Why does Celesta focus on deep tech?

The founders in our firm come from deep tech backgrounds and our thesis seven or eight years ago when we founded Celesta was that the deep tech space had been neglected for too long. Over the past 10, 15, maybe as much as 20 years, a lot of the VC world has been focused more on social media, commercial internet stuff, SaaS, and many of those types of applications, while the deep tech space seemed to have been neglected. We felt that there was an opportunity to focus bring our expertise, as well as financial capital, into the deep tech space because it was clear to us that, when you looked at all the trends and applications that were being driven in the technology world, that the existing core technologies were not adequate to support those the growth of those trends. That included the need to move, analyze, and manage the exponential growth in data; the electrification of the vehicle; autonomous driving; the advances needed in biotech; and the ubiquitization of artificial intelligence and machine learning. We felt that the core infrastructure, the semiconductors and other systems required to help enable those and drive them, did not exist or were not adequate. This is still true today.

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What do you enjoy about VC investing? What really motivates you to do this?

At my core, I'm a gadget guy, I'm a technology guy, and I'm motivated by working with entrepreneurs and managers to build great businesses. A part of building great businesses is developing and commercializing a differentiated product. Evaluating new deals and seeing what people are working on and seeing the potential for what the future could look like, that gets me really excited. When I work with startups, and I see what they're doing and I can get a good picture of how they can impact the future, that is extremely exciting.

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What do you believe differentiates Celesta from other VC investors?

We believe that we bring a strong combination of both intellectual capital and financial capital to our portfolio. In the areas in which we are investing, intellectual capital is extremely important and, we believe, in many cases, actually more valuable than the financial capital. There are a number of factors that help us to ensure that we can bring that value: number one, our firm is structured in such a way that all of us are compensated based on the performance of the fund, not based on individual investments that we may have done. When we invest in a company, that company gets the full might of our firm available to them, to help them with whatever problems they have.

The other thing is, if you look at our backgrounds, we have a background of building businesses. We are a relatively small firm, but the partnership of our firm has been involved in starting over 40 successful businesses; these are both companies as well as business units inside of a bigger company. So, we have a history of starting and building businesses all over the globe. The partners in our firm, collectively, have hundreds of patented inventions, so we know what it takes to develop intellectual property and to protect competitive advantages that you've developed. So, I would argue that, even though on paper everybody says this, if you dig deeper, you will find that the level of intellectual capital and experience that we bring to the areas in which we are investing are second to none.

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How do you think about evaluating the potential of an investment?

What we look for in early investments is the credibility of the business plan, and the credibility of the team to execute the technical strategy. You have to look at the typical risks that you look at in technology investing, which is technology risk, market adoption risk, and execution risk. The pieces you have to diligence really, really well at the beginning, obviously, is the technology risk and the product market fit. Then you look at the management team and the confidence you have in the management team to be able to deliver, so its technology and the competitive advantage relative to the competition is realized.

Oftentimes, in the space where we're investing, people are developing products they believe will not only be better than what exists today, but significantly better. If you're not two, three, or four years ahead of the incumbent, it may not necessarily be a good bet to take, so you have to be significantly ahead of the incumbent in terms of the performance and capabilities. And the team must be capable of executing to that timeline in order to maintain their advantage.