A pitch meeting with Steve Jurvetson reveals how legendary VC operates
He designed communications chips for HP, worked in marketing for Apple (AAPL) and NeXT, and served at the elite consulting group Bain & Company. Like many VC peers, he jumped from IT into greentech. Jurvetson currently sits on the boards of several hot cleantech startups, including Tesla Motors and Synthetic Genomics, which is why I recently buttonholed him at a conference for a Q&A. Jurvetson suggested I join him for lunch. I didn't realize lunch meant sitting in on an impromptu pitch session from a fledgling company, providing a fascinating, first-hand view of how the mind of one of the world's greatest VCs works in real time.
My first observation is Jurvetson does not walk slowly. After I readily agreed to lunch, he turned and started towards a restaurant at the Cavallo Point resort at a galloping clip, with me and Stuart Evans, the Chairman of Novacem Limited, in tow. Also trotting along with us was Arthur L. Chait, president and CEO of EoPlex, a smart manufacturing company who was acting as an informal advisor to Novacem (which is a DFJ portfolio company).
Jurvetson went through the buffet line in a hurry, snagging an upscale grilled gruyere cheese sandwich and a tomato gazpacho soup, along with a healthy serving of leafy butter lettuce salad. Our foursome sat down on the outside porch with the backdrop of the sparkling San Francisco Bay in the near distance and oil tankers foghorning their passage. But eyeing the roasted asparagus on my plate, Jurvetson returned inside to stock up on what appears to be one of his favorite veggies. I made small talk about how I had used one of Jurvetson's Flickr images on a blog I run about Hawaii (some eagle rays off the Kona Coast). A minute later, he was back and the pitch session started.
Like his gait, Jurvetson's mind moves at lightening speed. I am sure he deals with dozens of pitches every day and has to make snap judgments on what makes sense and what doesn't. Evans began with his basic pitch. Novacem makes a new type of cement that, he claims, will absorb CO2 as it cures. This is something other cement companies are also trying to do. One example is Calera Corporation, a startup funded by cleantech VC heavyweight Vinod Khosla. Novacem, however, has other important differences. Its product, says Evans, is based on magnesium oxide. Unlike Portland cement, the current industry standard, Novacem's manufacturing process requires lower temperatures.
That means less fuel required to heat up cement in the process and minimal CO2 emissions. Because the magnesium oxide compound absorbs CO2 and the production process emits dramatically less greenhouse gases, Novacem could actually be the first carbon-negative construction product. Evans emphasizes that the product could be transparently inserted into the construction supply chain.
"It behaves the same way as Portland cement," says Evans. "You can use the same trucks, the same hardening times, no crew retraining." Cement, of course, is a big deal because some environmentalists estimate that cement produces roughly 8 percent to 10 percent of the world's CO2. (Cement manufacturer trade groups differ on that count, saying it's less than half that amount). If widely adopted, Novacem could have a significant impact on global warming. And, according to Evans, the new product would cost significantly less than Portland cement to produce.
Jurvetson nods his head, listening, and then blurts out some rapid-fire questions. "Do you have a materials patent or a process patent?" This question gets straight to the value proposition of Novacem. A materials patent is more valuable and easier to defend than a process patent. Evans says it's a materials patent and that the company has unique IP that has gone into the design of Novacem's product. Jurvetson nods, pressing on. "Can you actually test cement to see if it's your product or someone else's out in the field? Does it have a unique chemical fingerprint?"
Here again, Jurvetson is checking on the defensibility of the technology. If it is possible to fingerprint Novacem's materials, then that could serve as a significant discouragement of IP theft or even of selling counterfeit carbon-negative cement products. In countries where IP protections are far less effective, having this capability makes enforcement easier and makes foreign governments less likely to turn a blind eye to clear violations of material patents. Evans waffles slightly. "We think we can identify it. The chemistry is unique," he says. Translation? We haven't gotten that far yet but will certainly work on it ASAP.
I try to sound smart and ask about the concentration of magnesium oxide supplies. My intent is to find out whether supplies are highly concentrated or dispersed, the latter being a better scenario for Novacem if this is the key ingredient in its alternative cement. I don't know whether I succeeded or not, but Evans answered directly. "It's very spread out. We are talking already to Rio Tinto, also." Rio Tinto PLC (RIO) is one of the giants of the materials world. The unspoken implication is that Rio might actually be a potential acquirer down the road.
Jurvetson asks about uses and whether Novacem actually has the required certifications to allow contractors to use the cement. Evans replies they don't have certifications yet, but in their own tests, Novacem holds up fine for lower-grade uses of cement. The question is a bit premature in one sense -- Novacem does not even have a pilot production facility, and that is exactly what Evans is hoping Jurvetson can help with.
Novacem is looking for an $8- to $10-million "A" round of financing that would let the company build a pilot plant on the outskirts of London and start making enough magnesium-based cement to test the product in more real-world settings. Evans also admits they have done no testing of performance with iron rebar and that Novacem can mix into standard cement but won't make it any stronger.
The conversation moves towards how Novacem might market itself into the cement world. The industry is conservative, with a product that has barely changed in a century. Many existing cement companies already have their own internal R&D departments and might be reluctant to go outside for help. Evans ticks off the names of the larger cement players he has contacted, including Mexican cement logistic innovator Cemex SAB DE (CX) and global cement giant Holcim. He handicaps which ones might be good partners and why.
But he seems even more interested in a partnership with someone like German chemical and industrial materials giant BASF SE (BASFY). "Then you are working with an established player who has good ties in industry but isn't directly cannibalizing their own product," explains Evans. Jurvetson agrees that is a good idea and suggests that the large project engineering firms, such as Bechtel Group and CH2M Hill, would be good partners. "We already got a call from Heathrow Airport," says Evans. "They were interested in using our product in the construction of their third runaway. We couldn't give them anything, of course. We have production facility. But we think we could be selling this stuff now."
The four of us all agree that eco-friendly products can already demand a premium due to public willingness to pay marginally more for products perceived to be better for the environment. I had actually seen Samsung present some market research showing that consumers were in fact weighing green properties as a key part of purchasing decision. "What sorts of uses could your product work for right now, without permitting?," Jurvetson asks.
At this point, a guy sitting next to us butts into the conversation and asks Jurvetson some questions about photovoltaic companies and his opinions. Jurvetson is polite but very firm, answering the questions then redirecting to Evans and Novacem. "This is really interesting. I'd definitely like to meet with you again this trip. Could you contact me?" Jurvetson asks Evans. Good outcome for Evans and Novacem.
All of this transpired roughly within 20 minutes, including some pleasantries and chit-chat that I left out. The technical discussion was actually much deeper but the transcription would have run over 5,000 words. The point being, the conversations at this level get very dense very quickly. Jurvetson was gracious but very direct and very efficient.
If any entrepreneurs out there can sit in on a pitch session with a VC like him, even in an unrelated field (or perhaps necessarily), I'd highly recommend it. Oh, one last thing. He finished off his meal with two cookies. Even superstar VCs with steel-trap minds can't resist white-and-black dark chocolate chip cookies.