seeing so many more scientists that are eager to start companies in these industries that we're looking at, these fundamental human problems. But it's important for us to be able to understand, are they willing to build a company? Are they willing to recruit a team? Are they able to speak with customers? Are they able to engage with a large, diverse group of people to make their vision reality?

AI assessment note: “important for us to be able to understand, are they willing to build a company?”