Venture Capitalists Return to Backing Science Startups

http://www.nytimes.com/2014/10/13/business/venture-capitalists-return-to-backing-science-start-ups.html

by adventured • 12 years ago

62 17 12 years ago

We must be at the top of the market if VC's are backing science. I know that investing in real science is the most important thing that we as a society can invest in, yet as an asset class it has never done anything other than lose money for investors. What is the date - February 2000?

dpflan2• 12 years ago

Do you suggest it's desperation - VC's finally are bored with or are exhausting the software space? Rationally, they would only invest if the incentive for sufficient return existed.

So what has changed with regard to starting a "science company"? I assume it's easier to begin prototyping and have a POC to convince investors. The issues of scaling such "science" to real-world levels is definitely more resource intensive and can be hit with more regulatory steps (biotech for example).

But what other factors have changed for "science companies" that make them more attractive investments?

danieltillett2• 12 years ago

Do you suggest it's desperation - VC's finally are bored with or are exhausting the software space?

I doubt they are bored :)

My outsiders perspective is it seems to be a combination of idealism (many VC's want to change the world for the better and they really see science as something we should be investing in), and running out software ideas so good that they can break into what is now an incredibly competitive environment.

If I was a VC thinking the party was about to end [1], I would be throwing everything I had at science too. Sure I am going to lose the lot, but I might do some good with it. Much better than losing it anyway backing another dozen B2B SaaS start-ups.

[1] I like everyone else don’t know if the party is about to end, but it does have that Feb 2000 feeling about it.

JimmyM• 12 years ago

Major tech companies - Google, Tesla, Facebook - seem to be investing more and more heavily in their long-term future and diversifying what areas they're involved with. Perhaps the goal is to be bought out by a Musk or Musk-lite?

ganeumann• 12 years ago

Were they investing in science in 2000? (Honest question, I was there then but can't remember this. But given the 1.0 zeitgeist and the Razorfish parties, it's surprising I remember anything from the twelve months before March 2000.)

jpmattia• 12 years ago

Were they investing in science in 2000?

Applied science that played into the telecommunication space saw very large investment in y2k: Optical components, high-speed electronics, exotic wireless, that sort of thing. There were probably others, but I was monomanically focused on telecom so didn't pay much attention to anything else at the time.

adventured• 12 years ago

Approximately the same thing did occur during the prior two funding bubbles, ~1999/00 and ~2005/06.

The one last decade was a huge clean-tech bubble. It famously hammered Kleiner Perkins' reputation on the downside, and was partially responsible for them missing out on that era of major tech startups (such as Facebook).

autokad• 12 years ago

i made jokes that the market is so hot VCs are now investing in nonprofits. regardless of the reason, its nice to see all that funny money going into something that may yield a long term benefit.

shiven• 12 years ago

My suspicion exactly! The bubble is about to burst. Maybe within 6-12 months?

Funding science isn't for the faint of heart (or wallets). There is no easy 'pivot' if the 10mil (minimum) you invested in a non-software start-up is tied up in physical equipment and a few -80C freezer boxes! And with the IP scene being what it is in Biotech, those patent applications may not be worth the paper they are printed on.

The SV VCs must be unable to find any quick-flip social-shit companies anymore, hence they are looking at funding hard science. The foam will settle soon enough.

perlpimp• 12 years ago

Andresen has mentioned that government's funding of science is more crucial because it takes a while for a breakthrough into a new area to happen, like 20 years long - companies can grow on results achieved in science. However well intentioned VCs are they are more goal oriented.

Bell being huge and not unlike government organizations had bell labs - i am sure you all know that transistor came from there. Idea for bell labs was to put many great scientists together and wait for things to happen. Internet is the other thing - one cannot imagine private money investing that much in such nebulous goal - where everything from microcircuits to software stack had to be developed to birth the Internet.

VC doing science is not a bad thing but in the long run government can provide a steadier hand to people that do science than market driven entities. Financial market cycles are detrimental to projects that run on 20-30 year span or clusters of research projects.

If VCs can do a hybrid model where government can step in during lean times and help science projects survive with minimal bearacratic interference I think that could the best IMO.

michaelochurch2• 12 years ago

I have mixed feelings about an impending Flight to Substance.

It's a good thing overall, but it can be bad for talented generalists. If there's enough demand for smart people that science and "real technology" companies will train talented generalists up into the specialties they need, then it's good. On the other hand, genuine research and technology have been so under-funded that the culture has become parochial and unreasonably elitist (against talented generalists). I deal with a ton of PhD bigotry in machine learning. (I don't have a PhD, but I read papers and I'm more current and, almost certainly, more effective than someone who stopped reading papers 5 years ago.)

For example, there used to be BA-level science jobs. There still are-- but they're filled by PhDs. Real science has been under-invested for years and we're paying a price because a lot of our brightest people don't have any experience with real work, because they can't get jobs on projects that actually matter.

In the 1970s to '90s, Silicon Valley wasn't pedigree-obsessed and talented generalists could "just fucking build it" without having to acquire permissions and credentials. What happened later, unfortunately, is that smooth-talkers moved in, outcompeted us on social polish, and are now raising huge sums of venture capital on lame "social media" ideas and build-to-flip bullshit. Right now, the genuinely talented generalist engineer loses in both theatres. He can't get a proper role in the Substance world (real science and technology) because he's not a PhD with at least one paper per year since graduation, but he can't get a proper role in the generalist's promised land of Silicon Valley because the smooth-talking douchebags with lame ideas have taken it over. Between "ultra-hard" science that requires either 5+ year job tenures (to make it worth it for employers to train people up) or advanced degrees, and that typically involves a decade between innovation and profit; and the "easy" social media stuff that any idiot can do (scaling such services is genuinely hard, but tech talent can be back-filled later) there is a "moderately hard" space that is under-explored.

nostrademons• 12 years ago

The value of a Ph.D isn't in the knowledge you learn or papers you read, it's in demonstrating the ability to take on a vaguely-specified original research task where you can't see the eventual outcome at the beginning, and drive it forward until you come up with something useful. All without having the support of other people who actually know what they're doing to guide you. If you're measuring knowledge by what you've learned from papers, you're missing the point.

There are other ways to develop this skill. I've never once felt hampered by the lack of a Ph.D, but that's because fairly early on in my career, I took on tasks that were scary, that nobody knew how to do, and drove them forwards until they were useful to other people. But it does require following through on original work, and pushing your projects forwards even when other people think they're a bad idea, and accepting responsibility for results rather than effort or ability.

tptacek• 12 years ago

Where were you working in Valley tech in the 1990s? Because I was there --- I moved there in ~1997, raised a round of funding in San Francisco in 1999, and started my career in 1994, and the Valley you describe where "talented generalists" could "just fucking build it" without acquiring "credentials" was not in evidence. The Valley was much, much more status-obsessed in the 1990s than it is now.

Did you not have the experience of needed a rabbi with grey hairs and a business degree to get a second meeting with any source of funding? Because that was my experience.

"Just fucking build it" might have worked if you happened to have a rack of Sun servers, some Oracle licenses, and a partial DS3 piped into your Cisco 7500. That's how things got just fucking built in the 1990s.

I understand that you have a problem with Valley tech culture as it exists too. That's unsurprising, because there's a lot not to like. But as a rhetorical strategy, attempting to rehabilitate the 1990s is weak.

Venture Capitalists Return to Backing Science Startups

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