Investing in the future, today
An interview with the founders of Catapult Ventures, an early-stage fund investing in frontier technology
Silicon Valley Bank takes pride in partnering with like-minded firms focused on supporting innovation at all stages of development, and we recognize that the right kind of support at the earliest stages can make an impactful difference in the long-term success of an enterprise. Our Frontier Technology team’s Cody Nenadal recently connected with Darren Liccardo and Rouz Jazayeri of Catapult Ventures, a newly formed firm focused on seed-stage investment in artificial intelligence (AI), automation, robotics, the Internet-of-Things and embedded systems. Darren brings with him operational experience, having most recently led engineering teams within DJI and Tesla. Rouz has top-tier venture capital experience from Kleiner Perkins Caufield & Byers, where he focused on early-stage hard tech investing and established the firm’s business development practice. Based on the unique skill set of the partnership and the investments made to date, we wanted to dig in a bit more on their focus and how the firm looks to support companies at their earliest stages.
Cody Nenadal: First let’s talk about what you each bring to the partnership. Darren, how do you leverage your operator background when investing in early-stage companies?
Darren Liccardo: I bring an understanding of the nitty-gritty practical aspects of how you actually build a product from a set of technologies that you can shift to generate revenue from. The big ideas are great — and that’s the foundational piece of any startup — but if you can’t execute on those big ideas and leverage your operating experience to understand where all the pitfalls are in execution, then you’ll fail. So the experience I bring to the table is helping startups evaluate from an execution-risk perspective.
Rouz, what experience from your background do you bring, and how has that helped shape you as an investor?
Rouz Jazayeri: I come with five years of direct experience at Kleiner Perkins, where I worked on our early-stage hard tech investing team. Through Darren’s and my collaboration, we felt that we could deliver a differentiated service as a new venture capital fund to seed-stage entrepreneurs building companies in the areas that we’re so passionate about. We both have advanced technical degrees and both spent time working as operational engineers. And then I have a lot of background in business development and strategic partnerships. So part of the reason we felt really good partnering together was that our skill sets complemented each other.
Tell me a bit about the fund itself.
RJ: We closed the fund at $55.35 million. We have made seven different investments so far, ranging from AI software to vertically integrated robotic solutions. We plan to build a portfolio of about 25 companies with a focus on the seed stage and in the areas of frontier technology.
How do you look to add value once you make an investment?
DL: The operating and business development experience that we bring, not only do we use that for diligence but we also bring that to entrepreneurs to help them build their business. Between us, we have all the bases covered to help entrepreneurs on the technical side, execution side, business development side and partnership side, and we bring all those key elements together.
What do you look for when identifying investment targets?
RJ: We have a passion for technical founders who have experience either through research or practical experience building technologies in the areas in which they want to build a new company. The experience of having actually built something and executed on specific engineering milestones, while staying within a budget, is really important to us. Coming up with the idea is actually the easiest part of building a new technology company. It’s the execution that’s, quite frankly, where most companies trip up.
The other piece is we have several different themes that we are bullish on. We’re in the process of reevaluating our themes for 2019, but “AI at the edge” is one where software optimization can allow you to do really interesting things with AI and computer vision in super-low-power envelopes. We’ve looked at autonomy for cargo drones — not like Amazon Prime, but real cargo, a few hundred pounds; we are very bullish on that potential market.
DL: It’s critical to us from our stage perspective to get early access. We are building a network of interactions with professors and researchers at various universities. This is a critical part of where technology development is seeded. We want to make sure that we’re seeing everything coming out of the university space.
What are the most valuable lessons you have learned so far in both investing and operating companies?
RJ: Probably the single most important lesson I learned with respect to investing is that whenever you make an investment in a company, you’re entering into a partnership. It’s a very deep relationship that has the potential to be years or even decades long. Looking back at my former boss, John Doerr, when he made his investment in Google in 1999, he had a vision for where he thought the company would go, and he’s still on the board today, helping the founders, helping the executive team. So I think whenever we make an investment, we’re looking at it as a potential long-term relationship and envisioning what it’s going to be like to work with the founding team. Whenever our founders need help, we want them to call us. We don’t want them to hesitate. We want them to be completely open and transparent with us.
DL: We also bring an understanding at the ecosystem level of how our entrepreneurs fit into the bigger picture, and we help make sure that they navigate that ecosystem, which of course includes building strategic or customer relationships. Those business relationships are critical as they start to get to a realized product. Making sure they strategize on the correct approach to entering the ecosystem is something we have been through and can advise on.
What trends are you seeing within frontier technology that make now a good time to focus the fund in this area?
DL: A tremendous number of interesting core technologies have developed enough in recent years to make some of these bigger system-level concepts now possible. Transportation is a good example of that, with drones and autonomous vehicles. The convergence of these various sub-technologies is starting to come together now, which makes for a very exciting time. A complete vertical stack solution is something we’re very interested in but also the horizontal applications of those technologies.
RJ: We’re equally bullish on how some markets are finally shaping up, for instance advanced, intelligent robotics. What we’re seeing in a lot of big industries is that the labor force is being squeezed and not replaced. In other industries, the labor force is not big enough to meet the demands of the specific industry, whether it’s long-haul trucking or harvesting crops in the field. Those are two labor forces that face significant challenges. So when we look at advanced robotics, we look at it from a technology evolution standpoint but also from the perspective of Can it solve a real pain point on the labor side?
Within frontier tech, which subsectors do you think could emerge as the next big platform play?
DL: I think transportation is a good example of additional automation working its way through various products, whether it’s something that flies, drives or glides on water. The nuanced view is that this isn’t a situation where you’re net removing jobs from the economy. It’s actually a situation wherein you’re net adding efficiency and value to the economy. Yes, the labor force does need to adjust over time as the job functions change; but very much like an elevator operator from the 1920s, we don’t really need elevator operators anymore. Those jobs become something else in the economy that adds additional value. From a regulatory perspective, I think there’s a big realization that safety in transportation has some improvements to make, and automation is the solution over the long term.
I want to thank both Darren and Rouz for taking the time to speak with us. At SVB, we are proud to support the venture ecosystem, and the Frontier Tech team loves to see investors taking a particular interest in emerging technologies.
