Episode 171: Dominic Falcão, Deep Science Ventures
Today's guest is Dominic Falcão, Founding Director of Deep Science Ventures.
Deep Science Ventures is a venture studio and a fund that pioneers a new model for synthesizing knowledge, talent, and capital into optimal outcome-centric scientific ventures. DSV focuses on building high-growth, high-impact companies in "tough" sectors from energy and agriculture to pharmaceuticals and computing.
With a decade's knowledge and experience in company building, Dom serves as Founding Director of Deep Science Ventures, where he focuses on energy and the net-zero transition. He co-founded Deep Science Ventures in 2016 at the age of 25. Before DSV, Dom led Imperial College London's science startup program. He worked with over 200 student companies and supported a fraction of these to raise over £25m in funding within three years. He grew the community 375% to 3000 scientists in 1 year. In 2021, Dom was named one of Forbes Finance Under 30.
I was looking forward to sitting down with Dom because Deep Science Ventures' approach to company building is unique. He walks me through that approach and their go-to-market strategy. Dom explains his climate journey and what led him to found DSV. We also discuss why the current path from academic research to commercialization is difficult and compare DSV with a traditional fund. Dom and I's conversation is a must-listen.
Enjoy the show!
You can find me on twitter @jjacobs22 or @mcjpod and email at info@mcjcollective.com, where I encourage you to share your feedback on episodes and suggestions for future topics or guests.
Episode recorded July 28th, 2021
In Today's episode we cover:
Deep Science Ventures model and an overview of the DSV
DSV's origin story and what led Dominic to found the company
How scientific innovations typically come to market and what makes DSV's strategy one-of-a-kind
How DSV was launched and how the fund got a committed pool of capital
DSV's evolution as a company and what the first three versions have looked like
The seven questions DSV asks at every stage of the company building process
How to make the traditional tech transfer process more effective and efficient
The role DSV takes on after a company is launched
Why the path from academic research to commercialization is a bottleneck, DSV's approach to this problem, and other barriers that exist when building companies
DSV's goals for the next 12 months
Comparing and contrasting DSV to a typical venture fund from timelines to capital intensity to risk assessment
Links to topics discussed in this episode:
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Jason Jacobs: Hey everyone, Jason, here I am. The my climate journey show host. Before we get going, I wanted to take a minute and tell you about the, my climate journey or MCJ as we call it. Membership option membership came to be because there were a bunch of people that were listening to the show. That weren't just looking for education, but there were longing for a peer group as well.
So we set up a slack community for those people. That's now mushroomed into more than 1300 members. There is an application to become a member. It's not an exclusive thing. There's four criteria. We screen for Determination to tackle the problem of climate change ambition to work on the most impactful solution areas, optimism that we can make a dent, and we're not wasting our time for trying and a collaborative spirit beyond that.
The more diversity, the better there's a bunch of great things that have come out of that community. A number of founding teams that have met in there, a number of nonprofits that have been established, a bunch of hiring that's been done. A bunch of companies that have raised capital in there, a bunch of funds that have gotten limited partners or investors for their funds in there, as well as a bunch of events and programming by members and for members and some open source projects that are getting actively worked on that hatched in there as well.
At any rate, if you wanna learn more, you can go to myclimatejourney.co the website and click. to become a member tab at the top. Enjoy. the show. Hello everyone. This is Jason Jacobs, and welcome to my climate journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change and try to figure out how people like you and I can help.
Today's guest is Dominic Falcao, founding director at deep science. Ventures. Deep science ventures is a new paradigm for applied science. They bring together teams of scientists to seize crucial opportunities and redefine industries from climate change to human longevity, to the future of our food system. We need a new process for framing these challenges and mobilizing the right talent. After spending 10 years in university tech transfer, venture studios and corporate innovation, deep science ventures has developed a better framework to scale the impact of science.
I was excited for this one. because Deep tech innovation is so important for tackling climate change. And according to Dom, there are some issues with the Existing process of commercializing this technology out of the labs and the deep science ventures approach seems different where they take a first principles approach focused on the problems that need to be solved in ingredients that the solution needs to encapsulate. And then they do a search far and wide to find the right technology in the labs, assemble teams to take them out of the lab and help them through the process of commercialization. We have a great discussion in this episode about the deep science ventures process, the origin story of the organization, what makes that process different? Some of the gaps and where the existing processes. miss the Mark. Some of the projects that deep science ventures is most excited about their progress to date and where they're going next.
Dom, welcome to the show.
Dominic Falcao: Hey Jason, thank you for having me.
Jason Jacobs: Thanks for coming. I'm psyched to dig in here. When you told me a bit about the model of deep science ventures, it sounded different than anything I'd heard of before and in an area that's just so important. So yeah, it's a real honor to have. you.
Dominic Falcao: I mean, I've been a loyal listener to the, my climate journey podcast for a long time.
Not since episode one, but since under 20. And so it's kind of a personal dream to be here talking to you.
Jason Jacobs: Nice. Well, Yeah. That's more than 200 episodes later. So that's a lot of shows. [
Dominic Falcao: laughs]
Jason Jacobs: Well, jump in. what deep science ventures.
Dominic Falcao: So We build companies, a lot of people say they build companies. We. are outcomes focused and means agnostics. So what that means for us is we work backwards from desired outcomes to form a team, to form intellectual property and technology and products and business model from scratch. Based on what has failed and what succeeded in the past. So instead of building things from university-based intellectual property or building up teams, based on the idea of an of an individual, we're focused really on these kind of overarching goals, and we're focused on the areas such as pharmaceuticals, agriculture, energy, and computing, and specific outcomes inside of those.
So my work is predominantly focused on climate. And inside of that, the net zero transition. And so we have a number of intermediate outcomes inside of that, that we're focused on. And then we build companies. So as to address,
Jason Jacobs: and what I thought was interesting when we were chatting before recording was that you have pretty well-defined outcomes that you're looking to achieve before you set out to find a company to build.
Can you talk a little bit about that process and how it works?
Dominic Falcao: Yeah, absolutely. And to be honest, those outcomes are really well-defined, but they're constantly in flux. So I can tell you what we think are the most important things now, but they constantly change in terms of relative importance and relative confidence.
So inside of this idea of net zero transition for us, there are sort of five key requirements that we're currently working on. One is that we need to remediate historical emissions. Another is that we need to reduce the emissions going into the future. A third is that we need to find a way of eliminating the sunk cost in the oil and gas industry and making it easy for that huge wealth of assets to move across, a fourth is that we need to kind of oil the work so the financial sector, is such that we see huge influxes of capital into the space.
And a fifth is that we need to generate energy and create energy systems that are capable of holding renewable energy successfully. And so under each of those. we then have Further intermediate, more defined outcomes. So inside of remediating historic emissions, for example, we think that an example of an intermediate outcome is ambient temperature, ambient pressure, direct air capture.
So removing carbon dioxide from the atmosphere at ambient temperature and pressure. And we think that in order to achieve a net zero transition over all that's one of the set technologies required going back up to that whole, that whole high level outcome of net zero transition.
Jason Jacobs: And then what's the origin story of deep science ventures.
When and where, and how did it come to be?
Dominic Falcao: Yes. I mean, there's two stories. There's the story about [laughs] how how the company evolved and is the story about how I ended up working in it. And essentially I think there's two sides of the story. One is around frustration and one is around optimism where personally, I was extremely frustrated by politics and social enterprise and the third sector.
And their efforts to combat climate change and their efforts to combat other what appear to be kind of embedded challenges in healthcare For example, and science entrepreneurship seemed to me right from the point at which I started university. to be A way of cutting dilemmas in two. So instead of having to choose between two arms of a policy dilemma, one of which is usually to restrict personal freedom.
The other of which is usually to allow terrible things to happen in the world. Science entrepreneurship seems to represent a kind of middle way where individual freedom can be aligned with positive results in the world. An example would be today. In most cases, your choices between driving a really fun car to drive.
which makes a lot of noise and goes really quickly. And making and polluting or driving a car that's not fun to drive and go slowly. It doesn't go the full distance. You want it to go and can only fit you and your very small companion in it or another trade-off would be, you can restrict freedoms around what food we eat, how much sugar we consume, or you can eat healthier food, which is less enjoyable.
We seem to have these dilemmas all over the place, but science entrepreneurship, each of those cases seems to cut through them. So. You know, if you can build a Tesla and you can make it go 300, 400 miles. In most cases, the dilemma ceases to be a dilemma. If you can create burgers, which are nutritious and don't destroy the environment, then you don't have to restrict whether or not people can buy burgers.
But those sorts of companies that create a compromise between what was otherwise and inevitable trade off don't happen, serendipitously and they're in the wild, because they're quite specific set of parameters. You have to optimize over to get that thing to exist Because it's particularly hard to get products that require scientific innovation into the market and the conditions under which those companies normally form don't set all of core optimization parameters in motion early enough.
So I used to work at Imperial college thinking that tech transfer was the place you could go to achieve these kinds of compromises. And I ran an accelerator program there that was started by a guy called Mark Hammond, and he himself had suffered some of these kinds of compromises working. on Trying to translate epilepsy drugs into the market.
We left Imperial in 2016 to start deep science ventures, essentially thinking that. It would be possible to create an environment where we could intentionally form companies focused on specific outcomes we wanted to achieve. And by peeling back the sorts of biases that tend to occur. Otherwise, if an individual comes up with an idea in whatever setting they're in and find a funder who has a kind of embedded interest in building something, and we've been working on different iterations of the program for the last five years, thinking about how to get this kind of unconstrained efficient allocation of scientific capital, talent, and knowledge to achieve those outcomes.
Jason Jacobs: And you talked about how these scientific breakthroughs becoming companies, that the conditions aren't typically set up in those scenarios for the trade-offs to be optimized that you mentioned, how do those scientific innovations typically come to market? And then h- how do you do things differently at deep science Ventures from that?
Dominic Falcao: So I I used to sit in the tech transfer office for Imperial, which is by all accounts, one of the best science engineering universities in the world. And what generally happens is that, you know, a hundred thousand papers are written a year of those a thousand are deemed by the academic themselves to be commercially valuable.
Those are submitted to the tech transfer office, which then reviews. them Of those you know, 10 or 20 are then patented. And all of those 10 or 20 that are patented four or five are deemed worthy of spinning out because there's no existing licensee for the technology. So there's no corporate that wants to buy the technology straight away. In other words, in at least in most European universities spinning out is a thing you do once you realize you can't. license your technology. And it's only done with less than 1% of the technologies formed at universities. And on the basis of the judgment of the academics, you've performed them. That's the kind of extremely harsh pipeline.
You have to go through to get technology into the world today. What you don't have is a group of people who are thinking about from the beginning, from before, this technology is. devised, What would have to be true of that technology in order for it to successfully scale in the world. That's a whole other set of parameters.
It often would mean, for example, starting not with a technology that's novel or new, but instead starting on the basis of technology that already exists, because that's the thing that makes best use of the existing infrastructure and has the least technical risk because it's surrounded by things in the knowledge landscape that we already know.
And then combining it with things that we also already know a lot about a kind of engineering mindset applied. to science, Taking known components and combining them inside of a set of defined constraints. So as to get commercial products, that can be the basis of commercial companies. It's a different thing. It's a different kind of activity.
And when we started DSV, it wasn't as a criticism of the way that translation of science exists or takes place today. But rather as an acknowledgement of the fact. that We serve different end, which is to create companies, not to license technologies, not to create novel technologies, to be clear, we can't do what we do unless there are people creating knowledge that we can then click together like Lego to form new products
Jason Jacobs: Any examples that are top of mind of, I don't know, the right term cradle the grave, or essentially like your process from identifying.
The problem to go after, through actually bringing a company to market. Can you give us an example, either a real one or a hypothetical, one of how that goes and what steps happen from point a to point Z?
Dominic Falcao: Yeah, I can give you an example. So. Most of our climate centric companies are quite young still. So I can't give you all the way to market.
I think our oldest climate centric company is only a couple of years old, but I'll give you an example in direct air capture by the forecast cost because of the theme that I've been talking about already. So in this case, if you acknowledge that we need to remove carbon dioxide from the atmosphere, um, it's clear that there are certain constraints around that that need to be fulfilled for this to be an effective process.
So there's no point removing carbon from the atmosphere. If you can't verify that it was removed. Moreover, there's no point removing carbon from the atmosphere. If you can't measure how much carbon was removed and there's no point removing it from the atmosphere, if it then is immediately put back into the atmosphere.
So then you have transparency, verifiability, and permanents as constraints around what you create here. That immediately means that we're looking largely at mechanical and chemical processes or biological processes that have some kind of like micro level of verification or where you can measure the outcomes. What we realized too, is that there's no point in doing this. If you have to burn loads of natural gas or produce loads of CO2 in doing it. So if your process emits as much CO2 as it captures, it's pointless. So it has to work with renewables. It's another constraint. And ideally it uses as little renewable as possible because renewable energy is gonna be your major cost input in almost every case.
Now, if you keep following these constraints through, you can see you know, if you wanna use renewable electricity and you wanna use it as little as possible. then Probably the greatest loss of efficiency you're gonna find is in heating or cooling, increasing pressure or reducing pressure because everything's really energy intensive.
And so now we get into the realm of hypothesis and one hypothesis is. that One of the most efficient, possible processes for moving carbon from the atmosphere is to do so at ambient temperature and ambient pressure Other constraints include not having to use rare earth or rare materials and the production of your thing.
Being able to use supply chains that already exist and so on. So now you've got a set of constraints around which you can hypothesize potential combinations. of technologies. One of the first things you'll do. If you're doing this is you'll think about what processes already exist that fulfill some of these criteria.
So one of the processes we looked at was the way biology separates carbon dioxide from the atmosphere. So every time you breathe in you separate carbon dioxide from air, and every time you breathe out, you have a higher concentration of carbon dioxide in the air that you breathe out than the air that you breathed in, Which means we must be concentrating quite efficiently. And we're also doing it at what must be close to ambient temperature and pressure. It turns out from further investigation that there is an enzyme in the human body, which does this extremely efficiently called carbonic. Anhydrase. In fact, it's one of the most efficient enzymes that we've ever discovered in in modern science.
And so we built a company based on an inspired by this biological mechanism, because it fulfilled many of the constraints we identified. at first. We also identified something like 30 other concepts that were all discarded in pursuit of this particular technology companies then formed. We co-invested at inception with collaborative investors 'cause we're a collaborative venture builder.
The company then proved that this technology worked. And in fact proves that it has one of the highest energy efficiencies yet demonstrated in carbon capture and signed commercial agreements with one of the largest off-takers of CO2 in the UK. And one of the largest international off-takers of CO2 in the world inside the first 12 months.
Jason Jacobs: Great And when you were first getting going with deep science ventures, how did you get started? And what did the team look like at the time? Did you have a committed pool of capital? Where did that capital come from? It strikes me that, I mean, this is super ambitious, but there's kind of some chicken and egg problems when you're just getting going.
So it'd be great to understand just. h- How you threaded that needle to get off the ground?
Dominic Falcao: Honestly, I think all entrepreneurship is basically chicken. and egg [inaudible 00:16:38] [laughs]. So we, we left Imperial in 2016. We had no money. We sat in a borrowed office space and we ran through different possible versions of the model. And we came up with a model that is not the model that we use today.
We're actually on kind of version three of deep science ventures in the way that we create companies, And We'd had some success with the accelerator that we run at Imperial. And we had been the two people running it. And purely based on that experience, which was working with something like 200.
Scientific founding teams and getting exits to Google and Facebook and apple on the basis of that, we were then able to go to angel investors and say, give us money to run a pilot of this. Before that we tried to start it as a nonprofit. So I actually went to, we went door to door with foundations and CSR departments and tried to get them to donate capital for us to do this 'cause ultimately I think the impact argument is really strong for this.
But what we found is because of the novel approach. Foundations and charities tended to be a little bit more conservative than angel investors in the end, they're typically passing on somebody else's money. so we've got going as an investment firm. And the truth is that our theory of change came to match that model anyway, because it tends to be the case that if you are successful in achieving some of the outcomes we wanna achieve, you can't really do it without making or acquiring huge resources. Like, if you wanna solve climate change, you have to, at some point be in control of vast resources and you need to grow. And that means you have to create an access at some point, which means you probably need to create profit. And so our theory of change came to match that of our investors, which is that if you solve big problems, you tend to make large amounts of money.
And that's Probably a good model for the world. So we've got going, we ran a trial, we built 13 companies in our first year, which was more than [laughs] what we would build And so Now we've built 32 so we slowed down a lot and we learned an absolute ton over the last four years. Just trying out different ways of tweaking the model to form companies.
Jason Jacobs: So you mentioned you're on version three. What were the first two iterations? And then wherever you landed, at least in this current iteration?
Dominic Falcao: Yeah. So the first thing we did was you know, we started very simple. We just funded 40 scientists and engineers for six months. To come up with concepts and we ran a kind of lean startup methodology.
You know, we use all existing standards, things that we were familiar with. And so, you know, we'd run brainstorms, we'd give them lots of chocolate and fizzy drinks and beer and ideas would come out. We then put them up to test those using standard customer development and go through that process again.
And again, until you have a bunch of companies. That has led to the creation of some really exciting teams that we absolutely love. But what it didn't allow us to do was kind of proactively go after the outcomes that we had decided ahead of time were important. The second thing we tried was to kind of challenge program where we both generated our own challenges and spoke to industry and spoke to government, to source challenges and scraped, just sort of standard open innovation platforms and then recruited a cohort to address the most interesting of those challenges. What we then found is that basically, as soon as people came into contact with these challenges, as intelligent people do, they found more interesting versions of them, which they themselves were not qualified to solve. And so you're left again with a chicken and egg problem, which is if you pick your challenges as your chicken, then I guess the metaphor kind of breaks down at this point, but your egg isn't suitable for your omelet.
I don't know how to [laughs]. So the third iteration is that we run this kind of iterative process where. we At a very high level to find the challenge. Find the first founder who is typically a kind of passionate generalist. Find a second version who after bringing them on, have refined the problem to be more specific. It's typically a technical co-founder. And the third person we bring on is often a kind of academic or commercial advisor chairperson who comes in and joins the founding team. And then we incorporate, so it's more like a spiral than a kind of start and stop.
Jason Jacobs: So when you look to first engage that generalist, where are you in terms of the problem definition that you mentioned at the front end of this discussion?
How far along are you with the problem before you look to bring that person. in?
Dominic Falcao: We usually ask the same seven questions at each stage of, of this process. So at this point we've identified something smaller than an entire sector, but bigger than a specific technology and business model. that We believe could impact the whole sector.
So an example would be today. We believe that it's possible to take hydrocarbons in the subsurface of the earth and refine them in-situ to produce hydrogen and leave carbon dioxide where it is and extract the hydrogen without any pollution. I don't know what technology is best placed to do that. I don't know what the best business model is, but I know that it will directly address one of my requirements for the net zero transition, which is to incentivize oil and gas.
To diversify or divest of their existing oil and gas, petrochemical assets cleanly. At that point, we bring someone on to look at commercial and technical models. The next stage would be for example, identification. that It's actually a combination of microwaves and synthetic biology that you need in order to do that subsurface refinement process.
In which case I go and build a founding team adding in those two additional people. And the final stage is to add in collaborative investors who really understand this market. So they're typically going to be in this case, investors who are focused on energy, transition away from petrochemicals, which fortunately makes up quite a few invest.
Jason Jacobs: What is the internal team look like at deep science Ventures?
Dominic Falcao: Fortunately, I'm the only person in the company who does not have a postgraduate stem degree. We're mostly weirdos in the sense of like people who care about science, but who also are interested in entrepreneurship. So the majority of people in the company have started or run a startup before and the majority have worked in science.
So for example, Laura Fletcher in our pharmaceutical team. Has a PhD in immuno-oncology and created a spin-out and then worked in translation, Edward Perello, who runs our agriculture team. He has a master's in bio science entrepreneurship, and he started a company called desktop genetics. That was then acquired mark who's.
My co-founder has a PhD in artificial intelligence and neuropharmacology, and he worked also in Cleantech fundraising in the city. So it's a real weird mix of kind of, amphibians people who are comfortable with both. worlds. And I've got a humanities degree and my job is to come on podcasts and talk about what we do [laughs].
Jason Jacobs: So how many of them are there and is everybody full time?
Dominic Falcao: We're 14 permanent staff, not everybody is full-time. We have people coming back from maternity and things like that. And we have around 20 full-time contractors, in addition, all of whom were working on more specific problems. So it's constantly fluctuating number of people.
Jason Jacobs: And on a day-to-day basis, what are these people doing?
Dominic Falcao: They're all doing one of three things, really they're trying to understand what the key point of leverage is in a system. So they're doing something we call scaping. They're trying to identify the right people to further increase our understanding of what the right point of leverage is, or they're trying to secure funding in order to allow us to hire the people to further [laughs] that point of leverage.
Jason Jacobs: Funding being equity capital or funding being grants.
Dominic Falcao: We work across the kind of inception points. So we work in both kinds of grant funding and investment funding. So it takes about 12 months to design a company. And for that first period, we typically work in a partnership often with foundations or governments.
Then after that point, we typically work with investors.
Jason Jacobs: And then structurally, if you find something that you do want to take to market, do you have a, a set arrangement or parameters within which you structure things with the founding team or does it vary widely from company to. company?
Dominic Falcao: It's pretty closely group.
So we always invest at a set pre-money valuation. We always give the company roughly the same amount money, which is about a quarter of a million pounds to get going. In some cases, we were also able to provide them with additional resources. So in the case of some of our climate teams, we also work with a partner to get them a 100,000 pound grant at inception.
In the case of some of our pharmaceutical companies, we get them specialists. lab, Access or data, but I guess unlike other programs, we don't take a kind of program fee or service fee or anything like that, which we give them all of the quarter of a million and we try and give them additional resources on top of that.
And then our own costs are covered by partners who care about understanding the area around that company. So because we do sort of high context innovation. As I said with mission zero, for example, we looked at something like 30 other concepts and uncovered lots of different companies in working out what to build.
There are companies who really care about understanding that context because it helps them position their products as well. And that allows us to fund this sort of work with highly aligned partners.
Jason Jacobs: When you look at the traditional. tech Transfer process, which it sounds like and correct me if I'm wrong is the primary feeder of the technical innovation coming out of the lab into being commercialized.
Into companies. What aspects of it do you think will be most important to change in order to make the model more effective? And the things that you think should be changed? Any thoughts on how they should be changed to bring about the most improved result?
Dominic Falcao: So in general, we don't license technology from universities.
And so for us personally, intellectual property, From universities is not the major source of innovation for us in general, we've created intellectual property at DSV. And normally what we're doing is combining things that people know in novel ways, which is a standard way of creating intellectual property in engineering, but less standard in science in terms of how tech transfer should be changed.
I personally think the tech transfer is intrinsically hard. and that It's normally not the process of tech transfer that needs to be changed, but the ecosystem around it that's required to change. So if you look the differential between most successful least successful tech transfer offices, it's normally not the process of resourcing of the tech transfer office.
That makes the difference. But the Environment culture and resourcing around it. So the difference between MIT and Imperial is not the quality of the research or the quality of the tech transfer office, but rather the quality of the embedded ecosystem around MIT, the set of entrepreneurs, VCs, the specialists that are able to assess and appraise the value of intellectual property generated at MIT.
Whereas Imperial has a less well developed ecosystem because it's in Europe and Europe has less well-developed ecosystems more generally. than the US. So I think a lot of the discussion around incentivization in universities and resourcing of tech transfer offices is a red herring. And we should instead focus on increasing specialization of our investment ecosystems around universities so that they can do what the ecosystems around Silicon valley universities and and Boston universities can do.
Jason Jacobs: And in the deep science ventures model is the bulk of the work that you do. Upfront to get the company into a phase where there's a team assigned to it, that's dedicated, or do you stay actively involved through the subsequent stages as well? And if so, in what capacity.
Dominic Falcao: Yeah, it does differ a lot in terms of the companies that we produce in general, we see our role as continuing to be about identifying what the key outcomes that we should be aiming at in these different areas are and improving investor understanding of those landscapes.
And we've played that service role to our companies as well. So a company that's formed. will help work with them and their investors to understand on what basis that company should be appraised against, what metrics and what standards so that the investor can share the kind of conviction that we have in that company.
'cause in the end, we're not biased in the sense of having a kind of stable of venture partners or a kind of set of intellectual property that we have to commercialize. We instead tend to take time to work out, you know, on some logical rational basis, what company needs to exist. So that tends to be the supporting mechanism that We provide mostly, but we do everything else as well. So the same tools that we use for building founding teams can be used to help people hire people and the same tools we use for understanding the economics and incentives in a startup, can be at inception, can be used later on as well. And so we're fortunate in that a lot of the infrastructure that we've built for company formation applies and the rest of the company, formation creation and development process as well.
Jason Jacobs: And it sounds like clearly you've identified. one Bottleneck, which is this path from academic research to commercialization. And so you have this different approach that essentially skirts that process and comes at it from a totally different way. If you look at the other steps that these companies go through on their path to wide-scale deployment, are there other bottlenecks?
Outside of the formative stage that you also see that stand out as particularly impactful or said the other way, I guess, as particular barriers. And if so, what are they and how might they be? addressed?
Dominic Falcao: I mean, specifically for climate, I think there's a huge, [laughs], huge array of additional factors. I mean, primarily the fact that we live and work in, in the economy, which doesn't value The same goods that we need to value in order to have an effective transition to a net zero or a healthy pantry system. If the economy that we invested in valued biodiversity properly and valued, clean air properly, then the companies that we formed would have no problem whatsoever, but we have this kind of broader structural issues, I guess, more specifically to the kinds of companies we form. There's also a. Lack of effective pricing mechanisms for technologies, which are not yet at scale. So for the first kilo of green hydrogen, or the first ton of carbon removed, it's gonna cost you more than for the thousandth time. And that pricing exists on a curve. One thing that I'm not working on that I'd love for someone else to be working on would be creating those pricing curves, those market-making mechanisms.
So that there's a really clever way of assigning a price to something which has not yet assigned a price by the market so that governments and forward thinking companies could use, I guess, another structural challenge that we have in specifically investment in deep tech for climate is there is not a really mature stable of entrepreneurs.
From, you know, a decade of successful climate innovation. Many of the people from the first climate wave have left the field entirely. A lot of the investors have been burned. And so we are having to back founders first-time founders. And so I think one of the things that we need to work together to do is to generate conviction around concepts and operating models to take the place of the previous heuristic that would otherwise have been used, which is, has, the founder started a company successfully and sold it before in this field.
which Very very few people have in climate. And so structurally I think I'm really enjoying the fact that it feels like the investment landscape and the investor conversations are more about what is going to work. Is this already working and less about, you know, how long did he work at Facebook for which are welcome, but ideally could be accelerated type trend.
Jason Jacobs: And once these companies do get on the path towards commercialization where they've got that initial capital and they've got the the generalist and they've got the scientific expert and more of a, a full initial team in place. Where are the biggest areas that you find that they need support in those subsequent stages?
Say over the next 12, 24, 36 months,
Dominic Falcao: I do think it's in, in different cases, I mean, Any company that's working in electrochemistry, for example, their primary challenge is finding electric analysts because there aren't very many, [laughs], so like it's, I mean, really climate investment is so new that we haven't got effective systems for solving these problems as they come up.
But other sorts of buckets you find are working with very large incumbents. So it's easy to get good traction at inception, but then as you work through the progression from pilots to scale up. The timelines that corporates work on are often existentially slow for these startups. And so finding ways to tell the kind of leverage, find leverage in those relationships and accelerate them as a problem.
Another that you'll find is a lack of effective benchmarks for investors to assess these companies at later stages. So it's easy enough to compare companies in direct air capture by the forecast cost that which they can capture carbon. But then once they built a working prototype and they've got data.
What's a good benchmark for effective energy requirement at the kilo per day scale. What about at the time, per scale day scale? What's a good price at that point. How do you effectively forecast the decline in the cost parameters that make up to forecast costs and the technical economic analysis? What is best practice in techno economic analysis?
These are things that we work really closely with our companies to help them understand and to help investors think about as well and hiring more generally. Is always a problem, always a challenge
Jason Jacobs: as an entity. What are the biggest goals for deep science ventures over the next 12 months?
Dominic Falcao: It's a fantastic question.
So we, we have a number of partners already, but we wanna increase the size of that stable. So we work with. the Net zero technology center in the UK, which is the UK flagship net zero center for new commercialization technologies. And we work with a couple of corporates, but we wanna broaden the coalition that we're part of, as I said earlier, we're collaborative, which means we co-design.
These companies with partners who know more about these things than we do and have deeper pockets. than we do. So one of our key goals is to find partners for some of the areas that we've been working on on our conviction alone. An example is we've got a climate FinTech team called the planet-positive economy, an extraordinary team of people from Palantir, the world bank, former.
founders, And we're looking for a partner to help us take those areas forward another, is a negative emissions technologies, believe it or not, we've been working on our own in that area. And we're looking for a partner to commit to working with us for a year or so to build a number of high impact companies.
there.
We're also working on a lot of the kind of internal tooling. So I mentioned software for finding people. We're also building software for identifying where in complex systems is the most impactful place to intervene based on current confidence levels and how important that is to the outcomes. that sit Above it in the kind of hierarchy of outcomes.
And so that first demo of that software is now working and is in the hands of some of our team, but I wanna get this into the whole company and into some of our partners as well. So we can construct thesis as collaboratively together and form kinda consensus processes for aligning on what's important.
And what's not what evidence is required. And we're also growing the team a lot. So at the moment I lead the climate team, but ideally it wouldn't be me. We're looking for an associate director to come on and define our thesis and energy and really steer all of activity. So we've got lots of growth ambitions in the next 12 months [laughs].
Jason Jacobs: and from a.
Return expectation standpoint for your fund. How structurally does it align to a typical venture fund in terms of timelines, in terms of capital intensity, in terms of risk, are there any parameters of the way you've set up that are different or is it just a typical fund in terms of return expectations and structure?
Dominic Falcao: I mean, as a refund, I am biased to say that I expect to make a better return than other funds at the same time, [laughs]. the way we. Increase the probability of that is by spending more time than anybody else. I think in the space on due diligence,
Jason Jacobs: Right.
Dominic Falcao: we spent 12 months with at least one person full-time per company, which I think is completely unparalleled.
We also work with a huge number of research institutes and centers across the world. I think there's more than 20, including the leading centers for agriculture and botany and net zero. technologies. Our investment model is that DSV invest that inception, which means we get a pre-market valuation and we get preemption later on as well.
And we sometimes follow on into these companies as well, and we get first rights to do so as a result. So we expect kind of super normal returns from what you'd expect in a normal VC.
We also, I think more capital efficient than most companies working in the deep tax base. If you're one of the big university funds, you're expecting a two million pound or three million pound seed round to get these companies off the ground.
Whereas we're putting in a quarter of a million, I think. we're achieving The same, if not more with that money, because we're not doing fundamental research, we're not recreating the fundamental research that was previously done in the lab in a commercial setting. typically doing something a little bit more like engineering.
So we typically see proof of concept TRL 4 and commercial traction inside that first 12 months, which is kind of unheard of for a spin-out working on a hard tech solution.
Jason Jacobs: Yeah. And then if if you could change one thing outside of the scope of your control or deep science ventures, controls that would most accelerate your progress, what would you change and how would you change it
Dominic Falcao: personally?
I think the thing that is different between climate and many other sectors is that we are not building companies that alone represent an entire supply chain. in climate. If you're producing energy, you're part of an energy supply chain, which you cannot be the whole of, if you're capturing carbon, you're part of a carbon commodity market or carbon offset market, which.
you can not Control the whole of, and so what we really need to do is create constellations of companies that work together to achieve an end that was already achieved by you know, a petrochemical giant, or a series of multinationals collaborating alongside a FMCG supply chain. In other words, we have to do something different from what typical VCs do, which is we've gotta get our companies to work together, to achieve intermediate outcomes.
To achieve the overall and we've gotta recreate brand new supply chains and value chains, independent of the existing, highly operationally efficient, but climate apocalyptic supply chains that exist today. So the one thing I think I would change would be. I would love to think about how we can better coordinate climate venture capital and climate R&D to make sure that there is less replications so that there's better shared information.
'cause I think unlike in other sectors, because we work as part of these complex embedded supply chains, the returns to us collaborating and succeeding together are much greater. There's not so much of a zero sum game as there is in for example, software where one company can take all. In this case. you know, If I capture carbon, I need someone else to verify I've captured it.
I need someone else to monetize that. I need someone else to create a marketplace in which I can sell it.
Jason Jacobs: And any examples out of the, I think you said you've brought 30 something companies to market so far, which examples are you most proud of or much you wanna highlight for listeners? if any?
Dominic Falcao: [laughs] I spent a lot of time talking about mission zero today.
So I should talk about something else. We've got another company called Supercritical, which I think is a really good example of how we work. And they're designing an electrolyzer specifically for decarbonizing hard-to-abate sectors. So they produce green hydrogen on site for sectors that use hydrogen in their processes.
and example, being ammonia production, the advantage is that they have. built an electrolyzer that creates hydrogen that's pressurized that uses waste heat, and that costs less than the steam heating from hydrogen and can be utilized immediately various different scales and can achieve a 100% efficiency. This is, I think, different from what you'd get.
If you were designing an electrolyzer from scratch in an academic environment, because you wouldn't necessarily think about the overall cost optimization of delivered hydrogen, which involves, for example, pressurizing it. Super critical deed And that's why they were able to do things like reduce the cost of compression in an ammonia factory.
I think they're very cool. And currently fundraising in case there are any investors listening that are interested.
Jason Jacobs: And for anyone listening, that's inspired by the DSV model. Who do you wanna hear from and where do you need help?
Dominic Falcao: Yeah. So, I mean, first and foremost, we're hiring. So if you think you have a really clear idea of what companies need to exist in order to achieve a net zero transition, please send us a message.
Also, we're looking to partner. So if you care about climate finance or you care about negative emissions and you're willing to work together from before inception to series aid and get in touch. And we're also got a bunch of other things. Like we're trying to create a PhD program to train PhD students, to start companies in the sciences.
So if you run a university and you think that would be a useful uh, addition to your university, then please reach out and equally, if for some reason you're listening to this podcast and care a lot about. Pharmaceutical cystic fibrosis or cancer. We've got a bunch of companies in those spaces that we have equivalent asks for as well.
same in agriculture. as well.
Jason Jacobs: Great. And Dominic, anything I didn't ask that I should have? Or any parting words for listeners?
Dominic Falcao: No, I just, I think the level of active engagement we see in the My climate journey, slack channel, the sort of resources and community that, that you've built. Jason are extraordinary and anyone's listening.
just You're part of something amazing and fairly unique. It doesn't exist in other sectors that I'm involved in like pharmaceuticals or, or in computing. So it's kind of a unique atmosphere and a unique opportunity to build things. So just keep contributing, keep reading, keep listening. And Jason, thank you.
for everything you're doing.
Jason Jacobs: Oh like wise. awesome discussion. Thanks for coming on and best of luck to you and the whole deep science ventures team.
Dominic Falcao: Likewise, cheers Jason,
Jason Jacobs: Hey everyone. Jason here. Thanks again for joining me on my climate journey. If you'd like to learn more about the journey, you can visit us at myclimatejourney.co no That is .co not com someday. We'll get to .com, but right. now .co. you can also find me on Twitter @jjacobs22, where I would encourage you to share your feedback on the episode or suggestions for future guests. You'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review.
On iTunes. The lawyers made me say that. Thank you. .
