Let’s Build the Future
Looking past the current economic climate
In this post, I want to continue the conversation that Marc Andreessen started in “It’s Time to Build” because it is important. It doesn’t end with “yes, let’s build!” Instead it leads to many important questions — what should we build, and why? Who will build what, and how will we start? Below I’ll share my initial thoughts… all opinions expressed here are my own individual views (not our firm’s), and are just a starting point.
The pandemic has exposed weaknesses, vulnerabilities and missed opportunities that we may now have a chance to correct. We have made immediate, massive efforts to develop vaccines and quickly build domestic manufacturing facilities; several major pharma companies are now in the facility planning stages. (Our portfolio company Covaxx has developed a multi-peptide vaccine, which promises to be easier to manufacture in large volumes than traditional approaches.) In addition to supporting the biotech sector, more can (and should!) be done by investors, companies, the public sector, and community members if we desire a stronger, more resilient society and economy.
One of the silver linings of the current economic, social, and general uncertainty is the opportunity to imagine the future the way we want it to be. And then start building it.
Before diving in… My goal is not to make light of the current challenges so many are facing. I recognize that things are not ideal right now. There are thousands of articles and scientific papers on the global public health crisis written by those doing the work. In this post, I want to talk about building things — creating resources, tools, and technology that exist in the physical world to make human lives better. I’ll touch on infrastructure, energy and chemicals, and emerging technologies, although there are many other areas that are worth discussing: food systems, education, transportation,the future of work, public safety. I’m sure you have some ideas too. Let’s grow this conversation.
Infrastructure
First, Some Background. When we talk about building our way out of an economic depression, images of the Hoover Dam and other projects of the Great Depression Era spring to mind for many. The Hoover Dam took 21,000 people total (an average of 3500 at any given time) 5 years to build (1931–1936). The Bay Bridge from Oakland to SF took 8,000 people only 3 years (1933 to 1936). In the early 1930s, there were no unemployment benefits — the framework for unemployment benefits in the US was established by the Social Security Act of 1935.
Times and priorities have changed; the recent span of the Bay Bridge took over 11 years. While big projects in the 1930s prioritized job creation and staying on schedule, today’s requirements are more complex: we also care about human safety (an important one), environmental considerations, aesthetics, and transparent procurement processes.
Investing in infrastructure was then and is now a great investment in society. There is also serious need. The American Society of Civil Engineers (ASCE)’s 2017 “Infrastructure Report Card” gave most areas of infrastructure a grade of “D”, meaning Poor or at risk: A large portion of the system exhibits significant deterioration. Condition and capacity are of serious concern with strong risk of failure. What I loved about this report was that it provides a detailed review of 16 areas — including roads, bridges, drinking water, and electricity — with recommendations for how to improve. Spending on public works — building roads, bridges, and other infrastructure — is also one of the most cost-effective ways to create jobs. [1]
Two initial thoughts: first, this is a great area for local action. Over 90% of US infrastructure assets are owned by states and localities. Schools and surface transportation are two areas where the ASCE estimated the largest funding gaps that are often funded at the local level. There may be shovel-ready infrastructure projects that require a champion, some creative financing approaches, or someone to figure out how to run public meetings with social distancing.
Secondly, Mosaic Inc. (no relation to Mosaic Materials) briefly operated a really cool platform that allowed customers to essentially “crowdfund” solar projects and receive a good return. I would love to see something similar to allow people to directly invest in infrastructure projects, creating more personal investment options with less risk and more value to communities beyond Robinhood.
Energy and Chemicals
Energy and chemicals provide both a) critical inputs for manufacturing and b) a large number of quality jobs, and c) opportunities for innovation. Wind and solar are two of the fastest growing areas in energy in the US, in terms of both gigawatts (GW) of power generation capacity added each year and in jobs. The wind industry now employs 120,000 people and generates 107 GW of power, up from 40 GW in 2010. The number of jobs in the US solar industry (full-time, direct) increased from 93,500 in 2010 to over 240,000 in 2019. The amount of new solar installed each year increased by over 15x over the same period, from less than 1GW in 2010 to 13.3 GW installed in 2019, for a current total of 81 GW. (For comparison, 1 GW is about 4 natural gas plants, 2 coal power plants, or 1 nuclear plant.) These facilities are highly distributed across states.
For comparison, the utility sector as a whole employs somewhere between 550k and 1.2mm people [2]. Utilities serve many roles, including operating gas/coal/nuclear power plants and wastewater treatment plants, managing our drinking water, and maintaining the electrical grid and natural gas distribution lines. The estimated distribution of these jobs is shown below.
Takeaway: the number of jobs in the growing wind and solar industries is significant. Let’s keep building wind and solar, in addition to the energy distribution and storage systems to take our grid into the 21st century.
Let’s shift forms of energy from electrons to liquid fuels and chemicals. Employment in fuels extraction and production in the US had been on the rebound for several years, and was estimated at over 800,000 jobs in 2017 (510,000 in petroleum, 310,000 in natural gas). Some of the biggest (>$1B) projects that the US has built over the past 10 years are facilities to process and export hydrocarbons from the shale gas boom. For example, there has been a massive ($63B) build out of six liquified natural gas (LNG) terminals in the Southeast and Gulf Coast to export natural gas to the rest of the world. Back in January 2020, China was expected to be the fastest-growing LNG market for the foreseeable future.
As of May, more than 100,000 jobs related to extraction, pipeline and oilfield services had been lost in the recent oil crash (including those of friends and family of our team). This figure doesn’t include the effects on downstream (refining) and export operations. Several multi-billion dollar projects are/were in progress including Driftwood ($29B), Rio Grande ($15B), Formosa ($9.4B), Cheniere’s Sabine Pass ($3B) and Corpus Christi ($16B), and Annova ($4.5B). The future of these projects and the thousands of engineers working on them is currently uncertain; in Louisiana alone (where the Driftwood and Lake Charles projects are located), 40% of LNG investments for the year have been postponed or canceled.
Petrochemical companies had also been building or planning to build large chemicals production facilities to take advantage of cheap natural gas, ethane, and propane arriving by pipeline from shale oil fields. These chemical plants would convert these feedstocks into the building blocks of common plastics, polyethylene and polypropylene. I won’t list them all again, but this was also a huge employment and economic hit. Loss of jobs from these areas wasn’t readily available, but I would bet it at least doubles the number estimated by Rystad Energy to 200,000.
Takeaway: We now have a massive glut of highly skilled chemical, mechanical and process engineers with experience building megaprojects out on the job market.
How can we leverage this? While new megaprojects will take time to plan and develop, the knowledge of how to execute large projects safely would be an incredible resource to many companies working on emerging technologies in materials, synthetic biology, and carbon capture sequestration and utilization (one of my favorites). Biofuels are also an adjacent area that has seen a recent uptick in growth and several new planned facilities, thanks in part to the market created by California’s low-carbon fuel standard (LCFS). Companies like Lanzatech, Enerkem, Aemetis, Gevo, the Renewable Energy Group, Fulcrum Energy, and the “new fuels” arms of oil & gas majors like Shell, Chevron and BP are forging ahead with bigger pilots and full-scale plants. (There is enough exciting activity in this sector that it deserves its own discussion.)
Takeaway: There are great engineers (and engineering firms) available like no time in recent history. The more experienced engineers that can connect with companies in emerging technologies ready to scale, the better.
Emerging technologies won’t be able to take in 200,000 former oil and gas workers (almost the size of the solar industry) overnight. Again, infrastructure projects could help hugely. Many of the major companies that provide engineering services to oil and gas — Bechtel, KBR, Fluor, Worley Parsons, etc — also have arms that perform general construction and environmental projects (e.g. wastewater, solid waste, levees).
Takeaway: Fast-tracking infrastructure projects (private or public) can create huge opportunities to put Americans in hard-hit sectors back to work.
Emerging Technologies
Looking out ten years, I believe that investing in emerging technologies is one of the best ways we can generate jobs and economic growth. As discussed in a previous post, the rise in DNA sequencing technology that accompanied the Human Genome Project had created over 310,000 jobs and almost $800B in economic impact within 8 years of its completion. The semiconductor industry came into existence relatively recently, yet Apple and Intel are both market drivers and large employers. The challenge we face is creating the conditions for these companies to both form and grow domestically, from the garage to the next Gigafactory.
As an early-stage “deeptech” venture capital fund, we support founders of companies who are ready to start building and scale. Upward Farms’s flagship vertical farming facility is under construction in Brooklyn; this facility alone will provide locally sourced greens and seafood to grocers in several states. Momentus’s first vehicle to drive satellites between orbits is assembled and in testing for launch in December — the team has grown to 67 engineers, scientists, technicians, and support staff. Heliogen has constructed a pilot facility that produces 400kW solar process heat, increasing up to 5–20MW in the next year. Pyka is building autonomous planes in Oakland that serve farmers around the world.
Want to join? Many of our awesome portfolio companies are hiring: check out the roles on their website or our portfolio “Careers” page!
To catalyze the growth of emerging technologies, the US has the highest concentration of venture capital in the world — $136B was deployed by VC firms into US-based companies in 2019 [3]. However, the majority of this capital is invested into startups built primarily on software that have lower capital requirements and can exit quickly, in verticals like Fintech (22% of investments) and Machine Learning and Artificial Intelligence (23%), Internet of Things (4.4%), and Information Security (4%). Hard technology startups are underserved in general, especially in the “deep tech” sector where development timelines can be longer and new manufacturing facilities must be developed.
However, new hard technology companies generate significantly more jobs than their software counterparts. For example, Momentus purchases physical parts from suppliers, uses the services of companies offering radiation testing, and collaborates with other cutting edge tech companies to test components in space environments. I appreciate the convenience of DoorDash but it does not contribute to a highly technical, innovative US work force in the same way.
Frustratingly, we lose some of our best innovations during the transition to commercial scale. Take the example of Hanergy and thin film solar, [4] or the story of 3D Robotics and DJI in the commercial drone space. [5] Let’s think about how to reboot manufacturing to win on efficiency and better utilization of resources, while maintaining high workplace safety and environmental standards.
Startups developing hardware for global markets must be extremely highly price conscious and get resourceful around reducing costs. A company’s ability to gain and show commercial traction is critical. Private and public investors (grant programs) increasingly require or heavily weight engagements with potential customers and other critical parts of the ecosystem at early funding stages. On the other side of the table, investors can be better long-term partners by helping startups develop strong customer and manufacturing partnerships early, and better understanding the timelines needed for scale-up.
Final Thoughts
Infrastructure, energy and chemicals, and emerging technologies are just a few paths to creating jobs and building technical excellence for the future,but I think they’re good ones. At Prime Movers Lab, we can (and are!) investing in emerging technologies. Founders, investors, and others interested in building the future, we’d love to hear from you.
If you want to create much needed jobs in the short- and medium term, invest in infrastructure. The absolute dollar numbers at work (in the public sector alone) are large; $440B was spent nationally on infrastructure in 2017 (mostly by states and localities). Clearly a lot falls under this umbrella, and if we want desirable outcomes it’s critical to get more data and industry perspectives to local decision makers. Contact info for your elected official at the national, state and local officials can be found here.
There are opportunities in the energy and chemicals sectors to leverage talent and shift towards areas with more growth potential and less risk. Despite their momentum, fossil-based fuels and chemicals are increasingly risky (global market volatility; high OPEX; risk of environmental accident; public perception). To me, a workforce and resource shift towards meeting the scaling and manufacturing challenges in energy production (solar, wind, bioproducts), synthetic biology, energy storage (all forms), new performance materials, and waste management just makes sense.
If you want to create jobs in the long-term, invest in emerging technologies. Even better, invest in emerging technologies that are both likely to grow (make money) and help create the world you want to live in 50 years from now. As we’ve seen with the growth of new industries, these can actually multiply investment in terms of value generation.
We started to see how quickly things can change back in March. Now that we’ve had a few months to adjust (and finish watching Tiger King), it’s time to think ahead, be resourceful, and hustle. If we as a society can take massive action and press pause on life as we know it, we can take massive action and make changes for the better. I like to think this starts with more open conversations, communicating with data, and specifying outcomes. Then let’s start building.
What do you think we should build?
Notes
- To give a rough sense of jobs created per dollar spent: $1 billion spent on public works was estimated to create roughly 20,000 jobs per a 2007 study by UMass Amherst.
- The large discrepancy is due to differences in how the Bureau of Labor Statistics (BLS) figures are estimated, and how the results of the American Community Survey are tabulated. Both figures are derived from US Census data.
- Globally, VC deployed $169B in 2019. To put this in context, this is just under 1% of the US GDP or about 10% of Canada’s GDP. Source: Pitchbook article, March 2020.
- Hanergy (a Chinese multinational) acquired several VC-backed US thin film solar companies between 2012–2014, including MiaSole, Alta Devices, and Global Solar Energy Inc, including significant IP. For context, Alta Devices’s flexible GaAs thin film solar technology remains the world record holder for both single-junction and dual-junction solar cell efficiency, at 29.1% and 31.6% respectively. Financial problems at Hanergy culminated in its doors shutting in Dec 2019, effectively ending efforts at mass production of these technologies.
- 3D Robotics, founded in Berkeley CA, is another example of the US losing to stiff overseas competition when it came time to enter mass markets. The two companies merged in 2017, giving DJI an effective monopoly.
Prime Movers Lab invests in breakthrough scientific startups founded by Prime Movers, the inventors who transform billions of lives. We invest in seed-stage companies reinventing energy, transportation, infrastructure, manufacturing, human augmentation and computing.
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