Two years ago, we spoke with Lior Susan, founder of the now six-year-old Eclipse Ventures in Palo Alto, CA. At the time, the organization believed that the next big thing was not any other social network, but rather a remaking of old-line industries through a heap of complete technology – including hardware, software and data – capable of bringing them into the 21st century Was.
Fast forward, and nothing has changed, not inside the eclipse anyway. While the world has gone through a dramatic change due to the coronovirus pandemic – never before has America’s crumbling infrastructure been evident to so many – Eclipse is supporting exactly the same companies as it always has and funds of the same size with. Indeed, after closing its second and third funds with $ 500 million, the company closed its fourth vehicle earlier this month with capital commitments of $ 500 million, primarily from endowment.
This morning, we spoke with Susan about focusing on reviving the old industries of eclipse, which remain largely untouched by technology, and why Eclipse’s team and the rest of Eclipse’s team have never been more powerful is. Excerpts from that conversation have been lightly edited for length and clarity.
TC: Because of where the eclipse is focused, you knew for a long time about the incoming supply chain that an epidemic has occurred. Have your priorities as an investor changed? Do you have a to-do list in 2020 and has it changed?
LS: Not really. We have been saying from the beginning that the infrastructure we are living in is 50 to 60 years old across the board. We are currently into all those social software and fintech, new ideas and consumer trends. But we don’t live in the Internet, we actually live in the physical world. And not the physical world [receiving investment] Absolutely. But much of that innovation can be applied to the world we’re living in, and what we want to do is bring that $ 65 billion backstage economy into the digital age.
TC: In this go-go market, a lot of funds are not raising the amount as it was before. Why did you choose to do this?
LS: We have a very specific strategy. We lead the initial level of investment per fund of only about 22 companies, we [want] 20% to 25% with our initial checks, and we double hit on companies we think are breaking up and try to lead two or three rounds in a row. And we know how to run a spreadsheet and we know how to make assumptions [about] What do we need for enterprise value to give alpha returns, and [that math leads us to] $ 500 million.
TC: Last time we talked, Eclipse helped build and fund a company, Bright Machine, which primarily develops software for robotic systems inside manufacturing companies. Have you launched any other companies in the last few years? I remember that you don’t like the word ‘incubate’.
Ras: We call it enterprise equity internally, but basically, we are very research oriented, so a lot of our investment starts with us [circling around] An investment thesis and an area that we believe is getting really interesting. I am currently working on a thesis around insurance in manufacturing [that will cover] Working comp, facilities, assets. . . this [always] Will start with a one-page thesis and we’ll talk about it inside the firm, and we’ll hunt. But we don’t get what we like in a lot of cases. This is where we like, ‘Well, we come from the operating background. Why not roll up our sleeves and find out how we can go and build these companies? ‘
You are right that we did bright machines. We also have Bright Insight (an IoT platform for biopharma and medtech that has raised $ 101 million in Series C funding led by General Catalyst), Cord (a commerce-as-a-service for direct-to-consumer brands) Software that just raised $ 18 million in Series A funding, and Metrolink (a new company that helps organizations design and manage their data flows). We did it [this model] a [few] At a time where we have not just invested in the company, but we are part of the founding team or we are excavating the property. We are trying to keep it very flexible.
TC: Interesting that you can’t find an insurance company focusing on the manufacturing industry that you like.
LS: We do a lot of research like this. We see a lot of horizontal business models and technologies [could work well] Where we are playing and we know that a solution is needed. So, can you do a slack for construction, or can you find the right people to make lemonade for construction, or can you find Shopify for industrial property or spare parts?
TC: What size check are you writing?
LS: I would say $ 3 million to $ 4 million initial checks and $ 20 million or $ 25 million in Series B, but you will find a lot of our companies where we invested over $ 150 million over the lifetime of the company.
TC: Which company has attracted the most from Eclipse?
LS: I think cerebras [Systems, which reportedly makes the world’s largest computer chip].
TC: What do you make of what we are hearing from the new administration in America on the infrastructure front. Do you think it is referring to putting money in the right vertical?
LS: I was on a call with the construction work force on Monday, and I will tell you – without getting into politics, because it is above my salary grade – that the current administration is going to invest hundreds of billions of dollars, if this country In infrastructure upgrades, not trillions of dollars. And it is going to be semiconductor, battery, manufacturing, industrial infrastructure as a whole. . .
[I think last year’s ventilator shortage made clear] We will lose 100% of the manufacturing capacities of this entire country and western countries. And I think everyone now understands that you are going to see a large share of investment in infrastructure and technology is the only way to do that, because we don’t really have a million people who want to [work on an assembly line]. We really need automation lines and software and computer vision and machine learning and everything that Silicon Valley is really good at.
TC: You are aware of what is happening on the semiconductor front through cerebras and other bets. There is clearly a huge chip shortage that is affecting everyone, including the auto industry. How long will supply take to catch demand?
LS: I think we are going to see some big changes, but it is going to take many, many, many years. It’s not software, we can’t bring everything [to speed overnight] As you really need fab and cleaning rooms and property. it’s too complicated.
It is going to worsen over the next few quarters. This is good for some of our companies that are working on the problem, but overall, as an economy, this is very bad news.