Corporate investment into start-ups and internal innovation exceeds typical venture capital funding. Why? The world is littered with corporate failures from not continually innovating.
Increasingly enterprises are looking at the startup space and entrepreneurial thought-leaders for direction. In fact, trends appear with start-ups three to five years in advance of their mass adoption into enterprises. A good example is at CES where startups are a big part of the program and topics such as mobile/smart devices, IoT, 3D printing, robotics, wearables, and drones; all in which are long embedded into the world’s largest technology event with 170,000 delegates, 7000 press, 950 million media impressions, 3500 exhibitors, and over 2 million square feet.
How do you analyze disruptive innovation to determine a go for investment? What are the qualities, attributes, and processes needed to drive new products and services? These are some of the key questions to enterprise agility and continuing innovation – all essential for success. Insights, best practices, tools, and metrics from investor entrepreneurs provide powerful and extremely useful lessons to enterprises. Bryan Johnson is leading the world, and you will find his ideas and work intriguing. Bryan uniquely is releasing his OS Fund Playbook research paper and spreadsheet for free to encourage crowd development and sharing of analytical metrics to reduce risk when evaluating ground-breaking innovations for investment.
Who is Bryan Johnson?
Bryan is the founder of the OS Fund. He invests in and advises entrepreneurs who are developing quantum-leap discoveries that promise to rewrite the operating systems of life. He currently serves on the boards of Human Longevity, Inc. and Planetary Resources.
Prior to founding the OS Fund, Bryan founded Braintree, an online and mobile payments provider. He and his team worked tirelessly to build an exceptional company – one that they loved, and one that was worthy of frequent love letters from its customers. Under Bryan’s leadership as CEO, Braintree acquired thousands of the most discerning and disruptive companies in the world as customers (including Uber, Airbnb, OpenTable, GitHub and HotelTonight) and created the critical infrastructure that powered the industry-wide shift to mobile commerce. Bryan profitably bootstrapped the company for its first five years of operations and Inc. magazine named Braintree one of the fastest growing companies in America two years in a row. The company raised two rounds of venture capital from top-tier firms and was acquired by eBay in 2013 for 800 million dollars in cash.
I had an extended chat with Bryan where he shares much more.
To listen to the interview you can go to the non-profit ACM Learning Center podcasts or click on this MP3 file link. In the learning center there is added text from the interview.
Here are extracts from the full interview.
Ibaraki:
What prompted you to create the OS fund?
Johnson:
When I sold Braintree, I achieved a goal that I had set out when I was 21 – to be at a point where I had an abundance of resources and freedom of time. I started talking to people and I went to a few of my friends and said who are the most audacious people you know working on the most significant projects facing humanity? I started making investments in these entrepreneurs and an investment thesis started forming that I could invest in these (what I would call these tools of creation – the ability to program biology and genomics, AI), and the OS fund naturally emerged out of that. The idea was that our ability to survive on planet earth, thrive on planet earth depends upon our ability to make scientific breakthroughs, but most of the time these companies pursuing these endeavors don’t have a lot of funding sources. The government is reticent to fund quantum leap type projects, and venture capitalists spend a lot more around the development of the internet and software type companies, but less on the scientific world. And so I wanted to try to fill the gap of bringing funding to companies who are pursuing real hard endeavours that didn’t have sufficient funding from other sources.
Ibaraki:
Did you make investments in the planetary resources area and all of the areas you just talked about?
Johnson:
I have made investments in biology and genomics and artificial intelligence, space tools, food and a bunch of other companies in those areas.
Ibaraki:
Can you describe the concept behind your investment playbook?
Johnson:
I was in part trying to answer the question I was facing myself: how do I as a non-scientist make good investments in science-based companies? It’s just too complex of an endeavour for somebody to bring you a complicated scientific company, for you to just keep all the work in memory, and try to digest all that information to make a good decision. Our team included a couple of PhD scientists and engineers, and we set out to create a decision-making model analysis that would allow us to properly assess scientific risk in a structured way using decision analysis so we could make good decisions on our own investments. We wondered if we could build up this model internally, and make it useful for ourselves and how we make investments; what if we open source it to the broader world and make a contribution to other people’s investment decisions, then we could potentially help bring more capital in to fund scientific endeavours. So we took all of our internal tools and experience and we shared it with the world and said please help us improve upon this, iterate upon this.
Ibaraki:
Can you talk more about the value of the playbook, who the audience segments that benefit are, and how do they benefit specifically?
Johnson:
In our case we use synthetic biology as the test case for the paper. If you take any firm who wanted to make an investment in the field of biology, then this playbook would help them structure their due diligence and decision-making process around whether or not an investment made sense to them. Whereas before they may have casually gathered information, had interviews with the founders, collected information and gone with the ‘gut feeling’, this model gives a much more structured approach so that the likelihood of a good decision is far higher than you would get keeping the information in your working memory.
Ibaraki:
You have a model with synthetic biology. What is this synthetic biology? What are some of the top insights you can share from that domain?
Johnson:
I think it’s one of the most promising areas of technology in the world right now and the idea behind it is that we figured out how to organize zeros and ones to program computer software, so our software today can perform functions like processing a credit card transaction or run an autopilot system on an airplane. We now have the same ability to program biology that we had to program computer software, which means that the potential of doing that is limitless as we climb the complexity curve and get better. The world runs on biology and if that basic material is programmable what we can do is limitless as our tools mature.
Ibaraki:
A significant segment in our audience is executives in enterprises. How can they utilize your model?
Johnson:
We are basically asking how to acquire information, how to process that information and then how to make a decision with that information. I think that anybody who is trying to make an investment-based decision in any field could learn about our structural elements of how we compiled it and whether they agree with it or whether they utilize it is a different question, but I think even just sampling and understanding how we structured our thought process on the data acquisition, the data analysis and decision-making process would be enlightening to their own process.
Ibaraki:
Where do you see the OS fund in five years?
Johnson:
It’s currently a question of exploration. We are contemplating a number of potential pathways to the fund. I’m very happy with the investments we’ve made. The companies that we’ve funded are doing well, not only financially but I believe they are making positive contributions to the world consistent with what the goal was. The goal was to benefit the lives of billions of people for generations to come and the trajectories of these companies I think have the potential to do that.
Ibaraki:
You have this crowd sourcing platform you’ve created and you are sharing a lot of the work that you’ve done to try to be a catalyst for more growth in this area to spawn innovation and ultimately to help developing nations around the world. Out there in the audience if there are investors or entrepreneurs what can they do to learn about and to interact with your fund and your platform?
Johnson:
If investors are interested in making decisions in hard science-based companies or are currently doing it today, we would love to hear feedback on our paper and our methodology. It was meant to spark a conversation to bring attention to the fact that the success of our society does indeed depend on scientific breakthroughs; and we do require more funding and it’s going to take a lot of collaboration to bring maturity to these types of investment decisions. So we wanted to make it a community-based approach to avoid an environment where everybody was trying to hoard their internal secrets and make it more of a collaborative approach. The playbook is available for download and then the additional addendum material can be requested. See: http://osfund.co/
Ibaraki:
Describe science and tech trends you are focused on and how they will shape the world and our destiny?
Johnson:
The example that I think is more relatable to people is when a printing press was created and people could assemble letters to create words, to create paragraphs to create books and share those ideas with the world. If somebody would have said, ‘boy this is interesting, what do you think is possible, what do you think would be printed on this printing press technology?’ Who would have guessed the variety, of the millions of books and ideas that have been written and published in the world that have influenced culture, politics, religion, morals and the destiny of us on earth? I think the same question is applicable to the technologies we are developing today with the ability to program biology, genomics, artificial intelligence, virtual reality, and 3D printing. We have the same creative powers to literally do anything we want and once these platforms are broadly made available the kind of innovation we see is too hard to imagine. I think that the technologies that we are building today, the platforms, the tools of creation are going to lead to far greater innovation creativity than we ever could have imagined in the first place.
Ibaraki:
You have this fund, you have this entrepreneurship background and you’ve created this platform to crowdsource to get broad global interest in innovation and entrepreneurship. What qualities do you think make for an entrepreneur? When you are making an investment what are you looking for?
Johnson:
For the entrepreneur I primarily look for future literacy. That is that they have mental models of understanding, the general contours and characteristics of what the future will look like. Not to be able to forecast it with specificity, but the ability to understand the general powers at play, they build their companies, and they decide what to work on based upon their future literacy. Other than that, I just look for the basic characteristics of tenaciousness, resourcefulness and determination that what they are working on they will see through despite the inevitable challenges that will come their way.
Ibaraki:
Do you have any other interests that you’d like to share or some interesting stories that you’ve come across in your work and travels?
Johnson:
One project that we’re working on internally right now is how to positively influence children. I have three children and we talk a lot about what they want to do in life, what they value and contemplate. For example, the powerful tools we’ve created in biology, artificial intelligence, etc. (then look at the maturity curve of all these technologies). My children will be getting into their prime when these technologies reach a relative state of maturity. I want them to understand what they can do with their lives, the power of their ability to create and the kinds of skills they need to acquire in order to do these things. I think if we give children this context, give them the optionality of understanding this, we will be better situated to have a sufficient amount of people working on meaningful endeavours that could positively impact the world.
Ibaraki:
Do you have any closing comments you want to make?
Johnson:
Where Leonardo da Vinci could sketch in his book about a flying aircraft or scuba gear he couldn’t actually create it because he didn’t have the tools. Today we can literally create anything we can imagine and that technical reality changes and challenges the essence of our identity and aspirations of who we are on planet earth and our relationship to the universe. And so I hope as we gain more knowledge about these technologies that we will raise questions for ourselves about our understanding about our own identity and aspirations in the context of our lives.