149. Beyond Capital: Phil Morle of Main Sequence Ventures on Collaboration as the New Competitive Edge

Karl [00:00:00] Phil Morrell. We've known each other for a really long time, and I'm so happy to know you. I'm so glad that you're taking the time today to join me [00:00:10] on the Grow Everything

Karl [00:00:11] podcast.

Phil [00:00:12] Any excuse to talk to you, Carl. I always love something new, so, ~~uh, ~~let's go. Yeah.

Karl [00:00:17] Uh, so you and I have known each other probably for [00:00:20] 10 years through Symbio Beta and, uh, you're down in Australia or up in Australia, however you wanna look at it. And what I wanted to talk to you about today [00:00:30] was really about ecosystem orchestration, and tell me a little bit about your background.

Karl [00:00:37] And I will get into more of this, but just give [00:00:40] people like a high level, who

Karl [00:00:41] is Phil Mor? What do you do?

Phil [00:00:43] Well, ~~like, ~~

Phil [00:00:44] like many people involved in venture and entrepreneurship, I have a, a, a very odd. [00:00:50] Background. We all come from different places. People think ~~ uh, we're all ex bankers or something, but people come from different parts of life and, uh,~~ apply that to what they're doing in Bedford. In my [00:01:00] case, I actually started my professional career working in the theater business, and I was a theater director for the first 10 years ~~of, ~~of my life.

Phil [00:01:09] And,~~ um, uh,~~ [00:01:10] I,~~ uh,~~ directed a theater company that was based in London and also in Australia. Yeah, being in theater is,~~ uh,~~ you don't do it for the money. ~~Let's, ~~let's say that. And in fact, [00:01:20] no one's doing it for the money. You need to figure out a different way of effectively doing the sales, recruiting the team, getting that revenue, which is getting the [00:01:30] audience along and.

Phil [00:01:31] We'll, we'll maybe get into that a little bit later in this orchestration discussion, but some of those sort of big ideas around orchestration of [00:01:40] what it actually is comes from that. But of course, working in theater, um, doesn't pay the rent. And,~~ uh,~~ I am a technical person as well. And so this was in the [00:01:50] early days of, ~~you know, ~~the Mozilla brows or the beginnings of ~~the, the dawn of the internet. ~~ um, and I was busy making websites for people at the time, and I was a sort of side hustle [00:02:00] programmer, and that's how I paid the rent on top of the theater production. And it, ~~you know, got to a point where I needed to decide to get onto the train ~~ uh, [00:02:10] of the worldwide web or just ~~let it, ~~let it sail away.

Phil [00:02:12] And I decided to get on the train. And I realized when I did that, and I began leading technical [00:02:20] teams, that I was effectively doing the same thing. But when I moved from theater to technology, I thought, gosh, I'm gonna have to have a sabbatical every year where I go and just make some art [00:02:30] because otherwise my soul will be crossed.

Phil [00:02:32] ~~ uh,~~ and I realized that actually, I,~~ I, I, equally love bringing teams together to make other things. ~~ uh, and again, pulling this into the [00:02:40] orchestration debate, ~~you know, that, ~~that there needs to be some pleasure and delight and focused in on that. what are the magic combinations that we can bring together here to make [00:02:50] something incredible happen?

Phil [00:02:51] And so I've, ~~you know, ~~I now go to the theater and watch. Performances. I love it, but don't feel like I have to create them anymore. ~~Uh, I, ~~[00:03:00] I express myself through helping other people build these great businesses. And yeah, as I moved my way through ~~the, ~~the career, I ~~sort of became a chief technology officer for, uh, uh, ~~one of the big files [00:03:10] sharing companies, I guess at the kind of peak of that, which is a company called Kaza, which was 80% of internet traffic at the time, ~~at its ~~at [00:03:20] its heights.

Phil [00:03:20] It was huge. Um, and I really got the bug through that about, uh, working in a startups, creating something new,~~ uh,~~ that is very [00:03:30] impactful globally, that you see millions and millions of people using. And I wanted to do that again after I'd completed that project. And I looked around for the next startup to [00:03:40] join,~~ uh,~~ in Australia at the time.

Phil [00:03:42] ~~ uh,~~ and there really weren't any, it,~~ this,~~ this was in the days of, you know. The kind of early to mid two thousands and, um, there just wasn't much going on. [00:03:50] And at the time, Australian entrepreneurs would, of which there were many already at that time, but the, the path was you would go to America [00:04:00] and, uh, most people would very quickly land in California,~~ uh,~~ and start building their company there.

Phil [00:04:05] And that's why there are many Australians in Californian,~~ uh,~~ [00:04:10] startups. ~~Um, ~~and so the solution to that, if I wanted to stay in Australia was to, to create an organization that would create startups, [00:04:20] startup. And, uh, myself and my co-founder, Mick Lebinski, we created an organization called Pollenizer, which was, ~~you know, ~~Australia's y Combinator, really.

Phil [00:04:29] And,~~ um,~~ [00:04:30] that was this 10 year journey. Actually realizing ~~that, ~~that, ~~you know, ~~there needed to be ~~a, ~~pattern, a repeatable way of thinking about what is it we actually do when we have an idea or [00:04:40] we wanna turn that into a company. ~~Um, ~~so we spent a lot of time in Pollenizer actually doing that work, actually just saying, what is it?

Phil [00:04:47] What do we do? In what order? Who do we [00:04:50] work with? How do we train other people to do that, to make it scalable? ~~Um, ~~and of course part of that as well is how do you actually build out the [00:05:00] ecosystem? Because to different degrees and different industries, we can't just fund it ourselves, build ourselves, create the [00:05:10] supply chain ourselves, understanding what regulations are needed ourselves, and then change those regulations.

Phil [00:05:16] So all the things like the gazillion things. ~~ um, you know, ~~you [00:05:20] know, at the time there was, no other accelerators. Um, the venture capital pool in totality in Australia was [00:05:30] smaller than one of our fund vintages in main sequence today. So very, very tiny amounts of capital. And in fact, in the Pollenizer days, we, we [00:05:40] created, um, about 25 companies ourselves over that time, over a nine year period.

Phil [00:05:45] And we did that with,~~ uh,~~ under $5 million of capital. [00:05:50] So we ran a company of 70 people building these companies with $5 million and,~~ um,~~ spell of an oily rag, but learned a lot. ~~ um,~~ and then by the time [00:06:00] we were done. There was no need for Pollenizer anymore because the ecosystem had ~~kind of you know, ~~risen and ~~kind of ~~filled in a lot of the gaps.

Phil [00:06:06] And

Phil [00:06:06] I moved on to what I'm doing now, which is doing [00:06:10] that company creation work. But in the context of science and

Phil [00:06:13] venture capital, that means the.

Karl [00:06:15] Amazing. Well, one of the

Karl [00:06:17] things,~~ um,~~ that. You recently wrote had to do [00:06:20] with this idea of orchestration, and you said,~~ uh,~~ in an article that the technology to make circular materials,~~ uh,~~ is not a pipe dream. It's already here. And what you did was [00:06:30] you mentioned a deal that a company called Samsara did with Lululemon, and it took them 10 years to go from the lab bench,~~ uh,~~ to get [00:06:40] an offtake agreement with Lululemon.

Karl [00:06:41] And that required really orchestrating an entire ecosystem. Can you walk us through the deal and explain how you think about value chain [00:06:50] creation versus just backing

Karl [00:06:51] science?

Phil [00:06:52] Yeah, sure.

Phil [00:06:53] ~~Uh, um, ~~Samsara is a great example. So, ~~um, it didn't take them 10 years. In fact, I mean, the, the, I think the great example of [00:07:00] Samsara is it's only taken them four years so far, and they have a 10 year offtake agreement with Lululemon. Now, uh, the Samsara eco business [00:07:10] began four years ago with ~~ uh, a market pull, ~~you know, ~~desire from the big company here in Australia that we ended up co-founding the company [00:07:20] with Woolworth and Woolworths is our Walmart.

Phil [00:07:22] It's our big retailer here in Australia. like all big retailers, they have this enormous problem of plastic waste. [00:07:30] And, uh, as we all know, plastic is a fabulous product. I mean, uh, in, in all respects until you have to get rid of it at the end of life. And then we have this [00:07:40] enormous problem ~~ uh, and Woolworths have, um, this, ~~this particular problem of mixed bale, plastic waste.

Phil [00:07:46] ~~Uh, ~~you know what happens when you've just got a big pile of [00:07:50] plastic. Some of it's PET, some of it's polyester, some of it's polycarbonate, some of it is nylon. What do you do with that? You, the sorting is as big a problem [00:08:00] as the actual recycling of it. And so we wanted to start a company with Woolworths to go after that problem.

Phil [00:08:06] And this is the sort of first principle of [00:08:10] orchestration. We did not, you know, find a great founder, uh, exclusively and then just put them to work to build a company on their own, in their own [00:08:20] isolated environment. We knew that we needed to understand exactly how the supply chain works and we knew we needed pull from a [00:08:30] customer that would actually set the momentum very, very early on, uh, in the company's life.

Phil [00:08:35] ~~ uh,~~ so we created this company under a model we have here at Main Sequence, which we call venture [00:08:40] science. We call it venture science because when we talk to a research organization, we say, this is how venture causes great science to be created [00:08:50] inside your organization. And then we co-found companies with founders that bring advantage from the first day.

Phil [00:08:58] And so the case of Samsara [00:09:00] Eco, the founders were main sequence. Our job is to actually bring all the elements together in the early risk capital, a [00:09:10] executive founder as we call it, which is amazing. Uh, industry leader here in Australia called Paul Riley, who's still the CEO of the company, uh, Woolworths, as I mentioned, who [00:09:20] gave us the access to the market, the understanding and the first bit of pull.

Phil [00:09:24] And then Australian National University, the A NU, where we discovered this [00:09:30] incredible enzymatic. Technology,~~ uh,~~ which used enzymes at almost room temperature to depolymerize these multiple [00:09:40] plastics back to the mono so that you could for the first time infinitely recycle the plastics.

Phil [00:09:45] But of course,~~ um,~~ the plastic supply chain, it's not like ~~ you,~~ you make a Samara, [00:09:50] a widget and then make a website and say, who wants to buy our widget? ~~Uh, ~~it's incredibly complicated. It's in different parts of the world. ~~ uh, uh, ~~and as we sort of move into the, [00:10:00] textile side, ~~ uh, which I'll come to how we sort of got there, um, it's very, very, ~~very particular, ~~you know, ~~a lot of it's in China and Southeast Asia, and then the, you've gotta [00:10:10] turn.

Phil [00:10:10] Monomers into polymers, you've gotta sort of turn those into threads, and then the threads turn into textiles, and the textiles turn into clothes, and then the clothes are shipped into the [00:10:20] different markets. And, um, all of that needs to work so that the cost works at the end. Right.

Phil [00:10:25] And yeah, this is a huge thing that ~~we're, ~~we've been learning, everything [00:10:30] just has just gotta come down the landing, the right industrial endpoint. And so you need to know all the things in there that kind of get to that point. But ~~coming back to, ~~coming back to [00:10:40] Lululemon, had the benefit of having Woolworths on the first day, which meant we were already a significant company with proof that we could do it because we [00:10:50] had the a NU technology, ~~we could show, ~~we could show demonstrations of infinite recycling happening at the lab scale.

Phil [00:10:55] The Woolworth, CEO declared it to the market that we've created this [00:11:00] company together and this is what we intend to do. ~~Um, ~~and that created quite a noise in the market, which allowed Samsara to be instantly credentialed

Phil [00:11:09] [00:11:10] and to talk to other people. this is what caused a conversation with Lululemon, where we realized that the first polymer that we needed to go [00:11:20] after was in fact, not PET, but was nylon because there was no solution for nylon.

Phil [00:11:26] And so much of ~~ the, the, the, the polymer waste is in [00:11:30] clothes, and then the mixed veil problem is even bigger because it's all woven into the same, you can't separate what's nylon and what's cotton in this t-shirt. ~~ and, and it was about a [00:11:40] business model, just samsara, and it lined up with a strategic.

Phil [00:11:45] Urgent strategy that Lululemon had to [00:11:50] pull that technology into market. and the same thing that happened with the Woolworths. CEO. Lululemon said, we are going to do this. We're going to do [00:12:00] this with Samsara. And they've made a commitment that by 20, 30, 20% of their clothing is going to be infinitely recycled [00:12:10] using the Samsara technology.

Phil [00:12:12] Now, is really important and this is my,~~ uh,~~ big push around orchestration at the moment,~~ uh,~~ [00:12:20] which I think is an unlock for all of us in this industry and why Lululemon have led, us with a great example. ~~Uh, ~~if we look at what Lululemon have done, they [00:12:30] have basically said to everybody else that might support Samsara.

Phil [00:12:34] We want this,~~ uh,~~ we are going to organize our supply chain,~~ uh,~~ with Samsara to make [00:12:40] this possible, and we are gonna commit to this kind of volume and this kind of revenue over the next little while. That's different to funding a [00:12:50] startup, if you think about everything, that we normally do in startups is we go to companies like Lululemon and we say, we need you to give us $10 million or [00:13:00] $5 million, whatever.

Phil [00:13:01] It's, and they said, well, your company's just too risky. Why should we give you $10 million? And I realize now, [00:13:10] especially as a venture capitalist, this is where there needs to be a very strong relationship between the venture capitalists and the corporate off takers where we say we stay as venture capital.[00:13:20]

Phil [00:13:20] What we need you to show us is this sort of high fidelity plan for the future that we believe in for this company, that we can see where it's gonna go, and then our risk [00:13:30] capital should help get the company there. And that's exactly what's happened with Samsara. ~~It, ~~it has been so much easier than many other companies to bring the capital into [00:13:40] the company to keep it moving forward with confidence and certainty and forward towards Lululemon.

Phil [00:13:48] And so that included lemon's more [00:13:50] likely to get their outcome,~~ uh,~~ that Samsara is going to be funded. It's not gonna end up in a situation that so many of these companies do where they're stuck in a [00:14:00] not quite having enough money to build the first of a kind to actually get the result that the companies need and get stuck.

Phil [00:14:07] And so this is the solution we need to solve [00:14:10] through

Phil [00:14:10] orchestration.

Karl [00:14:11] Yeah. I'm like so

Karl [00:14:12] fascinated by this story because when I read it,~~ um, you know, ~~I am fascinated by the fact that, ~~you know, ~~ you've got these countries [00:14:20] that end up being these dumping grounds for just clothing. I think of the Chilean, ~~you know, ~~clothing pile in the Tama Desert and what that looks like [00:14:30] as a business opportunity.

Karl [00:14:31] And so that was part of the reason why I was like, I gotta talk to Phil and get him on the podcast because I wanna hear more of the nitty gritty. ~~Um, ~~and so I think we should have another [00:14:40] conversation about like, how do we take this idea and move it into these countries where right now they're dumping grounds and ~~uh, you know, ~~they could become manufacturers of [00:14:50] these monomers that in turn can be return to the world

Karl [00:14:53] and infinitely recycled.

Phil [00:14:55] That's right.

Phil [00:14:55] ~~ uh,~~ that it's actually feedstock now and,~~ uh,~~ that's gonna be the [00:15:00] new contested,~~ uh,~~

Phil [00:15:01] resource I think in the future.

Karl [00:15:03] absolutely.

Karl [00:15:04] So ~~you, ~~you talked about working in theater as that being your origin and you've also, I've seen you say that, ~~you know, ~~being a [00:15:10] VC is more like being a movie producer than a banker. And you've also suggested that every entrepreneur should go to drama school because theater teaches you to convince people [00:15:20] to join a mission without a, without money.

Karl [00:15:22] How do you feel like all those ideas connect and how do they shape the way you work

Karl [00:15:26] with founders right now?

Phil [00:15:27] ~~ I mean, ~~ Yeah, I mean, going back to the theater

Phil [00:15:29] days, the sort of [00:15:30] classic. Example of how you get started is you would, for example, pitch to a international arts festival [00:15:40] that you've got this great idea for a performance that you're gonna create and you say what's gonna be happening and who all the characters are and what the staging will look like.

Phil [00:15:49] And then you create [00:15:50] visuals to show what it'll be like. But really you are a year away from having anything. you haven't had one minute in a rehearsal room, you don't know what it's gonna look like. All you [00:16:00] have is ~~that ~~that first narrative about what it might look like and all that ends up in the brochures for ~~the, ~~the events.

Phil [00:16:07] And ~~you know, way back then, you do it kind of kind of ~~a year [00:16:10] before. You've gotta tell people what to imagine until you have it before you have it. And then you start using that same collateral, ~~sort of ~~build another layer on it that says why the [00:16:20] actors. To come and join you and get paid not enough money for too long to start building this whole thing together and all the other people that you need.

Phil [00:16:29] [00:16:30] You're using it as your recruitment and your capital raising that's still needed for the theater. And you are really doing all this with no money. Perhaps you've had a [00:16:40] small, ~~you know, ~~prepayment for me from the arts festival, but essentially you are trying to get everyone to imagine wanting to see something great ~~and, ~~and come [00:16:50] in behind that.

Phil [00:16:51] And,~~ um, this is why, this is why theater is a very good, uh, you know, environment for this because there's no confusion, uh,~~ about money versus the vision. ~~It's, ~~[00:17:00] it's ~~the, ~~the vision drives ~~the, ~~the creation of something and the something can't be built without all these people coming together.

Phil [00:17:07] So you learn that [00:17:10] impulse. And I, and I just bring that to startups today. It's not about, uh, because unless you have that,~~ you,~~ you can't mess it unless you have that, you can't bring the whole thing together. ~~it's, ~~it's the same with big [00:17:20] companies. I think ~~when we, when we go to a big company or a university to co-found a company or get involved in a company, when we get bogged down in term [00:17:30] sheets, um, you know, ~~the financial transaction of the whole thing, the next moment we're just looking one step ahead.

Phil [00:17:37] The gate that we've all got to get through, it's [00:17:40] just not exciting enough. ~~Like, ~~and we don't start the company in the right way. If we start the whole company. Like that posture we have at the beginning ~~of a, ~~of a [00:17:50] performance that we're ~~sort of ~~planning to build. And everyone's thinking. They can imagine ~~the, ~~the factory on the hill in the future that's gonna be this new sovereign industry or [00:18:00] whatever it is that we're building. ~~that's, ~~that's worth going through all the pain that's between here and there and people committing to it and going for it. And so I think that's [00:18:10] what I've, learned, and that's, ~~you know, how I still, um, uh, uh, ~~orchestrate the culture of all the players that are around

Phil [00:18:15] these, businesses.

Karl [00:18:17] Yeah, ~~I mean, uh, it, ~~it makes a lot of sense. It's like you gotta have that [00:18:20] story and that vision so that you can get your followers and you can bring people along. And if that vision isn't big enough or bold enough or inspiring enough, you're

Karl [00:18:29] just not [00:18:30] gonna get it.

Phil [00:18:30] That's great. And it, and~~ And it, ~~just

Phil [00:18:31] coming back to this sort of movie producer, showrunner type of ~~uh, uh, ~~analogy. I think, ~~you know, ~~people often think of ~~a, ~~a VC as a [00:18:40] banker or a sort of capital allocator. And in fact I think too many VCs actually think of themselves like that today.

Phil [00:18:46] And I think Silicon Valley of the last [00:18:50] 10, 15 years has almost made that worse because Silicon Valley has become software driven ~~ um,~~ and has become such a sort of fertile [00:19:00] pool of capital that in Silicon Valley it's really just a battle of deploying capital and getting enough ownership. And then there's enough of a ecosystem in [00:19:10] Silicon Valley for the vc just to allow the ecosystem to go to work at a company to hopefully rise.

Phil [00:19:16] But I think,~~ uh,~~ modern VC has forgotten the [00:19:20] origins of vc, ~~you know, ~~the origins of vc. That were, you know, Boston Semiconductor or something like that, that, that is hardware is hard. [00:19:30] Things, you know, is factories, um, and, ~~you know, ~~building companies that have this huge motor around them because they were hard to build in the first place.

Phil [00:19:39] But, but you can [00:19:40] only build those companies if you have a highly collaborative way, which just brings us back to this sort of producer showrunner. ~~ you, you can't make a movie [00:19:50] by saying, uh,~~ hey, ~~you know, ~~John Smith, ~~you know, ~~here's some money. Good luck. ~~kind of, you, ~~you bring the talent in, you package the whole thing up, you crowd in [00:20:00] finance from all kinds of places.

Phil [00:20:01] You do the distribution deal, ~~you know, ~~you have to participate. In our world of venture building, Carl, ~~you know, ~~bio manufacturing and [00:20:10] synthetic biology, if we, if we stay in our silo, um, it's much less likely to succeed.

Phil [00:20:15] So we have to take that producer posture.

Karl [00:20:18] Yeah, I mean I think it

Karl [00:20:19] goes back [00:20:20] to,~~ uh, you know, ~~using the Samsara example, ~~you know, ~~the fact that they had, ~~you know, ~~first of all you guys orchestrated the relationship with the University of the Australian University with Woolworths, [00:20:30] and then that in turn attracted Lululemon. And I could see, and we do see it, it's like a lot of the startups that.

Karl [00:20:38] We're attract, we, We're attract, we, we visit or we get to [00:20:40] know. It's like they don't have that full vision. And a lot of times it's just because they're very science focused and they're focused on the technology and they're not really thinking about what the greater impact [00:20:50] is. And yet we see the same thing on the other end sometimes with the big, ~~you know, ~~companies that are looking for a technology or they need a solution, but they don't really understand what this other [00:21:00] ecosystem is that they need to build.

Karl [00:21:02] So I think you're in a really interesting place, ~~ I,~~ I'm looking forward to learning more about, ~~you know, ~~the playbook that main sequence has developed over the years. [00:21:10] But let's go back to Pollenizer for a minute. You said that basically you founded, I don't know how many companies and 70 people for $5 million.

Karl [00:21:19] There really [00:21:20] was no startup ecosystem. ~~Um, you know, ~~when you started that, but now you're spinning out global companies from, ~~you know, the, ~~the big research organization in Australia, [00:21:30] csiro. did you have to build the ecosystem from scratch? And what did it teach you about

Karl [00:21:34] creating these bigger value chains?

Phil [00:21:35] Well, there's a

Phil [00:21:36] humbleness to doing this right, because ~~you, ~~so much of the [00:21:40] work becomes participation, ~~you know, ~~not claiming that you've done all the work yourself, but participating and paying attention to ~~the, the, the, the, ~~the aspects [00:21:50] which are ~~sort of ~~removing the blocks around.

Phil [00:21:52] People. we take ~~sort of where we are today with the research system here in Australia, uh, and, and where we got to with Pollenizer with them, um, you, you know, ~~[00:22:00] at Pollenizer we had done the work on figuring out what you do on day one to actually start a company. When someone says, I've got a great idea for, ~~you know, ~~in the [00:22:10] Pollenizer days it was a, ~~you know, ~~restaurant booking app.

Phil [00:22:13] ~~You know, ~~great business around ~~restaurant, ~~restaurant bookings. ~~Um, ~~but I don't have an engineering team and I dunno how to do sales and I [00:22:20] dunno how to pitch it and I dunno how to raise capital. And so we, we did all that work to ~~kind of ~~figure out, well, what's the playbook for that? And then that becomes, well how do you scale that?

Phil [00:22:29] [00:22:30] So who are the other people that can help with that and how do you connect with them and what's that way of working? So that just starts to ~~sort of ~~move everything, ~~you know, ~~get the whole system starting to work. [00:22:40] Then as we ~~sort of got towards the final years of pollenizer and the whole system was getting good at that, that, ~~that's when we started to look at the [00:22:50] research system and uh, C-S-I-R-O, which is Australia's National Science Agency, they, uh, they have been tasked by the federal government here to try and do [00:23:00] something to stimulate the incredible research here and to turn it ~~into, ~~into companies and to capture the value here in Australia.

Phil [00:23:07] Now, if you look around the ecosystem, [00:23:10] at the time there were no accelerators in the universities. ~~Um, uh, there was no commercial muscle, there was no connection with [00:23:20] industry and manufacturing and supply chains. ~~ uh, and CSRO wanted to create a national accelerator. Program that could just start to ~~sort of ~~move [00:23:30] that.

Phil [00:23:30] And Pollenizer was given the job of designing that and sort of executing that over the first, uh, couple of years. And I still remember to this day [00:23:40] being in the first bootcamp we called it, and we had a hundred scientists from all over the country coming in with,~~ uh,~~ their companies. And [00:23:50] I asked them to say, tell me what's valuable about what you are doing. And not only did I not understand what they were doing, but no one else in the room [00:24:00] understood it was the quite literal Tower of Babel where no one understood each other. ~~um, ~~but as we started ~~to, ~~to find the way of communicating it, I'm [00:24:10] thinking, oh wow. Like how incredible are humans that we are? We have this capacity for invention [00:24:20] and look at what these people are making.

Phil [00:24:21] It's ~~like ~~this whole new world of, yeah, this was not, ~~you know, ~~booking a table at all restaurants, ~~you know, ~~this was removing methane [00:24:30] from livestock and this was whole new foods, and this was quantum computers that would massively revolutionized ~~how we, how we, ~~how we compute in the future. And ~~I, I was, ~~I was blown away [00:24:40] both with the capacity for value creation and the absence of capability to turn that into a company.

Phil [00:24:48] And that's what began that whole [00:24:50] journey. Now, ~~you know, ~~10 years into the future there, Australia has intervened as a, as a, as a community. Every university has multiple, uh, [00:25:00] accelerator programs. The common language where the Tower of Babel has gone away. Everyone has come, ~~you know, ~~connection with industry.

Phil [00:25:07] There's lots more. Venture capital, main [00:25:10] sequence is a billion dollar under management fund fueling these things. ~~you know, ~~we're you know, collaborate with the, uh, national Reconstruction Fund here, which is another government program with [00:25:20] $15 billion to ~~sort of ~~take what we're doing and move it into industry.

Phil [00:25:24] This whole thing has ~~kind of ~~blossomed and ~~it, it comes from, again, coming back to [00:25:30] orchestration. It's a, everybody talking about what we are doing and what we are doing collectively and where there is a gap and how we can help [00:25:40] each other. ~~ um, and this is how ~~the, the, the, ~~the ecosystem ~~sort of ~~unfolds the next layer.

Phil [00:25:45] ~~As, ~~as somebody that's an old timer and been doing it for, ~~you know, ~~20 years now in [00:25:50] Australia. ~~I, ~~I like to say to people, I'm often asked on panels and podcasts, ~~you know, what's, what's, ~~what's missing and how's it going? And I always say, look, we're doing great. Of [00:26:00] course this thing's missing, and we'll keep building, but look at where we've come from and look at what's happening.

Phil [00:26:05] So let's just keep going and just, and fill

Phil [00:26:07] in the gaps as we go.

Karl [00:26:09] Well, so one

Karl [00:26:09] [00:26:10] question I wanna ask is, ~~you know, ~~since you guys, you said that there was, it was this Tower of Babel, all these scientists that you met with all telling these stories, ~~but you know, ~~maybe not even understanding how [00:26:20] they could translate into a company. How do you get founders like that, or all founders to really understand that they need to have an ecosystem [00:26:30] script, like a story that gets regulators, corporates, and consumers, ~~you know, ~~all playing their parts, but also really excited

Karl [00:26:36] about what the tech might be.

Phil [00:26:38] ~~ we,~~

Phil [00:26:38] we create,~~ um,~~ [00:26:40] arenas in which,~~ uh,~~ that is exposed and where the opportunity is exposed and the gaps are exposed. And,~~ um,~~ and we have to work a bit, I must say, because [00:26:50] I think everybody involved in a company comes at it from their own perspective. So if you are a scientist. ~~You know, ~~it's very common for us to meet scientists who think [00:27:00] it's self-evident.

Phil [00:27:00] If I tell you the performance of my yeast strain or I tell you about how many cubits,~~ uh,~~ I have in my quantum computer, [00:27:10] or how many,~~ um, uh, ~~megawatts of energy I can store, it'll be self-evident to everybody that it's valuable. They don't understand that [00:27:20] other people are just not seeing ~~the, ~~the so what from that.

Phil [00:27:22] They also think that when they stay, ~~you know, ~~that technical aspect, that then the industry will come rolling in and the supply chain will [00:27:30] automatically change, and the regulators will say, of course, I've been wanting this for years. ~~Like, ~~thank you. And of course, as you get to that actual point in your life, you [00:27:40] realize there's a headwind.

Phil [00:27:41] You know, even, even pitching. We have very technical co-founders who, uh, they, they're not seeing ~~that, ~~that ~~in a, ~~in a pitch meeting [00:27:50] with a new investor or a customer, and that person is just not seeing why it's valuable and then you help them, ~~you know, ~~I had an experience ~~just, just ~~just ~~a, ~~a month or [00:28:00] so ago where, ~~you know, ~~the founder literally said to me, I don't intuitively understand why it's valuable and why you want me to do this, but I trust you.

Phil [00:28:09] [00:28:10] I'm gonna go and do it. And he, we went through this whole sort of pitch clinic process where he figured out how to share what he's doing, and then he came back and said, I [00:28:20] understand. Because he literally seen, all of a sudden the conversations became engaging and people were leaning in and saying, how could we do this together?

Phil [00:28:28] It all kind of made sense. You know, ~~ another, [00:28:30] just a much bigger example, is I'm in the middle of our deep tech week here in Australia where all our founders and investors come together, and we tried, uh, [00:28:40] a, um,~~ component of that we called Moonshot Cancel Moon.

Phil [00:28:43] Um, wearing, wearing the, wearing the T-shirt.

Karl [00:28:43] I heard you. Uh, so me with my reckon ear, I heard Moonshot canceled.

Phil [00:28:43] ~~no, no cancel, ~~

Phil [00:28:43] like, like how do we convene to look at our collective moonshot? And so, for example, I [00:28:50] had a group of, uh, government people, CEOs of big industry from different countries, startup founders working in, you know, uh, biotech food [00:29:00] companies. And we made a list of the blockers that were in place. We then, uh, created a series of projects which were intercompany [00:29:10] inter organizational projects for the year that would actually help us ~~sort of ~~reach this moonshot.

Phil [00:29:16] ~~ um,~~ and it's just forcing that arena, as I said at the beginning. ~~Um, you know, ~~these [00:29:20] things always begin. People go, gosh, ~~you know, like, is this really gonna help? And then at the end of it, it's like, like, ~~ah.

Karl [00:29:25] ~~Um. this was a, a, ~~good example ~~of, ~~of something I've heard you talk about, which is breaking down the silos [00:29:30] of, you know, between scientists and commercial teams, like having a moonshot council. But I'm curious about a deeper challenge. How do you help, um, scientists ~~and you, ~~and you [00:29:40] hinted at this, how do you help scientists understand that the breakthrough isn't just a better product, it might require building an entirely new market, really completely transforming its supply chain.

Karl [00:29:49] How [00:29:50] do you coach them to think like

Karl [00:29:51] ecosystem architects?

Phil [00:29:53] Yeah, I mean, um, this, this is a big problem to solve because I think, ~~ uh, scientists and I'm [00:30:00] generalizing, um,~~ are very uncomfortable talking about something which they haven't absolutely proven that this is ~~sort of ~~the first sort of cultural thing to navigate [00:30:10] between the sort of venture world and then a scientist.

Phil [00:30:13] And of course we must do that. We must talk about the evidence we have of what we know and ~~you know, ~~why we should feel very confident about where [00:30:20] we are today. But we have to see the beacon on the hill as well. We have to know what's possible. We have to figure out. How we can talk about a future state.

Phil [00:30:29] ~~uh, ~~[00:30:30] and there's two reasons for this. One is, as I said before, this is how we get everyone excited to go on what will be a very difficult journey. So everyone has to be bought into [00:30:40] an aligned view of the future. Understand the future might not end up being exactly what we thought about at the beginning, but if it's anything like it, it'll be exciting and it's ~~worth, ~~[00:30:50] worth the effort.

Phil [00:30:51] I think the other thing is we need to understand what are the properties of that working successfully on an, at an industrial scale. ~~And, ~~[00:31:00] and I think that so often ~~these, these products are developed, so they're kind of kind of ~~platform technologies. They're things that which would work really well in a big sort of [00:31:10] patent, ~~you know, ~~IP library.

Phil [00:31:12] Um, you know, the sorts of things which we think about where we're building IP strength inside a university, um, but they're just not valuable,~~ uh,~~ in [00:31:20] terms of getting you to industrial scale. And companies like Samsara, companies like Cauldron, which are our big biomanufacturing company, companies like Hulu that are [00:31:30] making,~~ uh,~~ new polymers with seaweed as a feedstock, ~~that ~~that only matter ~~if you, if you know, you know, ~~or you have belief and you have a, for them working at a big scale.[00:31:40]

Phil [00:31:40] And Michelle, who's the CE of our, Cauldron, biomanufacturing company, you know, she, she has this great phrase, which is, um, unless it involves a forklift truck,~~ uh,~~ it's not relevant.

Phil [00:31:50] ~~ uh, and, ~~and I think that's why we've kind of got to get to, it might be the most remarkable science, but if it will never transfer to pipes and tubes and, you know.

Phil [00:31:58] 500,000 TED [00:32:00] Bioreactors. In that case, it's almost irrelevant. And I think as well, scientists tend to, because they build this sort of broad, ~~you know, ~~patent [00:32:10] portfolio ~~and, and, ~~and ~~uh, technology platform, it becomes a very fat front to kind of kind of ~~move forward into industry. ~~you, you know, ~~when I look at the [00:32:20] Biomanufacturing industry, what I see is this, that front of innovation that's ~~kind of ~~stuck here and it can't get through.

Phil [00:32:28] ~~And, and, ~~and I think we just need to be [00:32:30] doing less. We need scientists need to talk with commercial people, with engineering people that turn what they're doing into factories. And we need to drag [00:32:40] this whole thing through to scale. And then when we get it to scale. And that's sending the message back through the ecosystem that what the scientists are doing [00:32:50] now is turning into real impactful scale that we should all lean into and make happen.

Phil [00:32:56] And you know, we had a, we had the first, uh, we had the opening of the first infinite plastic, plastic [00:33:00] recycling, uh, facility in Australia. So big factory that Samsara opened,~~ uh,~~ last week. And we had three ministers that came from the government [00:33:10] to look at the whole thing. And there was this very innocent comment, ~~ uh,~~ but it was profoundly important, where one of them said, ~~you know, ~~this is really good because [00:33:20] we're often on lab tours around the universities and things. And I quietly think to myself, that's really interesting, but. How does that [00:33:30] end up, ~~you know, ~~manifesting in something that's new jobs, new industry, all these things which are really important. And so, ~~um, ~~yeah, we need to get the scientists thinking more about [00:33:40] the forklift trucks ~~and, ~~and how it applies and putting that ingenuity there.

Phil [00:33:44] And then, ~~you know, ~~creating a, where, ~~you know, ~~We're heading towards ~~the, the, ~~the first [00:33:50] manifestation of it.

Karl [00:33:54] Yeah, I find it super interesting ~~and I, and I'm glad you mentioned, um, you know, ~~Michelle and Caldron, who we've had on the podcast [00:34:00] and really love and are watching and paying attention to what she's doing. ~~Um, ~~and, ~~you know, ~~caldron is building this, ~~you know, ~~precision fermentation at infrastructure.

Karl [00:34:09] You know, [00:34:10] You know, it's almost like. Precision fermentation as a service. And this is a multi-billion dollar infrastructure challenge. It just doesn't exist. [00:34:20] And what we've seen is that most, uh, investors avoid this, but there are some investors who are really interested in infrastructure investments. You guys seem to embrace [00:34:30] this despite the challenges,~~ um, you know, ~~associated with it.

Karl [00:34:33] Are you betting that whoever controls this kind of manufacturing, biological manufacturing infrastructure is gonna

Karl [00:34:38] control the next economy?

Phil [00:34:39] [00:34:40] Yeah, that's

Phil [00:34:40] it. I think that's a good way of putting it. ~~I mean, it's very clear from where I'm sitting that the maturation of various [00:34:50] technologies combined with the needs that Earth have for different manufacturing systems, all the calls for sovereign manufacturing capability, [00:35:00] everything that's happening with geopolitics. There is going to be a, great rise in new industrial platforms all over the world that this technology needs to [00:35:10] step into. And, um, we need to, ~~we need to roll out this infrastructure that means we need a different approach for sure. But I was talking with another investor last [00:35:20] night and I'm very glad I'm not a software investor because ~~I'm seeing, ~~all I can see is with the rise of ai, these are gonna become very volatile, [00:35:30] almost temporary businesses with very limited moats around them,

Phil [00:35:34] right?

Phil [00:35:35] And so, yeah, we can make them quickly, but that's the problem. Everyone can make them quickly. [00:35:40] And,~~ um, you know, ~~I don't wanna downplay what it takes to ~~sort of ~~grow a business around a software company, but. What we do know is how hard it is to build ~~these, ~~these big new [00:35:50] industrial companies. But once, we've got them and not only have we figured out how to build them at scale industrially, but we've embedded them in a supply chain [00:36:00] that is a ~~very, ~~very deep mode around these companies.

Phil [00:36:02] Then ~~you, you know, those, those things must grow to a big scale. I mean, I mean, the, the, the, ~~the Biomanufacturing solution isn't about companies like Cauldron building [00:36:10] one factory somewhere. There needs to be hundreds of them all over the world. Samsara needs hundreds of recycling facilities ~~and, ~~and that whole stream of [00:36:20] industry must flow through them.

Phil [00:36:22] And,~~ uh,~~ that is a huge opportunity. And ~~I, I, ~~often in conversations with my venture is that ~~we, ~~we need to find the way of leaning in. [00:36:30] To CapEx again, like we did in the origins of venture,

Phil [00:36:33] uh, and to ~~sort of capture this opportunity. And, um, uh, I, I, ~~wish I could see more of it. There aren't enough of us out there doing it, but we're [00:36:40] finding ways to do it.

Phil [00:36:41] One thing I'll say is I think, I think, uh, the big problem to solve today is that capital tends to,~~ um,~~ have its own [00:36:50] silos, right? So you have angel investors that do a certain kind of investing, have a certain risk profile, will put a certain amount of money in venture capital, [00:37:00] institutional venture capital.

Phil [00:37:01] The next little bit we're also risk tolerant, but venture capital is starting to get really worried if we might get [00:37:10] diluted ~~round after ~~round after round after round whilst new factory gets built. ~~And, ~~and so at the moment there's a, there's a little bit of a gap between. What we do in venture and [00:37:20] what project financing, uh, institutions deliver.

Phil [00:37:24] And we're seeing the rise of new funds that are ~~kind of ~~filling in that gap and there's more and [00:37:30] more of those coming and we need to, we've got people on both of those silos if you like, to ~~sort of ~~stick with that idea of just trying to reach across and find a way of just touched [00:37:40] enough and then just pull a company along and we'll get better at that.

Phil [00:37:43] I think that's a little bit of ~~the, ~~the ecosystem growing unless realizing what we have to do. ~~Um, ~~but there has to be a definite [00:37:50] plan and I think ~~if, ~~if you and I look back and the listeners look back at the history of these incredible, the companies we see pitch for the first time at MB [00:38:00] Beatta ~~and, and, ~~and then we watch their journey, so many of them get stuck at this

Phil [00:38:04] second valley of death point.

Phil [00:38:06] And that makes them weak. It's not their technology [00:38:10] that's weak, but like technology rarely fails. It's technology is rarely the reason for a company to fail. It's usually ~~a, ~~a human issue or a capital [00:38:20] issue or ~~a, ~~a kind of, ~~you know, ~~getting the cost right

Phil [00:38:23] to work in industry. ~~Sort of ~~issue

Karl [00:38:24] But ~~like, when you, when you think about Biomanufacturing and, um, you know, ~~I think you and I have talked about this before, and we [00:38:30] think about, ~~you know, ~~distributed biomanufacturing and like you're talking about Samsara, you're talking about cauldron. ~~You know, ~~these companies that are building these, ~~you know, ~~picks and shovels

Karl [00:38:38] that are [00:38:40] necessary? ~~You know, ~~is there a model for that? ~~Like, ~~is there a model that we can look to and say. ~~I mean, ~~and I, for me it's like the microbrewing industry, ~~you know, ~~it's like, it's a lot of independent little companies. [00:38:50] Sometimes they get bought by a big brewery, but you're able to set up these, usually pretty profitable, ~~you know, ~~micro breweries anywhere in the United States.

Karl [00:38:59] We say [00:39:00] everybody's a mile from one where I'm sitting in Brooklyn, I probably got five within, ~~you know, ~~five miles, maybe more. ~~Uh, um, ~~but I don't know if like investors necessarily see that model as [00:39:10] saying, okay, for buy manufacturing, we can replicate that and we're gonna help build like a cauldron and we're gonna see cauldron facilities in every country in the world.

Karl [00:39:19] ~~Like, are there, ~~are [00:39:20] there other models that we could look

GE - Ep [00:39:21] at

Karl [00:39:21] that, show us that?

Phil [00:39:22] uh, ~~ the analogy I have to give around industrial biomanufacturing and cauldron is, uh,~~ data centers.

Phil [00:39:28] Yeah. ~~These are, these are, ~~these are [00:39:30] ultimately, ~~you know, ~~massive, expensive pieces of infrastructure. Now, the difference between a bio FB that cauldron might build ~~in a, ~~in a data center [00:39:40] is that we know the business model of data centers.

Phil [00:39:42] Now you can go to the bank, you can get project financing. Everyone knows the return on investment that [00:39:50] happens there. Everyone knows how it works. You have confidence in the offtake if you like, and you, just build it. You build the next one, you build the next one. ~~And the, ~~and the market is so, ~~um, ~~[00:40:00] has so much momentum.

Phil [00:40:01] That just independently all over the world, people are saying, I'm going to build the data center, build the business case, get the money, get it built ~~So that, ~~so that's one [00:40:10] thing. And I think what that means we have to do as a community around bio manufacturing is we have to the path to showing [00:40:20] this working at scale in the first of a kind, next of a kind, kind of stages.

Phil [00:40:25] And once we're through that, then whoever you are in the world, it's much easier to do the next [00:40:30] one, the next one, the next one, the next one. ~~ the next one, the next one, the next one, you know, ~~that's job number one. And for me that is an unlock not just directly for companies like Cauldron, [00:40:40] liberation Labs and all of us that are trying to do these things.

Phil [00:40:43] ~~Um. ~~It is an unlock for the rest of the industry because that's how the rest of the industry gets the belief that it can be made at the right [00:40:50] price and there is enough capacity out there to do it. ~~that's, ~~that's point number one, just showing that it can be done and then we can have data center type dynamic in the industry.

Phil [00:40:59] [00:41:00] The second thing is, coming back to your question about scientists and founders, thinking about how the whole thing is going to work in the future. [00:41:10] And what I find, or what I used to do myself, I must say, is you would think about a company doing it all themself and you would [00:41:20] say, okay, so this is what we're gonna do.

Phil [00:41:21] We're gonna build our pilot plant, and then we're gonna raise this much money and we're gonna build our thirst of a kind commercial facility, and then we're [00:41:30] going to list, and then we're going to build the next 10 ourselves. And ~~there's, ~~there's a kind of. Uh, arrogance to that, uh, which comes from wanting to [00:41:40] control it, ~~sort of you know, ~~own the most value.

Phil [00:41:42] Um, but really, uh, do we want to learn to reinvent the wheel to do everything that needs to be done there? And really [00:41:50] can we, as a single organization that today is four years old or whatever, have the audacity to do that and actually have the global impact? The answer is probably no. [00:42:00] So then that leads you to the question, well, okay, well

Phil [00:42:03] do we work with in the supply chain? What is our business model so that we grow,~~ uh,~~ over [00:42:10] time sustainably, but other people are motivated to actually do their part? what I'm now learning and I'm really enjoying understanding more about [00:42:20] is, ~~you know, ~~there are a world of engineering firms, for example. Every day invisible to us.

Phil [00:42:27] Innovators are just rolling out [00:42:30] carpets of factories and infrastructure all over the world, and we need to be working with them. And ~~if, ~~if I look at the Samsara plan now and I [00:42:40] think about our board meetings in the work that we're doing, that's what we're doing. I mean, we actually have a plan for the next 50 Samstar facilities, 4-year-old [00:42:50] company.

Phil [00:42:50] ~~Right. ~~And ~~um, you know, ~~who's building them, how they're motivated, what the business model is, and we're working with all of those people now. I'm the first of the kind. And [00:43:00] I think the more we can do that, the more we've got this

Phil [00:43:02] pathway for scale and impact.

Karl [00:43:06] Yeah, I think we need to

Karl [00:43:07] see more of those because like, I, I've got two examples. [00:43:10] One,~~ uh,~~ on a podcast episode we did,~~ and,~~ and actually both the people have been on podcasts. I'm not gonna mention them by name, we'll let our listeners go back. But one, these guys had built like [00:43:20] this incredible facility.

Karl [00:43:21] They're very successful selling product. And when we brought up this idea of ~~like, ~~okay, you've got this facility, why don't you replicate the facility, ~~you know, ~~in multiple places [00:43:30] like that, thought, had never even crossed their mind. ~~Like, I think, ~~I think in many cases, the founders and the companies as, as successful as they are, they might not realize that they can [00:43:40] multiply their impact ~~by, ~~by thinking that way.

Karl [00:43:43] And I get it, ~~you know, ~~they're a founder, they're focused on building a company. It's, you have to be focused ~~like, ~~as you say, there's these engineering firms, there's all [00:43:50] this other ecosystem that you could build. So it could have that bigger impact. But what I'd like to see is ~~like, ~~not only like the Samsara model rollout, but I'd like to see someone, again, someone who's been on the [00:44:00] podcast where they could take what they're building or they could take what they're doing.

Karl [00:44:03] They've got a first of a kind, ~~you know, ~~facility. They're able to produce a lot of product. I'd like to see them start thinking about, [00:44:10] okay, now we can start producing this, ~~you know, next to, um, you know, ~~we can do it in Italy where they're gonna use our product. We're gonna do it, ~~you know, ~~in this place where they're producing shoes, we're gonna, so that [00:44:20] way other people can start to see this example kind of multiplying.

Karl [00:44:23] And I think. ~~You, you, ~~you ~~kind of ~~passed by the, ~~you know, ~~geopolitics that we're living through right now. But I think that this is [00:44:30] absolutely necessary and so it makes it an even more

Karl [00:44:32] compelling opportunity right now.

Phil [00:44:34] It, it really does. And, um,

Phil [00:44:36] I think ~~if, ~~if we take a customer perspective [00:44:40] of all these companies that we're working with, so our companies that are making new textiles, our companies that are doing recycling, our customers that are doing new dyes and things [00:44:50] like that in, fashion. Um, if you are a customer, if you are Lululemon, if you are Nike, if you are, um, uh, fast fashioned in Japan, you, you have to [00:45:00] believe that there's gonna be sufficient scale for you to to go.

Phil [00:45:04] It's coming back to the, what I was describing before, you have to know the beacon on the hill.

Phil [00:45:09] You [00:45:10] have to enough, it's gonna be big enough. It's gonna be cheap. Enough company's gonna there if all the company has got is that single [00:45:20] factory, and that's all they're talking about. And it only do 2% of the capacity that this is ever gonna need as a customer.

Phil [00:45:29] I'm not [00:45:30] comfortable anymore. ~~I'm, ~~I'm worried I'm putting my own future in the hands of this subscale startup.

Phil [00:45:37] And that's another reason why

Phil [00:45:38] we need to have ~~this, ~~this [00:45:40] sensor.

Karl [00:45:40] But how do you think

Karl [00:45:41] that contrasts with this kind of ~~like, ~~there's a trend that I'm seeing too, where you've got these companies that they're really focused on complete vertical integration. ~~You know, ~~ [00:45:50] they're following like a Tesla or a SpaceX model, and there's other ones where they just want complete control of a supply chain.

Karl [00:45:57] How does that sync with

Karl [00:45:58] this thinking?

Phil [00:45:59] ~~Uh, ~~ [00:46:00] well. I what companies other than SpaceX and Tesla don't have is the CEO doesn't have billions of dollars of their own money

Phil [00:46:09] to actually [00:46:10] put into the business. And Yeah, no question. It's very inspiring to, ~~you know, ~~read about how this happens and ~~you know, ~~how SpaceX, ~~you know, ~~[00:46:20] doesn't buy these expensive components from existing supply chain and it engineers its own, which is ~~sort of ~~a hundred times cheaper and more fit for purpose.

Phil [00:46:29] And [00:46:30] it's of course very valuable to do that. But I guess a contrast would be in China where that whole manufacturing system has been optimized for [00:46:40] a supply chain to rise. And, you know, um, we see whole car companies. Appear in two years out of, ~~you know, ~~a company that used to make toasters, [00:46:50] right?

Phil [00:46:50] A company that's good at taking in components for other people, then innovating around assembly and then building a big factory and then pushing it out. ~~Um, ~~this huge [00:47:00] scalability of that. ~~And it's, ~~and it's reproducible on an industrial scale. It doesn't need Elon Musk specifically with his specific bank account to actually get it there.

Phil [00:47:08] ~~Um, and so it's much more efficient. [00:47:10] But I think, we always have to be, I'm always careful to say, um, we, ~~we can't be religious about these things. You know, we have to, we have to say, look, what, what does my company need? And ~~I, I, I would say that as a [00:47:20] VC looking and participating very closely in Biomanufacturing and, and and, ~~all of these molecule making incredible innovations that are [00:47:30] happening.

Phil [00:47:30] ~~Um, ~~I think there's been lots of wrong steps, people choosing the vertical integration path. 'cause what actually happens if you're not Elon Musk and I know where it comes [00:47:40] from. It's because if there is no factory, I must build a factory. This is how I've been control of my destiny. But there's so many companies which are almost raised [00:47:50] enough money, but in the meantime, they're stuck.

Phil [00:47:53] ~~Uh, ~~they're stalled with no factory because there's no factory. They can't make it the cost of goods and the [00:48:00] volume they need to make. And so they can't do anything. They're ~~sort of ~~catch 22 precarious situation. So my, general posture at the moment is [00:48:10] invest in manufacturing companies that do manufacturing really well.

Phil [00:48:13] Invest in product companies that do products really well and then stick them together. Um.

Karl [00:48:18] ~~I mean, ~~to me it sounds like the, uh, your approach ~~is, ~~[00:48:20] is fundamentally different. ~~You know, ~~from most vc ~~you know, ~~if you're gonna focus on building a, tech startup. As well as the person who's gonna manufacture it, as well as this [00:48:30] distribution infrastructure.

Karl [00:48:31] What you're really doing is you're creating these systems, you're orchestrating system change rather than just optimizing individual companies. Do you think more [00:48:40] VCs,~~ a, uh,~~ should be thinking this way, or do you think that's the evolution we're gonna see? ~~I mean, ~~ you mentioned, ~~you know, ~~capital is siloed and we see that we want more of that capital to be talking to each other.

Karl [00:48:49] Do you think [00:48:50] we need VCs to kind of,~~ kind of, uh, ~~move towards

Karl [00:48:52] this model?

Phil [00:48:53] ~~I, I do, I, I, I, ~~

Phil [00:48:53] I have a fairly strong belief that gets proven every day that. ~~Um, none of us [00:49:00] can do this on, on our own. I, ~~ if we really are in the business of building moonshot companies, uh, then we need, um, Apollo mission [00:49:10] style collaboration that brings everyone together. ~~Um, ~~and even VC to vc. We need to know how do we each get enough [00:49:20] returns from our investors by working together on something and then, ~~you know, ~~deliver the growth together into the companies.

Phil [00:49:26] And the more of us that exist, the different pockets of [00:49:30] the world with our own proprietary relationships, with industry, with our own understanding of the market, with our own ability to crowd in capital, and that we do [00:49:40] that together. And that's what allows us to ~~sort of ~~keep these companies moving and not failing just purely because there's a missing bit or the $10 million short [00:49:50] or whatever it is.

Phil [00:49:51] So, ~~uh, every, every day in my work, uh, uh, ~~proves to me that when we do that, we're more

Phil [00:49:56] likely to move forward.

Karl [00:49:57] So one of the things that we

Karl [00:49:59] talk about,~~ um,~~ [00:50:00] is that we believe that really the first,~~ uh,~~ trillion dollar biotech company outside of Biopharma is gonna look more like a lifestyle brand than a traditional tech company. And you're [00:50:10] backing companies that are literally changing what we eat where, and really how we think about waste, ~~you know, ~~and turning waste into finitely recyclable products.

Karl [00:50:19] Do you see any of [00:50:20] your businesses or any of the companies you guys are investing in becoming cultural movements, not just successful

Karl [00:50:25] businesses?

Phil [00:50:26] Yeah, I think so. ~~Um, ~~

Phil [00:50:27] and I'd say there's ~~kind of ~~[00:50:30] two, Approaches to this ~~one is, ~~one is how do we find the collective narrative around some of this new technology [00:50:40] that gets the whole world, first of all, understanding, then comfortable that excited about something. ~~Um, ~~and ~~um, ~~I think we do the opposite of that [00:50:50] intuitively out of the labs towards industry.

Phil [00:50:52] And, you know, I was at a gathering, uh, of the,~~ uh, uh, synthetic biology food industry people here in [00:51:00] Australia, uh,~~ about a month ago. And,~~ uh,~~ someone very rightfully said, you guys need to hire a marketing agency. It's not like you, that company or you, that lab.

Phil [00:51:09] It's [00:51:10] like you as an organization need to have a common story where you're not. Talking in scientific terms, having horrible phrases like synthetic and [00:51:20] genetically modified and all these things, and ~~you, you know, ~~we need to ~~sort of ~~help the world understand that it's, like making wine and it's like making beer and it's like a, ~~it's ~~[00:51:30] it's nature.

Phil [00:51:31] It, we're learning from nature doing things which will naturally be good for the planet because that's what nature does. It makes things which are [00:51:40] sustainable and they work. And having that, that narrative around things is important. Another part of the narrative is, uh, something that VCs do very badly.

Phil [00:51:49] We talk about [00:51:50] disruption, we talk about change, we talk about automation. Now, many of these new industries that we're building are going to rise in [00:52:00] regional parts of America and Australia, and ~~they're not, ~~they're not. Capital city, that it's not Silicon Valley. ~~This is the, ~~this is the point. And um, uh, uh, all the biotech stuff we're doing here in [00:52:10] Australia is, is gonna naturally occur in places where today, uh, farmers live there, coal miners live there.

Phil [00:52:18] Um, you know, people that are pipe [00:52:20] fitters and plumbers that work around that industry, they live there. They want to understand why them, what, what is this business for them? And then they become part of the [00:52:30] crowd that wants to make this whole thing happen. Not the people that go get off my lawn, you are not welcome here.

Phil [00:52:37] ~~Right. ~~And this is what happens all the time. And so [00:52:40] there's so many parts to the narrative that we need to get right. ~~that's, ~~that's one thing. And then slightly related to the disruption story. ~~Uh, that takes us to the other pathway, which, [00:52:50] we're doing a lot of work on right now, which is, so much of this stuff doesn't need to be a conversation with the public. You know, it's just something we should do for industry, [00:53:00] make industry more resilient, make industry or profitable, um, and, um, uh, you know, just, just make these new ingredients. Help food companies make more [00:53:10] money. ~~ uh, if we go back to the sort of ~~the, ~~the Headie days of the beginning of Impossible Foods and Perfect Day, that these early symbio food companies, ~~you know, ~~think [00:53:20] about the rhetoric, the story that we heard, it was ending animal agriculture.

Phil [00:53:24] It was disruption, it was replacing traditional farming. [00:53:30] served the single purpose ~~of, ~~of creating an enemy which didn't need to be there.

Phil [00:53:37] ~~Uh, ~~and ~~you know, it, you know, ~~we were talking about this the other day. It all [00:53:40] culminated in a Super Bowl ad that sort of defined ultra processed food as a concept that just weaponized the whole general public against [00:53:50] everything that we were trying to do.

Phil [00:53:51] Whereas if we look at where we are today, you've got big food companies that are literally running out planet [00:54:00] to actually make the raw materials, to make the products that they wanna make. And we all have a solution ~~you know, ~~with these next generation food products, for example, in the food [00:54:10] industry that we're making.

Phil [00:54:11] Same thing in fashion that I know you are involved with a lot. Like We, it, it's harder for these big capitalism driven companies to just keep [00:54:20] taking oil-based products to make these, ~~you know, ~~it just gets harder and harder to do it. We have a solution, and doing it in a hybrid way, almost silently to consumers in [00:54:30] some places, as long as everyone's making money and the whole thing

Phil [00:54:33] works, then, ~~you know, ~~

Phil [00:54:35] ~~that's, ~~that's a good way to do it as well.

Karl [00:54:36] Yeah.

Karl [00:54:37] It's amazing. I mean, Phil, you and I could keep talking for the [00:54:40] next couple hours, but I wanna be mindful of your time. So what I'd like to do, if you're okay with it, is do some quick fire questions before we say goodbye. And goodbye. And then, um, we'll just have to have another, another interview.

Karl [00:54:48] Um, so yeah, because it's uh, it's early your morning right?

Karl [00:54:48] Or late your

Karl [00:54:48] evening. Yeah.

Karl [00:54:48] ~~And I've, I've got a, a co-op meeting in front of me in, in about an hour. So, um, uh, You know, ~~what's a scientific breakthrough [00:54:50] in your portfolio that becomes critical infrastructure

Karl [00:54:53] for reshaping industry?

Phil [00:54:54] ~~Uh, ~~I

Phil [00:54:55] think I would have to

Phil [00:54:55] say for this conversation, it's cauldron's Hyper [00:55:00] Fermentation technology,~~ um,~~ because it delivers the solution to companies making products at the right price, at the right volume,~~ uh,~~ [00:55:10] through building a global tapestry of infrastructure, which isn't too expensive. And so it's an unlock for all the companies that are [00:55:20] making, especially commodity priced

Phil [00:55:22] products with biology,

Karl [00:55:24] Yeah, very excited about Cauldron.

Karl [00:55:26] looking forward to talking to Michelle again soon. Beyond [00:55:30] storytelling, what's the single most important

Karl [00:55:32] skill you teach founders?

Phil [00:55:33] ~~uh, ~~synthesis. Uh, um, how to. Look at the whole environment around you, [00:55:40] how to listen to everybody and how to reform that into your own thinking on strategy. So you are always learning, but always bringing everything together into

Phil [00:55:49] [00:55:50] cohesive direction.

Karl [00:55:51] And this isn't really a

Karl [00:55:52] quick fire because it's like we could have a whole episode about this, but collaboration versus competition. Why?

Phil [00:55:58] Um, ~~ [00:56:00] first instance, there's no point in competing in a market that doesn't exist yet. The first job we have to do is to make the market together and then go for your life and [00:56:10] compete with each other. Um, and also I think that, uh, especially in this, in the domain of ~~ what, what are the collective stories and things like that~~ that ~~that we were just talking [00:56:20] about.

Phil [00:56:20] ~~Um, ~~when people compete early, they generally attack their own value proposition as well, because what they say to the market around them is. That synthetic biology [00:56:30] company is really bad for these five reasons. And then that company is really bad for these five reasons, but we're really good. But what the market hears is five bad, [00:56:40] five bad, something good.

Phil [00:56:41] And then you add all that up and all people. Here is all the reasons to be worried about synthetic biology companies, biology. ~~Um, ~~and instead what we need is a [00:56:50] way of collaborating on what is the consistent way of all of us rising as an industry with a common story and then

Phil [00:56:57] we can compete.

Karl [00:56:58] Couldn't agree with you [00:57:00] more. What's an unconventional metric that deep tech founders should be tracking?

Phil [00:57:05] I thought

Phil [00:57:06] this was the best question I've ever been best [00:57:10] and ~~uh, ~~it's really got me thinking 'cause I want to think about more of them. But the one I landed on this podcast was organizational velocity. [00:57:20] So how do we track how fast we make? Decision, ~~you know, what, ~~who's involved? How do we make the decision?

Phil [00:57:26] How quickly do they make the decision? And this is very important [00:57:30] because these companies have to decide quickly. You've got engineers, scientists, and commercial people all deciding together. Together they can slow each other down. [00:57:40] That slowness creates burn on a daily basis, which makes the company more fragile.

Phil [00:57:46] We need to figure out how to move forward quickly. Different companies will measure that [00:57:50] organizational velocity in a different way. ~~Um, ~~but it's just things like, ~~you know, ~~we look at speed of decision making on our boards, for example, so that ~~we're, ~~we're all part of the same

Phil [00:57:58] culture to get that done.

Karl [00:57:59] [00:58:00] Amazing. And what do you think the biggest advantage Australia has over Silicon Valley?

Phil [00:58:04] ~~I think, ~~I think for all

Phil [00:58:06] science driven companies, one of the most valuable [00:58:10] things we have is we have a, text. Benefit here called the r and d tax credit. And this is where anyone doing r and d in Australia gets half of that money back every [00:58:20] year as a tax credit. And if I look at all of our companies, you look at the burn down cash chart, it looks like a saw tooth.

Phil [00:58:28] It goes down and then up and then [00:58:30] down and then up and those up motions. So when the r and d tax credit comes in, and if you think of that in terms of runway for a startup, it moves the line out because you get [00:58:40] like an extra year for free of development, which is extremely valuable and not anywhere else in the world.

Phil [00:58:47] And then that combined with, [00:58:50] unfortunately for the rest of the world,~~ uh,~~ which is, has got quite a volatile geopolitical landscape, we are very stable here. We're probably gonna have the same [00:59:00] government for, ~~you know, ~~at least two cycles. And so this is a good place to sort of come and sort of dig into getting things done. And just finally with. ~~Um, ~~biotech that [00:59:10] you and I are just so passionate about, we are the second biggest agricultural lamb mess in the world. We have a lot of feedstock, both primary feedstock that we [00:59:20] grow like sugarcane, and then we have all the waste that comes out the other side of that, which is now the sort of feedstock of the future.

Phil [00:59:27] So Australia is the company to [00:59:30] build a global scale

Phil [00:59:31] biotech industry

Karl [00:59:32] Amazing.

Karl [00:59:34] Well, Phil, I thank you so much for your time. It's always a pleasure to speak with you. I, we could have spoken for another two [00:59:40] hours, um, but I wanna be mindful of your time and so we'll have to just have another,

Karl [00:59:43] conversation.

Phil [00:59:44] ~~always, ~~always would love to do that. Carl, thank you.

Karl [00:59:46] Thank you.