Flying Cars and Coffee
A conversation with Greg Reichow of Eclipse Ventures
Silicon Valley Bank works with the smartest innovators and investors in the industry. I recently sat down with Greg Reichow, a partner at Eclipse Ventures since 2016, to discuss his journey leading into venture capital and to hear his thoughts about the rapidly changing transportation landscape.
Matt Trotter: Why Eclipse Ventures? And what’s the driving force behind your interest in transportation?
Greg Reichow: I believe that to impact people’s lives you have to touch the physical world, and that takes hardware. Eclipse resonated with me because of this thesis around working on hardware, which I had spent my life building. Now at Eclipse, I get to work with people who are solving fundamental yet challenging problems at the intersection of hardware, software and data.
My interest in transportation began with my uncle, who was fascinated with aerospace and aircraft. My first experience of flying was when he strapped me into a hang glider when I was 9 and threw me down a hill. Fast-forward to college, when I was getting my mechanical engineering degree; my dream was to work in the automotive industry. After graduation, the automotive industry wasn’t a great choice because there were no jobs at the time. I wound up going into the semiconductor industry instead, but I always had this dream of going back into transportation.
You spent several years helping Tesla scale. How was that experience?
Shortly after accepting the offer to join Tesla, I received a single-line email saying, “Welcome to Tesla, it is going to be a wild ride.” This turned out to be quite the understatement. My experience at Tesla was amazing. I joined in the Roadster days, the general view of electric cars was pretty negative and people thought Tesla would never be successful. I remember reading an industry report stating that Tesla would go out of business before it produced 25,000 cars. As you can imagine, it was really hard for Tesla to get companies to work with them in the early days. That being said, I knew there was something different about the company. I remember when I first walked into the building, I got this clear sense that something incredible was happening here. There was an absolute crazy focus on the mission to make an electric vehicle that is better than any other type of car, and it was a fun challenge doing something that most people thought would never succeed.
What are some of the main takeaways from your time with Tesla?
Working at Tesla required a fundamental rethinking of how cars are designed and built. Typically, with traditional products there are a lot of trade-offs, but with electric cars it’s possible to get very high performance, incredible safety and very low operating costs per mile. That was really the driving force behind Tesla — trying to convince people to go electric not because it was the right thing to do but because the product was better in every way.
Another unique experience that stuck with me was Tesla’s design philosophy. We strived to always design products from basic fundamentals and ignore conventional industry standards. For example, we hired people from areas completely unrelated to the automotive industry, which complemented the skills and experience of automotive experts quite well, and that combination added great value. While this was helpful, I’d say there was also an important balance to achieve: You can’t have people who have expertise in nonautomotive areas working on problems that were already figured out years ago.
Why are you so excited about air transport being the solution to a lot of the problems facing transportation today?
A good example of why I’m excited about air transportation parallels what Tesla was able to do with the architecture of the car. In the early days of electric vehicles, people would take an existing car design and try to retrofit it to be electric. They would remove the car’s motor, put in an electric motor and find a place to stuff the battery as if it were an afterthought. That’s not the right optimization. A big breakthrough was when we decided to design the car from the ground up so that the battery was in the ideal position from a physics perspective, which is as low as possible. Once we did that, we could then put the motors where they really should have been in the first place. This shift in thinking created a very different car and a very different experience.
While many people working in aviation today have been trying to take the motor out of the front of the aircraft and replace it with an electric motor, that’s not the right way to build an electric aircraft either, and people are beginning to realize this and rethink the entire design from the ground up. Aircraft are in the same early stage that electric vehicles were in many years ago, which is really exciting to think about. When you go through that exercise of designing from fundamentals, the amount of improvement that you can achieve by having that kind of ground-up design is actually pretty amazing and very similar to the level of improvement that Tesla saw with the car. That’s a big reason why electric aircraft are quite interesting to me.
In terms of the issues in transportation today, how do you think electric aircraft will alleviate some of those pain points? How do you see it playing out in the coming years?
Think of all the inputs into the issues around transportation today. The population of the world is growing dramatically. People have increased economic access, and, as a result, the percentage of the population with the desire to move around the world is growing, as well. Add to that the fact that existing transportation systems are already saturated today — look no further than the [San Francisco] Bay Area or Los Angeles. The truth is you can’t just keep building more freeways because they’re not a good point-to-point transportation system. Freeways are fixed infrastructure, and they’re definitely not scalable. Contrast that with air travel, which doesn’t have any fixed infrastructure between two points and is actually twice as efficient as a Prius on a per-mile basis.
That being said, a big problem facing air travel today is unit economics. The cost of air travel works only with large batch–mode transport, which implies airports, which implies a terrible experience. We have to break the model of large batch transportation so that it becomes a more individualized experience. Individualized air travel drives the need for autonomy, mainly because when you are paying for two pilots in a four-seat aircraft the economics won’t work for most trips. Removing the pilots reduces the cost and increases the capacity of the same aircraft by 100 percent.
I think about major airliners today that run on autopilot for the majority of the flight. How much difficulty does autonomy really add to the problem faced by companies developing these new types of aircraft?
It’s a dramatically simpler problem than self-driving cars. While autonomous aircraft sound like a crazier idea, the reality is that it’s much less complicated. With air travel, you have some complexity at the beginning and the end of the trip, but when you’re in the air it’s a very structured environment, and there are far fewer actors to contend with. I firmly believe we’ll see full end-to-end autonomous aircraft before we see Level 5 self-driving cars.
There are clearly technological hurdles that need to be overcome for autonomous transportation, but the larger challenges seem to reside in regulation and public perception. What is your advice to companies trying to navigate through these risks in the transportation industry?
We’re already seeing it today; countries that are more forward-thinking are where people are doing more work in this area. But regulations are not always a bad thing. For example, having standards for how aircraft communicate with one another is certainly a good idea, and it is a specific area where regulations can be a boon rather than a burden.
Today, most commercial flights operate in controlled airspace along defined flight corridors. The FAA [Federal Aviation Administration] is investigating a more flexible flight path model where air traffic is managed effectively between any two points. This will help further improve operating efficiency and reduce congestion. Defining standards to enable this flexibility is a great example of positive regulations.
In terms of advice I would give to companies in this area, I would say: Develop a niche and own it. Transportation is a $4 trillion industry — no single player wins this game. When I think about the characteristics of a successful company, I think about the components that will impact this industry in the future, and then I look for people and companies that are solving parts of that problem.
By having a very focused initial target market and attacking the core part of the problem first, you gain the experience to do it right, which allows you to expand and become one of the dominant players in the industry. At Tesla, the sentiment was to build the technology in a very focused way on an extremely low-volume car — the Roadster — and scale it up into a broader market, Model S and Model X, and then go after the broad market, the Model 3. I would say we’ll see the same process play out in air transportation.
I want to thank Greg for taking the time to share his thoughts and experiences. I hope you enjoyed the conversation as much as I did. — Matt Trotter
