Deep Science Ventures Year 3: A new paradigm for Applied Science. Part 3.
Part 3 of 3
You can find Part 1 here, and Part 2 here. Hopefully the slight gap between articles is understandable, under the circumstances.
DSV will not scale like an accelerator programme
When we discuss how DSV will scale, it’s assumed we’d scale either like a fund (raise more money) or an accelerator programme (clone into new locations). But we are not. And whilst we drafted this post months ago, recent events have only deepened our certainty about our chosen path. DSV is differentiated in part by the depth of organisational conviction we build up around each of our companies, and our scaling strategy represents this.
Whilst it’s obvious that more money and greater geographical reach are essential to scale, these stock scaling strategies have clear flaws. Ever larger funds are ever harder to return, congesting investment committees and inflating cheque size (and often valuation). Similarly, an accelerator running independent programmes on multiple continents stretches management capacity. Worse, new ecosystems frequently defy the imperative to standardise in unanticipated ways. See YC abandoning China, EF abandoning Hong Kong, Rebel Bio abandoning Rebel County (and then London). Moreover, prestige, people and funding turn out to be deeply rooted in geography: any economies of scale are cancelled out by diseconomies of specificity. And then, right now, our current programmes are running remotely, and the opportunities this has offered have convinced us that the benefits of physical geographic presence do not necessarily outweigh the costs. Overall, both approaches imply linear and often marginally declining returns to scale.
Rather, the objective of scale, as with any strategic investment, ought to be compounding returns (financial and impact) to scale. Whilst geographic reach and cash are clearly critical, we realised that they do not need to be the primary focus of scale, but should rather be a byproduct.
Scaling breadth and depth of expertise
DSV’s expansion is focused on two core dimensions: firstly depth of expertise, and secondly breadth of expertise. This is something akin to focusing instead on ‘economies of scope’. Specifically, DSV is expanding by growing the number of sectors in which we are specialised and by deepening our capacity (people and capital) to tackle fundamental problems, create brand new opportunities and conduct unexpected, novel, venture-focused research in those sectors. We make all other growth dimensions subservient to these aims.
Each sector expansion heralds the addition of highly specialised sector leads, sector-specific partners and funders and additional advisors. These additional resources are layered on top of core infrastructure and frameworks, designed to compound their value over time and feed into our institutional memory, to accelerate and direct information flows across sector and disciplinary silos; to break down semantic barriers. How can platform chemistry companies capitalise on the most effective biotech business models in a way that takes advantage of the reduced complexity of their target systems? How can state of the art techniques in technoeconomic analysis in energy allow us to displace incumbent pharmaceutical companies?
These core frameworks and platforms are digital, intelligent and structured as graphs, and are therefore benefit multiplicatively from the addition of new resources and learnings over time. Each new recruitment decision (e.g. source, profile, performance vs. predicted), each constraint identified (e.g. technology fundamentals, parameters dictating customer and investor decisions, regulatory details, data) is tracked and integrated across sectors. This approach brings together systematic venture, academic excellence and creative problem solving.
It’s hard to understate the importance of this step for us, which has taken a year of design, implementation and iteration to achieve and countless hours programming late into the night to create a smooth, integrated recruitment and problem-solving machine.
Increasing breadth: two new sectors.
Today, our core sectors are pharmaceuticals, where we are aiming to design truly curative therapeutics and energy, where we are accelerating the net zero carbon transition. In 2020 we will double our core to four sectors, expanding to recruit founders in agriculture and in computation, and will announce funded partnerships for each of these, finalised in 2019, that hugely expand our capacity, expertise and reach.
Agriculture
Agriculture is eating the world. And unlike every other version of Venture Capital’s favourite aphorism, this time it’s not a positive.
We theorise the sector as a system, made up of a finite “Bank of Nature”, which is borrowed from and invested to provide a calorie harvest opportunity, “Ecosystem Services”, which are relied on to provide essential inputs from the natural world, like topsoil, pollination, fresh water, and finally agriculture can itself have a destabilizing effect on that infrastructure: a hidden “Management Fee”, which becomes noticeably overdue only when you haven’t been paying it regularly.
Competition has been limited by regulation, slim margins, capital intensity, and rigid consumer attitudes and business relationships. Fortunately, the situation is changing, with shifts in dietary preferences, increasing demand for meals to be sustainably and responsibly sourced, and ongoing changes in environmental and agricultural regulation in governments and agro-industrial giants alike.
We are currently exploring a range of possible opportunity areas, from approaches to hugely improve crop yield (beyond fertilizer and genetic modification), to properly harnessing agricultural assets that have been previously under-examined such as marine and aquatic environments, to the creation of much more effective agricultural environments de novo.
This work in Agriculture builds on DSV’s pre-existing track record. For instance DSV company PES Technologies, who are developing sensors to allow farmers to optimise soil management, in 2019 secured some of the largest grant funding awards for agricultural companies in the UK, allowing them to further cement their partnership with the National Institute for Agriculture and Botany and some of the most powerful agronomists. At the same time, Beta Bugs, a company that sells genetically optimised insect strains to insect farms, announced a funded partnership with M&S and world-leading genetic research hub the Roslin Institute, where ‘Dolly the Sheep’ became the first animal to be cloned in human history.
We’ll publish our agiculture thesis shortly!
Computation: Scaling intelligence
We’ve come to think of computation as a tool that we use to complete our work and extend the bounds of our social and entertainment world. At its core however, computation is simply a mechanism to scale the manipulation and transfer of information. This is something that humans have been doing for thousands of years, from initial languages to factory automation. Right now we’re moving from a world where humans use computation as tools, to one in which compute is beginning to inform its own design, connect without humans-in-the-middle, interact coherently with the real world and, overall, escape the limitations of human oversight.
We see 5 main areas of opportunity for new companies:
- Firstly, removing the bottleneck of human design on semiconductor progress. Semiconductors are the substrate that all computation is limited by. At the same time, this should allow us to escape (what we believe is) a local optima in deep-learning by finding the right abstract between brain inspired networks and rapidly iterable primitives that underlie common functions.
- Secondly creating fluid interactions between machines manipulating complex data sets in knowledge-heavy, low-repeatability environments.
- Thirdly extending this to interactions with the physical world.
- Fourth, joining the dots between the capabilities available and the potential impact across high-tech sectors from drug development to clean energy, an area we’re already heavily focused on.
- And finally looking at where uniquely human capabilities sit and could be yet further augmented in a far more automated world.
You can read a short version of our computation thesis here, and find opportunities to engage with our work on our opportunities page, for example in scaling quantum computation and in designing truly reconfigurable computation.
Increasing depth: ‘venture-focused research’
This year DSV will pioneer a new category of R&D that we call ‘venture-focused research’.
We will shortly publish a report, a year in the making, assessing the need for a reconceptualization of the recently mooted “ARPA” concept that is being discussed as the next stage of the UK’s industrial strategy. In stark contrast to the traditional funding agency + public procurement model of ARPA that policy-makers seem to have in mind, our proposal will argue for a private organisation, capable of getting directly involved in research, with a strong mandate to train a new generation of founder-type scientists and with venture capital as its core commercialisation strategy.
Research in fields as diverse as neurodegeneration (as described in part 2 of this series), or replacing dirty chemicals processes, are dominated by either incremental industrial or blue sky academic research. Closer analyses, such as this PLOS research paper on the MRC and the Wellcome Trust, argues that in research, funding seems to follow funding, rather than potential. The conclusions are damning, citing the composition of panels as a causal factor (in other words: research is dominated by cliques). Another, taking a completely different approach and published in Nature, shows that small teams using older research are more impactful than large teams working on the cutting edge. Needless to say, the majority of funding does not go to small teams working on older research.
Ultimately, this funding gap for pioneering, high potential, radical teams is due to the incrementally evolved nature of both funders and universities themselves: the culture they’ve become imbued with, the people they therefore select for, the expectations they develop in those people, the way they structure incentives. Angel investors and accelerators have too little funding and too little structured conviction to regularly commit to radical research, and are forced to wait for arising university IP. This leaves a gap: high conviction, spinout-centric, radical programmes of research to fulfil; specific commercial constraints.
Our argument is that in order for the UK to remain at the forefront of high impact science, we urgently need an additional category of research, that we call “Venture-focused Research”, a category of applied science, to create sector-scale innovation, answering a different kind of question, led by a different kind of person, conducted under different operating constraints.
For instance, what does the pharmaceutical industry look like if we no longer need clinical trials, or if drugs are produced for individuals rather than patient groups, or if we no longer need drugs at all? What does the Energy sector look like if we can create heat without gas or electricity, or if we cease to extract oil and gas from oil wells? What do the food and agricultural sectors look like if nutrition is produced directly inside humans, or if farms look more like polycultural symbiotic jungles? These research programmes will be multi-disciplinary by design and multi-institutional by nature, managed more like startups, optimising and pivoting towards commercial viability, rather than novelty.
We want to forge powerful, meaningful partnerships that go well beyond the press release.
We’re a tiny firm, early on in our journey, but 2019 was pivotal for us, as the scale of impact achievable with a purpose built applied science model became clear. We are actively pursuing conversations with founder type scientists and advisors for each of our sectors, with government agencies about how our systematic approach can augment existing policy work, with investors about funding opportunities and with corporates about how we can partner to short circuit the innovator’s dilemma. So if any of the above describes you, please get in touch at hello@dsv.io
