Lab to Market Leadership with Chris Reichhelm

Funding the Semiconductor Future | Kevin Chen

• Deep Tech Leaders • Season 1 • Episode 15

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On this episode of ‘Lab to Market Leadership’, Chris Reichhelm talks with Kevin Chen, Managing Director of Lam Capital, about securing funding and scaling in the semiconductor space. Kevin, with his extensive experience that spans MIT, founding startups, and leading teams at Applied Materials, is now responsible for strategic investments at Lam Capital, the venture arm of Lam Research, a $100 billion semiconductor leader.

In this episode, Kevin shares his advice for entrepreneurs and CEOs looking to fundraise for their semiconductor or materials startups, highlighting the key elements that investors look for in today’s competitive market. He also discusses the critical role of boards and how improving board performance can significantly impact a startup’s success.

Listen now for expert insights on fundraising, board dynamics, and navigating the future of semiconductors. 


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Kevin Chen:

To be successful in the lab to market journey is not just about making sure the technology works. It's about all the other things, raising money, hiring people, managing a board, bringing on advisors, working with difficult customers, getting purchase orders, firing people that may not be a great fit. All of those things are people related. Uh, and uh, yes, it's, it's based on the technology that I'm bringing, but ultimately, um, it's more than just the technology itself.

Chris Reichhelm:

Welcome to the Lab to Market Leadership podcast. Too many advanced science and engineering companies fail to deliver their innovations from the lab to the market. We're on a mission to change that. My name is Chris Reichhelm, and I'm the founder and CEO of Deep Tech Leaders. Each week we speak with some of the world's leading entrepreneurs, investors, corporates, and policy makers. about what it takes to succeed on the lab to market journey. Join us. For those of you in the world of semiconductors, particularly if you're an entrepreneur or a CEO looking to fundraise for your semiconductor or semiconductor materials company, or if you're in that domain, you need to listen to this week's podcast. I am talking to Mr. Deep Tech himself, Kevin Chen. Now, Kevin is the managing director of Lam Capital. Lam Capital is the Corporate Venture Capital Unit for Lam Research. Lam Research being the 100 billion market cap semiconductor materials and manufacturing equipment company. Uh, and, uh, and Kevin looks after their investments. He's responsible for making strategic investments. Young, promising, uh, startup companies within the semiconductor and materials domain. And, uh, I'm super interested to speak to Kevin.'cause not only is he a great investor, uh, he has got the most, uh, well, the most incredible background. And I call him Mr. Deep Tech because this guy, you know, he ticks all the boxes. He's got the PhD from MIT, he's been a founder or co founder of at least a couple of startups within the photonics, hardware, semiconductors, value chains. He's been an executive at Applied Materials. Uh, he's been a CEO, he's actually jumped domain and been a CEO of an Agritech startup as well. And now of course he's an investor. And so I want to understand from Kevin how he manages to take all of this great experience he's gathered and apply that to making better investment decisions on behalf of Lamb Capital. I also want to talk with him about the advice. that he has for entrepreneurs and executives looking to fundraise. Fundraising is pretty tough right now and I'd love to hear Kevin's view on the things that he's looking for when it comes to raising. Um, uh, I'd also like to get his insight into Uh, boards and board performance. If there's one thing I've heard again and again, uh, it's the, it's the mixed quality of boards of directors and their general performance. How can we get boards to perform better? Kevin has sat as the CEO and founder of these. He's been a non executive on these, which he is today. He's an investor on a number of boards. What is his view on improving board performance? This is going to be a really interesting conversation. Let's see where it goes. I hope you enjoy it. Let's get into it. Kevin Chen, thank you so much for joining me.

Kevin Chen:

Thanks, Chris. Great to be here.

Chris Reichhelm:

You are Mr. Deep Tech. If anyone looks at your profile and they see the PhD from MIT, they see the early background in semiconductors with groups like Intel, uh, the background to startups, the photonic space and the advanced materials space, the experience with applied materials, the, and then, and then the change over to AgChem as well, to AgTech, and now with Lam Capital, Lam Research, uh, back with Materials and Semiconductors, so, you know, the journey that you've been on from startup to corporate to investor, uh, all within these deep tech sectors is quite, is quite unique for an individual. Do you find you naturally gravitate towards one area more than the others?

Kevin Chen:

I think the underlying. Theme for me has been being around new technologies. That's probably the most basic, uh, common denominator over, over all of those. And then a curiosity, uh, to, to learn about different technical areas. Again, looking back, I, I realize now that really, I think my, my, uh, career DNA or my, my interest in technology really started at a very young age. early point where I just like, um, understanding different aspects of, of technology. Um, Is that true today?

Chris Reichhelm:

Is that still the hook?

Kevin Chen:

That is still the hook today. Yes. Yes. And so, so if I fast forward to what I'm doing now, which is that I lead the, uh, CVC, Corporate Venture Capital Group of Lam Research, a very large semiconductor equipment company, We have the wonderful opportunity to talk to deep tech entrepreneurs across the spectrum. And it's a, for me personally, it's a, it's a wonderful match of my interest in various technologies and Now, some years later, having all the operational and entrepreneurial background that I've gained through my career, being able to offer that to our entrepreneurs as well. So, it's, it's, it's the, it's the ultimate combination of personal interest and also professional experience.

Chris Reichhelm:

I get that.

Kevin Chen:

It's wonderful.

Chris Reichhelm:

Fantastic. Tell us a little bit about Lam Research's focus from a corporate venture perspective.

Kevin Chen:

Yes, so, um, Lam, Lam Research as a company is a, you know, we provide manufacturing solutions for chipmakers. We provide the machines and the processes that, uh, chipmakers need. need in order to produce the devices that we all use today. So from a, from a CVC perspective, we are looking for companies that can further the roadmap of the chip industry. And can enhance some of the things that we're looking to do within, uh, Lam, Lam research. So, some of the areas we look at include, uh, uh, you know, photonics, which I alluded to earlier. Uh, there's some, um, now a trend to integrating optical functions with, uh, semiconducting or, or, uh, electrical functions. We're looking at, of course, the chip industry itself, whether it be new memory technologies or new, uh, artificial intelligence, uh, computational, uh, technologies. And then, um, you know, things along the, the semiconductor value chain, starting from the, uh, incoming materials, uh, the substrates through to the manufacturing of chips through the, uh, backend, uh, processing of chips, the packaging of it, of them into Multi chip packages, for example, and then the use cases of new chips. Um, so we, we cover that whole spectrum and I would say we also look at adjacent areas, which include robotics. There's a lot of, uh, automation that's happening, not only in the chip industry, but in adjacent industries. We look at, uh, uh, uh, automation technologies. We're looking at some software technologies as well as other related manufacturing technologies, including additive manufacturing or 3D printing. So that, that's, uh, that's, it's a wide spectrum. It's a, it's quite a few different topical areas. And, again, that's what makes, that's what makes the role so interesting, uh, to be able to explore, uh, all these, all these areas.

Chris Reichhelm:

Well, it's a big diverse area, and it sounds like you're extending the reach, the core, you know, the reach from the core activity into some of these areas that are further downstream. But that probably offer a lot of value as well. The, um, how big is your team?

Kevin Chen:

The team is fairly small. The direct team is, uh, about four people. And by the way, we are recruiting right now. We're about to bring in two more. So we'll get to about six or so. Uh, but we work with an extended team. So included in that, we don't include uh, supporting Aspects such as legal and finance, that that's, that's with the, the, the parent company. Um, but the core team is fairly small. And, and I'll say one thing about the team itself. Um, we've been privileged to be able to build a team that consists of former entrepreneurs and um, um, folks with deep technical backgrounds. And so I think from a value add perspective, uh, having been an entrepreneur myself in the ag, ag tech industry, as you, as you alluded to in the opening. Um, one of the things that I really appreciate about investors and, and future board members is if they've kind of walked through my shoes, have, have they done this before? Do they understand what we as entrepreneurs are going through? And so when we bring on folks into the team, we definitely look for folks who have been steeped in the entrepreneurial world, either as a former investor or preferably also as a former entrepreneur. So, so that's what our team consists of

Chris Reichhelm:

That, that previous operational experience, especially for investors, is so valuable. Um, it sounds obvious. Uh, we still, we still don't see it quite enough, I think, in the UK and Europe. In the US, it's far more common, but the value it brings for young entrepreneurs is, is immense, I think. The, you know, the, your experience has, you know, Included startups and other corporates as well. The, which is really interesting when you're trying to take a startup from lab to market, because you're going to be engaging obviously in a, in a, in startup activity, but you're going to be engaging with industrial partners and corporates along that journey. And so are you able to, that must make, you know, that must give you some incredibly valuable perspectives. When you're advising entrepreneurs along that journey?

Kevin Chen:

Mm hmm. Yes. Um, I think, uh, that definitely, for sure. I think for a, for an entrepreneur trying to validate their idea, and in this case, a deep tech related idea. I think there's a couple aspects that, that they need to go through. And one of the big challenges is getting validation from the market that what I'm working on is really what the market needs. Let alone, let's set aside, can we actually achieve this technically? Because it's a, it's a deep tech problem. And so I think there's no better place to get that validation than to work with companies who are in the space. And that, that's, you know, it's, it's, it's, it's obvious. But I think it's also challenging, um, having worked at companies like Applied Materials and AMD in the past, large companies like that, um, sometimes it's, it's tricky to get, you know, the attention of the right people within a large company to, uh, divert their attention from what they're currently working on to talking to a very small company that may not have a product yet. And so I think there's definitely an art to, as an entrepreneur, to get the attention of a large company. or a potential customer. It could be a small company, but an important, special customer. Get their attention, and then walk them through a process of understanding what I offer, and also, more importantly, I think, getting feedback as to what the pain point is that the company is facing, or your potential customer is facing. That whole process is critical for, uh, entrepreneurs, um, and so, yes, for sure, I think, first, having, having gone through that myself and our team, as I mentioned, uh, uh, you know, uh, former entrepreneurs, having gone through that themselves, um, for Hopefully, we can bring, um, some knowledge to the portfolio companies that, that we work with in that respect.

Chris Reichhelm:

When you've seen it done well, or when you've heard about it being done well, what's been the hook that manages to capture the attention of the corporate? And who's, who's leading this exercise?

Kevin Chen:

Great questions. Well, when done well Um, there is kind of this resonance that, that happens. I think as an entrepreneur, we're, we're trying out different messages, trying out different lines of attack, different ways to market ourselves, our company, our products. But when it really clicks, you can feel it. And so, um, I'll give an example. We have a interesting water technology company that we have recently invested in, in the US, which, uh, helps companies like us and other companies deal with harsh wastewater treatment. And this is a new area for me. I didn't know much about it before, uh, studying this area. But one of the challenges that large companies have is how do you handle toxic wastewater? And oftentimes, it's something that is outsourced to a third party. And we've learned that in some cases, the wastewater is treated on site. Uh, in other cases, it's Loaded into trucks by the third party and then trucked off site for treatment at the third party's location. Whether it's the first or the second, it's a huge cost, and in particular for the second, uh, uh, route, which is that the wastewater is removed by the third party and trucked off site, there's tremendous, uh, emissions that are created from the trucking process itself. And so, the problem statement for that particular problem is not necessarily that we need to treat the wastewater. It's that, in some cases, we need to reduce emissions. We need to reduce secondary emissions, not caused by our company, but they'd be brought on by the suppliers that we use, in this case, the trucking company. So, if that is the actual problem, then how do we reduce emissions? Get rid of that problem. And so, what this technology from this water company is, is the ability to treat harsh wastewater on site with a new ceramic based membrane that doesn't dissolve in harsh wastewater and it enables companies like us to do on site treatment. Which then removes that need for trucking and thereby removes the emissions problem and additionally gives us a benefit in that we can show that in our sustainability objectives. And so, the actual resonance there was discovering what the actual core problem was among companies like us and other industrial companies and then being able to target that problem with the solution. Now, the solution itself is obviously very elegant. It uses an existing known ceramic material that's been around for decades. We find it in desiccants in food packages, so it's very safe and it's well known. But the approach is how do you take that ceramic and make it into a usable membrane for this particular application? And that's where the innovation has come in. And, um, I think that's one thing and then the other thing that this entrepreneur was able to do was tell the story very effectively to companies such as us in terms of what problem am I actually helping you to solve. And, um, uh, and, um, really getting to the root issue. Uh, so, uh, to your, to the second point, sorry, I was just going to hit on the second part of your question, which was, you know, who, who does this and who's responsible for it? Um, and, and I think I'm a strong believer that the entrepreneur themselves, the founder or the CEO should be out there speaking with customers and being the first salesperson for the company before they bring in, you a dedicated salesperson at the right time. So in that, in this particular example, the salesperson has been and still is the founder and CEO. And I think that's hugely important because you gather direct feedback from your customers, and then that can be integrated into the company's plans and adjustments can be made. And then on the customer side, There is a customer discovery process as well. Is it the water management people? Or is it the sustainability people that we need to be talking to? And sometimes it's both. And so, in this particular example, this entrepreneur did a wonderful job describing what the problem was, And then finding the right stakeholders within our company to, to get this, uh, technology, uh, installed.

Chris Reichhelm:

And do you know if that entrepreneur had a, had a domain background? Sorry, had a domain relevant background? So did this person In this particular case And the water industry?

Kevin Chen:

This person, uh, uh, has commercialized the technology he worked on during his PhD and spun it out of that work to form this company. Um, and I think he has, he gained knowledge in the water industry just by, uh, you know, diligent study of the industry, speaking with companies and talking to, uh, advisors, attending conferences and just absorbing, absorbing it by osmosis. Uh, sorry for the pun, but, but essentially that's what he did. Um, and so at, uh, so I think that's, that's a prime example of, of how a, a, a lab based technology has made it into the market and is making a transition from being a research project into being a commercial entity.

Chris Reichhelm:

What are the mistakes that you, that you observe now as an investor? Being able to advise, uh, and work with a number of different companies, no doubt you see presentations from even more companies. that you're evaluating, what are some of the things that you see again and again that, that, that aren't right or that aren't as they should be if, uh, if the entrepreneurs, uh, or executives have a hope of, of, uh, of raising?

Kevin Chen:

Well, there's a few things, but, um, so I think depending on the stage of company that comes in, I see different aspects. And I do have to preface this by saying, there are diamonds in the rough. And so, even if something doesn't look quite right, it could be a, end up being a great company with a little bit of coaching and maybe some different personnel and things like that. But if I were to just take things at face value coming in, what I noticed a lot in the world that we live in, the deep tech world, is a very strong focus on the technology. A love of where this technology came from, what I did to make it work. Which is wonderful, but as we were talking about earlier, it's only one part of the equation. The other part is, do customers really want this or is it solving a pain point? So I see graduate students, let's say, you know, who are, who want to start a company, talk about the technology and get a little too deep into it. I even see professional folks who maybe have not been a CEO before, but this is their first time. They spend too much time on the technology. So I think for an effective pitch Yes, the technology is important. Get to the punchline, what is this technology? Why is it differentiated? How do we know that it works? And then move on to other aspects of the company itself, not the technology, but the company. Customers and team and financials and business plans, marketing, uh, so on and so forth. So that's one thing that I, that I see. Another thing is that pitches can be too long, uh, and it's kind of related to the first point. If, if the time is not managed properly, these entrepreneurs are coming into a meeting expecting to give a 30 to 45 minute presentation, sticking to the script. And I think there may be a time and place for that, but certainly not in the initial pitch. I would recommend, and we recommend to our, uh, entrepreneurs that we work with, keep the pitch short. Keep it 15 minutes or so. Be ready for a 15 minute pitch. And again, this may be obvious. Uh, folks may have heard this advice before, but I think it's critical because as an investor now, I find that I just wish I had more time. I wish I could take the time to really listen for 45 minutes. But unfortunately, uh, we, we, you know, we have a small team. We just don't have that time. And so I think there are some very effective ways to pitch an investor where, you know, the entrepreneur is ready for a 15 minute pitch and they welcome getting interrupted with questions. I think those are the best kinds of pitches. So, um, in fact, uh, It's not going to be perfectly scripted. They're not going to be able to do it in the way that they've rehearsed, again and again. You know, you know, they'll have their pitch, but you're peppering them with questions. Then you're going to see what they're like on the fly, what they really know.

Chris Reichhelm:

You can kind of, you know, push around them, see, you know, you know, just how deep their knowledge goes.

Kevin Chen:

There's that. Exactly. There's that. There's that ability to see them as a real person rather than somebody coming in with a script. There's a presenter. There's also It's also good feedback. It's from the, from the entrepreneur's point of view, it's a way to gauge if this investor is engaged. If they're asking questions, they are engaged. Hopefully they're good questions. Um, but any kind of question can, can, you know, I think within 15 minutes is, is likely a good one. Now that doesn't mean We purposely leave out information in order to elicit questions. I think for the entrepreneur, it's about covering each of the key points in enough depth. Key points being, what is the technology? Has it been proven? Do we have examples? What is my market? And so on and so forth. Touch on each of those to sufficient depth and allow the investor to come in with their specific questions that they're curious about. So, I think it's a two way street for the investor, it's, it's an efficient. opportunity to learn about a company. For the entrepreneur, it's a great opportunity to see if this is a good fit as a potential investor in the future. Are they interested? Are they knowledgeable? So that's what I would advise. And, um, I see a lot of times that entrepreneurs will come in with a presentation and they insist on following the slide, you know, sequence. And they, if a question comes in, they say, well, I'll get to that in a few slides. And then they go back to their rehearsed order of, of, of, of, of storytelling. I think that can be a missed opportunity. Um, one of the things that I was coached to do as an entrepreneur, And as an executive in a large company is when there's a question, answer it within the first three seconds, give an answer, literally three seconds after the question, answer it. So the answer could be yes or no. No, or maybe, but let me tell you about this. So, there has to be an answer. It can't be a long story with an answer at the end of it one minute later. Uh, so, that's something that we also share with our entrepreneurs. You know, answer the question when it's asked. You can always go into more detail later, but answer it. So, um, I think entrepreneurs who, who feel like they have to stick to their script lose an opportunity to engage that investor.

Chris Reichhelm:

Yeah.

Kevin Chen:

So that's, that's another thing that I've, that I've noticed. So little things like that, that you learn along the way, uh, that could be effective.

Chris Reichhelm:

What's the filter for, for Lam Capital? What, you know, what do, where do companies need to be in terms of their technology development? Do you have a particular, look, we want to see technologies that are at least a TRL5. We want to see this kind of team in place. We want to have an industrial partner already signed up or nearly signed up to sponsor the company's development. And we, you know, what does that filter look like for you guys? If there is one.

Kevin Chen:

We, right there, there is a, I would say there's an implicit filter that we apply later in the process. I say implicit because, um, we want to leave. flexibility to find that diamond in the rough. I don't want to put a filter on too early. Um, but as a CVC, we have flexibility to invest in two graduate students working on an idea all the way up to the company has a hundred plus people and they already have a product. So we have that flexibility. So, um, that's also one of the reasons why we don't apply a filter, uh, too tight of a filter up front. I would say in general, we do have some filters though. One is. the domain itself. And as a very strategically oriented investor, we do look for companies in our domain or adjacent to our domain as we were talking about earlier. So, if a company comes in that is in agriculture, for example, because I mentioned that because I spent some time there. Unfortunately, we are not going to be a great investor for them. That'll be a very quick filter for us. So, I think that's, that's one. As we get down the process of through, you know, through the first meeting, maybe the second or third meeting, we start applying other filters to the company. And, um, one of the things that we do like to do as we evaluate companies is see if Lam Research as a company can help the startup and vice versa. Are there technologies that the startup is working on that can help us in return? And so that, those kinds of discussions take a little bit longer. We bring in engineers, we bring in business people from our teams. We bring in IP folks who look at the, uh, uh, the, the patents, for example. And that becomes a little bit more of a deeper process of discovering if there is a strategic partnership that can, um, augment the relationship beyond just the, the financial aspect, the, the, the funding into the, into the equity route. I would say some of the things that have given us pause are entrepreneurs who are difficult to work with. So, folks who believe that, you know, so strongly in their approach that there's only their way of doing it. Every company and I think that ends up being a telltale sign of somebody who may not be very successful in business development. If you're coming in to an engagement with a prescribed way of doing things. It's very hard to work with multiple customers that may have very different needs. So, if we see that, if we see that inflexibility, uh, or the inability to Um, think about, uh, creative solutions, I think that's, that's a sign that things could be very difficult, not only for our relationship, but for the company itself, their success in the future. So, we start looking for soft signals like that. Um, we also look for, you know, uh, so a positive signal on the other hand would A company that is coming to us saying, you know, that has proved that their technology, or not proved, but maybe shown that their technology has been important to others in our same industry. So, you know, one of the tricks that entrepreneurs can think of is, If there are three or four companies in a certain domain, um, you know, work them in parallel, right? Get, get, get all of them talking in parallel and then you can kind of get a little bit of a competitive dynamic working among competitors in, in your, in your targeted sector and that can help the entrepreneur out. So, as a, as a, as an, as a investor sitting on the other side of the table, if I see that there's traction going on in our industry, that will, will be a positive filter for us. We want to know more. We want to figure out how we can work with this company.

Chris Reichhelm:

So there's a, there's a few different things. There's traction on the part of the company or there's traction in the area they're in.

Kevin Chen:

Correct. Yeah. Yeah. If there's momentum, if it essentially tells us that, that this technology, uh, you know, works, you know, other, other folks that we respect are, are interested in, and maybe even signing up to, to use this technology, it shows that it works and it shows that it's relevant as well.

Chris Reichhelm:

Let me ask you a different kind of question, Kevin, if I may, in your experience as an entrepreneur, as a corporate executive, as an investor, are there, are there any patterns you've learned to pick out or any observations you have about the way lab to market companies start, about their ideal starting point and their ideal starting team, um, that, that, more people should know about or like little belief systems or little patterns you, you know, you pick up on that, that may indicate a greater likelihood of success in the future.

Kevin Chen:

Well, if we're talking about lab to market, uh, technology coming out of a university or out of an institute. I think it begins with the, and this will sound very cliche, the, the, the founder or the founding team. And it relates to the topic earlier about, um, being too focused on technology. I think successful entrepreneurs uniquely have an ability to understand the technology, And, you know, the fact that it has to be commercialized, that there has to be a, a receiver on the other end of that technology that wants it. So the water entrepreneur that I was talking about, there's another company that we invested in that has recently exited, which came out of Stanford University, uh, in the area of, uh, compact power supplies for industrial equipment, you know, and there's other examples as well. These entrepreneurs were brilliant technologists, PhDs in some cases. But they also had a mind to commercialization, a mind to linking that with a receiver on the other end. So, I would say, you know, that's something that we, we look for. Uh, and that is a Pretty, um, I don't know the statistics behind it, but it's, it's, it's been a good indicator for us of the potential future, you know, viability of, of these companies. Now, if a, if a

Chris Reichhelm:

Do you know, if you don't mind me interjecting here real quick, do you know? if the inspiration for their technology development was driven by a problem they had identified in the market previously, or did they start developing a general platform technology and then seek to back that technology into a particular application area later on?

Kevin Chen:

I, frankly, I think it can be both. Uh, I don't recall the exact origins of these two examples that I had brought up, but even if I look at my own history. I started a company coming out of MIT when I was working on an optical device for optical networking applications. In that case, we were not successful. I'll just end with, start with that. But the origin of that technology was a government or it was a customer funded program so that we had a set of We had one large funding agency, a company that was funding that research that had a problem that they wanted to solve. I guess the origins of the technology that I had worked on came from an industry problem. And so, uh, there was that, that ability to translate that to, to real world. In the case of a platform company, I think it would require a platform technology. Maybe that, that wasn't seeded by a, by a corporate sponsor or wasn't seeded by an industrial need. If it's a platform based technology, I think the founding team or the entrepreneur would need to select one or two key markets to address. with that platform. And so for those types of companies, having that mindset early on, I think is critical.

Chris Reichhelm:

That, and that mindset, just to go a little deeper into that, that mindset that says we've got to find, before we go too far down the path of developing this technology, we've got to find a home for it. We've got to find a problem that we can solve with this.

Kevin Chen:

Absolutely. Absolutely.

Chris Reichhelm:

How early, how early do they need to have done that by?

Kevin Chen:

I think they need to be thinking about that. Quite early. Now, if I say tease time zero is when this, when the company gets founded, meaning before that there could have been years of research. I think in the research phase it's a different environment. It's academia, it's publishing papers, it's, it's advancing science. But once you hit time, zero I, which is, I'm gonna start this company at that point in time, I need to have an idea of what my top markets are going to be. Uh, and so. You know, that's got to be the way I think to start a company. Uh, it's the problem that we often see is a, is a solution looking for a problem, a hammer looking for nails. And that is, that is challenging. So we, we need to advise entrepreneurs to make sure that there is a market need for this particular technology that I'm passionate about and start focusing on who are the customers in that market? What are the exact Pain points that they have.

Chris Reichhelm:

!Mm-Hmm.. Kevin Chen: And how can I solve? And if, if the technology that I'm working on happens to be the best solution, great. If it's not, then I need to go find another market for this technology that I've been working on. Or unfortunately, there may not be this, the timing might not be right for this particular technology to become a company. Yeah. And so we have to be able to admit that as well. How, um, how, how important is the team. When you're investing and, and, you know, that can sound like a very obvious question, frankly, but, but, but, but you're a strategic investor. You're also interested in the area where this innovation can potentially impact you. You may or may not require the team, or you may require the team for a little bit, but then ultimately you can get the value out of the technology later on. So, I've heard some investors say, and they've admitted, the team is kind of important, but it may not be the most important thing, because we can replace the team. At a certain point and get a better team if we need to. And in fact, we'll probably do so at some point along the journey. So the team is important, but it's, it may not be the most important thing. Most would say, Oh yeah, obviously the team's important. It's what we're backing. Where do you sit on that?

Kevin Chen:

Right. I can see both perspectives. I think the team is hugely important, uh, because we need that team to run the company. And to make sure they can keep the company going until such time that we feel like we can use the technology, if that is the scenario at play, uh, that, that, that our company would want to maybe buy this company or license some technology. But we don't, we don't go into an investment with that in mind. So, uh, having been an entrepreneur, there are so many uncertainties. to making a company successful. We need the team to be strong because they are the ones that are going to be running this company. We as investors are not going to be running the company and we don't want to run the company. We don't have the domain knowledge that the entrepreneurs have. So I think the team needs to be able to pay the bills at the end of the day. They need to be able to everything they do has to end up, uh, lining up, you know, in such a way. that they can bring in revenue or raise money from investors or get grants from the government, they have to be able to bring in cash in order to keep the dream alive. So that the team is hugely important. Now, there is going to be an evolution in the team based on the stage of the company. And um, that is something that we will encounter as the company grows. Let's say for example, the Uh, a company gets to the stage where the founder, um, may want to bring in a domain expert in a given vertical that they're addressing. Let's say it's the semiconductor vertical, and the person running the company initially is not a domain expert in the chip industry. They might want to bring in either a independent board director, uh, who is a veteran of the chip industry to advise, And to open up connections, they may need to bring in a, a chief operating officer who will be able to scale up the company and, and run it in a way that a large, you know, customer will, will feel that, okay, this is a credible company, we, we can back this. They may need to bring in a head of sales at that point in time who knows everybody in the chip industry that, that needs to be talked to. Whatever it might be, there, there will come a time when the team has to evolve or the CEO themselves. May find that they have brought the company from zero to one and, and the, you know, using that, uh, kind of analogy and to go from one to 10, maybe it's a, it's a different CEO that needs to be in place and the initial CEO will become the CTO. So there will be an evolution at some point, but when we do invest at the beginning, we, we look at the team. If this is the team that's going to be there for the next couple of years, we need that team to be amazing.

Chris Reichhelm:

Is there a, a natural inflection point for you, or a common point at which teams change?

Kevin Chen:

Um, I've seen cases where the original team has gone through all the way through to acquisition, and that's many years down the road. And I've seen cases where the original founding technical team has, um, changed roles within the first couple years after funding. Uh, so I think it, I, I think that the, the, the trigger point would be, um, market adoption and customer adoption. Uh, and so when, when that hockey stick, you know, curve starts to go upwards, uh, even before that, when we get signs that, oh boy, there's more and more customers wanting to do, proof of concepts or more and more customers that want to sign up for pilot, pilot programs. That might be a sign that, okay, we're going to enter a phase where we're going to start to commercialize this more and more. And then we have to look around the team to say, to see, do we have the right commercialization folks here? Do we have the right people that can ramp and, and, and get ready for the orders that are going to be coming in next year. And so that might be a natural point to look at the, re look at the team. And it's, it's more about, for me, it's more about putting the right. pieces together for the company to be successful, rather than this person is not right for the job or that person is not right for the job. It's more about, you know, how can we build the strongest case for this company to be successful? And, um, uh, I think it takes a certain entrepreneur to be able to work together with their investors and board to understand that, hey, it might be the best for me as an entrepreneur to bring in more senior people who may, you know, know much more than, who should know much more than I do, and who may actually take my job as CEO. We might, we might have to do that in order to grow this company and to become successful.

Chris Reichhelm:

Yeah.

Kevin Chen:

And that's, that's tough. That's tough.

Chris Reichhelm:

It is. I mean, it's, you know, and, uh, and the irony is that the more successful you are, the more likely you probably need to change up the team because you're going to be encountering a lot of new challenges. Um, and if you are trying to ensure a certain degree of success, so it's, It's a little bit perverse. Well, I've been successful, you know, we've made progress, we've hit our milestones, we've gotten the validation, we're taking, you know, we're, we're making progress along our commercial journey. And now we're going to encounter a whole new set of obstacles. And for that, we're going to need to draft in new skills and, uh, you know, and the chairs are going to have to change. Uh, so it is difficult.

Kevin Chen:

It is. And, and having been in, in, uh, the entrepreneur's shoes, when I took the role as CEO of Crop Enhancement, the, uh, uh, venture funded ag tech company, I just felt a huge responsibility to the team in place at the time because I was not the founder. I came in and took over, uh, the reins from the founder. Huge responsibility to the team, the employees and the investors. And so my mindset was, I'm here to maximize the value of this company for everybody. Uh, you know, including myself, I'm included in that, in that picture. And so, um, there came a time after about almost five years that I felt maybe it's it's time for somebody else to lead this company into the next phase. And that's, that was the transition I went through to leave that, uh, post and, and then come and, uh, join Lab Capital. Uh, but, but, but, you know, when I left, uh, Crop Enhancement, we had just raised Series B. So it wasn't like, I mean, the company was, was healthy, was growing. And I, I felt that it was time for somebody else to lead it. And the, the subsequent CEO was an industry veteran, 30 years in the ag industry. Uh, with a commercial background, uh, knew everybody, uh, knew all the customers, you know, by, you know, first name basis, and, and he was the right person to lead the company, uh, through the next phase. And so I, I've been through that, um, so I think it takes, you know, I think having the mentality of, I am here to maximize the value for everyone, uh, was the starting point, you know, is the starting point for, for being able to discuss, you know, future personnel changes, including for myself.

Chris Reichhelm:

That's, uh, I think that's, that's compelling. Um, let's talk about boards. You sit on boards now as an investor, I'm sure, and your team sit on boards. Yes. You've been an entrepreneur and a CEO before, and so you've had boards as well. Um, there are a lot of entrepreneur, excuse me, there are a lot of entrepreneurs who feel their boards are not worth an awful lot. And that, uh, and so I think certainly in the UK and in Europe, a lot of the feedback we get is that the boards don't provide. the kind of value that entrepreneurs would like. Did you find that as an entrepreneur? Do you observe that as someone who participates on boards now?

Kevin Chen:

I think in general, it, I've seen both situations, uh, effective boards and dysfunctional ones. And I've, and I've been on both. Um, and I agree that a board should be, ideally, should be a very productive environment and it should be a value add. But unfortunately, in, in some cases, it's not. Um, and in the cases where it's not, uh, I can't generalize because every situation is different, but I believe that in, in many cases, it's perhaps one or two members of a multi member board who may be, uh, uh, you know, uh, not who, who might not be adding value or who might be disruptive, who might sidetrack conversations or do other things that are not productive. Um, and so, those are, you know, situations that an entrepreneur has to deal with. It's part of their job. You know, the CEO is held accountable by the board. And so, uh, just as any employee would, uh, want to develop a good relationship with their manager and be aligned with their manager in a, in a, in a normal, uh, setting. A CEO and management team should work hard, gain alignment, and develop a relationship with each of their board members. So, um, One of the things that I've seen which is effective, which I also learned how to do as a CEO, is have individual meetings with board members between the board meetings. So if a board meeting is every three months, Use that intervening time to set up one on one meetings with each board member and get to know them, get to know what they're interested in, what they're concerned about, and start developing that relationship, number one. Number two, use that opportunity to answer, uh, questions or, or, or mitigate concerns that that board member may have and gain alignment so that when there is a board meeting at the third month, A lot of those, uh, questions and issues can be, uh, you'd go into those meetings with those questions resolved and, and, and thereby have a much smoother, uh, board meeting. I think

Chris Reichhelm:

How many board meetings do you typically have a year? Oh, sorry. I didn't mean to interrupt you there. How many board meetings do you typically have a year?

Kevin Chen:

Uh, I think, um, pretty standard, uh, for us is, is about four. So quarterly, I, uh, there's, there is one company that does it every two months so that there'd be six board meetings. And then, um, in cases where. Uh, a company is maybe going through some issues, uh, could be a week, could be a monthly board meeting until the issue is resolved. Let's say, let's say there's a cash crunch and it needs to be resolved, or there's some, um, uh, serious technical issue and it needs to be resolved. So, uh, in those cases, uh, it could be as frequent as, as, uh, uh, once a month. I've been in situations where there are weekly standing board meetings. Uh, when things are very, very much in a, in an emergency situation, and then that'll happen for some period of time. And then if the emergency is resolved, then we go back to a quarterly basis. So, it, it, it all depends. All depends. But just, just to go back to the, the issue of, you know, how, how do we manage a board? I think the other, Um, helpful thing, uh, uh, could be to break, uh, two things, uh, one, uh, bring on, if there's, if there's, uh, uh, an ability to do so, bring on an independent board director, ideally from the industry that, uh, the company is targeting. So, if it's an agriculture company, maybe bring in an experienced, uh, former executive of an agriculture customer and have that person be on the board. What I, what I've seen in those cases, and, and that's what we did at Crop Enhancement for example. We brought in a, a very experienced, uh, executive from the ag chemical industry. The independent board director can do a couple of things. One, they can be a, a wonderful mentor to the CEO or the management team, open it, opening up doors and advising based on their experience. Uh, and then number two, being a way, offering the ability to bring along other board members who may not have that deep of, of a background in, in this particular domain and, uh, and helping them to see. That what the company is actually doing is what they should be doing and, and not to, you know, have to question everything that, that, that the management team is, is, is proposing. So, bringing credibility, you know, bringing, bringing credibility to, to what the, management team is already doing and bringing along other, uh, maybe non domain experts on the board, bringing them along as well. So that's another way to manage a board.

Chris Reichhelm:

In the UK and in Europe, the role of chair and CEO are mostly separate and that role that you describe almost an independent individual, a director on the board to, to make sure that the board is behaving. And the board is up to speed. The chair may or may not have the domain expertise and relevant, but they will, they probably will have startup experience. They will know the lab to market journey. Uh, it might be in a separate, it probably is in a separate domain. Occasionally it's similar, but there'll be able to act as a good mentor for the CEO. And there'll be able to act as an umbrella as well for the stuff that can kick, that can sometimes kick off at board allowing the CEO to just focus on getting on with the role while she or he takes responsibility for herding cats and making sure the board gets aligned. Is that a similar model, or do you see the chair and CEO often in the same position?

Kevin Chen:

I, I, I do see, uh, chair and CEO being a different, you know, being two different people in cases where the board is quite large. I think that's where a board chair can really be valuable. Um, and by board, I mean board directors as well as observers who may not have a vote in certain decisions, but are also a voice at the table. Uh, and as a strategic investor, we, we send observers to our, uh, portfolio companies. And, and so in some cases, Uh, there could be board meetings where there are maybe, you know, three executives, the CEO, CTO, and maybe the finance person, but there might be 10 or 11 board members slash observers in the room. And it's very hard for the CEO to be able to manage, excuse me, uh, those, uh, folks each coming with different concerns and ideas. And I, so, so that the pre work of meeting ahead of time, that helps. But, during the meeting, I think having a board chair is very useful, uh, in terms of the governance aspects, calling for votes, moving the agenda along, keeping track of time, uh, and then, you know, keeping folks focused. So, I think in that case, the board chair and the CEO must work very closely together as a team. Uh, the CEO must, um, You know, trust what the chair is going to be doing during meetings and, and behave as a team, uh, and that's going to take coordination and relationship building and all that, but come in as a team, you deal with this stuff, I'll deal with that stuff and, um, make things very efficient.

Chris Reichhelm:

If, um, Kevin, I've so enjoyed this. One final question for you, though. If you could wave a magic wand and fashion up core skills that leading entrepreneurs would possess. More of. What skills would they be?

Kevin Chen:

I would say Communication, great, concise, targeted communication, A, B, relationship building skills, ability to, you know, uh, relate to people of different backgrounds, relate to different investors, different constituencies, employees, customers, advisors. Number three, a humility. I think a type of humility, which says, which is not, you know, tell me what to do. I don't want to overset my boundaries. Not that type of behavior, but I'm confident, but I'm also open to feedback. I'm open to learning and I'm willing to grow. That's what I mean by humility. I think those three would, would be humility. A great, like, set of characteristics for a, for an entrepreneur, uh, and so, um, you know, two out of those three relate to people, uh, I, I haven't said anything about technology. I haven't said anything about, you know, uh, things related to the deep tech aspect of it. Um, so, because I think an entrepreneur, a CEO has to be more than a technologist. And to be successful in the lab to market journey is not just about making sure the technology works. It's about all the other things, raising money, hiring people, managing a board, bringing on advisors, working with difficult customers, getting purchase orders, uh, Firing people that may not be a great fit. All of those things are people related. And yes, it's based on the technology that I'm bringing, but ultimately, it's more than just the technology itself. So, I would say those would be the, you know, a couple of things that I would wish every entrepreneur could have.

Chris Reichhelm:

Kevin Chen, thank you so much for joining me today.

Kevin Chen:

Thank you so much, Chris. I've enjoyed this tremendously. Thanks for inviting me.

Chris Reichhelm:

You've been listening to the Lab to Market Leadership podcast, brought to you by Deep Tech Leaders. This podcast has been produced by Beauxhaus you can find out more about us on LinkedIn, Spotify, Apple, or wherever you get your podcasts.

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Chris Reichhelm

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Kevin Chen PhD

Guest