69: Deep Tech, On Deck, and Venture Capital with James Sinka

In this episode, I’m joined by James Sinka. James co-founded the On Deck Deep Tech Fellowship with Abhijeet Petra. We talk with James about how to build a Deep Tech venture, what makes a successful founder, how the macro environment influences what kind of startups you can build, and how to build deep tech startups in the real world. You an apply to On Deck Deep Tech at https://www.beondeck.com/deeptech

Transcript:

William Jarvis 0:05
Hey folks, welcome to narratives. narratives is a podcast exploring the ways in which the world is better than in the past, the ways that is worse in the past towards a better, more definite vision of the future.

I’m your host, will Jarvis. And I want to thank you for taking the time out of your day to listen to this episode. I hope you enjoy it. You can find show notes, transcripts and videos at narratives podcast.com. Well, James, how are you doing today?

James Sinka 0:44
I’m goodwill. Thank you so much for having me. How are you?

William Jarvis 0:47
I’m great. Thank you so much for taking the time to come on. I really appreciate it. Do you mind giving us a brief bio and some of the big ideas you’re interested in?

James Sinka 0:56
Sure, sure. Um, let’s see. So by training, I’m a chemist and materials engineer. I’ve been into startups since actually spun out my undergraduate research thesis at 21. And on my first startup.

Well, at the time, I didn’t realize what the undertaking would be. So ignorance happened to play well, in my favorite.

We were printing solar panels. Oh, cool. And yeah, that sounds really sexy. It sounds way sexier than it actually is. But I was working on a project in my undergrad where

the research advisor is working under had developed a new set of dyes. It’s similar to the dyes you put into clothes, where they absorb certain kinds of light. So you know, blue, green, yellow, red, etc. But they tuned these dyes in a way to make them semiconducting. And the vision was that these dyes because they were carbon based, could be in the same way that a printer prints dyes for a page of paper, you could put these dyes into a printer as well and print those panels. Oh, cool. It turns out that me and the research professor had two different visions on how the research should go, he was very much interested in expanding the academic school of thought, whereas I couldn’t let go of the potential future vision of seeing the world printed in solar panels. So I just coded the entire I believe at that time, this is in 2016, or 2015. If you could cover the state of Rhode Island, Rhode Island and solar panels, you’d be able to provide enough energy for everyone in the United States, and so on. So it doesn’t take a lot of square area, right. And so once I saw that I couldn’t like let go of the idea. We ended up working with a set of materials called perovskites. I went to school at RMIT. It turns out there was a bunch of Kodak professors there. So you know, they helped us work through getting into contact with Kodak figuring out how to develop all this. And then, as all great technologies come to bear, you had to figure out what the economic forces look like. Right? So I had a big awakening about what business even means and why it’s important. You know, I understood like, yeah, your your costs have to be less than what you make, grab economic things, whatnot. But it turns out that if you look at the economics of the solar industry, the panel, the thing that absorbs the light, yeah, makes up about 5% of the cost of installing a solar panel on a roof on a farm anywhere. Really 60% Of the cost comes from the labor of installation and the certification of the install. Oh, no way. Yeah. And things like that. Exactly, exactly. So so the land that you’re going to build on. So one thing a lot of people don’t consider is the fact that you’re working with high voltage materials. And so you need those things to be installed in a very tight spec. Like you can imagine if a solar cells it sold on even your house aren’t properly insulated from the rain, like you could burn down that house, you know, you don’t want these things casually installed, you need to make sure that they’re done to a certain grade with a certain level of specialization. People go to school, like specialized training for these kinds of things. And so obviously, the specialization there, the the permitting, so on and so forth, makes it such that it’s actually a fairly large limiting factor in solar. And so the vision that we had of coding the world of solar panels was like, okay, great, we can do that. But it turns out that what’s holding the world back is not the ability to produce panels, but the cost of installing them. And so I Yeah, once I realized that fact, and and understood that, you know, as incredible of an innovation is, as we had been commercializing, even if it was to get to the absolute zenith of its capacity, where we could produce solar panels that, you know, pennies on the dollar of what Silicon could so we let’s just say we brought that 5% down to zero, it still wouldn’t move the needle on fixing climate change. And that’s when I was like, well, a good first shot on goal All right, like on the next one, right? Yeah, yeah. So I like thinking a lot about about energy generation about power about distribution. I really like you know, all the cutting edge research you’re seeing on fusion, like Commonwealth Gen fusion, so on and so forth. And then in my second startup, we were doing bio extractions. And we did a lot of iteration we went through Y Combinator for this one, we start off in the coffee space, transition from coffee to cannabis extraction, because cannabis is way more profitable, right? So high profitability were solar panels, very low profitability, kind of learn my lesson. And then what I quickly learned was that there was a call to do better things to to take my talents and put them to better use than to extracting cannabis, I felt like I had a higher calling in life during a drug dealer. Fair enough. So, yeah, I we kind of iterated our way through that. We we realize people are using cannabis for themselves asleep, that asleep coaching business for about a year. And ultimately, I fell out of love with that and realize that I was, again, I was in the services business, I was in the software business. But really, my background is in chemistry, it’s in materials, I love the physical world of atoms. And that’s what I wanted to help bring to life. So I co founded the the deep tech fellowship at ondeck with my partner RBG to help other people find their groove, their Nisha bringing their atomic innovations to the real world. So that was that was my arc. And now the thing that I’m thinking about is how can we unlock more laboratory innovation? To actually be commercial, real world products that help people and businesses on an everyday? I really

William Jarvis 6:28
love that. It seems like, you know, deep tech and building things in the real world is especially challenging versus you know, software, you can build a software business like 100k. Yeah, off the ground. But man, like the real world, there’s all like, you know, it’s like, you’re increasing the number of factors you have to worry about. So much like regulatory challenges, like you described with solar panels. You know, it almost seems like you want to dissuade people from trying to go after this. Like, it’s like, it’s very difficult, you know, how do you, you know, how do you keep keep the faith? And like, because it’s obviously it’s very, very important. Probably, that’s the answer, right? It’s super important that we actually have physical innovation. But But yeah, how do you coach founders through that? And maybe that’s too general question. But I’m curious how you think about that.

James Sinka 7:14
I think faith is actually an interesting question of like, because to me that applies to that concept. How do you know to keep building anything? It’s sort of right, in my opinion, a little bit more general. It doesn’t just apply to deep tech. And I think what you’re scratching at is true in that the cost of working in deep tech is higher, or, and so in an effect, your conviction for what you’re working on, needs to be that much higher. So you even see this, I think it’s starting to change now. But over definitely the past decade, if not two, you can see that even venture capitalists also dissuaded folks from working on things that are hardware oriented, but deep tech oriented. I think part of why Kickstarter came about and became such a commercial success is because investors were afraid to touch things in the hardware.

William Jarvis 8:04
Yeah. When touch hardware. Absolutely. It doesn’t pebble doesn’t work. You know, there’s all these like stories like that. Yeah,

James Sinka 8:11
exactly. Even though the I think Pebble was what the most funded Kickstarter up until that time. Right, crazy. So how do you keep the faith? I think part of that is by removing the what, how would I put this? founders are the kinds of people who have like a vision for what the world could be. Yeah. And it’s their job to crawl through the mud, to crawl through whatever barriers are going in their way to manifest that future. Yeah. And I think I think what I find is most important is to just remind the people who are building the future to not listen to the people telling them that they’re wrong. It’s so so easy to criticize, and to come up with reasons why something shouldn’t work. Right. And, and I think that, that that’s that kind of a check is useful when done in a, in a way to say, okay, but have you thought about this other way, like, God, I think the direction going down may not be useful, or you might run into some technical issues. But there might be this other route. Whereas like, traditionally, especially if you see on social media blog, people like, Oh, this is a stupid idea. Like, why would you do this? The world’s bad enough as it is like, right, you don’t need to extend life as an example. And so so it becomes like a like, just just tell the the folks that are building the future to Ignore the naysayers and and remind them as well, that when they make silly mistakes when they make, you know, first time founder mistakes, that those are the kinds of things that everyone in their first shot does because they’re fresh, so don’t beat yourself up. And then don’t listen to the naysayers is the TLDR Gotcha.

William Jarvis 9:54
And, you know, how do you how do you determine who can give you good feedback and Who is just gonna like, you know, because it seems like you know, it’s a real difficult challenge, and you want to try and think through these things as best as you can. And you want to, like, get good feedback from people. But you know, at the same time, you do need to like, be singularly focused on it.

James Sinka 10:15
Yeah, you touch on a few things there, right. And the last point, I think focus is actually the most potent wedge, that founders have to displace the present from the future that they’re trying to manifest. So if you think about it, like, the tip of a missile is an example, it’s what’s breaking, or rocket, what have you, it’s breaking through the resistance of the air and whatnot, and literally pressing it aside for you to penetrate through and work through. And so so that that tip that edge is, is where focus is most important. Because if not you, then you have sort of like a dull tip, and you’re not really making any headway on one specific direction. But in terms of where to get feedback, I think that that’s actually a harder question to answer than it might sound because like, you could list a bunch of characteristics and say, like, oh, you know, look for this, don’t look for that. Or these are the good things. These are the bad things. Yeah. But in a day, like, or modern day like 2021, where information is so abundant? Right, YouTube is incredible. Google’s amazing. Wikipedia has more stuff that you can read in a lifetime. I actually, I wonder what the status, how many lifetimes would it take to read all of it? Great question, Scott. It’s got to be a lot, right? Anyways, um, the specific knowledge that comes through experience, are the kinds of things that are differentiated from what you could read a textbook, what you can get in the classroom, what you can get on YouTube. And so to that avail, navall actually has a really great nugget on this, where it’s like, unique knowledge is what’s valuable in the modern day. And that’s what things get people get paid to, like transfer over to you. So So I would say people who have done it before, either things that are in a similar industry as you at a cutting edge, or who have gone through the process of going from zero to one who have gone from literally bootstrapping or creating from scratch, anything. Ideally, it would be a business if you’re in shouldn’t business even more ideally, it’d be in the same industry that you’re in. But oftentimes, you can talk to someone who made you know, a small startup in software, and they can give you advice. Better advice, I would say then, then some critic on Twitter, about what you should be doing what you shouldn’t be doing common mistakes, like raising too much money hiring people too quickly. Not being focused is another common mistake. And that’s across any any space, any industry.

William Jarvis 12:35
Yeah, that I really liked that. I really liked that. And I’m curious, what do you look for? You know, you guys just launched ODX, which is super cool. You know, it kind of a big fun to invest a lot of people within the fellowship, and I want to talk about the fellowship to here in a little bit. Sure. Let’s do it. How do you how do you think about selecting founders? You know, what do you look for? Do you look for technical aptitude? Do you look for, you know, idea fit? I’m assuming it’s just some mishmash of all that. It’s probably like one thing?

James Sinka 13:06
Yeah, well, that the value prop of ODX was to fund founders, or people that have the potential to be founders earlier than anyone else. Nice. We want to take bets on folks before other people have the conviction that this is someone who is talented, who can execute who has what it takes. And the best way to do that is to recognize or to pattern match in what your experiences have been as a founder. So right like I’m lucky or experienced in that I’ve done two startups. RBG has been involved in a number of startups Ashwin, another program partner at ondeck, deep tech, also, the the ODX team has a lot of folks that had built startups and also invested in startups. So we use heuristics, like the velocity of execution, I think that’s a really, really great example. So it’s like, How many things have you been able to accomplish towards your focus point, since you first had the idea? I think another important factor is why someone wants to do this. Now more than ever, right? And you see this a lot in web three and crypto, there’s the opportunity to speculate on NF t’s on new coins, projects, so on and so forth. And so if your desire is to to become wealthy actually think that startups aren’t the most efficient way to do that. And there’s nothing wrong necessarily in wanting to be wealthy. But if that’s your primary goal, if that’s what wakes you up in the morning, I think a startup is actually an inefficient way to acquire that, that vision. Right, right. So why people are doing it matters a lot as well. And teasing that out is is actually harder than it might seem because sometimes people don’t even recognize their own motivations. And so through conversation through, you know, the experiences they’ve had the choices they’ve made, you can start to tease those things out. So yeah, it’s it’s complicated, but at the end of the day, You’re betting on a person. Right? At the early stages, right? Yeah. So if you look at funding at the series, a level Series B level, so on and so forth, you look at the execution of the team, the company, their their metrics, their MRR, they are arr. For those that don’t know, that’s money, monthly recurring revenue, and annually recurring revenue. Whereas in the beginning, right at the precede stage, you don’t have those data points, oftentimes, especially the deep tech space, you don’t have any revenue, there’s none of that to judge. So you have to be a good judge of character, you have to be a good judge of the person. And like anything else in this space, it’s very risky, it’s oftentimes we’re wrong. But we are here to to be in the business of supporting people who otherwise never would have been able to get into business. Because they were slept on, they didn’t go to the right university didn’t have the right credentials. And that that makes me really, really happy as someone who you know, also didn’t go to MIT or Harvard, or Stanford, to be in business to have gotten into icon, it could be building community like this, to me, it’s really important to be able to reach out and give that opportunity to folks who otherwise didn’t have that privilege, and then get the chance to go to those universities, because those folks are often just as hard working just as intelligent, just as resourceful as anyone else at an Ivy League school.

William Jarvis 16:17
When you’re looking at at people and you know, you’re and you’re trying to evaluate founders, you know, how do you think about finding that $20 bill on the sidewalk? You know, is it is it valuing, like substance over status, like, you know, that, you know, this person is actually done a lot, they may have, you know, gone to MIT, but they’ve got like, you know, they’ve actually done a lot of these things like, like, how do you? Is it just unique every time for each person.

James Sinka 16:43
So I think you’re scratching at something that’s definitely echoing its way through the societal fabric, which is, how important is the status symbols that you carry? Like, how valuable is that a multi $100,000 piece of paper, and the education that it symbolically represents, versus a list of your accomplishments. And I think that there’s a diverse set of camps here, some people that are extreme, one way extreme another way in between, and then the full spectrum, across. My take is, it’s now more important than ever to show that you can do the thing that you are passionate about, it’s it’s more important to show that you’re the kind of person that can persevere through adversity, and that can break down walls, because the future is, unfortunately, mostly uncertain. There’s interesting quote, I that I like that, that talks about how entrepreneurs have a certain vision of a certain part of the future that they feel like a certain and it’s their job to manifest that to will that future into reality. Yeah. And so they have, you know, a specific imagination about what the future can look like, what what it should look like. And they’re working to build that into, into reality. But across the whole, we don’t know how tomorrow, next year, the next decade, the next century will look. And so the ability to problem solve abstract problems, to create resources, when you didn’t have any to turn nothing into something that that is generally a good sign of someone who knows how to get things done, even when they don’t have everything that they might necessarily need. And that is a phenomenal precursor, or identifying factor for someone that would make a good entrepreneur or a good founder. And you can’t necessarily accredit that thing, there’s no place you can go to to get a stamp of approval that says that it’s shown through the efforts that you’ve put in and the consequences of those efforts. And so I like to think that, especially if you’re, as an example, a software person, your portfolio goes way farther than your degree. So if you have a PhD from Stanford, that’s good. But show me your Git repo where you have 1000s of stars, and, you know, millions of views or uses that shows way more that you actually know how to implement the knowledge that you supposedly would have gained in a university setting. So I’m absolutely with the camp that what you’ve done, the proof of your work matters way more than the status of the thing that you come from. But I think you still have to acknowledge that in this day and age, a lot of people are lazy lead, just looking for ways to just say, Oh, this seems like a good pic. Cool, I’m not gonna worry about it moving on to the next one. And that’s where these status, style emblems come into play and where you find them to be useful. But for the folks that are working at the very, very cutting edge, they value more your grit and your tenacity and your ability to get things done. So if you are in the process of trying to change the world in a way, it’s easier for you to not go to school and to instead prove that you can execute right I think Hi, I’m struggling over who said this. But the most the smartest decision you could have made last year would have been like at the beginning of COVID would be to get into Stanford, start on the first day and then drop out before tuition was be collected, right. And so that way you have the Stanford dropout, but you save all the time to execute like you would have anyway. So you have both the credential and the time to execute and to get stuff done kind of live the best of both worlds. I love

William Jarvis 20:25
that. I love that. Yeah. That’d be a great hack. And I recommend that to anybody who gets in Stanford. Yeah. That’s listening. James, you know, you mentioned something earlier, it was philosophy of execution. I want you to talk about that a little bit more. And I just, I want to harp on this a little bit, because I think it’s something people can control. So I think that that’s good. You know, you can’t there’s things you can’t control, but you can’t control velocity of execution. And something I’ve noticed and I’ve recorded about 80 episodes so far. And the correlation between how successful someone has been and how fast they get back to me and you did a great job of this. You got back really fast. It’s, it’s a really weird thing I’ve noticed so Balaji, the founder visa got back to me within like 10 minutes, you know, the answer? No, Revell. Yes. It’s very, very well,

James Sinka 21:16
it’s incredible. You know, you

William Jarvis 21:17
got back to me really fast. There’s a lot. And so I think like, that is a metric of, of perhaps judging people is an interesting one. And of course, you know, things happen. You can’t always get back to people fast. But it’s just, it’s just something I’ve noticed. So velocity of execution, keep talking about that a little bit.

James Sinka 21:34
Yeah, I find it really interesting that I remember actually, Patrick Collison I want to say, No, it was Paul Graham commenting on Patrick Collins. Speed of reply, echoes your sentiment as well. I think that’s really interesting. As a devil’s advocate case, you know, maybe someone is on vacation or doing I have access to their electron. Exactly. Yeah, exactly. Yeah. So So I say that just so the listeners like, because I know if I got bad advice at 16, I’d be like, Alright, I’m always staring at my email, like waiting for the next opportunity to come in. Right? Yeah, just like looking and be like, cool. I got it back in 15. microseconds, like, I’m good. They’re gonna think I’m amazing. So yeah, don’t take that too, literally. Yeah. And actually, to that point, I remember navall has a point where he makes it a case to not do coffee, because he’s too busy, you know, thinking or kind of working through other other processes. So you know, teach through anyways, philosophy of execution. That was the question. I think that I want to default to something that that Elon Musk really inspired in me when I or the first time I heard it was from Ilan, which was if you have a better than average, so greater than 50% rate of being correct. On the experiments, or the executions that you make, then you should make as many of them as possible, because you multiply, or the aggregate the results of being more often than not correct. Right? So if you do like a quick math here, right, if you’re correct 60% of the time, and you do things 10 times, then in theory, you know, I guess what would that be would be half plus one. Okay, actually a different different mental model to use. Because this reminds me as well of a James clear point where there’s a a graph that shows basically, if you get 1%, better every day, for some 1%, worse every day after a year, point nine nine brought two 365 goes basically in year two, one, and then 1.01, brought to the 3/65 power goes to some something in the hundreds. So it goes to show basically how the the effect of compounding over time has really, really strong benefit. And Sam Altman also talks about the fact that you are a human’s, I should say, in general, have a hard time understanding the strength and the value of exponential compounding curves. So Execution Velocity leverages the same mathematical principles, which is, every time you execute, in theory, you should learn something. And again, if you’re making better than average decisions, then you are learning it because you’re learning something from your executions. And every time you execute, presumably you’re going to get further and further and further to toward I should say, whatever your goal is. And so the difference between you working 40 hours a week, and you working 100 hours a week is you will get done in one year, working 100 hours a week, would it take someone else two and a half years to get done. Now, I will say on the flip side of that it is in I want to say impossible, but extraordinarily difficult to maintain that clip of execution out 100 hours a week for an entire year and for that matter. For decades, so keep in mind that you have to factor in the human accountability aspect there, right? The fact that that we are not machines, however, it the more experimentation you can do, the more you get to uncover about what your unknowns are. And the sooner you get to figure out, okay, is this thing that I believed, right or wrong? And then what can I do as a consequence of being right or wrong? It kind of allows you to explore the decision tree matrix with increased velocity. And because we know, right, that the future is still uncertain, you can’t know until you go and you try that experiment. If everything was completely known, then there’d be no reason to you could just kind of like magically preordained exactly what would be, and you just need to do exactly the right one thing in order to have that feature manifest. But because it’s unknown, because we cannot tell exactly what will happen tomorrow, next year, next decade, you have to iterate your way and experiment the way through it. And that’s why to come back to an original point, having someone who’s done that, who’s had to go through Decision Matrix. Yeah, decisions before helps you figure out what am I doing right? What am I doing wrong? What should I get better at which What am I doing that I shouldn’t? So that specific, unique knowledge helps in that, like future forecasting, but no amount of expertise can outweigh the importance of executing. And so that’s why it’s the velocity of execution, not the velocity of thinking, has

William Jarvis 26:24
got it. Got it. And, you know, when you’re first getting started, or you’re thinking about getting started, and actually launching something, you know, is there a checklist you go through? Or you would read? Through or like, you know, is it just like, you should spend a lot of time thinking about it, evaluating it, you know, like, I don’t know.

James Sinka 26:42
Oh, God, this is kind of an interesting one. I would say it’s, I feel like I’m saying it depends so often. So I’ll say something different, very. Different strokes for different folks, maybe figure that’s the Yeah, better use case here. So if you look at someone like Elon Musk, it doesn’t take him very long to decide he’s going to do something, he just decides one day, I’m going to dig tunnels underneath LA and start the boring company, that’s fine. Or I’m going to merge computers slash AI with humans and start neural link. Yeah, that’s it. There are other folks who it takes them decades of, you know, inner work and working through whatever it is that that’s holding them back. I see, in some cases, it’s adversity from, you know, happenstance perspective, you weren’t born in the right country, or the right family, so on and so forth. And other cases, it’s, it’s that you didn’t find the need or the drive to stoke that flame until later in life, that conviction, let’s say, so for other people, it takes them decades to kind of have that level of conviction to say like, Okay, I’m going to go all in on a project and see if I can build something I can manifest something worth doing. But for my personal self, I think it’s, it’s important to figure out why I’m doing what I’m doing. Because at the end of the day, time is our most valuable limited asset. Right, you can always make more money, right? You can always try try, you know, something else, but you can’t get back the time that you’ve invested. And so being completely honest with myself about my intention here is really, really important. And that can be again, harder than it sounds because we can easily deceive ourselves, right? Where what starts off as as shiny object syndrome gets rationalized to be like, Oh, I just want to see if there’s cool opportunity here, which turns out to be like, I’ve already invested too much time into this, that I feel like I have to keep going. It’s this gamblers fallacy of Well, eventually, it’ll turn out red, you just continue to be black. And it turns out that, that doesn’t necessarily mean anything. It doesn’t have to, yeah, statistics can can mess with you mercilessly. So, I would always urge people to figure out what is your intention? First and foremost? And if if you are coming from it from a pure perspective of intention, of like, a curiosity of growth, like I want to see, hey, can Is this a challenge I can overcome. I’m like, Okay, that’s a great reason is an intellectual curiosity. But if it’s like, oh, I want to put this on my resume or on impress this person, or I feel like it’s, you know, the, the cool thing to do, then you’re better off, you know, finding something else that’s going to be less less painful because starting a company and actually going in, takes a lot out of you. And there’s it’s like running a series of sprints for years, and most companies fail. So if you’re not comfortable with with, you know, the prize being self exploration and learning, right, recognizing there might not be a financial payout, then I would say don’t even start the thing. So when it comes to a checklist, Though I think there are some basic things that people should keep in mind, if they do want to start a company, particularly in the hardware space, if you’re technical, make sure that it’s it’s feasible to be for this thing to build to be built, right? Like, we have an idea right now. But seriously, if you want to create, like a wormhole generator to teleport things around, it’s like, figure out at least theoretically, how it could be done. Right? Like, how about that for step one, instead of going around being like, you know, telling venture capitalists why they’re stupid for not investing?

William Jarvis 30:28
Exactly. Having says you have to have an attack, you know, you have to have an attack? Yes. Absolutely, absolutely shouldn’t do it.

James Sinka 30:37
For sure, no doubt. I completely agree with that. And I think this is especially true for technical people. And if you’re not technical get technical enough that you could talk to someone who could help you identify that attack. So as an example, if I wanted to write, if I want to do a piece of software, which is not, you know, my zone of genius, then I would if I was really passionate about this idea, watch enough YouTube videos, that I could use some kind of crappy Python or no code tool to put this thing together in such a way that I could get at least something out there that I could show someone else or describe to someone who might do to interpret what I’m trying to do. God, right. And so with code, it’s really easy for you to cobble together these Frankenstein styles experiments. Yeah, because the cost of experimentation is so low. It’s literally just a computer and internet connection. And in some cases, you don’t even need an internet connection. Whereas in the hardware space, I think because the cost of experimenting is so much more prohibitive for iteration. So like, like, let’s take a random example, if you wanted to make a new water purifier, let’s say that’s going to cost you more than an internet connection. And a computer it might cost you like a few grand in in parts, materials actually going and having a space where you could do the mechanical, the chemical, electrical engineering to do the water filtration. I would consider first maybe if there’s a need for this thing before you go out and you build it. There are some cases, right? There’s always exceptions to the rules. So a friend of mine named actually, I don’t I don’t know if you’d want me telling you the story. So a friend of mine, yes. Was working on a protein detection device where basically you could detect the presence of a certain biological material in a sample. And it turns out that midway through them going through building this COVID came and hit. And they thought, well, we can sense biological material. Let’s build a COVID test, to sense and help COVID Yeah, absolutely. Brilliant. They started working on it. They got some funding for this, and you know, iterated iterated, iterated, and one day to kind of pick their heads up, and they go like, wait a second, hold on? Shouldn’t we try to see if we can sell this? You know, try to do some pre sales? Yeah. Because like, maybe maybe, like, what’s the point of this? And so they go to their advisor and their advisors like, What? Are you stupid? Like, go prove that you can even do this go build the thing? It’s COVID? Of course, we COVID tests. Yeah. Like, like the market is. So obviously in need of what you’re doing, like, stop second thinking this go prove you can test COVID And they’re like, oh, okay, that makes sense. Okay, so they walked back in the lab and continued execute, you know, a few weeks later, boom, badda COVID. Test. And so so you know that there are some some cases where you don’t need to follow that logic, right, just build the thing, prove that it can be done. But usually, generally, in the hardware space, like you kind of want to prove that people will use or need or want to buy the thing before you spend 1000s, if not hundreds of 1000s of dollars and inevitably millions in order to get a product to market.

William Jarvis 33:48
That makes sense. That makes sense. Yeah, it does seem to be this thing where like, yeah, you know, if you can make someone live twice as long, of course, everybody’s gonna buy that. But you know, like in software, it seems like software lends itself to this problem where, you know, you build something no one wants a lot more. And DEC has less of those challenges, but it’s something you should probably still at least think through, take 10 minutes and call somebody and see if they buy it, you know, what I’m doing?

James Sinka 34:11
Yeah, no, that’s, that’s very insightful. I’ll add to that by saying that deep tech does generally have the benefit of products being more market, let’s say needed or driven, but not by an absolute measure. So it’s not like 100% of deep tech companies or products, right? Like I’ve done two of them, where it was like, Oh, does the market really need cheaper solar panels? It turns out that if you look at the economics of solar, what we use is actually more efficient solar panels. So higher price, but higher performance, and we’re going for the inverse, lowest possible cost, willing to sacrifice on performance to get ultra low cost. So it turns out we were optimizing in the complete inverse direction as was needed by the market. The other thing that’ll say that that you know, having worked in software a little bit, I’ll say is is for us Training is, you can like, you can absolutely spend 1000s of hours crafting and honing and tuning your landing page and your website and and this button where it leads. How person uses your app? Is it satisfying? Is it not all these different factors? And then when you put in front of someone that could just shrug like, yeah. Yeah, because at the end of the day, you’re competing against people’s desire to use Facebook, or Instagram, or Twitter, or YouTube or what have you. And just the same way, you know, Netflix competes with sleep, you’re competing with a bunch of other people’s priorities. So especially in the space of software, get in front of people as quickly as you possibly can. And all of that building and iterating you’re doing in private is actually often a waste. Again, there’s exceptions to every rule, right? Just my two cents.

William Jarvis 35:54
Yeah, absolutely. Absolutely. You know, this is kind of a left hand turn, but I’m quite curious about it, you know, the macro environment seems to really lend itself to detect problems at the moment, you know, like capital is very cheap. You know, is that really the case? Is it easier than it has been in the past to get these things started?

James Sinka 36:15
So it’s tricky, because great businesses will always be in demand, regardless of what the economy looks like, gotcha. If we’re in a session, if we’re in a recession, I should say an economic boom, it doesn’t matter. Great companies are always going to get funded regardless. So if you’re showing that you’re growing, you know, 500%, year after year, no one cares, they’re just going to give you money.

William Jarvis 36:41
It doesn’t matter, right.

James Sinka 36:45
That’s just how it is. That’s just how it is. On the other hand, there is something to be said about how cheaper cost of capital, because of the macro forces in more people wanting to get into venture capital has made it easier for companies that need to raise many millions of dollars to do it at a at a rate that is acceptable to their dilution. Right. So a different way to think about this is basically how much of my company do I have to give away to hit the next big milestone, got it. And based on what the funding environment looks like, that amount of capital that you’ll get for giving away a set, say 10%, or 20% of your company looks different based on the macro environments. So as an example, if it takes you $10 million to build your first prototype, well, you could kind of reasonably show how if you had like a bulletproof team, really good prototype designs, or sorry, even blueprint designs, and then you know, some MATLAB simulation that shows how you would make this thing if it’s a fusion reactor, let’s say, Yeah, then you can reasonably see how you could raise and this macro environment, you’d give away 20% of your company for that. 10. No, that seems within the realm of possibility. Whereas a decade ago, that wasn’t the case. I think Stripe raised that they gave away some absurd I was I’m definitely gonna get this wrong. So someone please, you know, fact check me here. But it was like 10 Actually, looking at the Y Combinator deal might be a better factor there. YC used to give out like, 20k, further 7%. And so it’s ballooned? 5x, right, they still take the same equity. And so it like even that the for the same percentage of your company that you’re selling, you get way more capital. So what that allows you to do basically is say, Okay, if we assemble the top tier talent, if we have a great attack vector, as you were saying earlier, then because of the market dynamics, we can afford to tackle bigger problems at an earlier and earlier stage. Now, two interesting market dynamics with that, I think the first is, the government is usually the one that tries to bridge the gap between something being venture fundable and just completely in laboratory research, like the grants like the

William Jarvis 39:04
way it is, for years can be super expensive, like no one else can fund this.

James Sinka 39:08
Yes, yeah, absolutely. And it was the same thing with the Apollo program. But now private companies are going to space. Yeah. Why? Because it’s, it’s a reasonable you can accumulate a reasonable amount of capital on this macro environment to spend on de risking the parts of getting to space. So that that’s one factor. So it’s, you know, SBIR grants, its government grants, NSF so on and so forth. Then the other factor is because more and more investors are trying to capture this this pie of venture returns. They’re going earlier and earlier and earlier into the stack. So normally, you would see this you can raise a $10 million dollar round that would typically be a Series A, and now some companies are raising that in their seed round. I’ve got another friend who raised an $8 million seed. And that’s yeah, I absolutely unheard of. We’re like, absolutely ridiculous. And it’s it’s just enabling more companies than ever before. So I think we’re at a great place to do these really hard, really, economically inefficient and deeply resource intensive projects nowadays because of the the venture model. But also because the software is starting to show that it is easily or it can’t easily be defended. So notion is actually being competed against by Microsoft, who just launched a notion clone this month, really? So you’re, yeah, yeah. Right. Whereas it’s very tough for someone to try and copy what SpaceX is doing. You can’t just like grab the rocket out and say, like, oh, how is this thing constructed? Let me just copy that, right, well, you can just play around with a software piece continually and get that clone. So the differentiation that becomes really difficult is the same thing, I think, with Microsoft Teams, where I think there’s now more Microsoft Teams users than there are slack users, because the distribution through Microsoft, so slack was kind of pressured to work with and be acquired by Salesforce in order to keep themselves relevant in this in this fear in this ecosystem. So yeah, it’s a multitude of factors that are coming together to enable now more than ever, some of these big projects. And last thing I’ll say is, it’s never been a better time to be a founder, it’s never been easier to raise capital, they’ve never been more people who are excited to build and work on startups. And the, I don’t know how long this environment will last. I don’t think that it will be this way, you know, indefinitely. Like everything, there’s a boom, bust cycle, right? We don’t know, where, you know, the economy might decide to tank in two or three years, and therefore the ease of raising will. And remember, as long as you’re the next Airbnb, or Facebook or Tesla, yeah, you’ll be able to raise no matter what, but if you’re a first time founder, you’re just, you know, trying it out and whatnot, it might be a little harder. But right now is a brilliant, brilliant time. So well, if you have any ideas that you’ve been thinking about starting Yeah, get in there, man. It’s like, what are you doing?

William Jarvis 42:07
Yeah, exactly. No, that’s super interesting. That’s super interesting. I I’m curious if you think I definitely agree that, you know, recessions come, you know, thanks, they, they returned, but it almost seems like it this is this is a trend that will continue as everyone searches for yield, you know, like you’re looking for yield, like you have to push farther down the risk continuum, to get more reward now, you know, because like negative interest rates and things like that. Sure. Do you think this would be a stimulus somewhat, you know, this, this elevated place we’re at will continue longer than people realize perhaps? I don’t know. That’s a weird pet theory I have.

James Sinka 42:45
Well, that depends. So why don’t you put a boundary on what people think right? Well, why don’t you be the the average person then I’ll try to contrast and respond to that. What do you think the average person anticipates? Gotcha.

William Jarvis 42:57
I see. You know, Joe Lonsdale Montville says me on on Twitter talking to Delian. Is that his name? I can’t pronounce that. Yeah.

James Sinka 43:05
posters.

William Jarvis 43:09
Exactly. Joe’s, like, be careful with BARDA because, you know, you won’t be able to raise this way forever, you know, recessions coming very, very soon. And how soon is very soon? I don’t know, the next couple, three years, let’s say, time. Yeah, but But I do wonder if this is like, you know, things may revert a little bit, but we are at a more heightened stage. As more more and more fun. More and more eyes are on venture venture used to be weird. You know, it used to be this weird thing. And now it seems like a lot more people are in it.

James Sinka 43:39
Absolutely. I think the question in there was, do we think that in three years, if there is a theoretical recession, that it will like shatter the grip to Exactly, yeah, yeah, I don’t think so. Because so history isn’t a good predictor of the future. We know that history generally rhymes. But if you look at what happened in the.com bubble, which, you know, I wasn’t investor back then I was got a kid a toddler. But nevertheless, you you saw a lot of internet companies get hyped completely to the moon, right. And then the stock market basically collapsed for those internet companies. And if you maintained your holdings, then you would have maintained holdings in Apple and in I want to say Amazon. And so it turns out that those two are incredible companies to a buttonholed like her enough both at the upset as it was ramping up at the peak and then at the bottom of the crash of that period. So it’s definitely not going to go back down to zero because our need for as a society, the the necessity is the mother of innovation and invention. And we need more solutions to problems today than we’ve ever had before. We have more complicated, nuanced issues than ever. So even if you just tackle one simple thing, like climate change, anytime anyone has a new idea for what they can do to work against climate change, whether it’s a new way of generating energy, or a new way of pulling carbon out of the atmosphere, or a new way of growing trees, or food, or what have you, the most efficient path to getting that project into the commercial space generating revenue, and actually achieving its mission is through the the juice, the acceleration, the boost of capital, it takes money to make money. That’s a pretty common phrase in business. So there will always be people that are risk tolerant, that that understand that 80% of the things that they will invest in will go to zero, but believe that they’ll find the 20% of things that will be the next Google the next Tesla, so on and so forth. So it’ll never go away, because our need to solve problems will never go away. But the ability to which folks who are not Elon Musk level, can raise capital, their ability to exist and not exist is transient with the state of the economy.

William Jarvis 46:10
Exactly. Makes sense. I really like that. I think that’s a that’s a great, that’s a great way to put it. James, where do you come down on the the tech stagnation thesis? And and I’m really curious on your opinion, because you know, you’re right, on top of these things, you know, do you feel that innovation is in the real world is continuing? You know, it’s going pretty well at this point? Or is it going like, okay, and I don’t know, what do you think about them?

James Sinka 46:36
Yeah, so I, we’ve had so much success, up until this point that I feel like a lot of people are taking it for granted. Software has been the biggest accelerating force we’ve experienced in the past few decades. So the incredible utility that’s been brought to us by Amazon, Facebook, meta slash Google, and so on and so forth, has been staggering. And we use I use the products multiple times a day. Whereas if you compare that to the obvious stresses of things like a crumbling infrastructure, yeah, it’s it’s easy to say like, Hey, every year we get a new and better iPhone, how come we’re not getting better railroads and power lines and cargo freight ships, right every year? And the reality of it is the two of those have a different competing interest in terms of like public allocation in terms of public facing brands. And generally, I like the, their Tim, what’s his name? Tim urban, has a blog called Wait, but why Yeah, and great hack. He has a brilliant, if you guys Yeah, phenomenal. He is a brilliant, brilliant essayist, who has this concept of the human megalith of human monolith, where basically, he posits, or he positions that whatever, because society has so much capacity, we have so much ability, whatever we organize to tackle we generally overcome. And that’s true. I think that allocation of problems that we address is often reflected by where the the medic interest is in society. And I think, reasonably, it follows in a place where you get rewards, reasonably easily in proportion to the energy that you put in. And that makes sense, right? As human beings, we’re naturally driven to seek out reward, we have a very robust dopaminergic cycle that’s evolved over hundreds of millions of years to give us this ability to seek experiment and then be rewarded from set experiments. And, as we now see with social media that can be engineered in a way to make things extraordinarily engaging, and in some cases, addicting. And in places like software, the ability to get feedback, and you’re seeing that, especially in crypto for an idea that’s been put out there, it comes on the order of seconds, or as building a new port, let’s say or new power lines, takes unfortunately years, if not decades, so that the speed of the rewards center of the brain is far more stimulated by these fast turnaround areas. And so I think that’s where we see a lot more activity easily. Now, there’s this counterbalance of saying, well, at a certain point, if we can’t build new roads, and we can’t get new power lines that are sent, what are we going to do as a country? Right? Right, like my take on? It is? Yeah, it is. It is So the way you kind of balance that out is typically if it’s done, I don’t wanna say correctly, but through through the capital mechanisms that we have here in the US, the market will figure out what the right rate for that is. So it’ll be that you get compensated instead of like, by, you know, your dopamine being triggered from Ooh, like people like this post. So I got, like, 1000 likes, this is exciting, and suddenly be like, wow, there’s a bounty for a multi billion dollar project for me to like, go build this thing. Yeah, like, okay, yeah, I kind of want that multibillion dollar reward. And so I think the incentives naturally teased their way out economically, except, now, the other thing that I’ll say that I do agree with, there’s a lot of people that comment on stagnation. I think, in the realm of physics, we’ve seen a lot of physics be stagnant in the fact that like, the last useful piece of physics that we saw commercialized was like nuclear and semiconductors. And like, we haven’t really been able to do a lot of useful commercial level physics with what’s being done at the cutting edge these days, like, you know, we understand the Higgs boson exists. Now, we understand about gravitational waves, but we can’t really do much with Yeah, yeah, there’s no real use your utility to those technologies. So I will admit that there are some places where it feels like potential, we may have mined through the low hanging fruit. Yeah.

But we’re seeing that software is able to restructure a lot of information that we maybe took for granted, or we didn’t realize was useful. So one thing that I really like that I’m seeing is companies that are building new fusion reactors modeled entirely from really great physics simulations or software to say, actually, there’s new ways we can try to make fusion work, right, helping getting a helping hand from from algorithms. And so I imagine that when we have like truly hardcore, that like GDP, six, right, but like after, after academia, for chemistry, for physics, or I mean, you see this already in biology, like gap three, it turns out for bio is already good enough. But you know, we’ll need a GTP, five for chemistry, and probably GDP six or eight for physics. But I anticipate that we’ll start to see a bit of a renaissance just by kind of mining some of this old data that hasn’t necessarily been leveraged yet. However, I think that there is a certain level of utility that comes in working from different levels of abstraction away from, let’s say, the atomic scale. So like, why is biology is an example such a booming field? Well, it turns out the biology is just such a relevant part of our lives. And biology is built up of chemistry, which is built up a physics. So it’s two levels abstracted away from like, what we would consider the fundamentals. Yeah. And so it’s very close to the ability to be actuated. So there’s so much in biology that is leverageable, that is manipulable, that we have the ability to leverage and utilize, but if you as a person were sick, and I was like, Oh, hey, you know, I’ve got this really great way to detect black holes in distant, you know, Galaxy, you just like I don’t like, yeah, why is this useful? I guess I kind of inspired. Yeah, sorry, exactly. So I think that there’s going to be more innovation, I think it just like anything else, just like a human attention. We’re seeing flow in different directions. And I think, once again, going back to Elon, he did a great job proving that really hard technical things can be done via exactly by a coordinated, motivated group of people. And that has given it gave me the faith to start my companies. And it’s shown that we aren’t done innovating in the world of atoms.

William Jarvis 53:51
That’s really good. And I love that point, you know, knowing that you having some kind of model and seeing that as possible, it seems really important. And this segues into that kind of come at my last big question here, as we went up, run up on our time here. You know, the fellowship, you know, how’s it been? Yeah. And, you know, could you pitch it to us, and where can people find?

James Sinka 54:13
Sure. So, we’re talking about the ondeck deep tech Fellowship, which I’m one of the co founders in the program partner there. He is the program director. And we are reading a playground for people who are deeply technical and who are interested in building joining and accelerating the careers in the deep tech space. So this is for founders who wants access to potential hires. So we have a person that that actually managed to hire. I want to say three people from the tech fellowship already. We’ve gotten people jobs at companies they would have ever had access to. founders have been fundraising. We’ve been able to make customer intros. We’re having you know sessions about how to apply for government grants, how to think about intellectual property. We have mastermind groups where you get to nerd out with other people in your same space, right? So if you’re a biotech founder thinking about how to use AI to understand potential biologics for disease, we can introduce you to other people who are also doing the same thing. But thinking about it from an entrepreneurial perspective as opposed to an academic, how do I get papers out of the door perspective, it’s just a brilliant melting pot of people who all have the same desire to make a massive impact in the deep tech space. And I’m just so grateful to be a part of building this community. So we you can find it on be on deck.com/deep. Tech, we also have Twitter. So we have a Yeah, beyond deck is the Twitter handle. I’m at James sinka, two ss JMS s i n, k. And if you’re trying to innovate in the world of atoms, and you want to surround yourself with other people who are curious, who are passionate, who are like minded and have a startup edge, you don’t necessarily have to want to start a company. You can want to be an early joiner or an explorer or help even if you’re someone that season that’s that’s built companies in different ecosystems, but you want to help other folks navigate their way. Maybe you’re someone that’s worked at a big software company that wants to help someone who’s working in biotech, figure out how they can leverage modern software off the shelf tools, or even AI, like GDP three, for some of these biological computations. We’d love to have you. So I got the fellowship has been great. I love it. It’s really

William Jarvis 56:44
cool. It’s really cool. I highly recommend everyone apply. Do you know what the next cycle is? By any chance for

James Sinka 56:49
perfect? Yes. So listening. Yep, yep, we’re going to open up the next set of cycles in q1 of next year we’re working out on when the right time is to bring everyone into a position where we’re ready to handle all the inbound that we sell. We have people actually right now, if you want to apply, we have a waitlist and we get applications on our waitlist already. So you don’t have to necessarily wait. But the next cohort will start. We’re thinking February March time.

William Jarvis 57:16
Nice. Nice. Yeah. Super cool. Super cool. Well, well, James, thank you so much for coming on. I learned a ton from you today. And so where can people find you? I think you mentioned your Twitter handle. Is that a good place to post personally?

James Sinka 57:29
Yes. So I’m at James sync on Twitter and obviously got a website’s JNBSSINK a.com It’ll just be the same thing for all of my socials. Right. But yeah, thank you so much for having me on. Well, this is entertaining. Thanks. Thanks.

William Jarvis 57:51
Thanks for listening. We’ll be back next week with a new episode of narratives.

Transcribed by https://otter.ai