20VC Why Core AI Is Largely A Bunch of Nifty Tricks, Why Consumer Electronics Is The Hardest Thing To Do In Venture & Why Silicon Valley Will Dominate The Future of Robotics with Jeremy Conrad, Partner @ Lemnos Labs



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.

Summary Notes

Introduction to Lemnos Labs and Jeremy Conrad

  • Lemnos Labs is a venture capital fund that invests in early-stage hardware startups.
  • The fund emphasizes the importance of each dollar, hour, and decision in the success or failure of these startups.
  • Jeremy Conrad, a partner at Lemnos, has a background in the United States Air Force.
  • Prior to VC, Jeremy managed an $80 million tests and targets group and was responsible for the BMC 41 system of the airborne laser.

"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.

The Shift in Hardware Startup Funding

  • Jeremy Conrad and his friend Helen Beniski initially moved to Silicon Valley to start a hardware company.
  • They found that hardware startups were not receiving funding due to perceived high costs and long development times.
  • Jeremy and Helen discovered that these perceptions were outdated and decided to start a venture capital fund.

"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.

Catalysts for Change in Hardware Development

  • Advancements in design tools, rapid prototyping, and accessible technology have reduced costs and barriers to hardware development.
  • CAD software has become more affordable and sophisticated, running on cheaper computers.
  • The availability of free software and tools like Arduino have made it easier to start hardware projects.

"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.

Evolution of Lemnos Labs

  • Lemnos Labs began with an incubator model but evolved into a hands-on VC approach.
  • The team at Lemnos focuses on a few deals each year and works closely with companies on product and market requirements.
  • The hands-on approach reflects a commitment to deeply engaging with portfolio companies.

"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.

Robotics and Megatrends

  • Jeremy Conrad identifies five megatrends driving the advancement of robotics: connectivity, cheap sensors, computer vision, storage costs, and computation.
  • He believes these trends are reducing the cost of starting a robotics company.
  • Moore's Law plays a role in making robotics more feasible and affordable over time.

"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.

The Role of AI and ML in Robotics

  • Jeremy Conrad challenges the notion that AI and ML are necessary for the success of robotics.
  • He argues that what is often considered AI and ML consists of "nifty tricks" and manual data tagging by large teams.
  • Conrad suggests that real-world applications of AI and ML are not as advanced as demos may suggest.

"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

  • Robotics requires a combination of hardware, software, and cloud components.
  • Investors may feel apprehensive about the complexity of multiple layers within a single stack.
  • The current state of technology makes it an opportune time to start a robotics company.

"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.

Robotics: Locomotion and Manipulation

  • Locomotion and manipulation remain challenging aspects of robotics.
  • These elements have not significantly benefited from advancements like Moore's law.
  • It's risky to assume that the cost or capabilities of motors and robotic hands will drastically improve in the short term.

"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.

Successful Robotics Companies

  • Successful robotics companies focus on specific applications with clear ROI.
  • Pursuing a "final robot" with broad capabilities is not advisable at the current stage.
  • Targeting niche markets, such as last-mile delivery, can lead to success.

"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.

Silicon Valley's Role in Robotics

  • Silicon Valley has a culture of high achievement and success.
  • The competitive environment pushes companies to aim for larger successes rather than settling for early exits.
  • However, this can lead to personal downsides such as depression and loss of perspective.

"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.

The Valley's Competitive Nature and Downsides

  • Silicon Valley's competitive nature can lead to never feeling successful enough.
  • The pressure to succeed can result in personal issues like depression and divorce.
  • The environment, while fostering ambition, can also lead to a loss of perspective.

"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.

Technical Advantages of Silicon Valley for Hardware

  • Silicon Valley offers technological advantages for hardware and robotics companies.
  • The presence of many successful hardware companies in the Valley is often overshadowed by the fame of social media giants.

"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.

Financing Challenges for Hardware Companies

  • Some businesses are not suitable for venture capital investment.
  • Understanding the milestones for the next funding round is crucial.
  • Investors seek scalable, venture-backable businesses, regardless of the industry.

"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.

Ecosystem and Investment Metrics

  • Companies are encouraged to reach revenue quickly.
  • The investment ecosystem has evolved, with a previous focus on hype and team now shifting towards tangible metrics.
  • Startups need to demonstrate scalability and revenue potential to attract investors.

"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

  • The venture capital market is experiencing a tightening, particularly at the Series B stage.
  • Companies are expected to have revenue or be on the verge of signing contracts to secure funding.
  • The market operates in cycles, and currently, some companies struggle to achieve the necessary metrics for additional funding.
  • Startups need to focus on reaching revenue targets to ensure their progression in the venture ecosystem.

"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.

Product Development in Hardware Startups

  • In hardware, narrowing the scope of the first product is crucial, as partial functionality is not viable.
  • Ambitious founders often include too much in the initial version, leading to integration issues.
  • The initial version of hardware may be suboptimal but must deliver high value to users.

"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.

Challenges in Consumer Electronics

  • Consumer electronics is a challenging sector in the venture ecosystem due to the need for significant capital to scale.
  • Selling a moderate number of units is feasible, but achieving long-term success is more difficult.
  • Startups in consumer electronics should consider recurring revenue models such as hardware with software services or consumables.
  • Examples of failed startups like Juicero and Pearl illustrate the risks of raising capital without establishing product-market fit.

"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.

Viability of Consumer Electronics Startups

  • Consumer electronics remains a viable product category, with successes like DJI demonstrating potential.
  • Companies like GoPro and Fitbit have fallen out of favor but remain significant as public companies.
  • Building a strong brand and understanding the market are critical for startups in this space.

"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.

Space Industry Investment Perspectives

  • The speaker is bullish on non-imaging based remote sensing in the space industry, exemplified by their investment in Spire.
  • Imaging-based remote sensing is seen as less viable due to questionable demand and competition for information.
  • Communication satellites face challenges related to spectrum regulation and the high costs of acquiring spectrum.

"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

  • Space startups face significant capital hurdles, particularly in proving their technology through satellite launches.
  • Cubesats offer a more affordable entry point for demonstrating technology in space.
  • Initial funding for cubesats can be around half a million to $2 million, with subsequent larger funding rounds contingent on successful demonstration.
  • Larger projects, such as communication satellites, may require upwards of $50 million for the first satellite, posing a challenge within the venture ecosystem.

"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.

Lemnos's Vision and Investment Strategy

  • Lemnos focuses on early-stage hardware startups, helping them find product-market fit.
  • The fund does not aspire to scale to the size of major funds like NEA, preferring to specialize in early-stage investments.
  • Lemnos's expertise lies in guiding companies from inception to the point where they're ready for larger scale-up.

"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.

Personal Insights and Preferences

  • Jeremy Conrad is not concerned about the threat of killer AI.
  • As a former operator, Conrad finds it challenging to relinquish control and serve only in an advisory capacity to startups.
  • His favorite book is "The Better Angels of Our Nature" by Steven Pinker, which he believes imparts a sense of safety compared to historical times.
  • ProRata by Dan Primac at Axios is Conrad's preferred newsletter for insights into the broader ecosystem.
  • He respects the Opportunity Mars rover for exceeding its mission expectations significantly.

"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.

Recent Investment Decision

  • Lemnos's latest announced investment was in Marble, a last-mile delivery robotics company.
  • The decision to invest was based on the founders' intelligence, ambition, technical expertise, and vision for scaling emerging technology.

"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.

Acknowledgements and Resources

  • Jeremy Conrad appreciates the chance to be on the show and mentions his Twitter handle, @nomadicnerd.
  • Harry Stebbings gives thanks to Ben Einstein and Chris Duvos for their contributions.
  • The podcast promotes First Republic for their support systems for startups and Segment for their data integration services.

"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."

Harry Stebbings invites listeners to engage with behind-the-scenes content of the podcast on Snapchat.

What others are sharing

Go To Library

Want to Deciphr in private?
- It's completely free

Deciphr Now
Footer background
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon

© 2024 Deciphr

Terms and ConditionsPrivacy Policy