The Science Nerd Turned Big-Think VC
WHY YOU SHOULD CARE
Because more investing in blue-sky science could change the world.
Please join us on Saturday, July 23, in New York City’s Central Park to hear Josh Wolfe — in person — along with other intellectuals, artists and “trend-makers” who love good conversation, a rich mix of food and great music. Welcome to OZY FUSION FEST, and enjoy this special encore presentation.
Nuclear waste management, microscopic metamaterials, short-circuiting death itself: all big, even moon-shot ideas, not exactly the kind of tech your typical venture capitalist might choose to bet on — short-term, you’re going to see nada in return. But that’s the sort of big-problem-solving technology Josh Wolfe aims to fuel, far from hit millennial apps like Yo or Tinder. They’re bets that could pay off big — or never at all.
His Lux Capital’s current $350 million fund is modest by Silicon Valley standards, but the self-described science nerd turned VC has good company in the deep-think end of the investing pool, where billionaire luminaries like Bill Gates, Peter Thiel and Marc Andreessen are also playing these days. While much of the $48 billion invested by VCs last year — the most in more than a decade — went to quick-turn, quick-return software products, Wolfe’s portfolio reads more like the sci-fi he loves. The cash he guides from offices in New York and Menlo Park goes to companies that deal with hard science, fundamental stuff like biology and physics, but aimed at producing tangible products. “We used to say that Angry Birds” — the mobile game — “does not an economy make,” he says.
Wolfe is part of a countertrend to app and software-related investments, one that eschews short-term thinking for blue-sky visions.
If that seems reminiscent of a famous Silicon Valley investor’s motto — Thiel’s “we wanted flying cars; instead we got 140 characters” — it is. Wolfe has co-invested with the Founders Fund guru and other big guns of the new economy, including Gates and Andreessen. All are part of a countertrend to app and software-related investments, one that eschews short-term thinking for blue-sky visions, says Harvard Business School professor Matthew Rhodes-Kropf: “People are excited about these things right now,” with enough investors satisfied that world-changing technology is both possible and lucrative.
Rhodes-Kropf means people like Elon Musk, who’s funding space travel (SpaceX), and Thiel, who’s after, among other things, the secret to immortality (Emerald Therapeutics and Immusoft). And then there’s Wolfe, who talks casually about the possibility of teleportation and lets slip that he recently signed a new investment — still under wraps — because the idea was “so improbable and so inevitable at the same time.” The biggest question about all these big ideas: Will they ever pay off? One answer, according to Wharton School professor David Hsu: “You just have to be right once.”
Married with two daughters, Wolfe, 37, thin-faced and fit, still comes across as the science nerd he once was. He loves sci-fi, quotes famous thinkers and calls his own ideas — presented like verbal outlines — “theses.” His prepubescent self played a big part in his path to investing. At 13, he got a dream spot in an AIDS/HIV immunopathology lab in Brooklyn by banging long and loudly on the door of scientist Dominick Auci. The research he helped with took Wolfe, who grew up in Coney Island with his mother and grandmother, to the Westinghouse (now Intel) Science Talent Search semifinals at age 15. In between running tests with Auci, he watched as his mentor traded futures and options.Those experiments with thousands of dollars caught Wolfe’s eye.
So instead of heading to the lab after college, he started up a financial career, working in investment banking at Salomon Smith Barney and in capital markets at Merrill Lynch and Prudential Securities before turning to big thinking and going solo. Well, duo, really. His co-managing partner at Lux Capital, Peter Hebert, colleagues joke, is the firm’s airplane, typically optimistic. Wolfe’s more the parachute — the skeptic looking to weed out a poor risk even as he bets on “matter that matters.” The pair got going only after an “improbable” meeting with William Conway, of multibillion-dollar asset management firm The Carlyle Group, that led to financial support and expert advice.
Unlike the software arena, where the barrier to entry is low and luck is key, Wolfe and his ilk wheel and deal in a place where “expertise” reins, Hsu says. For Wolfe, that means reading voraciously, including a selection of obscure science journals, rather than trusting his gut like the archetypal Valley VC. Partner Hebert says he gets an “intellectual high off of being right when others aren’t.” That strategy led him to not just invest in, but to create Kurion, a nuclear waste management company. Kurion was there after Japan’s Fukushima Daiichi disaster in 2011.
Most often, though, his investments take longer to blossom, which makes judging their effectiveness difficult. That can be good or bad, Rhodes-Kropf says, since raising capital becomes more difficult when quicker payoffs are available. “SpaceX and Tesla — these things only worked because everybody believes in them,” Rhodes-Kropf says. And physical products require scale and sales teams, and can be far more costly than building in bits. Then there are the pressures faced by all VC firms that aren’t in the uppermost tier: One bad fund can spoil the future.
Looming over all is the pin that many see poised to burst the current VC bubble. Wolfe’s been conducting a random experiment with friends, asking, How long before the current zeitgeist goes pop? The answer: It’s “linearly” more imminent, he says. That’s scientific talk for: It could all be over any day now.