1 00:00:06,000 --> 00:00:08,760 Speaker 1: Welcome to the Fearing Greed Daily Interview. I'm Sean Almum. 2 00:00:08,920 --> 00:00:12,400 Speaker 1: Investing in startups and early stage investing takes a certain 3 00:00:12,560 --> 00:00:15,600 Speaker 1: amount of courage and capability. When the asset you're buying 4 00:00:15,840 --> 00:00:18,360 Speaker 1: is in deep tech, then you really have to understand 5 00:00:18,440 --> 00:00:22,680 Speaker 1: what you're talking about. Main Sequence is Australia's largest deep 6 00:00:22,800 --> 00:00:26,480 Speaker 1: tech venture fund and Elaine Stead is it's principal. Elaine, 7 00:00:26,480 --> 00:00:27,440 Speaker 1: Welcome to Fear and Greed. 8 00:00:27,800 --> 00:00:28,960 Speaker 2: Thank you for having me. 9 00:00:29,720 --> 00:00:32,840 Speaker 1: What is deep tech? What it was is a deep 10 00:00:32,840 --> 00:00:36,040 Speaker 1: tech venture fund has a different to a tech startup fund. 11 00:00:36,960 --> 00:00:39,199 Speaker 2: Yeah, no, this is an excellent question, and when we 12 00:00:39,240 --> 00:00:42,560 Speaker 2: get all the time, the way we think about deep 13 00:00:42,600 --> 00:00:46,160 Speaker 2: tech is at the center of it is really some 14 00:00:46,520 --> 00:00:51,360 Speaker 2: fundamental scientific or engineering breakthrough, which is how we sort 15 00:00:51,360 --> 00:00:54,960 Speaker 2: of differentiate it from your traditional tech that might be 16 00:00:55,160 --> 00:00:58,880 Speaker 2: the sort of technology that generates a new software product. 17 00:00:59,240 --> 00:01:02,920 Speaker 2: The other thing or criteria that we think differentiates it 18 00:01:03,000 --> 00:01:06,199 Speaker 2: is it tends to be trying to solve a really 19 00:01:06,319 --> 00:01:12,000 Speaker 2: large global challenge, whether that's climate change or humanity scale healthcare, 20 00:01:12,160 --> 00:01:14,520 Speaker 2: or trying to feed ten billion people, which are a 21 00:01:14,600 --> 00:01:17,560 Speaker 2: number of the thematics that we invest in, and it 22 00:01:17,640 --> 00:01:22,400 Speaker 2: typically has a much higher research and development intensity. With 23 00:01:22,880 --> 00:01:25,360 Speaker 2: traditional tech products, you can almost stand them up in 24 00:01:25,400 --> 00:01:29,520 Speaker 2: a day now, whereas deep tech innovations tend to take 25 00:01:30,160 --> 00:01:33,320 Speaker 2: a lot more capital and a lot more time before 26 00:01:33,319 --> 00:01:34,080 Speaker 2: they're proved out. 27 00:01:34,800 --> 00:01:36,440 Speaker 1: How do you do it? Then? How do you invest 28 00:01:36,560 --> 00:01:40,560 Speaker 1: in literally technology that's trying to solve the world's problems. 29 00:01:41,120 --> 00:01:46,479 Speaker 1: It's sort of there's a fair bit in that, You're right, So. 30 00:01:46,800 --> 00:01:51,840 Speaker 2: I think fundamentally it requires some imagination. So I think 31 00:01:52,520 --> 00:01:56,160 Speaker 2: the difference between deep tech and traditional tech is you 32 00:01:56,160 --> 00:01:58,440 Speaker 2: can't sort of touch and feel the products straight away 33 00:01:59,040 --> 00:02:01,480 Speaker 2: or what it might event turn into. So it does 34 00:02:01,560 --> 00:02:05,080 Speaker 2: require from an investor standpoint that you have a little 35 00:02:05,080 --> 00:02:08,600 Speaker 2: bit of imagination about what it could turn into if 36 00:02:08,680 --> 00:02:11,600 Speaker 2: it was to work. And it very much helps to 37 00:02:11,680 --> 00:02:15,200 Speaker 2: have a technical background. I don't think it's necessary, but 38 00:02:15,320 --> 00:02:19,760 Speaker 2: certainly amongst our team at main Sequence, almost all of 39 00:02:19,800 --> 00:02:23,840 Speaker 2: the investment team have some technical expertise that helps us 40 00:02:23,919 --> 00:02:28,079 Speaker 2: to really understand the technology at a fundamental level, and 41 00:02:28,120 --> 00:02:31,560 Speaker 2: then that's paired with commercial expertise to try and understand 42 00:02:31,600 --> 00:02:35,720 Speaker 2: how we turn that into the next industry and well, 43 00:02:35,840 --> 00:02:39,640 Speaker 2: firstly the next product that might help solve a particular problem, 44 00:02:39,720 --> 00:02:42,600 Speaker 2: and then eventually a new industry, and I think it 45 00:02:42,639 --> 00:02:45,679 Speaker 2: takes a little bit of courage. It takes courage to 46 00:02:45,720 --> 00:02:49,000 Speaker 2: kind of invest in something that's so early stage and 47 00:02:49,120 --> 00:02:54,680 Speaker 2: potentially very esoteric, but has the capacity to really forge 48 00:02:54,720 --> 00:02:57,400 Speaker 2: something new, whether that's an industry or a way of 49 00:02:57,440 --> 00:02:59,720 Speaker 2: doing things or solving a big problem. 50 00:03:00,160 --> 00:03:02,560 Speaker 1: So just give me a couple of examples of what 51 00:03:02,639 --> 00:03:05,080 Speaker 1: main Sequence has invested in so we get a feel 52 00:03:05,080 --> 00:03:06,080 Speaker 1: for what you're talking about. 53 00:03:06,600 --> 00:03:10,200 Speaker 2: Sure, well, I'll give two examples that are very different. 54 00:03:10,320 --> 00:03:14,280 Speaker 2: One is Samsara Echo. So this was a company that 55 00:03:14,680 --> 00:03:19,000 Speaker 2: we actually started along with an entrepreneur, Paul Riley, with 56 00:03:19,760 --> 00:03:25,040 Speaker 2: the ambitious goal of trying to recycle plastics infinitely. Your 57 00:03:25,040 --> 00:03:29,160 Speaker 2: listeners might is that all that's exactly right, and your 58 00:03:29,200 --> 00:03:32,560 Speaker 2: listeners might understand that, you know, when you buy a 59 00:03:32,680 --> 00:03:35,760 Speaker 2: plastic water bottle that is recyclable, but only to a 60 00:03:35,760 --> 00:03:39,920 Speaker 2: certain extent. It's never possible. It has not been possible 61 00:03:40,000 --> 00:03:44,480 Speaker 2: to take plastics back down to their monomer forms in 62 00:03:44,720 --> 00:03:47,240 Speaker 2: the same way as they existed when they were virgin 63 00:03:47,280 --> 00:03:52,080 Speaker 2: plastics and infinitely right recycle them. What Sam Sarah has 64 00:03:52,120 --> 00:03:56,400 Speaker 2: been able to do is take enzymes and design them 65 00:03:56,440 --> 00:03:59,160 Speaker 2: so that they can actually do that, and they've been 66 00:03:59,200 --> 00:04:02,360 Speaker 2: able to solve that problem, and along the way they've 67 00:04:02,400 --> 00:04:08,040 Speaker 2: also learned how to recycle nylon infinitely and through a 68 00:04:08,080 --> 00:04:12,720 Speaker 2: partnership with Lulu Lemon where they're now able to recycle 69 00:04:12,760 --> 00:04:16,080 Speaker 2: their nylons back to their virginal state monomer state and 70 00:04:16,120 --> 00:04:20,560 Speaker 2: then infinitely recycle them. So that that's actually an example 71 00:04:20,640 --> 00:04:25,000 Speaker 2: of a very fundamental technology but also an ambitious goal 72 00:04:25,839 --> 00:04:31,039 Speaker 2: that hopefully will contribute to a sustainable, a more sustainable future. 73 00:04:31,839 --> 00:04:34,040 Speaker 2: And another example on the complete other end of the 74 00:04:34,080 --> 00:04:38,800 Speaker 2: spectrum would be Gilmore Space. One of our investment thematics 75 00:04:38,880 --> 00:04:41,280 Speaker 2: is how we would like to help bridge the gap 76 00:04:41,320 --> 00:04:45,800 Speaker 2: to space, and Gilmore is building a hybrid fuel rocket 77 00:04:46,160 --> 00:04:50,039 Speaker 2: and trying to launch that out of semi rural Queensland 78 00:04:50,480 --> 00:04:53,640 Speaker 2: and they are they have their launch permit now, it's 79 00:04:53,680 --> 00:04:56,920 Speaker 2: taken several years to develop the technology and build the 80 00:04:57,000 --> 00:05:00,080 Speaker 2: rocket and get all of the permits to launch. That 81 00:05:00,360 --> 00:05:03,880 Speaker 2: goal there is to try and launch rockets and then 82 00:05:03,920 --> 00:05:06,920 Speaker 2: payloads into space in a much more cost effective way. 83 00:05:07,000 --> 00:05:10,240 Speaker 2: And given how much the world depends on satellites and 84 00:05:10,279 --> 00:05:13,760 Speaker 2: others other things like that, to communicate, we think that's 85 00:05:13,800 --> 00:05:14,680 Speaker 2: pretty fundamental. 86 00:05:15,240 --> 00:05:19,760 Speaker 1: Is it mostly about backing academic research that has practical uses. 87 00:05:19,920 --> 00:05:23,719 Speaker 1: Is like those examples you're doing are heavy on research. 88 00:05:24,160 --> 00:05:27,280 Speaker 2: You're exactly right. Yeah, a lot of it comes out 89 00:05:27,320 --> 00:05:31,919 Speaker 2: of fundamental research and sometimes that's out of universities and 90 00:05:32,000 --> 00:05:37,120 Speaker 2: research institutes. And what we focus on is technology that 91 00:05:37,160 --> 00:05:40,720 Speaker 2: has some connection with publicly funded research in Australia. Some 92 00:05:40,760 --> 00:05:43,800 Speaker 2: of it is backyard inventors as well, who just happen 93 00:05:43,839 --> 00:05:48,680 Speaker 2: to have really focused expertise, but it is very fundamental 94 00:05:48,920 --> 00:05:52,160 Speaker 2: in its research when we often come into contact with it, 95 00:05:52,520 --> 00:05:55,120 Speaker 2: and then what we try to do is increase the 96 00:05:55,200 --> 00:05:59,720 Speaker 2: velocity of innovation, so with capital and with expertise and 97 00:05:59,720 --> 00:06:02,599 Speaker 2: bring the right people to bear. Hopefully what we do 98 00:06:02,800 --> 00:06:08,040 Speaker 2: is help translate that fundamental research into practical outcomes much 99 00:06:08,120 --> 00:06:10,240 Speaker 2: more quickly than if they were to do it themselves. 100 00:06:10,600 --> 00:06:12,559 Speaker 1: Helene stay, we think we'll be back in a minute. 101 00:06:19,600 --> 00:06:23,880 Speaker 1: I'm speaking to Elaine Steed, principal at main Sequence. Okay, 102 00:06:24,000 --> 00:06:27,360 Speaker 1: so what about the company itself? I do you come 103 00:06:27,400 --> 00:06:29,520 Speaker 1: out of CSIRO? Am I right? And I say that 104 00:06:29,560 --> 00:06:30,360 Speaker 1: when I say that. 105 00:06:30,520 --> 00:06:33,720 Speaker 2: Yeah, you're right, that is our that's our origin story. 106 00:06:33,760 --> 00:06:38,240 Speaker 2: We were originally spun out of the CSIRO with a 107 00:06:38,279 --> 00:06:41,640 Speaker 2: goal to you know, there was this acknowledgment that Australia 108 00:06:41,839 --> 00:06:45,880 Speaker 2: was fantastic at fundamental research and development, but one of 109 00:06:45,880 --> 00:06:50,239 Speaker 2: the things Australia did not do particularly well was commercialize 110 00:06:50,640 --> 00:06:54,599 Speaker 2: that research. And there are a lot of reasons for that, 111 00:06:54,720 --> 00:06:57,359 Speaker 2: but one of the key reasons was that there was 112 00:06:57,360 --> 00:07:01,880 Speaker 2: a lack of capital and also focused capital and expertise 113 00:07:01,960 --> 00:07:07,440 Speaker 2: to really help translate those really interesting pockets of research 114 00:07:07,560 --> 00:07:12,120 Speaker 2: into commercial outcomes. So it established the fund which was 115 00:07:12,160 --> 00:07:15,520 Speaker 2: eventually called main Sequence, and then eventually a few years 116 00:07:15,600 --> 00:07:19,560 Speaker 2: later that fund manager was privatized, so it's now quite 117 00:07:19,560 --> 00:07:23,920 Speaker 2: separate to the CSIRO and most of our investors and 118 00:07:24,000 --> 00:07:27,880 Speaker 2: our superannuation funds. So probably most of your listeners actually 119 00:07:27,920 --> 00:07:31,480 Speaker 2: have a portion of their superannuation fund invested into main 120 00:07:31,520 --> 00:07:35,600 Speaker 2: Sequence and other venture capital funds in Australia. But what 121 00:07:35,640 --> 00:07:39,680 Speaker 2: we do retain from that origin or that legacy is 122 00:07:39,920 --> 00:07:43,920 Speaker 2: a commitment to continue to focus on translating those things 123 00:07:43,920 --> 00:07:47,560 Speaker 2: that have come out of publicly funded research in Australia. 124 00:07:47,720 --> 00:07:50,360 Speaker 1: Is it about making money or is it a lot 125 00:07:50,400 --> 00:07:50,800 Speaker 1: more than that. 126 00:07:51,760 --> 00:07:56,080 Speaker 2: It's both, So we absolutely are measured on our ability 127 00:07:56,120 --> 00:07:59,440 Speaker 2: to make our investors' money that is the primary metric 128 00:07:59,560 --> 00:08:02,480 Speaker 2: by which which any venture fund manager is measured. But 129 00:08:03,560 --> 00:08:07,680 Speaker 2: one of the great privileges of investing in deep tech 130 00:08:07,760 --> 00:08:09,880 Speaker 2: is that you do get to try and solve some 131 00:08:09,920 --> 00:08:13,080 Speaker 2: of these bigger challenges which we think are you know, 132 00:08:13,160 --> 00:08:16,400 Speaker 2: our planet are really battling against at the moment, whether 133 00:08:16,440 --> 00:08:19,360 Speaker 2: it be climate, whether it be accessibility to food as 134 00:08:19,400 --> 00:08:23,480 Speaker 2: population expands, whether it's how do we make healthcare more 135 00:08:23,520 --> 00:08:29,400 Speaker 2: accessible for a growing population, how do we help enable 136 00:08:29,480 --> 00:08:33,840 Speaker 2: that next intelligence leap as well, whether that's quantum technology 137 00:08:34,000 --> 00:08:37,920 Speaker 2: or artificial intelligence. Our goal is really to try and 138 00:08:38,280 --> 00:08:40,560 Speaker 2: make our investors' money while trying to solve some of 139 00:08:40,600 --> 00:08:43,000 Speaker 2: these large problems at the same time. And that, you know, 140 00:08:43,120 --> 00:08:45,840 Speaker 2: that really is a privilege and I'm very grateful. 141 00:08:46,160 --> 00:08:48,200 Speaker 1: What I mean, is it too early to ask you 142 00:08:48,240 --> 00:08:50,760 Speaker 1: what sort of returns you're getting, because presumably it needs 143 00:08:50,760 --> 00:08:55,079 Speaker 1: to be patient capital going in into main sequence, because 144 00:08:55,120 --> 00:08:56,520 Speaker 1: it's not something that you're going to pull out in 145 00:08:56,559 --> 00:08:58,680 Speaker 1: six months time. But are you at the point where 146 00:08:58,679 --> 00:09:00,199 Speaker 1: you can show return. 147 00:09:01,240 --> 00:09:04,640 Speaker 2: Your spot on? It does take a lot of patient capitals. 148 00:09:04,720 --> 00:09:07,480 Speaker 2: So typically our venture funds are ten year funds and 149 00:09:07,520 --> 00:09:11,800 Speaker 2: you don't start to see realizations until year seven of 150 00:09:12,120 --> 00:09:16,400 Speaker 2: a given fund cycle. We're now three funds in. Our 151 00:09:16,440 --> 00:09:19,760 Speaker 2: first fund was twenty eighteen, so we're just getting to 152 00:09:19,840 --> 00:09:24,080 Speaker 2: that inflection point now where we're starting to look at 153 00:09:24,120 --> 00:09:26,720 Speaker 2: how we can realize some of those investments that we 154 00:09:26,800 --> 00:09:30,920 Speaker 2: made many years ago. So it's a bit early for 155 00:09:31,080 --> 00:09:35,360 Speaker 2: us to quote our return profile yet, but I will 156 00:09:35,360 --> 00:09:39,680 Speaker 2: say it's looking extremely exciting, and I will touch on 157 00:09:40,679 --> 00:09:43,680 Speaker 2: maybe some more audited data in Europe. There was a 158 00:09:43,720 --> 00:09:48,440 Speaker 2: McKinsey study that showed that analyzed fifteen hundred venture funds 159 00:09:48,559 --> 00:09:52,559 Speaker 2: across Europe and compared deep tech to traditional tech in 160 00:09:52,640 --> 00:09:57,040 Speaker 2: terms of returns, and deep tech funds actually significantly outperformed 161 00:09:57,240 --> 00:10:01,040 Speaker 2: traditional tech VC funds with a seven teen percent IRR 162 00:10:01,440 --> 00:10:04,760 Speaker 2: compared to a ten percent IRR. So it really does 163 00:10:04,840 --> 00:10:09,240 Speaker 2: have the capacity to generate much better returns because we're 164 00:10:09,240 --> 00:10:12,440 Speaker 2: investing in those things that have the opportunity to grow 165 00:10:12,480 --> 00:10:16,120 Speaker 2: and scale quite substantially, because they are addressing very global 166 00:10:16,400 --> 00:10:19,120 Speaker 2: markets and also very underpenetrated markets. 167 00:10:19,960 --> 00:10:23,240 Speaker 1: Is it a very you say global market, Is it 168 00:10:23,320 --> 00:10:28,080 Speaker 1: a very competitive market in terms of both a discovery 169 00:10:28,120 --> 00:10:29,079 Speaker 1: but also the funding. 170 00:10:29,600 --> 00:10:33,160 Speaker 2: Yeah, it's getting more competitive. I would say there are 171 00:10:33,280 --> 00:10:38,600 Speaker 2: still very few deep tech specialist funds across the globe, 172 00:10:38,640 --> 00:10:43,480 Speaker 2: although that is changing. In Australia, for example, there would 173 00:10:43,480 --> 00:10:48,880 Speaker 2: be ourselves Blackbird also invest in deep tech opportunities. We 174 00:10:48,920 --> 00:10:52,560 Speaker 2: have the recently stood up National Reconstruction Fund which has 175 00:10:52,600 --> 00:10:56,840 Speaker 2: a focus on many areas of softeign capability which overlap 176 00:10:56,960 --> 00:10:59,520 Speaker 2: with deep tech, and so we're starting to see more 177 00:10:59,559 --> 00:11:02,840 Speaker 2: players move into that space and that's an indication that 178 00:11:02,880 --> 00:11:05,760 Speaker 2: there is a lot of opportunity, but it is right 179 00:11:05,840 --> 00:11:10,760 Speaker 2: now not nearly as competitive as a enterprise SaaS from 180 00:11:10,800 --> 00:11:13,559 Speaker 2: an investment or a capital accessibility perspective. 181 00:11:13,960 --> 00:11:15,640 Speaker 1: Well, good luck with it all, Elaine, and thank you 182 00:11:15,679 --> 00:11:17,160 Speaker 1: very much for talking to Fear and Greed. 183 00:11:17,360 --> 00:11:19,000 Speaker 2: Thank you very much, pleasure to be here. 184 00:11:19,360 --> 00:11:22,040 Speaker 1: That was Elaine Stead, principal at main Sequence. This is 185 00:11:22,080 --> 00:11:24,439 Speaker 1: the Fear and Greed Business Interview. Join us every morning 186 00:11:24,440 --> 00:11:27,160 Speaker 1: for the full episode of Fear and Greed Business news 187 00:11:27,240 --> 00:11:34,800 Speaker 1: you can use I'm sure al month Enjoy your day.