Luca Venza is a specialist in deep science and healthcare focused startups and is a mentor and/or board member to dozens of science-backed startups. He founded Lotus Partners, a deep tech venture builder, to support science backed startups with strong IP in the frontier materials space. We spoke with Luca about his experience at PUZZLE X and how scientists can become successful entrepreneurs.
How do you think commercializing materials deep tech is different from other ventures?
The technical complexity is the obvious place to start. The benefits of materials occur at a microscopic or nano (or even pico) scale. What cannot be seen can often be difficult to explain or understand for a customer or end user. Basically, scientists are asking the uninformed customer to trust that what they say is true. And if the material is new and untested, that can often be too large of an ask.
What further complicates life is that materials are components of products and often not products themselves. This means there are potentially dozens or hundreds of interactions that the new material needs to align with in an existing product in order to make it better or to work optimally. Those synergies can be difficult to develop and test in a lab, let alone prove in a commercial setting.
The final element is that banks don’t like to invest in innovation and venture capital often does not have an ability to assess risk in a deep tech world. The investment landscape needs to create more qualified investors and new venturing models to take into consideration the unique challenges that materials create. But the onerous is not only on them, deep tech startups need more balanced teams. Scientists need to work with experienced entrepreneurs and commercial experts to improve the adoption of their technology, as well as the storytelling for investors.
Why do you think frontier materials startups have a notoriously low success rate?
The main two reasons that any startup fails; product and team, both are enhanced in the field of frontier materials.
The main reason is that materials startups are often not stand-alone products. For the purposes of selling, it is easier for a startup to own the entire value chain of its product to market journey. By this I mean, I would prefer to generate material, manufacture that material into a finished product, then sell that product to an end user. More often, materials are part of a larger recipe for a product commercialized by a third party. We generate raw or finished materials, then we sell them to someone who has to insert them into an existing product with its own complex engineering and manufacturing challenges. This increases our probability of failure, the more components in the final finished product of our third party partner, the more likely they will fail—therefore, the more likely our product will fail as a result. Scientists entrepreneurs have two options, either build very strong partnerships, even joint ventures, with complementary businesses to maximize success in this environment, or, and this is a huge challenge, build companies with a bigger ambition to own the entire product journey.
As for the team, now we get into an area of tremendous sensitivity. I will undoubtedly say some scandalous things here, so please take this with a grain of salt, I absolutely acknowledge that every individual is different as is every team. If you want to succeed in business, a diverse team is key. Gender, skills, life experience, nationality, specialization, all of it. More diversity is nearly always better and there is strong evidence in the entrepreneurial ecosystem to support this. Science founders are raised in an ecosystem of like-minded people, all focused on a similar objective to prove out a new technology. The winners tend to develop pretty big egos in the process. Ego, especially in the early phase of a startup, has no place in business. Successful commercial models require leaders who are flexible, agile, humble, and above all, great listeners. No matter how good a technology or a product is, the customer is all that matters. If they don't pay, the startup will fail. This requires strong emotional intelligence and relationship building skills, not readily found in great scientists. And that is okay, the challenge of building a great startup is not that one person is great at everything. It is all about having the humility to recognize what you are good at and what others are good at, and building a wonderful and diverse team around that.
What do you think are the biggest pitfalls for scientists when starting their own business?
The single largest pitfall is the belief that a smart person can do anything!
Yes, brilliant people are exceptional, and they are key to the types of innovation that move the planet forward. However, starting a company cannot be done by one person. The thought that a great scientist will automatically make for a great CEO is the most dangerous pitfall of all, and it ALMOST never works. It can work, which leads some to believe that it is a good idea. But the instances of failure vastly outnumber the successes. Many times, start-ups which are led by scientists sacrifice their best technical mind on product development and gain a sub-par CEO in the process. This kind of lose-lose situation ruins many early-stage start-ups.
On top of that scientists tend to have a tenuous grasp on what it is that CEOs do and how the title, and the responsibilities that come with it, change over time in a growing company. The best CEOs are experienced commercial professionals that have a strong sense of product, customers and competitors in their field. That kind of network and experience will save companies immense amounts of time and energy in gaining commercial traction.
No matter how you build your startup, you will need great people to join you in order to be successful. Don't be afraid to attract other brilliant people with complementary skill sets, you don't need to be the CEO dictator, a suite of professional C-Level experts with strong collaboration and communication will yield a better result.
What skills do you think scientists need in order to become successful entrepreneurs?
Know thyself. Spend time on emotional intelligence and try to understand where you have strengths and weaknesses beyond what is obvious. The successful science entrepreneur is the one that can truly inspire. No one will be as passionate as the inventor in communicating the power and importance of new technology. But the path to success does not come through explanation, but rather through inspiration. Do not try to explain to your customers or investors why your technology is great, paint a picture of what is possible, get people excited about the future. If you can find a story that you believe in, this is also the first step in becoming a successful salesperson, which, like it or not, all entrepreneurs must be.
What is your top tip for scientists thinking of launching their own company?
Absolutely do it if you cannot imagine not doing it. Starting a company is not a rational decision, entrepreneurs are tortured by the thought that someone else might start “their” company. If you don't have that thought, greed and ego make for poor motivators when the times get tough. And make no mistake about it, building a company is a rollercoaster unlike anything that you have experienced in your life to date and their will be tough times and loud arguments at times with co-founders, staff, investors and customers.
If you commit to starting a company, you can never pull out until it is over. Companies are built on the shoulders of one or two people. It is a commitment beyond marriage, it is more like having children. Once the child is born, you are responsible for it until you die (or the company is sold). The foundation of this commitment is what allows you to recruit talent, investors and customers. If these groups doubt your commitment, even more than your abilities, you will never be successful. So make sure before you start that you understand exactly what you are getting into, but once you start, do not ever look back.
What frontier materials excite you the most when it comes to new ventures and why?
Graphene and all carbon based product derivatives are extremely exciting. The thought that highly quality graphene can increase energy efficient and neural activity at the same time is quite incredible to contemplate. Equally, graphene can replace cellophane and be used in common materials like tires and shoes. The pure scope and impact it will have across the globe is unmatched in recent history (silicon cannot touch it). It is fun to dream about!
Could you tell us more about the co-creation workshop you led at PUZZLE X?
Our Co-Creation Workshop series is intended to demonstrate exactly why we say that diverse teams are the most important element of successful startups. We attract participants from diverse backgrounds and provide a team setting where collective thinking demonstrates how nearly all ideas are improved when you surround yourself with the right people. It is great practice for anyone wanting to enter the deep tech startup space, and if you are lucky, you might even find your future co-founder.
How do you think an initiative like PUZZLE X can help scientists who want to become entrepreneurs?
PUZZLE X was built with the singular focus to increase the positive impact of frontier materials on the Sustainable Development Goals. In my mind, startups are the best way to do this because they allow for more freedom for product developers to build the best solutions for customers, without the institutional burden that most large corporations suffer from. But the only way to build successful startups in this space is through a collaboration of many different types of people, scientists, doctors, researchers, engineers, MBAs, artists, sales people, etc. PUZZLE X is the only event in the world designed with this objective which makes it the best place in the world to make extraordinary things happen.