Some founders hide in stealth but Danielle Fong has mostly done the opposite: publish the work, take the hits, and let the right people find you.
In part four, we unpack the pluses and minuses of being public, raising from individuals, and building a company where the technical story is also the recruiting story.
Transcript
Pablos: So what do you think about, just to milk you for wisdom here, where was LightSail based? It wasn’t in San Francisco.
Danielle: No, it was in Berkeley. It was in Berkeley.
Pablos: Okay, so Bay Area though.
Danielle: Bay Area.
Pablos: And so you’ve been here for a decade or so. How do you think it’s working out as essentially deep tech founder in the Bay Area?
Danielle: Yeah, I mean, I think it’s a great place to be a founder. And, you know, probably the best.
Pablos: You’re getting a lot of money in here.
Danielle: Huge amounts, yeah. and we are also enacting strategies that mean that we’re getting quite a good yield. We’re very visibly using AI in how we do the company.
Pablos: Tell me about the visibly thing. You said that before. You want to build in a visible way.
Danielle: Well, so we post videos of the experiments and directly, here’s the data sets and basically if we’ve already patented it or even we started opening the kimono a little earlier than we probably should, but we patented a bunch of stuff and then we started just being pretty open about exactly where we were and what we were trying to do instead of trying to manage it. It’s this bright glowing power source. People are excited about that. And we wanted to show it in person as many places as possible. So including, it used to be less full than it is now, but in this lab, we would host parties. We would do, there was Deep Tech Week. We did a demonstration on the Hornet. We did one in Light Haven for Manifest last year. We did, so we’ve done a lot of these public demonstrations. And a lot of other founders and, physicists, ex -physicists and different people have supported us. And even though they’re small checks, they come with a lot of help.
Pablos: Yeah, cool.
Danielle: And so it’s part of being part of a community, but also channeling it as much as possible and speaking out about it. And also there’s a lot of hard tech founders around who will help out. And there are a lot of software founders who might have come from hardware or physics or something, or they really want to get back to it. They want to do something in energy. They’ve been convinced. And so those are great supports. And by showing what we’re doing, we’ve been able to reach out and get sponsorship from Entopology, which does the most advanced CAD software that allows us to do these designs. have curvature everywhere and form labs who sponsors our 3d printing of Illumina and we’re promoting that and developing new yeah and so uh that’s all side effects of being of building in building building in public building in public
Pablos: wow super cool
Danielle: i wouldn’t say that like it’s absolutely the only way to do
Pablos: yeah
Danielle: yeah
Pablos: but it’s definitely advantage. That’s great that you’re convicted about that. Any downsides?
Danielle: Well, I mean, people know what we’re up to. I mean, I suppose someone could try and copy, but it’s kind of the difficulty level kind of filters out.
Pablos: Do you feel like pressure to keep reporting to the public or to post regularly or any of that?
Danielle: I mean, not in a negative way. It’s just part of the flow. I think of it as there is in a very real sense, like an extended brain. So those are the kind of stuff that might be relevant. And we have a karmic network that
is working on our behalf all the time.
Pablos: And
Danielle: it is very good. And thank you, karmic network.
Pablos: Yeah, great.
Danielle: And they’re providing connections and wanting to build power plants with us, signing LOIs and sending us smart people who tell us important things and give us money and buy us stuff.
Pablos: Yeah, great.
That’s super cool to hear.
Danielle: You have to decide to be a public person,
Pablos: which
Danielle: is insane.
Pablos: Right, there you go. So you’ve got haters and all that too.
Danielle: You know, you get past the haters pretty quick. At some point, you’re like, oh, the haters really hate me. And then you’re just like, oh, block. Insult and block. Easy.
Pablos: Okay.
Danielle: Yeah, I feel very, very, very liberated. People who aren’t,
They’re just barely sticking their head out. They’re like, what if I say something? And people are like, listen, the chance is, firstly, nobody will care.
You will have to make noise 100 times until someone will care. And you’re like, finally, a hater cares.
You might go back and forth a little bit and be like, hey, want to get coffee? They’re giving you energy, actually.
Pablos: Okay, great to hear.
Danielle: So most of the time, and I think that authentic engagement is the only thing that penetrates through when there’s so much slop.
Are there pluses and minuses to wearing your heart on your sleeve and being a public person and talking about all the stuff that you’re up to all the time? Sure. And people bump into you. On the other hand, it’s awesome. I’m quite recommending the strategy of becoming a niche celebrity in your field and doing it in public.
Pablos: Great. You are the entire field.
Danielle: That’s right. That’s a great move.
Well, there are other people doing TPV, but nothing with atomic emitters.
Pablos: Okay, well, and then I guess, would you say that the normal concern maybe of starting companies in the Bay Area is that everybody’s trying to poach all your people and you’re constantly losing people if you don’t have that problem in the same way? A deep tech thing?
Danielle: No, I mean, I wouldn’t say, I mean, you know, it’s probably a little different than being like say an AI, RL, environment company right now is extremely perilous because you can get absorbed by the front of your labs or your competitors. And definitely people are kind of working in deep tech for different reasons. And they understand that there is a lot that’s associated in sacrifice and doing that. And that just hasn’t been supported as much as possible. However, well, I like to think that, and again, founders finally talk about this. Basically, if you’re a company, you should have a theory of talent about why you will be best in the world at a certain kind, a particular kind of talent. Doesn’t have to be everybody, right? But maybe people who have specific conviction around glowing optical physics to do really wild physics energy stuff. There are only so many options. And you have to make something that’s,
It really seems like it can work. And make progress towards it visibly, and then you hold on to your people. 100%. Is my basic experience. I mean, basically, yeah, and you try to make it good for them. You know, you make the best they can imagine or the best you can imagine for them to do a certain kind of work and learn a certain kind of, and be around amazing people.
Pablos: And
Danielle: they’re not going to want to go away and leave. Whereas, unfortunately, you know, some other folks, I mean, maybe they’ve treated other folks better, but some folks really, you know, burn people out
Pablos: even.
Danielle: And then they run out of good people.
Pablos: Right.
Danielle: I don’t like that.
Pablos: I sort of think, you know, in my sort of weird career, I sort of defected from working on computers to working on deep tech early.
Danielle: Yeah. And, you know, 25 years ago. Yeah.
Pablos: So I think a lot of other nerds would want to build spaceships and robots.
Danielle: Yeah, they don’t know how to get started.
Pablos: It’s just that the jobs forever were in making these ad networks and stuff.
Danielle: Yeah.
Pablos: And now what I think is exciting about deep tech is all those people would want to do these cool things if those opportunities existed for them.
And I think the truth is, it’s going to be software nerds who build everything.
We have to get them to do that. They’re the only ones who know how to build shit, have an idea, build it, ship it, scale it, sell it, in one lifetime. And that’s not true for people in other industries. In the energy industry, everybody starts in an industry that had been around when they were born.
Danielle: I think that the rate of innovation,
If you just think of the orders of magnitude of how much faster it is to innovate, even in hardware, oh, it’s hard. You go to jail, see PCB, get boards. You can 3D print and center Illumina. You can get your AI to go through all the vendor networks exactly what you want. You can dig through, like, the amount of surface area that someone who is empowered, who knows how to design software systems and has AI right now, is empowered, and then in a unique way in the world, when they go and innovate in the physical world.
Pablos: Yeah, that’s right.
Danielle: You’re like superheroes. Relative to what you would have had to do. Previously, you would have had to be blessed with the kind of venture capital that I previously was blessed with.
Pablos: Yeah.
Danielle: And then learn to manage these people to understand what to hire a person. It would take all this time. Yeah. And it would take all this time and then you finally hire the person and then you indoctrinate them to go chase down what vendors can do the…
And now, in addition to, you can do so many more over so many things and to a pretty good level, which is, you don’t have to be best in the world everything. You have to be best in the world with some things and pretty good with like a whole bunch of other things, right? And like because of AI and because of the ability of small teams which work a lot better than big teams to get their hands around, even though there’s a multiplicative effect on a single person, there’s an even bigger compounding multiplicative effect on small teams. And so there’s so much surface area that can be rewritten because The only things that could really innovate in these much more capital-intensive areas were in very particular times in development of that industry or if you had a massive business. And so now there’s much more is up for grabs. There’s much more of the universe is up for grabs. It is much more dynamic. It’s extremely exciting. Yeah.
Pablos: Yeah. Perfect. Well said.
Danielle: What do VCs need to know that they don’t know?
Pablos: I think VCs today are largely derivative of kind of the SaaS era.
That was a huge economic boon and attracted a lot of people to VC.
We systematized the playbooks for Y Combinator, systematized everything about startups. VCs basically got systematized around their economics and their product market fit, minimum viable.
Danielle: Yeah, and they can do all these spreadsheets with customer acquisition costs.
There you go. The CAC to LTV ratio, they got all that stuff worked out and it’s great for SaaS, but so I think that what they need to know is what’s different for deep tech.
Danielle: Yeah.
Pablos: And by extension, what’s different for anything actual tech. Because they haven’t been doing actual tech. They’ve just been doing software.
And when you do software, one of the big issues, you have milestones like product market fit.
And the reason for that is you’re taking market risk. And the market risk is, will people pay for your iPhone app?
And what you’re not doing is taking technical risk.
Because any iPhone app we can draw on a napkin, we can definitely make it and ship it. So there’s no technical risk in the last 20 years.
It’s all market risk. In deep tech, we take technical risk. One example I use in the book is we have a company that’s figured out a chemical process that can liquefy the metals in electronics waste. Gold is infinitely recyclable. We’re busy recycling the cheapest shit on earth which is like plastic bottles.
We haven’t even started recycling the most expensive shit on earth, which is gold. And there is no product market fit problem for gold. It literally defines liquidity. So yeah there’s technical risk but the day we get that working, the technical risk goes to zero and there was never any market risk to begin with. And so you’re, by extension, like in your example, you’re making your energy company the biggest market on earth is energy. There is no market risk if you can deliver electrons and you can do it cheap and fast and clean.
So I think what VCs are often missing is that deep tech is actually better for them because Zoom and Slack have infinite market risk.
You never know when somebody’s going to build a Slack killer or a Zoom killer or an OpenAI chat GPT killer. You don’t know. That’s infinite market risk. It lasts forever. But in deep tech, we don’t have that always.
And so I have other examples, but to me that’s the kind of thing that VCs just need to internalize in order to evolve past their SaaShole era into an era where they can start investing in the biggest markets in the world.
Danielle: I think that’s well said. I guess one thing confused me for a long time. So a lot of VCs will, to deal with the technical risk, they’ll like job out due diligence to some professor.
Pablos: Usually a frat buddy, but yeah.
Danielle: Well, the smartest guy, the smartest person that they know.
We’ll do a serviceable job. A scientist. Maybe not a physicist, but a scientist. They’ll do an incredible job. They’ll run a report. It’s unclear if they’ll make the investment on the report or not. That’s right. Usually. To be honest. And then they’ll flake out when it gets hard even a little. Even if the thing was specifically highlighted as like, yeah.
This is one of the things. And we started encountering really high success ratios in firms that didn’t do that. Firms that the partner would go and try and understand this as hard as they could. Like Founders Fund. And they didn’t have the background that the professors did. Why are they doing so much better than all of these advised VC firms?
Pablos: Let me add some color to that. Interesting. So I think one thing is that it is very difficult for people to invest in things they don’t understand.
And by definition, you’re talking about the quantum effects of salt…
Danielle: Sorry to get a pretty esoteric.
Pablos: Even somebody who was a trained physicist might be lost. And as soon as you get one degree removed, you ask a VC, and the VC calls his old roommate from college who was like the science nerd and was like, “hey, dude, what about this?” And he’s like, “I don’t know, here’s a report I’ll write with help from Claude.”
Danielle: Right, no.
Pablos: It’s like, okay, we did the diligence. We didn’t find any glaring holes. That’s why it’s called diligence.
Danielle: That’s what they’re… But it doesn’t translate into conviction.
Pablos: Conviction, that’s…
Danielle: Which ends up being fatal.
Pablos: Yes.
Danielle: In all cases.
Pablos: Right, so I think, this is a very important point. A couple things. One, really important to just recognize 99 out of 100 VCs are finance guys. Spreadsheet jockeys. They spent their whole career looking at numbers. If you don’t feed them a spreadsheet populated with numbers that go up or some kind of little exponent in there, they don’t know what to do with it. You have zero chance. And then I think the second part of that, also very important, is that almost all of them are managing somebody else’s money.
Danielle: Yeah, that’s true. That’s the number one thing. What’s wild is they won’t make those kind of mistakes with their own money. They’ll make different kinds of mistakes, but generally speaking…
Pablos: We obviously have this across our entire portfolio, but I think the way to think about it is in your first few rounds, obviously everybody knows, we’re the kind of investor that cares more about the tech. Every other VC says they care about the founder. They really care about it as the spreadsheet, but they pretend to care about the founder. I don’t give a shit about the founder. Sorry, Danielle. I care about the tech. And so I’m going to go in and try to understand and believe in the tech. And the reason for that is that because nobody else will do it. You can find an investor who loves you, but we’ve got to find an investor who’s going to love the technology that you’re inventing. I think it’s important for me to do that. I do care about my founders, but the truth is it’s a good point. And I’m the last investor who’s going to be like that. Everybody after me has to cross T’s and dot I’s and see the spreadsheet and all this stuff. So what I’m trying to do is help people get venture compatible.
Okay, when I met you, you’ve got wires sticking out of metal here. You’ve got a half written patent and some glowing salt.
Danielle: We have four issued patents.
Pablos: Okay, so sorry.
Pablos: And I know, maybe more than the founder knows, where to get the next money. There’s a deck coming. There’s a spreadsheet coming. There’s a Provisional patent, we’re gonna have a one paragraph explanation about how we’re an energy company, not a photonic quantum salt company. Because that’s where it transitions to a market that an investor can understand. A lot of that is language. And like you said earlier, it’s about those professors who can actually explain things in a way you understand, that’s what matters. And I think a lot of times founders are hurting themselves because they take too long to learn that.
You’re not going to change VC, but you can change yourself to play that game and to co-opt that machinery.
Danielle: It’s important for everybody to really master empathy, to figure out a way to put yourself in the mindset and perspective of the other person. Of the investor.
Pablos: That’s what I fucked up when I was a founder. I didn’t understand the business of the investors.
Danielle: Yeah, they have to do all these things. They have to make it make sense to their partners, the LPs, the thesis that they said. That’s what they’re thinking about. First they’re thinking, crap, I like the company. Then they’re thinking, how do I explain this? And then you need to arm them with how to explain this.
Pablos: That’s actually true. My favorite thing is an email where I get one line in and I see Claude wrote this and it’s SaaS. Fucking easy I’m like “done” now my day is saved.
Danielle: I know, right, yeah.
Pablos: After that, it’s like “oh that sounds kind of cool. Oh shit. That’s interesting Oh damn it I’m gonna have to waste a lot of time on this” and then I talk to your founder, dig in. I’m lucky because I can invest in things that I think are really cool but imagine if i was at one of these big funds and now I’ve got to go convince a whole investment committee that it’s cool.
Danielle: It’s the wild thing.
Pablos: That would suck.
Danielle: I think all the funds that are doing well have to come up with some kind of rule of like you can just do it right you don’t have to convince everybody like in certain circumstances like once and once.
Pablos: And actually the ones that have a single decision maker on the deals make better investments than the ones that have a committee of any kind.
And I don’t work in those funds, so I don’t know the ins and outs of how they operate. But there’s a job to do for the founder of trying to understand the predicament of whoever they’re raising money.
Danielle: That’s right. Yeah.
Pablos: Whatever that is. If it’s a principle, meaning an actual person who’s rich and giving you their own money, investing their own money, that’s a completely different situation.
That’s my favorite, but…
Danielle: You know, that’s actually the ideal.
Pablos: Yeah.
Danielle: And we’ve lived on that.
That’s really the ideal. But professional money can come in tactically and be very powerful at a certain time, especially when you want to attain scale.
And understand what the constraints are, what are they looking for, how do you fit, trying to drive to something that isn’t going to work doesn’t work, having understanding even though you know someone might have said oh this is out of my perspective how it fits in with what they’re thinking about that can work.
Pablos: Well cool.
You’ve raised money from those kind of individuals, is it possible because you’re in the Bay Area? Do you think you could do that if you weren’t, or do you not have a control for that?
Danielle: It would be really hard to replicate the amount of serendipity that I tap into all the time. I’m practically drowning in it.
I can kind of think the playa will provide. I can kind of think “I’m tired but maybe I’ll just go out” and then you know people are investing in my company and I’m having doors open that are really getting me to the next level and something really important super cool and i think that that is not absolutely unique to the bay area if you’re in the top you know the world-class thing of whatever you’re doing… You know El Segundo is really taking off in in deep although it’s not just El Segundo, this entire LA area is massive. There was like little center in Florida right around Disney Imagineering and NASA and New York City is obviously huge and it’s a solid number two. A whole bunch of things it’s not number one in and then it’s like number one in fintech and AI. There’s significant competition still although it’s difficult, like in London. And probably there will be much more in China coming soon. But you really want to be in the world-class domain. You don’t want to be thinking in provincial ways at all.
Pablos: That is so well put. And we struggle with that all the time because there’s no deep tech center of gravity, they’re all over the world.
But the truth is what I find is most of these founders, if they aren’t in Silicon Valley or haven’t previously worked in Silicon Valley, they’re just miscalibrated on what a startup is.
Danielle: Yeah. So I think like it might be possible, like if you have already experienced a totally world-class like environment, and this is true in previous areas too, like scientists and artists and philosophers who were like in Paris, you know, in the 20s or in the, you know, 18, whatever it was. Or Hungary. Like being taught in Hungary, like by George Polanyi in math competitions. Like there’s just this incredible thing. And then they can go off and do all kinds of things. So post Manhattan Project. Yes, people are totally miscalibrated from all of the standard institutions. They have, by two or more orders of magnitude, the wrong idea of where they should be setting their ambitions.
Pablos: Totally agree. And we see it every day. I feel like my favorite thing actually is a not a founder who’s moving to Silicon Valley, but moving from Silicon Valley.
Danielle: Yeah. Because I think this is a place to build a lot of things. Oh, it’s expensive. And there’s significant competition and so on. You’re really planning on a high metabolism type existence.
Pablos: You could take, the sensibilities and the community from here.
Danielle: That’s right.
And there are particularly cracked cultures that come out of things that are not this. you know you’re seeing a lot of the SpaceX you see this sort of Huawei you see this out of Israel, you see this out of particular like groups of people who have competed in something at some very high level. What you’re looking for is people who have lost patience for excuses about reality or themselves or whatever it is, like they must be grounded to the actual physical reality. They don’t have to be like necessarily world-class in everything that they’re doing immediately at the outset. They need to know where they are and they need to know how relevant that is then execute to the level that is necessary to bring out something that is truly new and not have it face plant for one of the unnecessary reasons.
Links
- Lightcell: Danielle Fong’s company turning heat into light and power
- Danielle Fong: Danielle’s writing and projects
- Danielle Fong on X: Danielle’s X account