No more focus on Unicorns in 2024 with Francesco Petricarari of Silicon Roundabout Ventures

Summary

Today's guests is Francesco Petricarari of Silicon Roundabout Ventures who primarily invests in Deep Tech and Hard Tech. Francesco is an early stage deep tech VC who shares the importance of founding team, VC founder fit, having the right board member, and a lot more.

Takeaways

1.Founder-led funds provide advantages in terms of understanding the challenges faced by founders and offering relevant support.
2. Deep tech encompasses companies that focus on technology development rather than just business growth.
3. Evaluation of deep tech startups requires a focus on the team, their expertise, and their ability to build a sustainable business.
4. The team slide in a pitch deck is crucial as it showcases the founders' strengths and their potential to execute their vision. The team and their unique qualifications are crucial in a startup pitch.
5. Key slides in a pitch deck include the team, market opportunity, and technology.
6. Deep tech and hardware startups are on the rise due to increased demand for security and climate solutions.
7. Moving from prototype to mass production in hardware startups requires building the right supply chains and finding the right advisors.
8. AI in deep tech should go beyond current systems and offer unique applications.

Chapters

00:00 Trailer

‍01:50 Introduction

‍05:00 What is Deep Tech and why is it exciting?

‍09:00 How experienced founders help early stage founders in Deep Tech with investing

‍12:50 Achieving the right VC-Founder Fit (Crucial insights for new founders)

‍16:36 Why the era of Unicorns has ended

‍20:50 The 40 Rule's importance and how VCs judge businesses

‍24:20 Why VCs really like SAAS startups

‍29:25  Why many companies fail after getting lots of VC money

‍33:15 Strategies for building a sustainable business in Deep Tech

‍38:22 What VCs look for in a Pitch Deck for Deep Tech Startups and How He Evaluate

‍53:21 In-depth analysis of Deep Tech trends and insights

‍58:50 Challenges that founders of hardware companies need to know about

‍1:04:40 Strategies for generating innovative Deep Tech ideas

‍1:08:40 Deep Tech and AI

‍1:13:00 Ritual Time

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Transcript

Mudassir (00:02.174)
Okay, we're rolling. Please do a clap for me. This is another pro thing. So we do the clap at the beginning of the recording to sync the audio and video because it creates the spikes in the sound wave. So yeah, okay. All right. Hey, Francesco, welcome to the show, sir. How are you doing today?

Francesco Perticarari (00:03.837)
Great.

Francesco Perticarari (00:22.357)
And very well Mudosir, great to be on the show. Thank you for having me.

Mudassir (00:24.958)
Oh no, it's my pleasure to have you on the show. Every single time, and we've been doing this for quite some time now, so every single time there's anybody on the podcast, we're asking them one particular question from day one, and probably gonna do that for the rest of, you know, until we're running this thing. And the question is, what's the context of your life? Like, how did you end up becoming Francesco the Deep Tech VC, and how do you end up here on this particular podcast about that thing? So let's talk about that.

Francesco Perticarari (00:53.269)
I haven't got a clue as in like there has been so many things that could have gone in a different way that got me to where I am so You know if you yeah, it's so it's crazy. So I'm Italian, but I'm in London now and I launched the VC in London I come from a very small town and I wanted to get out of that because I found the passion in Engineering and you I wanted to do software engineering professionally

My other passion was physics, but I chose the first. And obviously I couldn't do it from a tiny remote village in the middle of nowhere in Italy. So I went basically to the best place in Europe to do it, which is the UK and London specifically. I then through that started to realize I needed to expand my network because I didn't know anybody. Started to attend meetups, ended up co-founding one. And through that meetup of engineers

scientists, I started to get in touch with a lot of founders. And as I grew more senior in my career, eventually realized that what I wanted to do was to get more involved with these founders, started to write my first angel checks, started to look at what the community had achieved because in the end he ended up running for like over a decade and he's still running. And that was what eventually made me realize that there was an opportunity to serve founders that were taking very, very big technical challenges. I think...

many people in the US have been writing about it. And now people even like me are writing about it in Europe that for too long venture capital and technology had basically just become equal to B2B SaaS, apps, CRM, tax accounting software, whatever. Whereas the reality is that there is so much more potential to build the new versions of NVIDIA, Firechild Semiconductor, Intel, and the companies that are really have shaped the technology development

today. And so this has pushed me to start Injury Investing myself. And then finally, when I realized that I wanted to do more and the community in a way requested more, had the opportunity to be more, to launch a fund that could support the community on one side and then take back the opportunity that the community offers in seeing founders, exceptional founders.

Francesco Perticarari (03:12.957)
very early in their journey so that we can invest and take advantage of their financial growth as they grow. So anyway, that's a very long way, twisted way of answering your question to just basically say I haven't got a clue like how all of these happen exactly in this sequence so that a little guy from a little town in the middle of nowhere Italy ended up in London launching a venture fund in deep tech.

Mudassir (03:37.006)
Okay, awesome. Awesome. So it's as funny as it goes. So there are a few questions that I have specifically around, so when I started out in this entire startup ecosystem, so one of the things that I have observed was there was very few true founders led funds. Like very, very little, you know, you could just count them on your fingertips or something. And now we're just seeing this sort of a.

You can say that there's sort of a rise, like a lot of these founders are, you know, starting a fund and helping other founders, which is an amazing thing. So, operator-led funds are always amazing because you could understand being in their shoes more so than an investment banker from that perspective. But before that, I want actually to ask you a question, and that is, how do you define deep tech? So, my understanding was a lot different, like maybe something around, I don't know, biotech or maybe something in the mining industry or maybe something in, I don't know, in the

in the ocean or something like that, that kind of a technology. But what exactly is a deep tech? And why it excites you so much?

Francesco Perticarari (04:38.345)
Well, that's actually a very good question because in practice I ended up adopting an easy way for people to refer to understand kind of what I'm doing kind of. And I think that's happened across the world. I think, you know, in the end, we're all using this term whenever we want to say that we're not investing in companies, tech companies, of course, where the bet is on the business

economic growth as much as it is actually on the technology development side. So it's not a clear-cut definition, but I would say when there is, especially in the earliest phases, when there is a much bigger risk but also opportunity on the technology side, and the opportunity being that if you crack that tech, which is hard to crack, then

you have by definition a strong moat around your company. And so, you know, just to try and put that into an example, you know, what the typical VC deal has been for the last 20 years, a company that is selling as a SaaS, leveraging APIs and easy to use technologies, and then trying to have that J curve of customer acquisitions, blitz scaling, whatever.

that for that reason, because as soon as you start to be half successful, if a VC wants to back somebody that is exactly the same as you and is going to just copy your model and use it and build their own tech using very traditional systems, it's going to be fairly easy for them to catch up technologically and then it becomes a battle of marketing and sales and splitting geographies. So you would probably expect for every any given company.

that ABC would back in that space, you know, the non-deep tech space, that if it's any half decent, a host of competitors will pop up everywhere. In deep tech, it's more the case where a company all the way until post-series A still has uncertainty into whether their technology is even going to work and how they specifically choose to solve a problem is non-trivial. So I think that non-triviality means that...

Francesco Perticarari (06:59.773)
There might not be more than a handful of companies that even try to do this. Let's say battery recycling. You can literally count how many companies all over the world are even trying. And each of them is trying with a different flavor. Somebody is trying with a certain type of chemical process. Somebody is trying to burn the batteries and use a pirate extractions. I backed one that is using, that is trying to commercialize direct recycling. And all of them are still, you know, some at growth stage, some at the earliest stage,

the risk in the technology at different levels, of course. And I think that is what I define as deep tech, which obviously it's not necessarily like a clear cut definition, but it's kind of a blurry thing where there has to be enough of this and a lot less of the other for me to make it. So.

Mudassir (07:49.914)
That's interesting and very, very interesting. All right, cool. So going back to my previous question, which was as a founder-led fund, what advantages do you think that thing has given you being a former founder yourself? I don't wanna say a competitive or other VCs because this is not that much of a competition, it's more of a collaborative environment. But the question that I wanna ask is like, how are you being a former founder yourself?

is now beneficial to the founders you're investing in today.

Francesco Perticarari (08:22.033)
All right, so I'm going to take the... Well, first of all, I wouldn't define me as a founder. I mean, I'm an entrepreneur. I've done a couple of businesses in my life, but they were contingent to my tech career. So I haven't launched and sold the tech business. So I don't necessarily call myself a founder. I'm more of an engineer. I am an engineer and a computer scientist. Yes, of course, like I said, I've launched a couple of businesses alongside and...

that has been part of the journey. But more than anything, in my case, I think it's actually even that is part of why founders can relate to me because I'm speaking to, because of the deep tech angle, to technical founders, scientists, PhDs, other engineers that may believe large corporates to go and launch a company. And effectively, they face a similar struggle to what I'm still facing today.

wanting to launch Silico Roundabout Ventures, which of course is a fund, but a fund is a company. I mean, it's not necessarily a tech startup type of company, but it's a company and it needs to raise money and like a startup, and it needs to basically make money in this case by having a management fee and then carry on the success of the investment. So the idea of somebody purely technical that takes this leap is definitely relatable. And I think in general to your question,

all founder or operator led funds that have a similar angle of some sort of being in your shoes like you said definitely have that extra connection. In terms of how useful that is, I also want to say that I think it can be both, it can go both ways. I on the positive side, you're able to share your experience and you're able to understand more especially the emotional side and

Mudassir (10:00.366)
Hmm.

Francesco Perticarari (10:14.633)
eventually give tips in maybe scaling teams. And if you have done things like fundraising and that, if you've done things like hiring on that, et cetera. On the other side, I think it can be a dangerous territory when you think that you can do it better than the founders. Because I believe, one of the things that I believe and that I've learned through engine investing first and now investing as a fund is I'm becoming more and more of an extremist on the field of

Ventures is an elitist type of funding that should be backing exceptional, seriously exceptional, as in by the definition of exception of a person type of funding, it's not like giving loans to people. So if you believe you've backed an exceptional person, you're not going to coach him in how to be an entrepreneur. You should basically offer your network, offer your support and then let that person take it and do the best that they can with that. So I think that he has

these two types of things. It's great for relationships. It's great to understand in the industry. It's great for understanding tech. And if you're building your fund and your venture like a company, you're also very driven to innovate and do things differently and break up and change the ecosystem, which is needed because the ecosystem does need a lot of change and is still very opaque, is still not transparent, is still, which is why I'm building this thing in public, for instance, is still very much based on relationships to who you know in terms of raising capital, lots of these three things.

On the flip side, it can be negative if you basically are trying to do it better than the founders because ultimately, I think you cannot be both. I think you can be a founder and you build your company or you can be an investor, in which case you build the investment company but then you let each of the founders figure out how to be the best of themselves.

Mudassir (12:04.686)
Okay, a very hot take sort of a question that I have in mind is, most of the times, like most of the times, and I've seen multiple cycles, you know, the 2021, I've seen that, seen what exactly is going on now, and I've seen people on either side of things, and the question that I wanna ask you is, most people, most founders actually, they'll be more than happy to get a check. Most people don't care about who they're getting the check from, unless it's a brand name VC, so which obviously adds a lot of value.

in many different ways. But most people would be just happy, like somebody's raising two and a half million or something, and they'll be more than happy, like somebody's just giving them two and a half million, or like at least leading the round. Is there such a thing which is called VC founder fit in any particular way? Like you should be taking money from this particular VC and not that particular VC. Obviously adds a lot of complexities to it because it's very hard if you niche down because it's a very small industry anyway. So what's your take on that?

founders and VCs and having this sort of a compatibility sort of a relationship. So what do you think about that?

Francesco Perticarari (13:10.245)
Yeah, 100%. And I think it's not even obvious here, but I think it's about founder investor fit the same way that it would be hiring the first team. Because again, especially for a small company at Seed Series A, even every person counts. So failing a hire is extremely painful because your team is like anywhere between a few people to 15, 20 people. And

or just slightly above. So every failed hire is a pain. And so every, when you're working with a few investors, every failed investor is a pain. Now, of course, you know, there are ways to mitigate and you know, there are some, there are occasions where you need cash and you get cash. But one of the lessons that actually I wrote, I recently wrote an article called Unicorns are Dead, the Age of Titans Begins and there is a...

Part of it is around looking at deep tech, especially in Europe. But then part of it is my reflections of what I've seen on the ground, not just looking at the data. And one of my top lessons learned from last year, my first year of VC operation, was actually that co-investors matter. And obviously, if I see other investors as co-investors, founders also see all of us as investors. And what I mean by they matter is that...

having a wrong board person, having a wrong chair person on the board, having an investor that becomes a director that is not aligned with your vision, or having an investor that even is not on the board, but it creates shareholder problems. And sometimes it's not even about problems, sometimes it's just alignment of values. If you've got a strong investor that takes a big chunk of your company and wants to, and have a certain vision of how you should be exiting that business.

that doesn't align with what you are trying to do as a founder, it's a major conflict and I think it's not great. So I think to summarize, I would literally say it's exactly the same tip that you would get from every book on hiring, which is hire slow, fire fast. If you get a shareholder on board, you basically can't fire them, but it's very, very difficult to fire them.

Francesco Perticarari (15:28.341)
so you definitely need to hire slow.

Mudassir (15:33.102)
That's a good advice. One very interesting thing that you said is that unicorns are dead. It's the age that heightens. So I, for one, totally agree to that because I think that stupid valuation and if you look at the essence, all the companies that are labeled as unicorn, it's just the valuation game, right? Somebody just got valued at like $1 billion. Oh, wow. Okay. So we just got a new unicorn. And there's this research that in 2021, 2022, I think...

there was, there's dozens and dozens of unicorns were produced compared to like the last decade or so. So the question that I wanna ask you is, why do you think unicorns are dead? And the second question on top that I wanna also ask you is, do you think this entire montage of this thing, like, okay, we just have to build a unicorn, we just have to build a unicorn, like that one word is synonymous to success. How misleading is that for any founder in the world?

Francesco Perticarari (16:33.701)
It is, and to be fair, obviously part of any challenge to the system is also marketing, in the sense that I was trying to find a way to define the type of companies I'm after, and I thought it would be a provocative thing to say that unicorns are dead. Now in practice, I want to invest in companies that are worth more than a billion, because obviously you back them at seed where they might have a valuation of anywhere between a few million and...

a couple of tens of million or there about on average and for that to be your 100x of course you with dilution and everything you want that to at least to have one or two that have a genuine well first of all of them should have a genuine goal at becoming a billion dollar company lots of them will fail on the way some would have an exit in the middle but I think you should take shots at being there so there is part of all such

you know, being contrarian to draw attention to a problem. But then there is that problem, which is exactly what you say. If you are effectively just focused on raising cash at whatever increase in valuation, that's very useful for a VC that wants to mark you up. So, you know, in a way it has been useful to my colleagues for the last part of the, the ending cycle and that kind of stopped at 2021, but it's also a short term gain, which is, I think is part of the reasons.

but reason why a lot of funds are not raising now that they had raised before and a lot of funds are struggling or some of the funds are downsizing lots of funds are even getting out of the market partnerships are splitting up I think it's just the fact that it's just the consequence of the fact that some funds raised very quickly because they could say, oh this company is already a unicorn it's only been, you know, 20 months, 24

Mudassir (18:25.964)
Hmm

Francesco Perticarari (18:26.173)
30 months since I invested a pre-seed, then that very company is now bankrupt. So it's worth nothing. So then people are questioning, okay, so was it just, did you just get lucky and did you just find a fool that in 20 months valued that company at a billion, but now that fool is either out of the market or is licking their wounds. And so, you know, what is your capacity to pick companies that have the capacity to build genuine long-term value? And I think that is

why, especially for someone like me who is focused on deep tech, which most of the times involves hardware and businesses that are initially harder to scale, you definitely want founders that are focused on the long-term vision on how to build a long-term profitable and sustainable company, because you really need to think that through. It's not as simple as, oh, I'm just going to have a bunch of

buttons for people to subscribe and I'm just going to put it out there and I'm going to get a lot of VC money and spend on marketing and whatever. And then we'll see if I get the J curve or not. In this case, you need to think about your business model, which can also adapt in my involved licensing of IP, in my involves selling physical goods, in my involved selling goods, but then use that as a way to get customers and then build, you know, sell software. There's so many things and that requires thinking, but also that makes you as an investor that wants to back them.

have to think. And I think that that's why a lot of people are scared of deep tech. They're scared of the fact that they cannot easily plot into a spreadsheet and then have an automatic formula that does, oh, that startup is hitting the rule of 40 is a perfect investment opportunity. There's no spreadsheet. You're gonna have to build a spreadsheet. And you've gotta think, and that's great, right? Both as a founder and as an investor, you both have to build a spreadsheet. And if they do align and you agree that it's a viable potential opportunity.

then you would invest and the other person will build. So there you go.

Mudassir (20:26.626)
So a long, long time ago, I happened to have a founder who was building a future unicorn, hopefully, because the company is already at 500 million. And he explained the whole rule of 40 thing in an episode. That's a founder site. So I just want to hear the importance of rule of 40 and why we see so heavily rely on that. So if you can just explain it, what exactly is this thing? So a lot of early stage founders listening to this probably don't know about that.

So what is rule of 40? And then how do you guys leverage, or is that part of your evaluation criteria? I think that's a better way to ask.

Francesco Perticarari (21:03.577)
Well, it's a good question, but also in a way, what I said is I don't necessarily rely on it because my businesses don't tend to be SaaS. One kind, not really. So the thing is that it's just a mathematical rule on how you can calculate the efficiency of a...

company that is effectively selling subscriptions and therefore having what in BC has become almost like a thing, you know, like one of the key metrics of annual recurring revenue, right? So you've got this year-on-year growth percentage of revenue, you assume that revenue has a part of churn but it's mostly recurrent, you then work out what is the profit margin and then you will not...

Mudassir (21:43.554)
Hmm.

Francesco Perticarari (22:01.053)
those sorts of percentages to end up more than 40. I don't use it because I invest in deep tech. And like I said, it's not something that it would give me any insight. And that's part of the challenge in the unicorn assumption, because if you're valuing a company as a unicorn, purely on the fact that you can plot this rule and not a bunch of financial metrics.

you then have an other multiple on revenue or on EBITDA or on Revit or whatever. And based on those, you value a company at a billion. That's not how you can value a deep tech company. However, if that company is creating so much value, then even governments have to take note. For instance, the Teslas and SpaceX is a Northvolt here in Europe that have managed despite

the typical VC not investing in those type of companies to raise funding, mostly because of who the founders were and the early executives. And they've managed to prove that they can become so valuable that they can change the supply chain, they can provide, they can change entire markets, they can bring forward adoption of new things like electric vehicles or ignite the new space race. And now we're at the point where we might go back to the moon thanks to startups.

Mudassir (23:04.006)
Hmm.

Francesco Perticarari (23:25.269)
They were the pioneers, they proved the point. I think more and more companies now will be of this nature. And so if you're selling propulsions for rockets, or you are selling defense tools to governments, it's, there's no rule of 40. One contract might be worth, I've got a company that is about to close a 10 million contract. They're gonna go from no revenue, well, tiny revenue, pilot revenue, to potentially a...

Mudassir (23:43.338)
Make sense.

Francesco Perticarari (23:51.857)
tens of millions of revenue and it's just a contract, right? So it's, you can't plot that.

Mudassir (23:54.99)
Yeah. Okay, awesome. So a lot of follow-up questions on that, like a lot of follow-up questions. Okay, so question number one that I want to ask you is why SaaS is so sexy to VC? Because majority, like crazy amount of VCs, VC money goes to SaaS. Especially B2B, B2C, whatever that is, it goes to SaaS. Probably then comes the whole CPG system.

which is kind of blown up. It was a bubble. Everybody was thinking, hey, CPG's going to be the next big thing. And VC model is probably not the fit for CPG. And then deep tech is, there's very, very passionate VCs in the deep tech space. But it is not deemed as sexy as SaaS is. So my question to you is, why? Why is that so? Why every other fund that you look up, they're working on, even in the AI space, they're investing in SaaS? It's an AI.

wrap it on a product or whatever that is, right?

Francesco Perticarari (24:53.233)
Yeah, of course. And I think that the answer to that, well, I think it's twofold. One, I think that has changed. I think since 2021, the market is clearly different. In the U.S. you had people managing or leading intellectually large funds like Peter Thiel or Mark Andreessen that came out, you know, and they were the same people that maybe were talking about soft trade in the world right back in 20 years ago.

that now came out with essays and public declarations on the type of companies they want to build and they lead back to American dynamism, which goes back to defense, governments do use hardware, it's time to build and all of that, which again, effectively are always of defining deep tech in various ways, more or less. So I think that is changing. There has actually even been the case of a fund, a small fund, deep tech fund in the US that basically went public to say...

I've raised the fund, I studied it, and I'm returning the money because I think I can't compete. I'm too big for being just the first check fund. I'm too small to compete with Andreessen. All the best deals are getting eaten up by Founders Funds. So it's becoming actually competitive overseas. I'm based in Europe. We don't have Founders Funds and Andreessen. I mean, you do invest here, and I think that's actually positive, but there aren't European brands of that nature. And the few that there are...

They take a lot of money from governments and that comes with constraints. So, you know, for instance, when now the fence is becoming older age, Europe is a lot slower to react to that because if you take government money and you've got a very long and detailed LPA limited partnership agreement, funds are limited partnerships, so that agreement limits what you can do, then you can kind of adjust halfway. So you've got to wait to raise another fund and try to convince your stakeholders to change what you can or can't do.

That doesn't apply to tiny fans like me, which is one of the reasons I ended up choosing to launch with small fans. There is a lot more nimble. So in general, I think it's changing. Now, there is also the part that despite the change, we're not quite there yet. There is a lot more that needs to change. And the reason why Sass has been so sexy, continues in that way to be sexy, and Deep Tech still needs to catch up, is because it's easy.

Francesco Perticarari (27:16.761)
I mean, it's very easy to understand. You can have a financial argument about it. And also it made a lot of money for quite a long time. So it feels like something that you can grasp. Even if you're a pure finance person, you can, it created a craze because actually almost created this circle where there would always be an ex valuation. You can launch a fund relatively easily.

kind of know what you need to do if you work as an analyst or a principal at somebody's fund, you get your network, you just spin out and know what to do because you apply the same lessons you've learned somewhere else, it almost becomes a rinse and repeat. Whereas obviously if you want to do something different, it also becomes a game of networks, of relationships, of understanding business models, of understanding the underlying technology. And that is something that...

I do believe finance people can do and some people do it well. Actually I hope more people do it over time because I think it's totally possible and I think one of the first VCs ever, I think actually the VC, the backfire child semiconductor, it was a finance driven VC. So you can, you used to do it, you can still do it today. But I think people just got comfortable with the ecosystem.

Mudassir (28:40.288)
Yeah.

Francesco Perticarari (28:41.269)
LPs, the ultimate money holders, assumed that was what would be less risky and good to do. So it forces, it just creates this assumption that it's just the thing that you're going to do. After 2021 with the market changing direction, it's forcing people to rethink, is it the only thing that we should be doing? And I believe the answer is no.

Mudassir (28:56.663)
Yeah.

Mudassir (29:08.946)
Okay, so great insight on that. So two questions that I have in mind that I wanted to ask you. Why so many companies who have raised millions and hundreds of millions of dollars and not just like tens of millions, like hundreds of millions of dollars, they're going out of the business, they're getting bankrupted. You know, we have seen like all kinds of things. We have, like quite recently, I think WeWork is one of those getting the headline and all of that stuff. So question is like, why after raising that much amount of money,

They could not build a sustainable business on that. Like what's your take on that? Like why companies are going bankrupt? It's an entire outflow, okay.

Francesco Perticarari (29:41.833)
It's entirely our fault. It's entirely our fault as VCs. And obviously I'm new to the game, so I wasn't part, I guess, of the bunch that created that. But in general, we as a class have, as a group of people have lived for 20 years doing things like back in a certain type of businesses and whatever. And if, but most of the fault.

lies with growth stage investors that have a lot of capital to deploy, raise insanely big funds and needed the companies to raise and take a lot of money. So, you know, then you start to be in a position where instead of investing because you believe that that's going to give the best returns to your shareholders and the companies got the best chances of being a sustainable long-term business,

you're investing because you've got a certain amount of years to deploy an insane amount of cash that has never been deployed ever in the history of EC. And so that was the lesson. I think a lot of good funds that struggled to then deploy according to their thesis but wanted to maintain their brand took it on their chin, reduced their fund size and sort of went back to basics. And I think that on the company side...

you know, a fund at the end of the day, if you've got loyal LPs and you're, you know, playing at Perkins or whatever, you can do that. If you're a company and you've hired so many people and creating an unsustainable business model, I mean, we work as a bit of an extreme case because they also were pushed to do things like lease real estate where they were never going to make money. They had so much money. They didn't know what to buy and what to lease. And so that, and it's not exactly the company that was part of the downfall. Right. But even none, we were companies have.

even software businesses that look like this is just software. I mean, this is so capital efficient. Why? You know, you would ask you because like, can't you just fire some people? Well, first of all, you can't just fire an entire company overnight, right? So if the market changes direction, you're assuming you're going to raise your next round in two months, in two years, or one and a half years. And then suddenly you can't raise even in three. There is a limit to how much you can cut.

Mudassir (31:35.559)
Yeah, yeah.

Francesco Perticarari (31:59.313)
Then there is also the direction, you know, if you've built an entire company on the idea of scaling and growing as fast as you can and whatever, and also fighting off marketing because you've got competitors, right? It's so easy and so digital. Um, then everybody else is copying. So none of these businesses were alone doing something completely unique. And so you're fighting off competitions. You're still have to do sales. You have to pay, you're having to pay your people. There was this culture that the more you raise, the more you can pay your people.

They can go on holiday forever. You can pay them whatever salary. It doesn't matter. I'm going to compete with Google, even though if Google is a beast, I'm going to compete because my VC is just going to give me all the money that I need to fight with Google. And then you realize you can't fight with Google anymore. And to be fair, Google is not even interested in fighting anymore because they are downsizing. So that's actually great for startups today. But if you're already in that train, if you have enough runway to pivot away and fire a lot of people and change your business model, change your culture.

Mudassir (32:40.567)
Yep.

Francesco Perticarari (32:57.497)
you can re-adapt and survive, but a lot of companies couldn't, and couldn't race, and that's the end.

Mudassir (33:04.83)
Okay, and the second follow-up question that I originally had on this thing was... So I'll give you some antidote on that. Most of the times what we have seen, like in these recent times, what we have seen is people were not building fundamental businesses. Like everybody was just more than happy to, you know, just take VC money. And I think that was widely misunderstood in many ways. And the reason why I say that is because there was this notion going around, as you rightly so mentioned,

The raising VC money is one, is kind of a validation. Two, is the success metric. And three, you can take whatever amount of money from the bank account. You can just go to Ibiza and have a party. Do whatever you would want to do. It's the other way around. It's a whole different thing. It's a whole different ballgame. So people are not focused on, one, building good companies. And two, thinking about fundamentals and sustainability. So the question that I want to ask you is, is that the same case?

in the deep tech as well. Because deep, I'm gonna ask you a lot of questions like how the whole deep tech companies and how do they operate, because it takes so much time for them to just, from an idea to go to market and then get, I think they get profitable, I don't know if they get profitable quickly or in the later stages. But do you think in the deep tech industry especially, people are more focused toward building fundamentally strong businesses, sustainable businesses, because the likes of,

things that you have mentioned, NVIDIA, Intel, all these other hardware products, these companies are not going out of the business, at least not the traditional SaaS one. So what do you think about that?

Francesco Perticarari (34:45.925)
Yeah, I think that on average, historically, when you face a more challenging environment, you've got to be more prudent with what you're doing. So you have less success and you've got to have stronger metrics. And part of the reasons why now Deep Tech is also more appealing to investors and people are starting to take notice is that precisely the fact that companies have experienced lower multiples.

lower valuations perhaps, more challenges and longer time. But you look now at what happened with all of what's happened, which we discussed on the whole digital bubble. And digital businesses take just as long or slightly less to exit. They do take less to get to, say, series A, B, C. But then between B and C, the timelines start to collide. So deep tech business will take longer to have that demonstration.

and would probably not, unless the founder is, you know, someone maybe that did something exceptional before, so he already comes with a book of relationships, would probably not do the sexiest series A of the world and, you know, have Sequoia leading the series A and becoming a unicorn already like, you know, 18 months after inception. But again, there are some exceptions, but normally that wasn't the case and it's still not exactly the case today. So then what that means is that people...

had to have a long-term view already, and he almost created this culture. So yes, I think that because of the struggle that the whole industry had to go through, then in general, yes. We also learned though with the SPAC mania that happened during the 2020, 2021 period, that there were cases in which a deep tech business would strike the emotional side of certain investors.

with a lot of cash. And so when still not exactly sustainable, they went all the way to raise a lot of money and focused on keeping on doing R&D without proving the model to the market. And even when all the way to go public, some of them closed down, others are still going, but really struggling and others are considering the listing because you cannot.

Francesco Perticarari (37:06.501)
it was this great, a lot of money goes to deep tech. I think deep tech only functions if you're very focused on making a sustainable business. And if you accelerate too much, how fast you grow and you go even all the way to go public, then the problem is that you're under scrutiny and a long and a deep tech business shouldn't be under scrutiny financially for the R and D phase because.

they're not gonna make a lot of revenue. And even if they make a lot of revenue, they're gonna have an insane amount of R&D expenses and a lot of trial and error. So going too fast is not necessarily a good thing. We've learned that. Some businesses manage to go really fast. And if, oh my God, DeepTech, actually there is a case where you can exit within a few. And it didn't kind of work. So on average, yes, they're more... It...

it's more, they're more focused on building a sustainable business. And I think that now even more so, because some people managed to try to shortcut, to take a shortcut and it backfires spectacularly. So people probably realized, hold on a second, let's take your time.

Mudassir (38:14.99)
Okay, that's a good side. I think it's a good thing that these companies are built fundamentally and it's a strong business, sustainable business, that's perfect. So a few questions that I wanna ask specifically around not just deep tech but other way around, it's just like you're focused on early stages with startups and all that. So let's start with the evaluation and stuff like that. So you must be getting, I don't know, like hundreds of pitches, and I don't think hundreds because it's not a SaaS.

a lot of pitches every day. So two questions, actually. So one is, what's your favorite part of the slide of the pitch deck? So that is one, because some people like problems, some people like market sizes, some people just go to the GTM right away. How are you going to acquire the customer and all that? So your best, your most favorite part of the pitch. And the two is, how do you evaluate a deep tech startup? And the reason why I say that is because

It's so stupidly hard to just evaluate these ideas because it's just like, yeah, everybody's just building the next Nvidia or something. So how do you actually evaluate, what's the systematic process you have there?

Francesco Perticarari (39:23.649)
Yeah, I mean, I am getting just as many pitches actually. And a lot of them are easy paths because they don't fit with my thesis of building a portfolio of picks and shovels, infrastructure technology companies, which means most likely hardware. And if it's software, it really has to have that low level approach and hard technical challenge. So a lot of them, even though they claim they have AI, they're applied AI and that doesn't fit well with my thesis, so it's an easy pass.

So a lot of pitches I discard because of that. The ones that are interesting because they're solving genuine, like serious, hard challenges, but also within markets that where that challenge is, and it's not just the market, but the challenge itself is interesting as a way of creating an insanely large business is successful. So, but in terms of favorite slide, it's probably team slide because

even if it's deep tech, even if of course then later I will need to look at what tech and whatever, the team is what makes us, makes or breaks a startup and so I think that's not enough, even good founders, not enough of them spend enough time to think about what is their, what are their strengths and then develop on that, whereas for me that's kind of the one thing.

Mudassir (40:21.268)
Okay.

Francesco Perticarari (40:49.053)
that would really matter. I have in one case, back to founder where, yeah, of course it's aligned with the thesis, but perhaps less core than what you would think, because I've known this founder for a long time, and I've seen her achieve amazing things despite struggling and that hustle power, that vision, that determination eventually put me to write the check.

and I potentially bend, slightly bend, I mean, it's not, it wasn't a huge bend, like, you know, maybe slightly bend other criteria to accommodate wanting to write that check. And I would do it again. But I wouldn't do the other way around. Like the best technology in the world, like for example, I believe in, deeply in certain technologies that help repatriate supply chain in climate, or technologies that target a defense use case, or technologies that can accelerate computing.

And so, you know, you come with the potential replacement for Nvidia with everything laid out technically. And I don't, if I don't believe you've got what it takes to scale the business side of that thing, it's a pass. So the team, a hundred percent.

Mudassir (41:58.966)
So sorry to interrupt you here. And the reason, and I'll tell you the reason why I'm asking these questions. We're actually working on creating a lot of resources for first time founders, just getting into this startup ecosystem, but more so in venture-backed startup ecosystem. So just putting together this sort of a room where they can find the best of the best templates as we see would like pertaining to each industry.

database or resource. Like we're doing all that stuff. And one of the questions that I get quite often by the audience is, what exactly, you know, what do you look for in a pitch deck? So most of the time what people would say is like there's three head shorts and everybody is just like, okay, so the founder, co-founder, or maybe the founder CTO and CPO co-founders or like whatever. So it's a very high level. But like, you know, because you mentioned it's a very, very important thing to use, especially in early stages, you would want to look at the team member.

What exactly do you look for in that one slide that has so many, not so many, that has a few headshots actually? How do you evaluate those?

Francesco Perticarari (43:06.149)
question. So first of all, templates only gets you so far and raising a VC fund is just as much as just as hard and potentially even harder because at least because at least now it's quite democratic. You've got free pitch days, free advice, free templates, like things you like to do for VCs. It's like your LPs kind of want to hide away from you. There are some exceptions, but the majority actually want to hide away from you. They don't want to be found.

Mudassir (43:12.566)
Absolutely.

Francesco Perticarari (43:33.805)
Some of them don't even have a website. There are some events where you've got to pay to pitch and then you end up meeting nobody of interest, only service providers. So it's horrendous, but you go through the same challenge of building a deck, for example, and one of the things I've learned, which now I'm passing on to founders that I meet is that templates are bullshit. Sorry. Okay. No, that's not true. Templates are very useful to get your ideas down and you should start with a template to try to get your ideas done and make sure that you don't end up fluffing away and focus on what really matters.

Then you should test that, you know, and you want in through that testing, you should create an adapt and create your own story. Eventually, you've got to be able to successfully tell me a compelling story about where you're coming from, why you're doing this, and where the opportunity lies. So the story is almost this overarching thing that doesn't end here and now, it actually goes forward. So everything has to be around that.

So definitely do start with a template, because sometimes I get crazy stuff where you don't even know where to start. There's no, it's just, I'm pointless. But then at the same time, once you get started, then try to refine it so that you make it your own. And then it's not just the deck, it comes what comes with the deck. If you're reaching our goal, those two lines, three lines, four lines you put on an email, it matters just as much because...

it presents the deck and it makes you want to read the deck, and then it complements the deck. So managing to have that one, two line punch and everything that matters. Going back to this, so that's just as a premise that ultimately there isn't a killer template and there is a one-side fit. So you should start with the basics, and I think there are plenty out there, and then make it your own. Going back to the team.

Mudassir (45:15.109)
Hmm. Okay.

Francesco Perticarari (45:23.665)
In my opinion, and it can be totally wrong, and this is part of the feedback, you're gonna get so many different ones, and eventually you make it your own by taking what works for you. In my opinion, it shouldn't be a slide of headshots, because I don't care about like, because, but that also because of deep tech, right? The reason that rule of four is that there's not gonna be a slide where you're showing me a preset, it's either like a j-curve or whatever. And if there is, it's invented. I mean, the other day I saw something in Space Tech where it was telling me that they're gonna capture 10% of...

Mudassir (45:35.553)
Yeah.

Francesco Perticarari (45:49.865)
certain market and obviously I'm not going to go into much details. I will identify the startup, but it's basically this is not Airbnb. There are like five, six providers that would buy that type of thing. I would much rather be interested in how you've already managed to get the CEO of one of these to support you, maybe write an angel check or maybe like sign a letter of intent or whatever. Then you telling me that the market is so big and you're going to then take 10%.

Each of these is bigger than that percent. Like, tell me how you're going to win one of the top five and then maybe I'll be interested. Like, you know what I mean? So the headshots and the team, what's been the thing that makes you unique? Unique and also uniquely qualified to be that person. So if you're the CTO of a aerospace propulsion company, have you worked at, you know, Rolls-Royce, no, BA Systems, Arondale, Underrail, you know, in defense?

Have you got something that gives you a unique insight into that? Or if you're a scientist that has developed this IP, how are you taking it to market? If you're the CEO, then have you got anything to prove that you can lead a company? And if you don't have anything, logo-wise and whatever, although logos can be misleading, obviously, I always check on LinkedIn because you can say, oh, I'm ex-palantir, and then you go and check, and you were like an analyst, an intern, or whatever. Doesn't matter.

Mudassir (47:17.654)
Yeah.

Francesco Perticarari (47:19.266)
Although it works with some VCs, so again, take it with a pinch of salt. But maybe you've done something crazy, like you were, you know, like, I don't know, Brady Buckett school, you managed to take your entire class to the White House and create like a protest that went viral or whatever. Again, I'm looking for exceptionality. And so if you want to be the CEO of a company, what makes you exceptional to lead that business?

Mudassir (47:21.195)
Yeah, yeah.

Francesco Perticarari (47:46.777)
I've seen cases where I've met the founder and he's like, you know, the CEO, he's like, yeah, that's some interesting thing. I mean, the tech wise. And then on the first call, he was like, I don't think I should be the CEO of this company, actually we're hiring a CEO and actually he's top, I managed to convince this person that is like top tier, whatever, to join us and, you know, as soon as the funding round, he's going to join and you know, you can be the gents all of that. So actually even like being upfront about the fact that he didn't want to be the CEO.

was actually a great thing because it's telling me you're thinking big, you know what I mean? You're thinking as like, how can I build something that is bigger than me? So there are a billion answers to that question. The reason a one size fits all, I guess the only things you need to think is do start with some template to make sure that you don't ramble away, but then make it your own and figure out what is it your exceptionality and like, why is it even worth it what you're doing? And try to give me that.

logo, bullet points, you know, you've made exits, whatever, anything, you know, those below the headshots, those bullets, what have you done that makes you exceptional?

Mudassir (48:53.79)
Got it. Okay, so you were mentioning this three particular slides that you look into. So one of them was obviously the team and what were the other two?

Francesco Perticarari (49:02.181)
I mean, obviously I look at a whole deck, right? So in the end, everything forms a picture, but what I understand, the market opportunity, a lot of people really downplay that, and they just go with, oh, McKinsey said, I'm in space, McKinsey said the space tech is gonna be this big and I'm gonna take a percentage. That doesn't work. I mean, I'm sorry, right? I much rather have a top-down approach where you're telling me that you've got maybe one pilot with a...

client that might end up buying, sign a 10 million contract, and you've got three other names of clients in your pipeline and other stuff like that. And kind of make me visualize how you're creating your idea of scaling that business. And then if you say, footnote, this is a market that is growing this much and it's this big. OK, that's like the context. But it's how do you play within that? And to be fair,

This is only like a passing note, right? This is basically just to say, okay, how do you think? And is there really a big market opportunity there? It's actually not that important afterwards. I just want to understand like, is this even worth it? I've seen a lot of, for instance, medical devices where it's actually a great company. Like it should exist, but I don't think it's VC fundable. Maybe angel fundable, definitely grant fundable, foundation fundable.

but just the market doesn't seem big enough. Like if you start to think bottom up of how many of these are you gonna sell? Like what is the actual problem and how are you gonna scale in what markets? Maybe it's only a few countries you can do this in. So yeah, so having that kind of vision and then the tech, what are you building? So what is your products? Again, there's gonna be a lot more in later, but for me, I need to understand that actually you're talking about deep tech because if I see...

It's super cool AI that is doing this on business transactions. I actually care. So it's a pass for me personally. Again, other VCs will have different slides. So ultimately your best bet is just to do a lot of work outside of the deck and the storytelling into selecting the people you want to speak to. Because if you look at my, even on Crunchbase, which is like the cheapest public thing, or you would see what I've invested in and you would see that I've done.

Francesco Perticarari (51:23.717)
an aerospace propulsion company, a climate hardware company. It's just like, and if you can with an AI for CRM, and I don't even know you, so it's like, what are the chances I'm gonna take that call? But there are so many other VCs that would take that call. So like, don't waste your time with me, go to them, right? Customize your intro with them and don't waste your time sending me your deck. Because you can have the best deck in the world, I'm still not gonna invest.

Mudassir (51:42.152)
Yeah.

Francesco Perticarari (51:49.949)
than once I invested in a company that had the crappiest deck in the world ever. But the founder went to the right events where I was also going, because I'm in deep tech and it's not that difficult to figure out which events to go in the UK, or whatever other jurisdiction in Europe, actually, more than UK, I might be everywhere. We met and then through that chat, you know, it got me interested. The deck that he sent me was crap.

But it doesn't matter. You already conveyed me with that crappy deck and that chat very quick that there was a big market opportunity, that they had actually some really cool technology that they want to take to market, and they had a big vision. Why not? You know what I mean?

Mudassir (52:32.306)
Yeah, no, totally, totally makes sense. And the reason why I ask, I think I've interviewed more than 50, 60 VCs on the podcast. And the reason why I asked this one particular question like around pitch decks to almost everybody is because I just want people to understand, listeners to understand this thing like pitch deck does not get you fundraising, does not get you funding. That's the point that I wanna make. It's just like, you know, so everybody talks about, so like you talk about the team.

Somebody will talk about, especially if they're in the SaaS, they'll talk about the TAM, Total Adressable Market. Somebody will talk about, I don't know, if they're in consumer, they're in CPG, they'll talk about your go-to-market strategies, right? So everybody will have one, every VC is gonna have a different criteria, they have a different thesis. It's just not like you're building one thing and you can just reach out like 100 of those things. That doesn't work. So that is one. Second thing is...

is because as you already mentioned, crepiest tech but you ended up investing in them. It is because that beautiful slide or whatever does not tell the story, does not align with the thesis, you're not gonna get anything. It's a good thing, good education, good exercise to do, but not the whole thing. So this is why I was asking, thank you for sharing that. So one thing that I wanna ask you specifically around the deep tech is,

And I've seen you on LinkedIn, you know, making these massive statements, and that is like the hardware is back eating the entire world, and the deep tech is the new tech. One, why you think that is true? And two, why you think that is the next big thing?

Francesco Perticarari (54:19.961)
Like I said, there are various reasons on the funding side. There are also various reasons on the where the world is going. So I think that everything is cycle is cyclical in life. So if there has been an excess in one direction markets, but to be fair, like nature corrects itself all the time. So there has been a big shift in one direction. Now it has to kind of go the other way. The other reasons are evident.

outs but just lifting your face from the VC book and looking outside. We clearly are at war, I mean there are wars everywhere. In Europe we've got a conflict in Ukraine on our doorstep, I actually have friends there, I flew to see them the year before everything started and you know on October or whatever I could be in Kiev or Lviv or whatever and by in February they were invaded, so that happened.

Israel, Palestine clearly going crap and it's only getting worse, right? You know, this is only like the tip of the iceberg. So that has forced people to reflect on the need for security, basically. Because of course that's what that's visible, but at a higher level, I mean, again, I'm a software engineer, remember? So like, you know, there is a lot of the security spots that you don't even see, but you've got to protect yourself and everything.

There is a need for protection, for security, and countries have realized that they cannot do it themselves anymore. Technology startups are so advanced that basically the private sector can be a better space, even space propulsion contractor, than what the government can do alone. And so you have the need from corporations because they want to...

Mudassir (55:57.061)
Hmm.

Mudassir (56:03.391)
Mm-hmm.

Francesco Perticarari (56:16.357)
have assured you in their supply chain or they're forced to meet certain targets and governments want to protect you've got an interest from a buy side of customers an entire new area of customers they were reticent to work with startups and now they are and they want to do more then you have the climate

area. Finally, people are realizing that it's not just a do-goody type of thing, we're literally fucking up the planet in a way that is having severe economical damage to countries and supply chains and everything. So again, there is the element of resilience. So if you want to do climate stuff, there was a little bit of a wave where a bunch of climate funds, ESG funds, were going with the box-ticking approach and they were saying, no, because they backed this SAS that it helps you

carbon credits, whatever. I'm actually doing a climate investment. It's not climate investment, come on. If you're not doing climate investment, you've got to buy battery companies, you've got to buy. Which is why a lot, by the way, VCs miss Tesla back in the days, you know, like the climate VCs, you know, like the specialist VCs miss that, you know, because they were all focused on these type of things. Now it's changing. It's changing because the outside world is demanding a change. So there are more customers, there are more needs. Computing.

Mudassir (57:14.327)
Yep.

Francesco Perticarari (57:31.645)
I mean, Nvidia, ASML, like you've got a couple of companies, and a few others around the world that are calling the shots. Everybody's worried about Taiwan. I mean, there is obviously also a moral argument, but everybody's worried because all of our chips come from there. Taiwan's semiconductors is an irreplaceable player. So there is also a self-interested rationale behind being worried about the Taiwan situation. And then of course there is de-globalization. So all of these things we've said, they're symptoms of...

a change where we're not an over the world supply chain where everybody's a friend and nobody cares about who's living in a country. Suddenly we are all aware about the fact that certain countries are free, certain countries are led by dictators and dictators can just wake up one day and say, you shouldn't be the CEO of that company. I'm going to invade that country. I'm going to do whatever I want. I don't like my women in my country to go and be free, whatever. They just wake up and do this shit. So then...

All of that, all of these things from economical reasons to political reasons are starting to become so acute that you've created problems, problems need solutions. That's what startups can solve, some of them at least.

Mudassir (58:41.59)
Yep, some of them at least, yep, awesome. All right, you know, Francesca, really lovely talking to you, sir. Thank you so much for sharing all the insights. We do have a decent big of an audience, so very, very happy with everybody who listens to us, you know, writes back, all of that stuff, so very fortunate. So, you know, when the call was scheduled, you know, we just floored out this thing, like hey, you know, Francesca is coming on the podcast, and then he's basically gonna be, we're gonna be talking about deep tech and early stage startups and stuff like that.

So give us the best of the best. So we got some of the finest questions that I've ever read, but we also got the crappiest one. Not gonna ask you the crappiest one. So, you know, let's try to stick to, we will try to stick to the good ones, not the crappiest one, okay? So, all right. Okay, so the first one that I wanna ask you is, for hardware founders, hard tech or hardware founders, what are the biggest challenges in moving from

Francesco Perticarari (59:19.113)
Great.

Francesco Perticarari (59:31.709)
That's fine, go for it.

Mudassir (59:40.534)
prototype to mass production.

Francesco Perticarari (59:43.841)
many challenges and they're actually not all the same depending on the industry. So there isn't a straightforward answer. Some common challenges are working, it's a transitioning from working with potential customers at pilot level and scaling up to major contracts. That's actually becoming a bit easier because normally these are big corporates and historically they've been terrible at dealing with startups.

Now they have more of an interest, which is why, you know, CVC activity, even on the investment side, is not going down as badly as other tourists, like tourists might mean non-traditional VC investors. CVCs are actually holding up, in fact, potentially increasing their share versus maybe hedge funds or other genuine, like proper tourist investors that are literally just leaving. And that is because they want all of the issues I've just mentioned. They have...

Mudassir (01:00:37.32)
Mm-hmm.

Francesco Perticarari (01:00:38.649)
agendas that are forcing them to want to work more with them. So that's a little bit getting better. But getting better, by all means, doesn't mean easy. So there is a big challenge there. Getting into the right supply chains, building the right supply chains. Sometimes I've made investments because I was so impressed with, and there is always an element of that, of how the founders have managed to map and create good early relationships in their own supply chain, in terms of who their future customers are going to be, who their...

approve like some of these companies need regulations. So it's not just building and they will come and it's and scaling into mass production will require certifications in many cases, it will require approval at government level. So you've also got to do a little bit of lobbying and I know it's a lot of it's a massive ask for an early team, which is why you know, not everybody can actually do it. It's sexy to say I want to build the next SpaceX, but very few people understand the complexities of building a deep tech company.

and figuring out actually what the challenges are, because they are in a way different from combat, from co-market to market, from jurisdiction to jurisdiction, from technology to technology, figuring out what the challenges are, actually, I know it sounds like an easy way for me to get out of the answer, but actually that, finding the answer to your market is actually one of the reasons why I would invest in you, because there isn't a very straightforward thing that I can just come and tell you, oh, this is easy, I'm a VC, I've seen it many times.

Mudassir (01:01:59.442)
Yeah.

Francesco Perticarari (01:02:06.045)
we can just do it this way and that way. The reason, unfortunately, that straightforward answer. So you figuring it out is actually a good point for being investable. Again, other common things is if you're working with governments, there are now more opportunities to work with them through accelerators and side projects they do. So that's potentially a way to get started. But eventually it's...

just figuring out what are the steps you actually need, maybe bringing on board the right advisors, the right people when you start hiring because you've raised your pre-seed and getting those top executives and decision makers. You could actually, another thing I've seen some companies do really, really well is figuring out who could be retired people that have a lot of experience in a certain industry that can help them open doors and figure out how to scale.

Mudassir (01:03:03.312)
Hmm.

Francesco Perticarari (01:03:04.633)
So, you know, in one case, I've got a company that needs to build, that needs to choose how to scale the production of their chips. And they've chosen to go down the way of creating their own fab and actually even potentially scaling up with a new fab. So it's like, there is an entire industrial strategy there that you can also absorb from people that have done it, maybe in different industries. And maybe a way to get them, let's say cheap in quote, is that instead of going to hire

straight away a person, maybe even before you raise, you manage to get someone who used to do it and is now retired or is now injured investing even better because that person can give you a check and a seal of approval and can help you figure out the strategy. So trying to get the advisors, the angels, and these people that can add because they come from that industry, in your industry, can be a way in which you can move from, you can prepare the move from prototype to mass production. And then lastly,

part of the process is, if you are in deep tech for real, in hardware for real, part of the process is a question mark, even for you and even for me as an investor, right? There is a part which is possibly is not going to scale. And we've all made a major mistake and the thing's not gonna work and you're gonna have to pivot or maybe even fail. There is always that, but if we exclude that,

Yeah, I would say trying to find the right ways to scale, to get the proof of concept going and getting the right people that can open doors to map out the right supply chain in the industry so that you can start to make the right calculated bets and moves on the chessboard to get there.

Mudassir (01:04:51.486)
Okay, got it. The next one is how do you actually validate the hard tech ideas? Because most of them starts in universities and colleges and then people are doing PhDs or masters or something and they come up with this thing. And then there's a whole bunch of people involved in that, like maybe a supervisor, professor or something like that, maybe the university or something like that. So two part question, like this is something that I wanna ask you is, this commercialization part of that, it's like how do these ideas get commercialized

And the other part which was actually asked is how do you get like how do founders validate these ideas? Because it's not like you know, it's not like a SaaS, it's not like a hey join a waitlist or something like that. I'm just building the next SpaceX would you like to go into the space? It's not like that.

Francesco Perticarari (01:05:38.989)
Yeah, my answer to that is not everybody's answer to that. There are people and we have arguments, I mean polite arguments with colleagues that take the seat differently. I personally, again, this is me, they give you the pincho salt, and also it's me, 2023, four, so 2024, so pincho salt, am I even changed my mind? Who knows, maybe I'm wrong. Is that...

you're not going to commercialize an idea or an AP, even patents, is not necessarily something that you can validate, that is worth validating because it's not a business. In fact, half of my portfolio doesn't even come from academia. Everybody eventually does, but not straightforwardly. They might have left companies and they were maybe head of engineering or, you know, the...

Mudassir (01:06:26.208)
No.

Francesco Perticarari (01:06:32.625)
Yeah, head of engineering, most likely like that type of people or like senior decision makers in certain companies, maybe in robotics, maybe in medical companies, maybe in aerospace companies or you know, that type of thing. So that brings with it a certain element of commercial awareness. Those that don't have that, then they need to find a way.

to speak to the people that can help them validate that. And they would, and then trying to be honest with themselves about one, who is the right person to lead. I've seen amazing people that were in their early 20s, like PhD people, never done anything commercially. Okay, maybe done, you would notice sometimes people always have a, if they are like.

Mudassir (01:07:22.402)
Hmm.

Francesco Perticarari (01:07:29.205)
leaders materials they would always have done things on the side but it might have been like it's like a small business on the side at uni nothing worth nothing maybe nothing even have worked out successfully but you notice that there is that eagerness if you don't have that i don't necessarily think that you can learn so then maybe you need someone that would be that commercial leader um if you do

And again, it doesn't have to be a previous company because maybe you're a PhD, but you might have done something and you believe that you have this thing. You can help cultivate this work by creating, by getting, to be honest, it's the same answer as before, getting those early advisor, maybe angel investors that have deep knowledge of the industry that you want to penetrate. And you try and figure out how this can be applied. Because one good thing of deep tech is that if you have genuine novelty,

People will you will probably find people that disagree with your solution That's okay. If you're if you build if you've got a strong belief Not everybody would agree with you and that's okay. I think polarizing people are better than people that would become people pleaser but the problem and The need for a solution to that problem should be obvious and people should be able to tell you and you should figure out the way to get there

Because people might not agree with how you want to solve it, which is fine, actually gives you an edge if you're right and everybody's wrong. But if you're struggling to figure out whether there is a real, a real pull, a real demand for what you're trying to do, like a solution to the problem in the first place, then maybe it's not the right thing to become venture scalable. And sometimes that's just what it is.

Mudassir (01:09:28.494)
Okay, got it. That's a good one. What do you want to see from AI in deep tech? Because you don't, because I clearly can say that, like you don't want to see another, you know, AI extension for CRM or something like that. So what do you want to see in deep tech from AI? Because it has that potential. Maybe we'll see. It'll come to fruition or not. So what do you want to see?

Francesco Perticarari (01:09:53.928)
Two things, one, if AI is part of a bigger proposition where there is...

What you're doing is hard. People have tried and other people with AI have tried, but they have failed. And there is some uniqueness to how you build the technology that incorporates AI, but there is more. So in one case, again, the biology knowledge and what they've managed to figure out at founder level with the previous knowledge of the founder, to me, it was even more exciting than the fact that there is an AI part in how the whole system, the whole technology and how after that.

the acquisition of data and the manipulation of data. And by the way, that's still like on the edge of what I'm doing. So there was also a strong founder element there in this particular company I'm thinking about. But you know, overall it's possible that I could see applications where in areas like security or tech buy or something like where regulations and difficulties in even accessing the right data and everything else makes it invisible for the foreseeable future.

for a general purpose AI system to work there. And all you have to do is just to plug it and repurpose it and maybe do training or whatever. The other aspects, which I don't know if I'm gonna see it with this fun lifetime, but I'm definitely gonna see my personal lifetime, is the next chapter of AI. And what I mean is that in 2011, people were crazy. People were thinking that DeepMind was crazy here in the UK.

for many years after the early rounds, people were like calling it the worst names. Like, not everybody, obviously some people loved it, but like a lot of people were like, this is not a business, it's a, it's a serious thing. Like, what is this thing? They're trying to commercialize the neural network. What does it mean? Like, like this is not a business, whatever. Google arrives, buys it for 400 million. And now everybody here in the UK thinks, including myself, that if that company existed today.

Francesco Perticarari (01:11:56.689)
that would probably become a unicorn and maybe even scaled up in their own right. Maybe became an OpenAI before OpenAI was even a thing. At the time, in that ecosystem, a sale into bigger corporates made a lot of sense also because you didn't even know if you would be able to raise the next round, right? OpenAI, same thing. In 2017, Google does some work with LLMs, actually publishes the first paper and then nobody notices except for geeks like us in the industry because we work with that stuff.

Then OpenAI comes along, it's a charity, like whatever, nobody notices, Elon Musk gets involved, people notice, but nobody really expects it to be a company. Sun comes along and then it becomes a company. And then, hey, now everybody's like, wow. And then GPT-3 comes out and everybody's loves it. And everybody's like, oh, AGI is gonna happen in 2024. It's not, by the way, if you wanna put me on record, this is my view, please. Companies out there, prove me wrong.

I think there is a computational complexity problem that hasn't been solved and addressed, if you want me to be specific. But there is going to be new versions of this, right? There's going to be maybe right now, as we speak, a company that has taken a different approach to machine learning, maybe that we all know about, but that nobody has taken to scale yet. And maybe they will take it to scale and they will become a new thing. Maybe they're inventing something else altogether. So...

I don't know if I'm going to see it yet this year, next year, but I'm pretty positive that we're going to see it. And that's going to be the next DeepMind OpenAI, whatever. And I'm very excited about that because I think the more systems become mature, the more then eventually we might approach something like an AGI. I think there would need to be a concert, an effort that goes above a single approach company.

It will require different successful companies doing a lot of things and a lot of data. And then who knows?

Mudassir (01:13:59.798)
Got it, okay. All right, thank you for all of that. So Francesco, we have one small ritual on the podcast. And what we do is we ask all our guests a question for our next guest without telling who the next guest is gonna be, okay? So I got a question for you, and obviously gonna take a question from you for the next guest, okay? So the question that the last guest left for you is, knowing that 2023 was so turbulent and intense, what is your word, what is your one word or a phrase for 2024?

Francesco Perticarari (01:14:32.541)
Hmm, that is a challenging question. I mean, in the sense that you are.

What could be a non-trivial answer? I mean, for me personally, my word is baby. I have a five months old baby, right? That's the biggest challenge and biggest joy for everyone else and for me professionally. 2024 is a riddle. I still haven't figured out if we're out of the woods and the down cycle before the next cycle was actually fairly short and...

you know, maybe not as painful as unless you were over-invested into 2021. Or if we're in a dead cut, dead cut bounce market wise, which we would have repercussions across the whole training building VC. And therefore IPOs won't come back as strong as people hope M&As will continue to get down or remain low and that eventually will create more, less capital available.

even in 2025 and maybe 2026. So, a riddle. I haven't figured out if pain has happened, was it maybe as painful as it could have been and now slowly we're gonna get back up or at least be constant and then back up, or we're gonna smash our face. I'm actually thinking the latter is probably more likely, but I haven't decided yet. So my guess, the question for the next person.

What's a good question that is for everybody?

Francesco Perticarari (01:16:18.533)
I'll have my answer to that, but I'm not gonna reveal it. Do you think we're gonna have a full tolerant quantum computer within the next 10 years?

Mudassir (01:16:27.934)
Okay, that's an easy one.

Francesco Perticarari (01:16:28.189)
There you go, even if you're a SaaS investor or whatever, I don't care, give me an answer.

Mudassir (01:16:33.502)
Okay, we'll do that. Okay, all right. Let's pause the, you know, finish the recording and please stay on the call, okay? Okay, all right. Thank you so much, sir. Thank you. Enjoyed the time, enjoyed talking to you. Thank you so much for educating me and the listeners on the deep tech and how the venture capital sides work on the deep tech. So I really, really appreciate all the candor, all the knowledge, all the insights. And thank you so much again.

Francesco Perticarari (01:16:59.653)
No, that's right, great questions. You make me swear not too much considering my standards. So that's good. Maybe because we didn't talk about Brexit and all of these like crappy things that have happened over here.

Mudassir (01:17:04.75)
Okay.

Mudassir (01:17:12.393)
We'll do that after the recording. So not going to let you go without swearing, okay?

Francesco Perticarari (01:17:17.539)
good alright nice one it's been great thank you so much