Lan Xuezhao — All Raise #WomanCrushWednesday
Editor’s note:
April is Artifical Intelligence month at All Raise and our second #WCW is Lan Xuezhao, founder of Basis Set Ventures. All Raise’s Women Crush Wednesdays (#WCW), a series where we highlight genius women who are funding or founding tech companies. Please come back to the All Raise Medium blog every Wednesday to find a new profile of an awe-inspiring female VC or founder.
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Lan Xuezhao, the founder of Basis Set Ventures, is an atypical VC.
She has a PhD in Psychology and Masters in Statistics. She’s worked at McKinsey as an Engagement Manager focused on big data and growth strategy, and at Dropbox where she led Corporate Development Strategy.
Lan founded Basis Set Ventures — a $140M fund that invests in AI and automation companies that aim to improve the way people work and business workflow — because of her two decades-long obsession with AI.
Among hundreds of AI investors and companies, Lan sets herself apart by focusing on entrepreneurs that are like her: deeply technical and passionate about AI and automation. BSV’s portfolio includes companies like Workstream, which utilizes AI to help hourly workers find employment in restaurants and factories to address the high churn typically associated with these jobs, and Rasa, an open source developer platform that helps companies build conversational interfaces for the front office.
More recently, Lan has spent time in the Midwest and South, observing market-specific opportunities for AI and automation including factory and farm management. For example, Basis Set has made investments in FarmWise, which produces autonomous weeding robots to address farm labor shortages, and Falkonry, a machine learning system that assists industrial operation teams. In addition, she explored the burgeoning entrepreneurial ecosystem in the Midwest on the Comeback Cities Tour organized by Rep. Tim Ryan of Ohio and Rep. Ro Khanna which visited Youngstown, Akron, Flint, Detroit, and South Bend. One of BSV investments includes a company that makes an autonomous welding robot based in Ohio, called Path Robotics.
We sat down with Lan and discussed her perspective on the opportunity in AI and automation in atypical ecosystems and her atypical profile.
Q: Where do you currently see the most interesting opportunities in AI?
A: A lot of AI’s potential is in automating repetitive tasks. Repetitive tasks happen not only in offices, but also on farms and in factories. And this means the potential for AI spans many different geographies. BSV has visited over a dozen places outside of California to meet local entrepreneurs and VCs and understand what those ecosystems look like and how we can partner with local entrepreneurs. I just came back from a trip to the South — cities like Atlanta, Charlotte, and Columbia — where entrepreneurs are facing different mass market problems.
Q: What are the mass market problems affecting the South and Midwest that differ from California?
A: California is a great place to develop office productivity tools for workflow automation for office workers like engineers or product managers. But not many factories are in California, so we want to go to places where people deeply understand the time, complexities, and ecosystems around working in factories in order to find entrepreneurs who relate best these historical industrial problems.
Another example: A problem in California real estate is that housing is too expensive and how do you get people loans and get them to be able to pay for these houses. But in South Bend, housing prices are so cheap that the fee of originating is more than the actual loan size. That’s a problem you don’t really think about in Silicon Valley.
Another company is Lime, where we became an investor. When I went to South Bend, I saw Lime everywhere. The mayor of South Bend told us that people use them even in the winter because it is so much cheaper than taking Uber and many people cannot afford a car. It’s a form of transportation people use to go to work every day.
Q: How is fundraising different in the South and Midwest as compared to California?
A: Outside Silicon Valley, you might not have as much access to venture funding as you would in California, so a lot of companies struggle to raise venture capital. Some companies, like Mailchimp in Atlanta, are completely bootstrapped. Local investors often look for profitable businesses which may not be venture-backable, driving more entrepreneurs to start non-venture scale businesses. Outside investors often find it harder to diligence a deal when they don’t have strong local connections to vouch for the entrepreneurs or understand the market.
Q: What do you look for in an entrepreneur?
A: I’m inspired by entrepreneurs who work really hard to build a company that solves a real problem that’s close to them. The founders we invest in are usually on the more technical side and have lots of grit. We like founders who learn very fast. We also naturally have a large percentage of technical female founders because we connect with them well and they are a natural part of our network.
Q: You’ve described yourself as an atypical investor, what makes you atypical?
A: I’m a woman, I’m a working mother with two very young kids. I’m a first generation college graduate and immigrant. I’m also relatively introverted. I don’t see many VCs who are like me. But I work very hard. I feel like I’ve been preparing for this for 10, 15 years. When I was an undergrad, I started to look into the earliest form of AI, teaching a computer how to acquire language like babies. I went on to do a PhD doing similar things. It was too early back then but I’ve remained obsessed with these ideas. I want to do this. I really want to focus on opportunities for automation to improve the way we work and live.
