Ryan Gibson, Eclipse Partner on Physical AI, Robotics and Industry transcript

Hi Ryan, welcome to Intro 3. >> Hey, thanks Grace. Thanks for having me. Excited to do this. >> Same. I'm so excited about our conversation. But before we dive into the conversation, I want to give a quick shout out to our amazing sponsor. This episode is brought to you by Navius, the ultimate cloud for innovate for AI innovators. Navius provides AI infrastructure you can count on. Combining reliability and speed with flexibility and engineering support are matched by hyperscalers.

AI leaders like Matter, Shopify, and Hicksfield already partnered with Navius to run their AR workloads. Plus, ventureback startup can save up to 150K on compute costs when they apply for access. Visit navius.com or nebas.com/startup to learn more. Okay, so let's in uh I want to start with your background. So honestly um you know I love the Eclipse team. Obviously I love one of your portfolio company Batrock and I feel like you know Boris Calvin and the team has been very doing amazing amazing things um as well as like you know I feel like Leure has been like blowing up on LinkedIn lately [laughter] >> absolutely conference.

So I want to start with like you know um you know before we dive into Eclipse uh maybe we can talk about your background. So like you have such a robust background as you have intern like Google, Facebook um you know you work at ABC and you co-ounded a company before going back to investing. Maybe we could talk about what were some core lessons that you've learned early on in your career kind of shape you into who you are today. >> Yeah.

Oh great question. Great question. I um I kind of always took the next step in my career out of curiosity and where I could go maximally learn and hopefully have impact. Um and each one of those arcs g gave me a lot. Um so I did I did go to University of Wateroo up in Canada and that afforded me the opportunity to go sample a whole bunch of different opportunities during undergrad. I got to work at Google, Facebook, Microsoft and see what great engineering looked like, what ambitious projects look like.

I think what I took from most of those experiences including joining Microsoft postgraduation uh was what gold standard engineering looked like. as a electrical and computer engineer and I get to work with teams with effectively infinite budgets to go spend and build remarkable remarkable feats of engineering. I also learned uh the flip side of these companies which is infinite dollars and world-class engineering doesn't necessarily equal great products. products are built with customer obsession, with focus, with the right incentive structures.

And although great products are built at great companies, I also saw the flip side of large organizations and how they can be deficient in actually innovating and delivering delivering products of cost and quality that actually make a customer want to get up and purchase them. So, a lot of a lot of great lessons from them, a lot of um on the positive and the negative working at big tech companies. the sort of the culmination of that was working at Microsoft and shipping hollow lens version one and two which was an augmented reality headset that that was I think pretty um pretty early for its time and and reach some pretty awesome heights.

Um I then worked at 8VC which was which was incredible. It was sort of a random chance opportunity to go work in venture for someone named Alex Kollesich um and Joe Lonzdale over there just as the firm was starting and um I would say that was the most most formative uh early early career thing that I did. I basically just fell in love with startups and venture capital. I just saw the power of very small teams working with a very pure incentive structure of building products that actually matter for customers. that being the only incentive in how you make decisions about technology, about go to market, about how you spend your days and how you know what is rewarded culturally within within an enterprise and that was it was it was enlightening and it was so different from my experience working in big tech.

I mean it was it was night and day and um I also learned that this startups is what I wanted to do for the rest of my career. I just I saw the effectiveness of small teams and on a on a dollar in basis to great products out basis. Startups win by orders of magnitude. And there's something I love about efficiency as well. And so I learned I also learned there's there's great people building startups and there's great people on the venture capital side of things.

It was uh it was an industry actually quite foreign to me, but I'm very grateful that um the ABC team took me in and uh I got to got to do some great work there. It turns out I got way more than I bargain for. I also learned uh I wanted to build a company with someone uh that I did build a company with, my co-founder Maria, and uh we built and scaled a construction technology company to a few hundred million. And the learnings from that are uh are vast and deep and and learnings I use today in my work at Eclipse which I'll get to in a second.

But learn so many things about how to build companies. probably the most the most important and especially what I do today and the work the work I do with founders and the work we do in capital allocation is f focusing on market quality focusing there's there's a very small number of very important principles or axoms that companies are built on from their inception who is my buyer what's the severity of the problem I'm going to go solve for them how do I get to um who are the people around the table that I'm going to build this company with?

How do we treat each other? What are the cultural values by which we make decisions? What technology decisions am I making about the the platform that I'm using? How do those decisions enable or constrain what the company is capable of doing? And um I would say as a founder going very deep in building to a company to to the scale we did. I got to see the cause effect relationships between early decisions that we made about the company we built which ended up being great especially as first-time founders but just the the limitations that we put on ourselves as well as the tailwinds we gave ourselves by interesting market selection.

And I'd say that's what um that's one of the the primary things I bring into into the work I do with the with Eclipse today at Eclipse today, which is not just capital allocation, but we really think about ourselves as operators with capital and a team of people who have been in the trenches building businesses to significance and that informing the partnership we have with entrepreneurs. And the most the most extreme sort of ace of this is when we partner with people from inception.

When we're actually building companies alongside entrepreneurs from in times a clean sheet of paper and you mentioned one of our favorite mutual set of people, Boris and Kevin from Bedrock. It's precisely what we got to do with with those guys. Um how do we go from in your blank sheet of paper and really map out where, you know, where in the market are we going? um what what are the sort of ideal customer profiles to go bring autonomy into our built environment?

What are the first best machines to go do? How should we think about when to do our second machine? So, there's all these great really important um decisions to make that us as sort of operators that have the lived experience of building companies and being in real organizations and really shipping things bring at that early stage and it's wonderful. Um so that that's a summary uh we've done sort of with my personal background too.

Grace >> for sure. Um I mean I saw on LinkedIn before you know when before you joined our dinner but I didn't know in depth of like because obviously I was just looking at your last company it was um it's so like very successful and you know you guys raised like over um 275 million from like some of the top VCs whether it's like ABC Tiger Global and like everything else and like you know I feel like not many VCs have built a company before.

So um I think it's a really unique experience especially I feel like in the um deep tech space which is like extremely hot like every day whenever you know I launch like I launched my own like job and like top company list and that every list about like anything deep tech hard tech is like something that's very popular nowadays but I think back in time it's probably like one of the unsexy like category and like now it's like really popular.

Um, I have so many questions. I want to start with like >> um >> um you mentioned a word that I took notes on which is market quality. Um I think Boris said the same thing on our podcast which is like essentially like you know you have to have a sector that people are like chasing after you then like you are solving a problem that doesn't exist. So I want to start with what is market quality? >> Market quality I'd say put simply is the speed and volume by which customers want to pay you to solve their problem.

Um and there's there's a few things in it, right? Uh almost mathematically it's how do I get the attention of people in a market >> and that is a function of the problem you're solving as well as their attentiveness and as well as the relative state of competition in the market. Okay. Are you entering a markets can be high quality but can be full of competition and therefore the challenge to a specific startup can actually be incredibly difficult. the market can actually be low quality because there's too much competition even though there's many dollars flowing.

Um it can be almost impossible to break in. Um the other is just the sheer the sheer size of the pain that you're going to you're going to go solve. So I I would give you an example um even to compare and contrast um within given markets like even construction for example [clears throat] parts of it are extremely high quality parts of it are not high quality with regards to with regards to selling products into it. Um, for example, it's extremely challenging to build another project management application within within construction.

Even there's lots even though there's lots of dollars spent on that problem. The incumbents are very very strong. There's lots of startups trying to go after that same thing. Software, pure software budgets and construction are being spread more and more thin. the channels of getting to customers are more and more noisy. But there there's a there's there's all those challenges in going after going after a market that part of the market.

On the flip side, we can take bedrock robotics which is doing autonomy for heavy machinery. You know, the market is so unbelievably massive. You're selling into a labor budget line item. Okay, that's 40% of the industry is your budget. >> [snorts] >> um every single construction company you talk to doesn't have enough labor and the problem's only getting worse. And the problem's only getting worse because there's exponential demand for this new asset class coming online in in in data centers and and hyperscaler data centers for AI. though you have this like unbelievable constriction in the market that like every single customer is feeling and they're just looking for anything and everything to get more productivity out of their labor force and increase their capacity and it's I can tell you when what it looks like when you have a high quality market is most of the calls you make to prospective customers get answered and the follow-ups happen very quickly.

Um this is by the way when we are when we're building companies with entrepreneurs this is one of the principal things we're testing what's the rate at which our conversations convert to real lois orus or even contracts even in the incubation stage are we feeling that pull are we feeling those tailwinds are we feeling like the market is working in our favor and people want to really want to spend money and are really really desperate for someone to come save them um in in problem areas. >> Um, I'm taking notes.

So, how do you find something like this? >> There's a there there's a few ways. >> Wait, I have another question. You Oh, [clears throat] okay. I'll let you finish this one. I'll write it down. Sorry. Keep going. >> You know, there's there's a few ways. Um, there's no substitute for just having as many conversations as you can. I'm I'm a huge believer in boots on the ground market research. um talking to real executive buyers, real conversations, open-ended problem discovery, um non-leading questions, especially when you're forming your thesis.

How do you There's actually a real art to going and sort of extracting out the right level of problem that's worth solving. Mhm. >> Um, but it's really boots on the ground, direct conversations with real real buyers >> that will have budget or have budget and to tease out the, you know, the set of conditions that would be true for them to to hand over their dollars. There's other ways of doing it. And, you know, at the end of the day, this is where this is where a lot of the insights flow.

Um, but I can tell you it's the accessibility of those insights is actually very different for different people. And I think that's this is actually the the real the real interesting part about company building and how we partner with with entrepreneurs especially at Inception is so often we're partnering with entrepreneurs who are world class in some technology area but are coming into a space that we know extremely well and are extremely well connected to. that they they may not have spent a ton of time in.

Um, and our ability to supercharge both the insights we already have from being operators in those spaces, knowing the set of problems, knowing the set of budgets that actually exist within those industries. Um, level setting on which problems are actually deep and worth solving versus which are sort of surface level and you can solve them, but it doesn't um it doesn't lead to a durable generational business. Um, and the set of conversations to set up for those entrepreneurs.

Um, that's actually one of the the main areas entrepreneurs want to partner with us on is how do I get those market insights? How do I actually really understand the willingness to pay in a market I've maybe never been in, but I want to. And why do they want to? They want to because just grace, as you said, these these physical and critical industries are really hot right now. People have realized that, you know, 70% or more of our global economy is these physical industries and they're actually the largest hams in all of in all of the markets.

And people realize if they apply technology in just the correct way, you can build massive businesses. You can build the largest businesses on the planet. [clears throat] >> I have so many questions there. One is like you talk about like you know having boots on the ground and then talking to the exacts. um what would you ask them and then what would be the answer that you're looking for? Obviously, you know, budget or like does a budget exist and stuff like that makes sense, but like I think the the difficulty is like how do you really first of all like getting the real answer because like people are not going to be like oh here's our like spreadsheet on like stuff and like what would be the way that you're like spamming if something is like real or not.

Yeah, it's that's a great it's a great question and really depends on really depends on where you at in your in your journey to discover like an opportunity, right? Um when you're first when you're first beginning um to do open-ended exploration to really make sure you're turning over every stone, what you're asking for is very open-ended questions. Um where have you experienced the most loss or inefficiency within your organization?

By the way, you always have to double click when you're talking to a potential executive buyer of a new solution. You always have to double click. >> You always have to double click on what do they mean? Why does that problem exist? Is it the real problem? Um is there something upstream or downstream that might be creating that problem that's far more important? is the inefficiency or loss that you're experiencing in your organization as a result of a process that shouldn't exist in the first place.

And so you really you really have to create the the tessillation of the of the market and the enterprise you're talking about to really pinpoint that okay what they're really talking about is a pure problem that exists for them. And then you need to go sort of triangulate that um with multiple other multiple other people you could sell the product to needs to be scalable scalable highv value problem. um at some point in time you sort of flip from a okay this is a very clear and consistent economic problem for my buyer and and what I'm talking about largely applies to B2B is probably a completely different playbook for DTOC um type companies that um is not my specialty for sure but you know when you have this semblance of an economic problem you've really triangulated that is real and is like unsolved and you've heard all of the ways in which companies have tried to solve the problem before and have not made ground on it and you understand that all these things, you can start getting into very specific conversations about solution quality that you you you know this is really when the entrepreneurs doing a ton of their magic, right? this is that okay I think I have a set of insights about product a unique a unique product that like by the way it it turns out to be the case only those entrepreneurs could have come up with with their with their backgrounds with their authenticity with their unique insights about all the other things they've seen in the world before they even learned about these particular problems okay what is that special what is that solution I actually envision that's unique and differentiated and can we actually put that to the test can Can we go make a a sales deck for a product we haven't built yet and really get into real customer conversations?

I can tell you we're working on a new incubation right now. Um it's going to be an industrial marketplace. We have [snorts] uh we've gone and built the sales deck for the product and the platform that does not exist. um but what it will be or what it could be um if we have you know the next three to six months to build it and we've presented it to executive management at dozen companies now that that need this sort of uh what we think need this sort of part of their their operations done fully autonomously we've pitched it and we've put LOIs in front of them and many of them have signed already and this is by the way we've just incorporated the company we'll doing uh we'll be do doing a financing shortly here, but you really have to put the solution in front of the market um and get them to sign something and get that get that skin in the game.

Make it real, put it in front of them and um you'll start you'll start seeing you'll start seeing the objections when you start asking people to sign something, put their time on the line, um put their budgets on the line. That's this is the very clarifying thing. And my belief and and Eclipse's belief is this is something that can be done. A lot of it can be done in the very early stages of a company and you can get these insights and you can make good decisions about the the market quality of a company before you even begin.

Of course, there's no substitute for being in the game and you learn a lot along the way for sure, but there's a lot you can frontload. >> I have like two set of questions. I'm sorry. I'm like a motiv I I feel like I have to so like I feel like I have like always have like two set of questions in my head. So one simple question is like about the journey of like talking to the customer right like I always like I always heard about the idea of like you have to sell before you build the product yada yada but like the problem is like how do you sell confidently right like you can't just be like >> yes >> straight up be like hey we're building this can you sign and then what if I can't build this what if like you know I can't deliver the product and then wouldn't other people's job on the line be like kind of destroyed because of me so I I I don't know how do you kind of like ask people to sign.

That's like from the company perspective. The personal perspective, it's like um I feel like you had such unique qualities to be obviously I feel like Eclipse is like a really unique place as you guys kind of co-built the company from the scratch with the founders. But yet on the other hand like you could have been building like one company straight up, right? Like like what you have done before like first of all like why did you you know leave the previous company? since like it's doing well and then like um how do you justify the opportunity cost of like you being the CEO of like you know a bad rock or something? >> Yeah, for sure.

It's it's a really good question. I think at the end of the day our brains are all wired differently and some combination of I I could I could speak fairly confidently for for myself and also my colleagues at Eclipse. I think if we were doing venture capital the traditional way, we'd all be pulling our hairs out and we would be we would be wanting to go operate businesses again. Um, but I think we found what is a very unique blend of high conviction capital into a small number of uh companies and missions we really believe in. um that allows us to not be a mile wide and an inch deep, but allows us to be through partners with our entrepreneurs in a way that connects us to the operations and the building of those companies in a way that I think for myself at least scratches that itch on the operating side.

Um but but personally, um I just get so much out of out of breath. I I [snorts] love I love I love being across so many industries, so many technology areas, working with a constellation of incredible entrepreneurs. It to me is personally how I love spending my time and where I can be most effective in compounding these learnings from inception and from building now almost a dozen companies from scratch personally either very on the spectrum of very very very involved as I did with my company to assess assisting deeply in the formation of new companies within Eclipse and so I think it's just personal style preference and what what gives you energy and and where you can most contribute And like I said, if it was any other way, if we were doing traditional venture capital, I don't think any of us would be I don't think we'd be enjoying it as much.

I'll tell you that. Um, and I can talk about more of my views on the industry maybe later on. The other question you had, what was the what was that first question you had, Grace? >> The first question was like, u, how do you sell something that doesn't exist? >> Oh, it's a great question. It's such a great question. So, you sell it with credibility. Uh, I'll I'll say that at the end of the day. Like, in order for you got to think about your customer at the other side of the table, especially if you're asking for large large dollars from them.

Um, which by the way, you need in order to build a substantial business. Asking that from them before you have a product and sometimes even before you have a company, which is when we do it, right? Some people are like, "Great, where's the company incorporated?" And we're like, "It's not incorporated yet." Um, how do you go build that credibility when nothing exists? Well, something does exist. And this is I would say where the partnership is so beautiful.

So, f first is within the founder themselves. Um, who do we work with? How do we work with them? Um, we're largely working at inception with entrepreneurs that have at least some proven execution quality. They may have been repeat founders, former founders that, by the way, could have been extremely successful. Others that really went for it and didn't quite make it. [clears throat] Others that learned a lot and are compounding the learnings into their next thing and didn't quite get where they wanted the first time and sometimes have a huge chip on their shoulder to go prove something, which we love as well.

And then the other type of person is this sort of executive at an inflection point in their career where they've just had a decade or more of just excellent excellent continued sort of exponential um execution in some very important space and have shown that they can execute at a world-class level and the the logical thing for them to go do next is to build something. they just haven't done it yet for sometimes life circumstances, sometimes um the opportunity costs for them, you know, they just kept getting pulled in by great entrepreneurs themselves that they were working with who didn't let them leave.

I mean, we just we just built a great company uh that we unstalled last week called Noative with uh Amir Frankle. Um Amir is a head of AI at Meta. He had a lot pulling him. Mark kept asking him to do more and more and um you know sometimes sometimes that brings you to a little later in your career when you're going to start a company. But these incredible people um these [clears throat] are the types of people we work with at Inception.

And what this allows us to do, frankly, is to go after go after opportunity sets where execution is a little bit more of a given or we can go for something a little bit more ambitious because we know we can go to the customer earlier with credibility and especially that joint credibility, that credibility from the entrepreneur that what they say they can build, they can build. And then the joint credibility from Eclipse that our capital is behind this entrepreneur and that the company is going to be sufficiently funded to go deliver that exceptional product and especially if that exceptional product requires uh it can require $100 million of R&D and product development before it's actually in place.

Well, the number of firms that can go credibly sit beside an entrepreneur and say, "We are behind this person, this exceptional person, this is one of a small handful of investments we're going to make at inception this year and we are all in on them." It really actually does go a long way to getting entrepreneurs, getting companies signed up in meaningful ways ahead of product existing. It's really about building confidence of execution on the other side of the table.

And so we do it that way. And that's why, by the way, when we're building companies, not just actually when we're building companies, this happens throughout our entire company, all of the company's life cycle. there's sometimes just more opportunity to do it at inception, but I mean this happens this happens with um with Cerebrus and the work Leor did um with Andrew in some of the the major deals before before the IPO.

I mean, we can go with our entrepreneurs and partner exceptional high conviction capital and operating capital with entrepreneurs to to pull in incredible uh incredible commercial uh commercial partnerships and channel partnerships. I okay so I want to dive into a little bit about deep tech in general so obviously [clears throat] like you know you guys invest in a lot of like robotics company energy company among like many others let's start with like you know the sub segment of deep tech like why first of all like why is deep tech a thing right now because obviously I think the most obvious reason would be like software is getting so expensive um like the marketing the sales like all the crazy stuff that's happening like the competition is very high like you mentioned the earlier which is like the market quality is not necessarily the best right now but so that given a chance of like I guess like um hardware becoming like a very popular subject um and the other part is like uh I mean I I call it that has a new SAS because it's like where is a service >> I haven't heard that before I like that >> yeah I mean I yeah I honestly the the word past.

I never heard about it until like my fellowship like people from uh you know have like a fellow from Berkeley and then he was uh he was reporting on Berkeley and like Berkeley startup trends and then he said has the word has I thought it was like the H school of business and then obviously [laughter] service I was like okay great um so >> let's go >> okay so and then I want to talk about like the sector in general why it's hot and obviously there's also the you know uh like people want to build things in America and all that kind of stuff.

So, um the other part is like I want to talk about like the subsegment of things that you guys are looking at in Eclipse because there's obviously terminology called Eclipse economy as like Eclipse companies sell to each other. >> Absolutely. >> Uh from our past interviews. So like I want to talk about those two specific well like one is like the general trends the other one is like specific subsegment trends. >> Yeah.

Well, well, the Eclipse economy is is incredible, which is we have been doing this for 11 years now. >> Mhm. >> With extreme focus building full stack companies and the overlap of complimentary resources, products, uh best practices, supply chains, um strategic resources, insights, what have you. is just like so genuinely powerful and um it's uh it's just compounded and continues to sort of grow exponentially um as our AUM has and our ability to raise more capital and also the companies themselves growing exponentially and so the eclipse economy is really just like this now quite large part of the start the total startup um value in in deep tech that is like super aligned and complimentary and is free to share great best practices and and and work together in a way that's um incredibly constructive.

So um we love that. I mean it's just nothing gets us happier when two Eclipse portfolio companies are end up working together because it's just so synergistic. Um and that we can be helpful sometimes in connecting the insights that this portfolio company is working on this thing and this portfolio company is working on on Y thing and them working together actually just accelerates both of them. We're so happy when we can facilitate that insight and that that that value creation moment.

So that's that's the eclipse economy um which is um which we love. Um yeah, deep tech is having a moment um for sure. I I think there's a few things. So, obviously, there's just been there's just been results, right? So, um on the venture side of things, um you just had some pretty incredible IPOs with SpaceX, Cerebrris, of course, a portfolio company we were first investors in 10 years ago at the beginning of the company, um which is a remarkable IPO, largest. >> Julie, the CMO spoke at our conference as well. >> Oh, exactly.

I know I know you're quite close with the with the team over there too and it's um it's an it's an incredible company and uh one we're very we're very proud of but it actually really validates the the deep tech thesis the full stack I would call it the full stack thesis by the way I think a lot of people are um now sort of they have this hammer called deep tech and they're sort of like hitting everything with it. I think the the rewiring I at least the way I view it here is it's really about being full stack and the question predominantly is how much do you vertically integrate your product how much do you vertically integrate your your business model and how much do you vertically integrate your value chain um this is this is really the deep roots of how you go create enduring enduring value you know the deep tech thing is really okay if I'm entering these industries like construction manufacturing logistics, defense, space, etc.

And I'm moving atoms or I'm helping the world move atoms in a different way, in a more efficient way, in a more productive way. I probably need to touch the physical world. Not it's not a requirement, but you know, you can you can get incredible gains. And often times the more engineering disciplines you have in house across that full stack product um the more you can do in the world on a on a on a per performance perdoll basis.

There's there's definitely a correlation there. But that's just that's just about products. The real full stack companies really innovate as well on what's that end product or service they're actually selling. So are you selling a piece of capex that is you know a deep tech product into a legacy value chain without changing any of the go to market dynamics? Well, you may actually not get you may not monetize your innovation effectively.

The incumbent industry you're selling to may not value the performance of your system in a way that it should. Um, and so the question therein is, well, do I want to sell my deep tech product into a legacy value chain or do I want to disintermediate that value chain entirely and sell the actual service um, instead of letting the incumbent do it? And by the way, what do I get when I do that? Well, I probably delight the customer more that the incumbent was servicing because the incumbent's slow and unresponsive and not tech enabled and all these things.

So, I can go delight the customer more. can probably increase my sales price as a result, better quality of service, um, better performance, and I also eat their margin. I disintermediate them. Um, I not only eat not only do I disintermediate their margin, I disintermediate their waste. And so, we really like thinking not just about deep tech with regards to products, but full stack with regards to vertical integration.

And I think when you get those two things right, um, you get the results we've seen in the market. And that's why people are so excited because some fairly monstrous companies have been built in [clears throat] the last decade here. >> Maybe we can use some of your portfolio as an example whether it's like you know Bat Rock or like Jetson or like Peak or like whichever you like the most. But um maybe we could start from >> pick my favorite child. >> Yeah.

Exactly. >> Yeah. Yeah. So um maybe we could start from like the full stack perspective on like you know how is [clears throat] it different than like the traditional version of this problem and like you know how does a company come in and maybe the building stage as well. Um I also like the sub question would be like since it's like you know these companies ranging from like construction to climate to energy to like logistics like it's literally in four different sector.

Um, how do you think about as your as you know as a company builder slash investor like how do you really study the industry to make sure that you understand the whole thing as like you know do you pick a sector every year to be like oh let's just go deep and then build something here or how do you kind of like also like digest the amount of information that you have to like have and then also like a sub question would be like you know obviously like you know Boris and Kevin are from like Whimo And like you know you guys really go after the executives at different companies but I guess the the question would be like how like obviously they are exacts at these companies like what what would you say is like um the experience working with a big tech exact cuz like it's really difficult to tell who can actually build a company sometimes like I mean yeah every day I get like even myself like get like connected to like a lot of like second time founders like they they may have a public company or they may exit a company some way but it's really difficult to understand if they kind of still build it because of like their me mindset it's like very fixated on like what have worked in the past but like what have worked in the past in the AI era is like very different right so how do you kind of like exam like who would be a good builder versus like not >> yeah so great great few questions there so one of the you know the question about uh how do how are we comp how do we stay informed um knowledgeable useful in in so many different industries um I think it's a great one I think the question is how do you have a prepared mind and I think there's there's a few there's a few answers to it one is I'd say we're like on the ground like I think that the firm is structurally set up to be operators with capital we are boots on the ground working with our portfolio companies with customers.

We are, you know, at industry conferences. We are constantly refreshing our rolodex ourselves of people in industry. Um, we are set up as a firm to be integrated in these industries we are investing in. And and I think this is super powerful to stay really really fresh in. And the reason we're able to do that is, you know, although you did mention a good number of industries, there's so many things we don't do. Um um and I think this ability to sort of really focus on our critical industries, our most critical industries, it's a finite and countable number of things we can be quite competent in that we've set ourselves up to be in the flow of.

The other thing I'll say is we're also structurally set up um to have so few investments. We're we're we're a high conviction firm with very high concentration and this affords us focus and so we get to focus on a small number of opportunities which we can master instead of being spread thin across hundreds and hundreds and hundreds of investments that you know the industry knowledge and the working knowledge of what is happening is diluted so so greatly.

You would think maybe with more portfolio companies you would have more insights but really at some point in time depth of insight is far more important than just the sheer number of you know broad data points that you have. I'm I'm very very proud of the fact that we have under 70 active portfolio companies with our 12 billion in assets under management is a very very concentrated portfolio and that that allows us to really have genuine insight into the spaces that we're in and be good partners to our to our entrepreneurs.

And then I would also say look we the way we um build our team here at Eclipse is we're former operators coming from these industries where we have very very deep operating experience and and we bring that in. But you know my general take is unless you're unless you're in the flow with the with the portfolio companies your working knowledge of what's relevant can fade after a few years. And so it's really about that continuous motion of being in the flow and being partners with our entrepreneurs.

And I mean the number of the number of anecdotes I can give on that are just sort of endless. like the number of uh warehouses and manufacturing sites that my my partners like Leor and Charlie and Jaten are in on a on a monthly basis. Working with their portfolio company, bringing them customers and doing that in the flow work is just incredible. The number of construction sites Aiden and I are on is like it's very high.

And so we're just we are in the flow talking to industry constantly. You asked a really good question about founders uh and knowing you know knowing which founders and especially executives from companies are going to be effective founders. This is like a such a good question and um there's no there's no perfect formula. Every great founder is just different. They appear differently in the world. You have to think from first principles about each one of them and really understand if the the fit of the thing they're going to go do also is really in line with their superpowers and they're they're and of one nature.

I can tell you probably the biggest drop off though in in personality trait that we sort of look for um to see if uh a incredible executive at at a great company is actually going to translate into being a great founder is um is just their their insatiable learning appetite um and the sort of agency by which they try and piece the world together. Um, and what I mean by that is there's a few behaviors you can sort of see.

Um, especially at the inception stage, you can really really see when people are like critically trying to ask and answer hard questions about a thesis and that they themselves are seeking out any possible resource that can give them more clarity. Um, I find, you know, often time and and are they willing to go do that themselves? Do they have the agency to go find that, find the resources, do the work themselves, come up to the insight, come up with the insight, own that insight, and and move forward.

Um, and not take it for granted that, you know, it's just going to happen. Um, I find the the the large company executives who are fantastic in their own right, don't get me wrong. Um but where they sort of fall over in their ability to build build companies is they just have so much in their favor at the big company. There's just such an apparatus to go seek answers to go set strategy to go have distribution on a new product that they're thinking of and there's just so much in their in their favor and they kind of forget how to actually make that happen.

Um, and so you'll kind of see you kind of see executives, great executives from these from these places. They try and start a company and it's unsuccessful. It's it's usually because they just they they benefited too much from the motions already in place and they couldn't actually do the work themselves. Because really at the end of the day, if you're founding a company, it's a it's a fundamentally a process of invention.

It's it's coming up with a new product or a way of attacking a market that's never been done before. And it really requires first principal thinking, customer centricity, a unique craft that you have about the world. It may be a technology, it might be a type of product, it might be a business model, but whatever that like end of one craft is, you need to apply it in a first principles way. And um yeah, I just I just see a difference of bifurcation in people willing to do the work and like obsess about the details and piece the world together and people that kind of never break through on that stuff.

It sort of was the thing that was always handed to them at the big company that they could execute on very well but never had to like invent from scratch. Um I like um maybe we start from like >> [clears throat] >> uh this time I'm not going to ask two question though I have two questions but okay let's start from like you know maybe we use Batrock as an example. So I know that you know uh when we're like doing the dinner and then I saw the picture that you and you know Kevin Boris like everybody were at like the factory and stuff.

So maybe we could start like like walk us through like first of all like how do you guys kind get connected to um the founders and then like how when you're saying like boots on the ground like for example let's say the three of you like visited like a construction site like what [clears throat] are the question in your mind to like validate during this like construction site visit? >> Yeah. Okay. So great question. So how did we get to know uh Kevin and Boris?

Well, Kevin um Kevin was a portfolio founder in Fund One with Seth uh one of my partners, Seth. Uh he was the founder of a company called Marble. So Kevin was adored by Eclipse already. Um and we had gone, you know, into the trenches with him to build a previous company. Um we independently met Boris, uh through Aiden, uh obviously who you know super super well. in got connected to Boris and it had we had found out that those two were interested in working together and um you know those so so super super super warm introductions and knowledge of both of those two but really the sort of what can we go do together phases when you sort of meet people and this so often happens in our in our world there's a lot of random particle collisions and you meet people but you got to go figure out what you actually want to go do together, especially at the start of a company or a company that doesn't exist, you sort of have all these options on the table.

And um we just we had the chance as a firm to go partner with them, to go create lots of clarity on the core thesis and to go do that that fundamental work of learning about the industry with them, helping accelerate that process, help getting them into customer conversations and getting those boots on the ground cycles that inform the product roadmap and and frankly the road map that today I'm very happy to say the original strategy document and the milestones set out at the beginning of the company when it was incorporated have been executed on to a te to the month.

All of our core milestones and there was just such intentful thoughtfulness at the beginning that uh we get to do with them. And that's maybe to your second question like what are you doing when you're on site? Um what are you doing when you're with the customer? You know, you're doing you're doing everything from I'm learning about how an excavator operator interacts with this machine every day. I'm learning about the day in the life of a superintendent that is fundamentally responsible for coordinating the work and getting work done.

And that's a you know this is this is almost to the level of like how will my autonomy fit in the context of a [snorts] real operating site. Who will be actually overseeing it? Who will be interacting with it? Who's a key stakeholder? What are they concerned about? What hesitations would they have? How would they manage? How would they manage the question from their team of is this going to go, you know, you know, how many of these do we need or am I going to be still using it?

Am I going to be overseeing a fleet of them? Like all these things come out and what you get to do when you're on site is you get to hear what's in people's brain on how they're actually going to integrate this into their business. That's a type of learning you're doing when you're boots on the ground. That's sort of like product level, user level, customer journey type type work when you're, you know, you can be boots on the ground metaphorically, but you can be sitting in the office with the CFO or the VP of operations or the CEO of a company and you can be really understanding the P&L of their business and the core unit economics of their business and how given certain outcomes in the technology, what that would mean for their bottom line. and you can create an iterative sort of iterative process of working collaboratively with them to uncover the economic benefit of this thing that doesn't exist.

And it's a very fun it's a very fun process because it requires imagination on both sides. It requires the founders to have an imagination about how the business can work in the future. It requires an imagination on the business side of things, especially the CFO side of things to envision, well, what what it what would happen in the case of Bedrock, for example, what would happen if I had a reliable labor force that was always available and I could consistently get like X productivity out of.

Uh, what would that mean for my risk in my projects? What would that mean for my profitability per project? and easing these things out and going through the scenarios um really at the end of the day help us learn about how valuable our product will be, why it would be that valuable. And we take those insights to shape the product, to shape the business model, to shape the go to market strategy, to shape the messaging, and you're just doing you're working at every strata of understanding your customer um so that you can deliver that product to them as best as possible. >> Um I love that.

So, um I was going to ask like when you said like you know Boris and Kevin meets like all the like milestones. So like how do you set up a milestone when there's like it's kind of like you mentioned like you know the company is kind of like inventing stuff right and then like I feel like a lot of it being a funer is about like AB testing like test stuff and then if something work and then you double down on the thing and then you test another stuff.

So like I guess like by testing a bunch of stuff but like how do you like do a realistic benchmark? Um, I am using benchmark cuz like everybody's benchmark maxing, but like so like what would be like a a quick way to like set up like the milestones for that's just all of scratch. >> So I I got to give all the credit to the founders on the on the milestone setting because our major milestones are really for the company the long pole in the tent is technology development, right? in the case of Bedrock where we're building autonomous heavy machinery.

But this look this can this can apply to companies in our portfolio like Oxide which is building like the world's best private cloud systems um and have just absolutely been popping off. But this was built by two founders who had spent their career in building servers and building systems at like Sun Microsystem and and what have you. Like these are very very complex development programs that are steeped in technical detail, right?

And I think this goes back to our early our the earlier part of our conversation which is like well how do you how do you get confidence that you can deliver? You can actually deliver what you say you're going to deliver. I often find in deep tech the what you want to go deliver is you got to get it right and that's the front-end work we do and understanding the industry and knowing what's valuable and and you can do that and there's there's an entire thing to do there but that doesn't actually it probably doesn't radically radically change as you sort of are executing there are things on the margin that change and you got to be wise to but you can kind of set that aspirational product pretty early and know it's right which is what we The really hard part is that that execution and you know the reason that Bedrock has been able to execute so well is because Evan Boris AJ Toms is the full co-founders the founding team the people that they've added this is not their first rodeo right there is a reason we wanted to build this with um executives and people that have actually shipped production reliable safe autonomy in the real world because there's so many things that can get you in a complex program like this.

Um, having those scar having that scar tissue, seeing what it really takes, having those cycles, having paid that that tuition um at Whimo allows them to know really really where those um where those pitfalls are and really the contingencies you have to plan for and really what you want to go do. Now, what I will say also is there's also a culture behind hitting milestones cuz you actually can't have perfect foresight.

Um, but I find the best companies in our portfolio that's oxide. You know, there's so many great ones, but I just think about some of our our our portfolio like True Anomaly and and Oxide and Mitra and and so many others that have very complex programs to deliver against and they somehow hit their milestones. It's also not because there's perfect foresight. There's also a culture of hitting milestones. There's a great culture of like let's do what we can to go make this happen and that's the type of organization we are.

So I also attribute that to culture and the founders and the great people that want to go deliver excellently to. But a lot of it is that that foresight and knowledge of the the literal technical complexities of of operating a program like that. >> Okay. Um Ryan I um so I want to be mindful of the time maybe we do like one or two real question and then we'll do one minute fire run though I mean I I I can learn about this in fire but like okay I want to start with like you know maybe we talk about like the trends in the DTAC space like first of all like how do you categorize like where like which category are like things are flowing money to one thing like I'm observing is obviously robotics um you know whether it's bat rock or like other things like you know at our conference there's Dina robotics founder and like um a bunch of other like founders that's in the space right so how do you do the sub sector analysis on like which part is like reinventable in the space and then um maybe if you could share more about like you know since you invest in climate energy logistics uh where like in general where do people spend most money on and what are something that you find really interesting. >> So the I I'll kind of the consens I'll cover mostly just consensus thing where I'm seeing like a lot of the money flowing and um how we think about making good investments in that in that because there's a lot of money flowing into robotics and the reasons for that are are great.

I mean, we're talking about, you know, reinventing the vast majority of our global economy with automation. The TAMs are the biggest TAMs ever. And so, you know, you're having these sort of like chat GPT moments for physical for for physical AI and what Whimo has delivered and what, you know, robo taxi and and FSD are delivering. These are the sort of chatbt moments for for robotics where people sit in a autonomous car and they just have this oh my god moment.

Um and so you kind of have that moment in the technology and then you see the size of the market and it's no wonder people are really flooding to the space and so we're seeing just a ton of robotics. We're seeing what we're see what's kind of interesting about robotics though right now is the in the the sort of core building blocks of building a useful autonomy system or robotic system in the real world are not reliable or set right now. like you really need a world-class team across so many different subdomains in order to successfully get autonomy into the real world.

And so, you know, we're at the stage in the in the the capital deployment cycle where the first and second and third most important thing right now are the team. Um there's so few teams that have actually delivered these things into production. It's so important because there's so many gotchas. you're playing with people's li like you're not playing with people's you have people's lives on the line when you put these systems into the real world they're physical systems they need to be reliable you just can't compromise on your ability to execute against those things or else it's a existential risk for the company and so you know first second and third thing is team and so we're predominantly interested in teams that have high credibility to go execute on these very complex technical programs and you can see that in the investments we've made um and the and the best you know the best performing companies really in the whole sector also in the portfolio we have obviously Bedrock's doing a great job but Mind Robotics we we incubated as well last year um and it was a spin out from from Rivian just an incredible team behind that we have companies like Wave you know Wave has been a pioneer in autonomy and just just like the most stellar team you can imagine to go do that and and a good number of others.

So, we're still so so team focused because this this industry is still in its nacency. Um the other thing we're seeing a lot is in energy that highly consensus area right now is time to power and the power the infrastructure itself to go power data centers. There's so much to do there. I would just maybe there's so many there's so many things to do from generation to the picks and shovels of delivering power whether that's in new transmission whether that's in power electronics.

There's there's like so many good building blocks to go reinvent that they themselves are massive categories. We actually just announced yesterday um that we led the seed investment and then also announced the subsequent series A that followed very quickly in a company called Parallax which is doing turbines but just at a radically lower cost structure as a result of lower operating temperatures and and additive manufacturing process to go deliver gas turbines which is a huge speed to power play. the the token economy is so valuable that anything you can do to to drive speed to power and infrastructure that allows that is going to be hugely valuable.

That's why we've made a number of investments both recently and also we saw this coming many years ago and and ended up building companies like Peak Energy and a good number of others um that are extremely well positioned and have got all the tailwinds from from uh from the demand in the market here. What are what is something that you're currently looking at or like studying? What is like a current sector that you're excited about? >> Right. >> We have [laughter] Yeah, we have some good incubations on the horizon.

I'll just say I'll just say you can apply the radical vertical integration model to industries that have monopolies or duopolies in large categories of hardware or physical systems. We are doing we're doing a few of these right now. One of them in an aircraft. A little little teaser there and incubating a company. >> We're ext I'm extremely interested in industrial marketplaces. >> I think the world is going to get re re >> what is industrial marketplaces? >> Basically the major parts of our economy how supply and demand transact in major parts of our economy.

This can be um I don't want to give the actual sector I'm building [laughter] because I think it's going to shock the world but >> I think the you know I think the the major thing is you know so many great marketplaces have been built in the world and a lot of them have been consumer um but AI is sort of rewriting the ability to structure entire ways that parts of the economy transact especially industrial parts of the economy. >> And so linking supply and demand has never been cheaper, easier, more scalable now with tokens. >> And I think we're going to see a complete rewriting of how entire parts of industry transact with one another. >> Um so I'm very excited about that.

There's so many other things. Um you know, we're playing with the idea of um vertically integrated rollups as well in major parts of our industrial economy. I can't say all of those opportunities are equally attractive. Um, some sectors of the economy make sense to roll up, some don't, but that's a very interesting business model and really in the, you know, comes from the question of where will value acrew in the world of AI >> and then we're doing a ton and a lot is unannounced in our work in data centers, neo clouds, distributed compute.

We [clears throat] have some pretty awesome things brewing and things we built. And then I think lastly, we're all very excited about an incubation we just announced a week ago, company we built called Noative, which is building a neolab for the physical economy, doing fundamental research, applied research [clears throat] models, auto research, and pointing all of those capabilities into things like construction, logistics, manufacturing. >> Yeah, I think that that company is already on our list.

So I I'm not uh Yeah, but keep going. Sorry. >> Oh, wonderful. I I [laughter] I think you'll enjoy the conversation with um with the founders. Um it's just an incred I think super super on point thesis to go um to go bring what what I think ultimate always happens in Silicon Valley and so frustrating, but I'm glad we're sort of all catching up here. Um and my peers are Silicon Valley always overlooks the largest ham, which is our physical economy.

And we built this company with air because we thought the frontier of AI was just not focused into the [laughter] into the major parts of the economy that we just see every day that are so massive and would benefit actually the most in a lot of cases from this. So we we had to build a company. >> Love that. Okay. So uh I want to be mindful of time. Uh maybe we'll wrap with a one minute firearm. >> Sounds great. >> Okay.

What's your favorite book? Um, Foundation. >> Um, >> Foundation series. Yeah. >> Honestly, there's a company called Foundation. I was tagging them yesterday, but it's >> Yeah. Um, okay. So, who would you invite to your dinner party? >> Oh my god. Um, [laughter] that's a good one. Dead or alive? >> It's your party. >> It's my party. Um, oh, some fun people. I don't know. My founders. I love my founders >> of course. Uh we'll do a founder dinner.

Uh who who made the biggest impact in your career? >> Um Leor, um Alex Kolich, my co-founder Maria. I was going to ask you like what was the lessons from ADVC because of like obviously it's a really special place and obviously famously for investing like the Palunteer off the boards but what what are some like core things that you've learned there? Um yeah, a few things. A few things. I think they were also investing in very unsexy places.

Um which I think is where you can produce so much differentiated outcome in venture. [clears throat] >> Ambition just a very very deeply ambitious set of people there um to go build really big and to go fix the world. So I thought I think the mission is great. I I learned that there's like it was a fundamental learning at the beginning of my career and it's obvious to me now and maybe obvious to many, but that there really are there really is a way for capital um capital allocators to partner in real ways with entrepreneurs to that is positive some um I think that's very very true and it's something that I try and do every single day but they um they were definitely doing that way back when and I got to got to benefit from that.

Love that. Uh, where can we find you outside of work? >> Working? No. Uh, hiking. [laughter] >> San Francisco. It's like working and hiking. >> That's where I am right now. After work, we're working. Uh, no. Great a great restaurant. Hiking. Um, spending time with my family. Um, I'm from I'm from Canada, so actually kind of any spare time I I get, I go back and see my family as well. Yeah, very close to them. >> Love that. >> Ryan, thank you so much for coming to the show today.

It was such an insight for conversation. >> Thanks, Grace. This was enjoyable. I appreciate it and so glad you've uh you continue to spend time with the Eclipse economy and our portfolio as well and ask such such good questions. Um, we love what we do. So, thanks for thanks for bringing out the best in us. Appreciate it. >> Thank you. Let me quickly endstream on the