In a deep dive into the hardware startup landscape, host Harry Stebbings interviews Jeremy Conrad, partner at Lemnos Labs, on "The 20 Minute VC" podcast. Conrad shares insights from his unique journey from the United States Air Force to venture capital, highlighting the transformative impact of affordable design tools, rapid prototyping, and reduced hardware costs on the industry. Lemnos Labs, focusing on pre-seed and seed stage hardware startups, believes in a hands-on VC approach, assisting portfolio companies like Marble with market requirements and product development. Conrad discusses the significance of narrow product scope for hardware success and the challenges of consumer electronics ventures. Despite skepticism, he remains optimistic about the potential of hardware startups, emphasizing the importance of scalability and revenue generation. Conrad also expresses his bearish stance on space investments due to high capital requirements and regulatory hurdles, contrasting with his bullish view on non-imaging remote sensing ventures like Spire.
"Now, Jeremy is a partner at Lemnos Labs, the fund that believes in the earliest stages of building hardware. Every dollar counts, every hour matters, and every decision is crucial to success or failure."
This quote highlights the philosophy of Lemnos Labs, focusing on the critical early stages of hardware startup development where resources are most constrained and decisions have significant impact.
"But really we started talking about starting a hardware company, and this is summer of 2011, and we started to talk to some other people and really found out that no one was interested in funding hardware startups."
This quote explains the gap in funding that Jeremy Conrad identified for hardware startups, which led to the founding of Lemnos Labs.
"Fast forward to 2010, 2011, and today, any $500 computer can run incredibly sophisticated cad. And on top of that, the software is free."
This quote illustrates the dramatic change in the accessibility and affordability of design tools for hardware development, which has enabled more startups to enter the space.
"So today we talk about how we're a hands on VC, and what that means is we only do five to ten deals a year, and then we're going to dig in with them."
This quote describes the operational model of Lemnos Labs as a venture capital firm that takes a deeply involved approach with its investments, emphasizing quality over quantity.
"And so today, what we're seeing in robotics is things like connectivity, cheap sensors, advances in computer vision, storage costs, and just overall computation. All of those things conspire to make the cost of starting a robotics company fraction of what it used to be."
The quote summarizes the key technological advancements that are making robotics startups more viable and less expensive to launch.
"So I really don't think it does. And I would also argue that what people consider core AI, ML today is a bunch of nifty tricks."
This quote expresses skepticism about the current state of AI and ML, implying that the practical application of these technologies in robotics is not as reliant on AI and ML as some may believe.## Robotics and Investment Concerns
"Well, and I think that in general, great investments are hard but not impossible."
This quote emphasizes that while investing in complex technologies is challenging, it is not unachievable with the right conditions.
"The cloud has gotten so cheap and so easy to use, like overall software has gotten much better and also easier to use. And hardware, the stack for a hardware company is shorter than it's ever been."
Jeremy Conrad points out that advancements in cloud technology, software, and hardware have reduced the complexity and cost, making it more feasible for startups to engage in robotics.
"The two things that I don't think are really that you can't bet on that will get better are locomotion and manipulation."
Jeremy Conrad identifies locomotion and manipulation as the two areas in robotics that are less likely to see rapid improvements, implying that startups should be cautious when relying on advancements in these areas.
"I think the best robotics companies started today will have a singular use case where the ROI is obvious and apparent."
Jeremy Conrad suggests that robotics companies should concentrate on a single, profitable use case to succeed, as opposed to trying to develop a universally capable robot.
"You always know someone more successful than you."
Jeremy Conrad discusses the competitive culture of Silicon Valley, which drives entrepreneurs to aim for massive success but can also lead to personal challenges due to constant comparison.
"It's incredibly competitive, and it's never enough."
Jeremy Conrad reflects on the relentless competitive spirit of Silicon Valley, highlighting the potential negative impact on personal well-being.
"There's dozens of incredible hardware companies here, but they just don't have kind of the mind share that I think some of the social media companies do."
Jeremy Conrad points out that while Silicon Valley is home to many successful hardware companies, they do not receive the same recognition as the more prominent social media companies.
"What we found is that there's a couple different things. One, there are just some businesses that are not a good fit for venture capital."
Jeremy Conrad acknowledges that not all business models are appropriate for venture capital, highlighting the importance of recognizing whether a company is a good match for this type of funding.
"We're really focused right now on when we work with our companies to make sure they understand how to get to revenue as fast as they can."
Jeremy Conrad emphasizes the importance for startups, particularly in hardware, to focus on generating revenue quickly to appeal to investors and ensure sustainable growth.## Venture Capital Market Dynamics
"But right now we're seeing very much a tightening in the market of when you get to series b, you better have revenue or be about to sign those contracts, or this money will undisputedly unlock that."
This quote highlights the current expectations in the venture capital market for startups seeking Series B funding, emphasizing the need for demonstrable revenue or imminent contracts.
"I think it's about making sure that you really narrow your scope for your first product, because if 90% of your product works in its hardware, you have nothing."
This quote underscores the importance of focus and simplicity in the initial hardware product development to ensure that the core functionality provides value despite potential shortcomings.
"So I think consumer electronics is one of the hardest things to do in the venture ecosystem right now, partially because at some point you need a huge slug of money to go big."
This quote conveys the difficulty of succeeding in the consumer electronics space, highlighting the substantial funding required to scale and the importance of a sustainable business model.
"I definitely think consumer electronics as a product category is still viable and you're going to see some really interesting stuff go on."
Jeremy Conrad asserts the ongoing potential for consumer electronics startups, despite the challenges, and points to examples of both successes and failures in the space.
"So there's two main reasons that I'm bearish on most space companies."
Jeremy Conrad explains his cautious stance on space companies, distinguishing between the promising prospects of non-imaging based remote sensing and the difficulties faced by other space-related ventures.## Capital Requirements in Space Startups
"And so if you can build something and launch it on CubeSat and prove that your technology works, that then I think you have a shot for that. You can raise half million, $2 million, get one in orbit, prove it work, and then go take the data from that and go to the investors and say, well, I proved it works."
This quote emphasizes the strategy of using cubesats as a stepping stone for space startups to demonstrate their technology and secure further investment.
"But for one communications satellite company that I was looking at, for their first satellite in orbit working, you needed $50 million."
The quote highlights the daunting financial requirements for larger space projects, which can be a barrier to entry for startups in the venture capital ecosystem.
"We really like being an early stage fund for a variety of reasons. I think that we really focus on helping our companies find product market fit."
This quote explains Lemnos's dedication to early-stage startups and its core competency in assisting them in achieving product-market fit.
"We don't really have ambitions to go raise 500 million or a billion or $5 billion like NEA does, just because that doesn't fit our model very well."
The quote clarifies Lemnos's strategic decision to remain focused on early-stage investments rather than expanding to a larger fund, which is not aligned with their business model.
"I'm not at all worried about killer AI."
This quote reveals Conrad's contrarian belief regarding the fear surrounding artificial intelligence.
"The hardest part, know, as a former operator, was like, these aren't my companies."
Conrad reflects on the difficulty of transitioning from an operator with control to an advisor without direct control over the companies he supports.
"So there's a book called the Better Angels of our Nature, why violence has declined."
The quote shares Conrad's recommendation for a book that provides a historical perspective on violence and safety, which he finds empowering.
"I'm going to go with prorata that Dan Primac over at Axios writes."
Conrad expresses his preference for a newsletter that he considers to have the best commentary on the current state of the ecosystem.
"So I'm going to go with the Opportunity Mars rover, because it was supposed to be there for a 90 day mission, and well over a decade later, it's still driving around Mars."
The quote shows Conrad's admiration for the Opportunity Mars rover's longevity and success, which surpassed its original mission parameters.
"And the reason we said yes is because Matt and Jason, as founders, were just exactly the kind of people that we're looking for."
This quote explains the rationale behind Lemnos's investment in Marble, emphasizing the qualities they seek in founders.
"Thanks for having me."
Conrad expresses his gratitude for being featured on the podcast.
"You can find out more about him at nomadic nerd on Twitter."
Harry Stebbings provides listeners with information on where to follow Jeremy Conrad online.
"And if you'd like to see behind the scenes at the 20 minutes vc, you can by following at htebbings with two B's on Snapchat."
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