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Perspectives on Game-Changers

Funding the game changers.

Matthew Nordan

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Russ visits with Matthew Nordan, a vice president at early-stage venture capital fund Venrock. Venrock was founded in the 1930s as the venture investing arm of the Rockefeller family and today seeks young companies with game-changing technology. It’s all about use of resources and what we do with matter, he says, and waxes philosophical about what’s REALLY important. Nordan has a fascinating perspective on nanotechnology, the economy and where we’re headed.

Full Interview text

Russ: This is the BusinessMakers Show heard here and online at theBusinessMakers.com. And now it is time for the Aflac BusinessMakers Flashback, brought to you by Aflac, ask about it at work. And for this mornings Flashback we are going to roll back several weeks when the Rice Alliance held their 9th Annual Nanotechnology and Sustainability Venture Forum. And I had the opportunity to visit with Matthew Nordan of Venrock, one of our country's earliest and most successful firms. Matthew, welcome to The BusinessMakers Show.

Matthew: Glad to be here, Russ.

Russ: Why don't we start by you telling our listeners - those that don't know - about Venrock?

Matthew: So Venrock is an early-stage venture capital fund. Venture capital is buying low and selling high where what you're buying and selling is ownership stakes in small technology-driven companies that you're trying to build into market leaders of tomorrow. Venrock's kind of unique in that landscape, though, because of its history. It was started in the 1930s as the venture investing arm of the Rockefeller family. So Lawrence Rockefeller, son of John, Jr., son of John D., just had a predilection for putting money into early-stage technology businesses that were the high tech of his time. Things like aerospace and chemicals. Eastern Airlines was the first Venrock investment. And he did that for several decades until it really became a beast unto itself and professionalized in 1969. At that point, the firm brought in some outside managers to start investing this capital and actually the first investment it made under the new regime was investing something like $100,000.00 for a 10 percent ownership stake in a little semiconductor company called Intel. And then Apple and 3COM followed that in the information technology world. The firm went pretty heavily into biotech in the 1980s. I'm focused on energy at Venrock and we made our first opportunistic investments in energy also in the '80s. California Energy, for example, big geothermal producer, was a Venrock company and we've had a dedicated team focused on that area for the last five years or so.

Russ: So Venrock might've been the first venture capital firm?

Matthew: Well, there was a small number of family offices, wealthy families, Graylock also came out of that; another firm called Bessemer. Venrock was one of those that established the venture capital industry as we know it today.

Russ: Okay. From what I understand, you're somewhat new at Venrock and previously, you were co-founder and President of Lux Research.

Matthew: That's right. I've been with Venrock for about six months, which puts me in a golden period where I've been in enough Monday morning partner meetings to know how the firm operates but I don't have blinders on, yet. So in a year, I'll have lost my ironic detachment, Russ, and I'll be useless to you. I'll be a sheep, but for now I can exercise some independent judgment. Yeah, I came to Venrock from a firm called Lux Research which does technology scouting and market assessment on behalf of big corporations, primarily. Also to a lesser extent in governments and investors. The idea here is that there's just so much technology innovation happening at universities like Rice where we are here today, but also in start-up companies all over the world from China through to Western Europe through to the United States that it's too much to track. And if you were the guy at Exxon Mobil or at Mitsubishi Chemical or Saudi Aramco whose job is identifying the next game-changing technology, you just don't have enough Ph.D. scientists on staff to go out and find it and Lux Research does that on behalf of those companies and helps build the front end of their new product pipeline.

Russ: Okay. Now I know you've mentioned already you're focused on energy but that also includes the whole world of nanotechnology.

Matthew: We use the word energy because it resonates, right? You know, it's a hot topic and it's something that people can immediately understand. But I think fundamentally, myself and my group are really resources investors. If you look at what drives the world and what drives the world down to political wrangling with Iran or China or whoever else and certainly all the way back to scientific research - it's more and more use of resources and in many ways it's kind of inexorable, right? There's an equation that drives the world - starts off with people. Depending on where you put the onset of modern human beings, it took something like 200,000 years to get the first billion people. We got the last billion in 13 years.

Russ: Right.

Matthew: So dramatic acceleration in people. Even if nothing changes, people don't have more stuff; just more people equals more resources. But then secondly, all of those people are using more stuff. The way you can measure that is through GDP, right, gross domestic product per head. How much stuff is produced divided by people. That didn't change at all from say, 0 A.D. to 1700. The last few centuries it's just been on a vertical upward curve and rising more sharply now than it ever has.

Russ: Is that good?

Matthew: Debatable. We can come back to that in a minute or two but I think debatable.

Russ: Okay.

Matthew: You have to question if there's enough stuff for all those people to be using.

Russ: Right.

Matthew: But you can't argue the fact that if you look at an average American household 50 years ago didn't have a refrigerator, didn't have two cars in the driveway. It does now and there are a lot more people in China than there are here.

Russ: Right.

Matthew: But then, the last part of it is that it's not just more people using using more stuff, but it's the stuff that we use requiring more resources. If you look at the last five years in China, the stuff per person, the GDP per head, went up by an astonishing amount, something like 60-some percent, right? Unprecedented in modern economies that are industrialized but the amount of oil used per person is up 400 percent. So the things that they are using, right, eating more meat, driving cars when they used to ride bikes or walk, just requires more resource utilization. When we look at that, doesn't matter what it is, right? It could be oil, it could be natural gas, it could be coal, it could be neodymium, it could be phosphorous, it could be nitrates - doesn't matter. The world just needs more resources and we want to go back and find the choke points on fine technologies that can help address them and provide more of them, or recycle them.

Russ: Not to be a pessimist at all, but to some degree, when you hear that explanation, which is a great explanation, it feels like a collision course.

Matthew: Well, I think you can look at this in two ways and I'd have to tell you, I bounce back and forth between one and another most mornings. You know, one is that nothing comes for free and that for every action, there's an equal and opposite reaction and that every problem that we solve will just create another problem. We make electric vehicles so that we don't rely on gasoline now we've held ourselves hostage to lithium. And where is that lithium going to come from? Governments that may not be too nice about providing it to the rest of the world in places from Bolivia to China and they recognize they've cornered the market on something pretty valuable. But on the other side, you know, every time you got a billion people, you got a billion more brains and humans have proven to be remarkably ingenious at being able to get around problems and to use science and technology to go at them. So think you can look at it either way and it behooves us to be optimists no matter how pessimistic we may want to be.

Russ: Well, tell me - I've already brought up the world of nanotechnology - does nanotechnology potentially play a big role in the solution to some of these challenges?

Matthew: Absolutely. You think about chemists and physicists as artists. Imagine the palette that they have to draw from. Their palette is the periodic table and the, you know, the history of science and technology going back to, say, the onset of the chemical industry - 1930s, 1940s - has been about combining and manipulating those things on the periodic table in new ways. What nanotechnology enables folks like these to do, manipulating matter at these very small size scales, is gives them a whole new set of colors to pain with because now you have these properties that are endowed - not just because of what something is made out of - but about how big it is. You know, classic example of this, people listening to this may look around yourself. Look at an aluminum can. There may be one in your field of vision. Aluminum's an inert metal.

Russ: Right.

Matthew: So you can pick it up. You can crush it, burn it, throw it, shred it; nothing's going to happen, right?

Russ: Right.

Matthew: And in fact if you take that aluminum, you get it down to pretty small particles, say 20 or 50 microns in size - that's pretty small, you'd need a pretty powerful microscope to see it - again, nothing changes. But there's this magical point around 50, 60 nanometers of particle size for aluminum, where its properties change dramatically and it now will spontaneously combust with air. It'll blow up. And you can use what in a big form, or even a pretty small form, is inert, nothing happens to it, you can use it to make shape-charged explosives to do things like oil and gas drilling that don't just explode but they explode in a direction. You can use it to make rocket fuel. You can use it for weapons. And again, that has nothing to do with what it's made out of - still aluminum, just has to do with size. A hundred years ago, fifty years ago, thirty years ago, scientists couldn't manipulate materials at that size or model of them or even see them, to be able to figure out how to unlock these new properties. They can do that today.

Russ: That wraps up the radio broadcast portion of my interview with Matthew Nordan of Venrock, but obviously there is more, so go to TheBusinessMakers.com and listen to the Matthew Nordan WebXtra. And that wraps up this mornings Aflac BusinessMakers Flashback, brought to you by Aflac, ask about it at work. Stay tuned in for our featured guest segment with Dr. Matthew Aylet, co-founder and CTO of Cereproc, the cool happening speech synthesis company. You're listening to The BusinessMakers Show, heard here and online at theBusinessMakers.com.

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