Dialogue with VC Veteran Jim Breyer – Investing Future Technologies With Wisdoms And Humble Attitude

5 Dec, 2018 23:38
source: 香港奇点财经 Singularity Financial

Jim Breyer is a famous American venture capitalist, founder and CEO of Breyer Capital, an investment and venture philanthropy firm, and a former partner at Accel Partners, a venture capital firm. Breyer has invested in over 40 companies that have gone public or completed a merger, with some of these investments, including Facebook, earning over 100 times cost and many others over 25 times cost. Breyer has invested in companies like Etsy, Circle, Marvel, Datalogix, Kensho, Legendary Pictures, Spotify, Paige.AI, Subtle Medical, and many more. In 2004, Breyer helped establish a joint venture between Accel Partners and China-based IDG Capital Partners, a pioneering Chinese investment firm behind Baidu and Tencent. Breyer is active in the Chinese investment community and continues to invest in the country through Breyer Capital and IDG. Additionally, he is a member of the Advisory Board at the Tsinghua University School of Economics and Management.

On November 28, 2018 Hong Kong tech media company Singularity Financial Limited (“SFL”) conducted an interview with Jim Breyer at CNBC’s inaugural tech conference, East Tech West, in Nansha, Guangzhou. Below are details of Jim’s discussion with CNBC and with SFL’s interview.

Part 1: “the very best AI and machine learning personnel are being recruited now as freshmen, from the top universities.”

When I was very lucky and fortunate to invest in Mark Zuckerberg, he was not yet 21. I had met with Friendster and Myspace, and a third company, Tickle, within the past year, so I knew what I wanted in social networking, in 2005, and then tracked down Mark. We met in March, it took us a week of going back and forth on what kind of offer it would be, we went out for a dinner, I ordered him a pinot noir, he said, ‘Jim, I’m not yet 21, no pinot noir for me, give me a month,’ and shook hands on a deal the next day.

I spend most of my time looking at new investments, where the underlying platform is a set of artificial intelligence platforms built alongside cloud services provided by Alibaba, by Google, Amazon, Microsoft……In the United States, the very best AI and machine personnel are being recruited now as freshmen, from the top universities.” That’s never happened before. They are being recruited just like a pro basketball team will start looking at high school and first year students at college, they are getting enormous pay packages, they are encouraged to finish school, but these are the Messis, these are the LeBron Jameses, if you will, of the world of artificial intelligence. So, one of the trends we see in the US, the so-called FAANG stocks are recruiting the very, very best artificial intelligence talent, and they’re not always working on the latest consumer web service, many oftentimes they’re working on very specialized applications, Google and Apple both have significant AI healthcare opportunities that they’re recruiting heavily for, in some cases out of medical school. These are gifted young individuals. And I try to recruit these same people, maybe a year later, or maybe two years out of Apple, Google, and Amazon, uh, where they want to change the world, they want to have a mission-oriented company, they have extraordinary talent, they are getting the equivalent of $400,000 or $500,000 annually, plus equity, they’re 25 or 26 years old , and the goal is to team four or five of these superstars together……The good news is, if we can make these work, get the great chemist, get the great breast cancer expert, get the best of the best computer scientists, to work together, and run algorithms against very defined datasets, there will be massive opportunities. Google, Facebook, Amazon, won’t be building those kinds of vertically oriented AI products and services. This is human-assisted AI, which will help nurses and doctors give better diagnoses to their patients……Finding the art to try to combine the great machine learning individuals with the great doctors, having them work on a congruent mission, that’s part of the art of venture capital.

Part 2: “the two countries, particularly in strategic areas, are in a race, but a lot of good solutions will come out of this competitive race that will be broadly distributed to consumers.”

My personal view on the China-US trade war is, the two countries need each other, it is a mutually beneficial relationship. I felt very strongly about China-US in 2001 and 2002 when I was the managing partner at Accel partners in Palo Alto. The venture capital business was good, but less so in Europe, and the real competitive internet consumer products were emerging in China. In 2005 we created IDG Breyer Capital, which is still doing extremely well, the investments include Baidu, Tencent, Xiami recently and many others. We have about 100 professionals now just in China, and 1/3 of Breyer Capital investing is in China. And I believe, the two countries, particularly in strategic areas such as bio-genomics, artificial intelligence, cloud services, and of course, the consumer leaders of today, are in a race, but a lot of good solutions will come out of this competitive race that will be broadly distributed to consumers.”

……we were speaking earlier about AI applying to medicine. There are a handful of brain cancer centers in US, Memorial Sloan Kettering, Mass General, UCSF, Stanford medical center, MD Anderson, Mayo, they provide outstanding cancer care by using AI……one technology can cut the wait time for a result in half, plus with the way algorithm data works, we will see better results coming back to the doctors……it is also true for people who don’t have access to tier one cancer centers, people who live in the rural areas, we see this as a very fundamental opportunity and solution for a second opinion, for lower cost, and for improving efficiency……we are looking at a broad landscape of AI…in certain vertical areas, it has been hard to penetrate with long-standing system software built-in……the two big vertical areas of medicine and finance will leverage artificial intelligence and deep learning to do tremendous things.

We always come to periods of trade war, I hope this one does not go too far. I believe both counties are much better off with fair balanced trading. The trade I see today is fairly balanced.

Part 3: “The great thing about technology investment, we always have to be humble.”

2/3 of my portfolio goes to AI opportunities, or Blockchain opportunities with AI elements, almost all of the additional 1/3 have some element or partnership where AI plays a significant role. There is a company called C3.AI, the founder was a super star at Oracle in the mid-80, left Oracle and built Siebel System, and sold Siebel System back to Oracle 15 years later. Four years ago, he developed this massive software company to monitor the performance of services, where he is building an underlying AI software platform to allow companies to monitor IoT performance in different industries……so this kind of big application, costs US$1million or US$1.2million, for customers to implement, to compete with Oracle, GE, to some extent, Microsoft.  So what we see is mass platform-ship, it leads to, for some period of time, a massive software development opportunity. In the late 80s, it was mainframe; then it came client-server systems; then we moved into the internet as designed; in the mid-2000s, we had social media networks; in 2015, we started seeing some artificial intelligence platforms, cloud services; the next big thing, 3-4 years from now, will be quantum computing.”

The great thing about technology investing is we always have to be humble. There is always someone brilliant, ten years from here, a potential winner, a Nobel Prize winner, there is always a hard problem to solve.

If we take a ten-year view of FAANG or BAT stocks, I think 2/3 of them will succeed even with all the pressure that is going on because of the great leadership they are taking on.  Jack Ma brought in a gifted team for next generation leadership, Pony Ma and Jeff Bezos are exceptional. Never before have we seen many companies leading by a large amount in their respective areas. They have the intensity and entrepreneurial vision to keep fighting, to keep on moving forward……so the smart ones, they are constantly looking for partnerships, like Marc Benioff from Salesforce, has made several investments with me, they tend to be in healthcare oriented areas that leverage AI.

Part 4: “India is very interesting, from a startup point of view. But it does not have the same sheer breadth of growth as the US and China.”

When I first started investing in China, one third or one half of the investments were copycat investments. Today I see companies innovating in AI, 5G, genomics, biomedicine, almost as diligently and significantly as the top US companies. The number of top graduates from Tsinghua, Beida, they competed effectively when I interviewed them with top students from MIT, Harvard and Stanford University. It is a different era now. I see ground rules that are important, mutual trust is important. I see copycats less and less, IP thefts occurring less and less these days……I see a company like Sensetime that has the best facial recognition capabilities in the world.

India is very interesting from a startup point of view. But it does not have the same sheer breadth of growth as the US and China. Some people would argue India is ten years behind China, but it is never that simple. You can get a provincial go-ahead, but the central government might slow down the service; you can get a central government infrastructure initiated, but a couple of states will slow down the initiatives. So one example, we were a large investor of a large e-commerce company in China, Walmart bought the company and paid US$15B. But the sheer number of details in India requires much more time with ministers, government officials… there are a lot of business mentalities where business owners will push back.

Part 5: “Crypto technologies are coming, be patient, we’ll see a rebound in sentiment towards these. But they’re not coming this year or next.”

There was clearly tremendous speculation, I invested in Circle, series A in 2013. I worked with Jeremy and his previous two companies, Brightcove and Macromedia, so he is a third time entrepreneur. Bitcoin, at that time was US$70.

I always would rather be early, but the mistake I made for sure is being too early. But I think I divide the world of cryptocurrency into those that have truly interesting underlying platforms, where parts of the rails are blockchain-based, and then others that are hoping to be a true commodity, and trade like silver.

Crypto technologies are coming, be patient, we’ll see a rebound in sentiment towards these. But it’s not coming this year or next, although we’ll see isolated examples next year.

I see a lot of good technologies built around bitcoin. Although bitcoin itself performs poorly today.

I see too many flaws in the ICO area. I think though, eventually, ICOs will offer smaller companies innovative, transparent ways to raise money.

And I do think it is reasonable for a country to issue cryptocurrencies. It may take a lot of political back and forth, but already some small countries like Estonia, are very aggressive. There are too many people who would push back in larger counties, but for certain aspects of trade, especially as we have seen the breakdown of trilateral/bilateral trade agreements, blockchain technologies make sense..

I have also sat down with leaders of large counties, not G20, but fairly large. They are asking why the US is always fighting and advocating for the dollar as a base currency.  These countries are thinking of implementing blockchain based currencies. But most of these issues are not technical but political. These things take time.

Part 6: “Right now China is doing an exceptional job at the president level.”

I think there is a 50-50 chance China will become the most important type of economy in the world. Right now China is doing an exceptional job at the president level. President Xi has laid out strategies in AI, 5G, infrastructure, belt and road, Bio-genomics, advanced manufacturing…These are the areas that the US will have to compete crazily in. Silicon Valley certainly has been the internet consumer leader of the world, and in certain technologies of the world. But we are not the business model leader of the world, that is where Tencent, Alibaba come into play. We have not seen similar type of business models like Tencent or Alibaba in the US, maybe because the Chinese population is five times larger than the US.

I love working with developers and entrepreneurs, in both the US and China. My advice to the engineers, developers and entrepreneurs is: get a couple of friends you really value and respect, build a great product that you love, a lot of good things will come out of that. I get up every day thinking, I don’t know if I will find the best investment today, but I will meet really interesting people, that is the reason I love working with entrepreneurs. I’m always learning, there is always something to be curious about.