On today’s show, we sit down with Kelly Coyne who is deeply immersed in the Silicon Valley start-up community. Having grown multiple start-ups from conception to over $100M valuations, she is a leading Go-To-Market expert. After earning her MBA from Oxford University, Kelly served at the helm of several early-stage hardware companies (Lily, Mimosa, Candl) and advised many others.
Kelly has broad technology experience, but specializes in guiding Robotics, AI, AR/VR and computer vision companies from concept to launch. She has tremendous experience managing successful betas, developing use cases, connecting products to the right customers, and leading successful product launches. She has also seen some of the extreme pitfalls of SV start-ups – this unique knowledge helps her guide new companies to success. She is a Techstars and Oxford Creative Destruction Labs mentor.
In this episode, you’ll learn:
- How have the VCs changed over time in relation to their paths and career backgrounds before becoming a VC?
- What are the skills or knowledge that is going to be key to be a successful VC in the future?
- What does it look like to be a fundable pre-seed hardware company?
- What are the two largest issues that early-stage robotics and artificial intelligence startups face?
- What is “humanized AI”?
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Guest
- Kelly Coyne on Linkedin
- GritVentures.com
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Disclaimer to the Transcripts:
Intro 00:00
You’re listening to The Silicon Valley Podcast.
Shawn Flynn 00:02
On today’s show, we sit down with Kelly Coyne, who’s deeply immersed in the Silicon Valley start-up community, having grown multiple start-ups from conception to over $100 million valuations. Kelly has broad technology experience, but specializes in guiding robotics, artificial intelligence, augmented reality, virtual reality, and computer vision companies from concept to launch.
On today’s show, you’ll learn about how the venture capitalists in Silicon Valley career paths have changed and what’s different in their backgrounds now than before; what skills or knowledge isn’t going to take to be successful venture capitalists in the future; what does it look like to be a fundable pre-seed hardware company; what are the two largest issues that early-stage robotics and artificial intelligence start-ups face; and what is “humanized AI”? And much, much more.
Intro 00:52
Welcome to the Silicon Valley Podcast with your host Shawn Flynn who interviews famous Entrepreneurs, Venture Capitalists and Leaders in Tech. Learn their secrets and see tomorrow’s world today.
Shawn Flynn 01:15
Kelly, thank you for taking the time to be on Silicon Valley.
Kelly Coyne 01:18
It’s my absolute pleasure.
Shawn Flynn 01:20
Now, Kelly, you have this amazing, interesting background, can you tell us the career path that led you to become a venture capitalist?
Kelly Coyne 01:28
Well, that’s a flattering description of my background. I’m from Denver, and I started in telecommunication, and I worked at a company called Level 3 Communications. When I left there, I was working as the product manager for virtual private networks. I left and went and got my MBA at Oxford.
While I was out there, I had the pleasure of meeting the founder of Polycom, Brian Hinman. He was starting a new stealth mode Wi-Fi hardware company. He asked me to move to Silicon Valley and be the first hire. So that was what I did. I came out here, worked with them, and stayed with them through over 100 employees, $100 million valuation, and eight products launched six-in-market. That really helped me understand what it took to build a hardware product from scratch. Particularly, one with very deeply complicated software componentry.
After that, I left, and I moved into a little garage with five AI PhDs. I like to point out that it was a garage because we had to actually hang lights and fans because it wasn’t attached to the house. We were building what I’d like to call a flying robot. That sounds better. But yes, it’s a drone as you might suspect.
That was called Lily. Quite a famous and infamous story behind that. I stayed with them from over 100 employees. For them, I was running marketing, PR, sales, customer support, and the thing I take the most pride in, their beta testing program. There’s nothing more complicated or terrifying than running a beta testing program for an autonomous flying robot for consumers.
After that, I looked around Silicon Valley, and I realized that there was a tremendous amount of talent in understanding the aspects of go-to-market for software, but really not that much in hardware. So, I started a consulting firm that specialized in early-stage deep tech go-to-market and helping companies understand what it took to get from an idea to launch.
It was during that time that I was mentoring a company out of Bolt and that my now partner happened to be invested in. She spent about six months trying to get me to be CMO at one of her firms. And then eventually, one day over lunch she said, “Actually, you know what? Why don’t we just start a firm together?” That was the origin of Grit Ventures.
Shawn Flynn 03:36
You had mentioned the word “deep tech” in that. What is the definition of “deep tech”?
Kelly Coyne 03:41
There isn’t one. I guess it’s a broad idea. But I think right now, it’s really more around artificial intelligence, and that being based in any product. It can also mean frontier tech space. Everyone has a bit of a different definition.
Shawn Flynn 03:56
How is it different being on the entrepreneur side versus being now on the investor side?
Kelly Coyne 04:02
It’s different in a lot of ways. The first thing is that you have to really make this transition from having one company be your baby, and be this thing that you think about all day, every day, to having 7 or 10 babies. You’ll really have to bounce through all of them, think through that, and remove yourself a bit emotionally in comparison to when you’re in-house. Also, you’re not actually doing the work. You can give them advice. You can give them structure. Help them, but in the end, it is their company. That’s something I think we need to remember as venture capitalists (VCs).
Shawn Flynn 04:35
Is that frustrating for you? It sounds like you really like to be hands-on and in the trenches.
Kelly Coyne 04:41
Not really, but that’s because we’ve been very, very careful about picking our founders in our portfolio. There are people that we spend a lot of time with founders before we invest. And so, all the people that we’re working with are people that we have seen take direction and run with it. For instance, one of our portfolio companies, I built their beta program. And then, watching them execute that has been more of a delight than anything else. I’m glad I’m not the one executing it.
Shawn Flynn 05:08
So were there any struggles that you faced while doing these beta programs or beta testing that you’d like to share?
Kelly Coyne 05:16
I think the way to think about beta testing is…essentially, the goal is to take every use case, every single one that you can think of. Break it down into its metrics and its componentry, and then align it with dates through which you move. That’s how you know when you move to the next step of hardware.
There are basically two buckets. There’s a problem that you are slowly moving closer to reaching your metric goal, and there’s a problem that you have no idea what’s going on. With Lily, for instance, we were moving closer and closer to our metrics. Everything was going well, but for some reason, the drone would just toilet bowl randomly. We didn’t know how to fix that. When we are doing due diligence on companies, those are really the things we look out for: the problems that they don’t know how to fix.
Shawn Flynn 06:06
You’ve had all this experience hands-on in hardware companies. Is this very similar to the other VCs in the Valley? What’s the career path that most of them have taken, and has that changed over the years?
Kelly Coyne 06:18
Yeah, I think we’re in a really interesting time. The originals, the OGVCs if you will, of which my partner was. Most of them were operators and engineers. Because it was in this time of telco and deep tech, and these companies really understood their technology. Anyone that was creating a company at that time understood their technology, but they really needed help in understanding how to build it into a company. That was how you saw some of the operators.
Then, we moved into the mobile social gaming wave. That was when we saw a lot of financers join the business. It was a different time. It was about customer acquisition costs and virality quotient. Those were the more important things. As we move back into this era of artificial intelligence and deep tech, I think you’re seeing the reemergence of the operator and engineer model. And especially in the very early stage, which are the people I spend most of my time with, many of us are operators and engineers.
Shawn Flynn 07:09
Do you see in the future a lot of the investment bankers or the economic majors moving away from VC?
Kelly Coyne 07:17
No. I think that, first of all, there’s still always a lot of SAS. Not everything is deep tech. Also, after you get past pre-seed, seed round, and Series A funding, it does become more about financial tinkering. I think they’ll probably just move later stage.
Shawn Flynn 07:29
Then, what skills will be the most valuable for a VC to have in the future to be successful?
Kelly Coyne 07:36
I think that in the early stages, the most helpful skills are the ability to understand how to build a company, and specifically to understand that from experience.
Shawn Flynn 07:46
By saying the early stages, do you mean the first two years of a company’s growth of more or less, or…?
Kelly Coyne 07:50
That is a really difficult question. One of the big things that we’re seeing, particularly in the robotics space, is that many of the companies are spinning out of labs and have gone through many, many years of working, and DARPA grants before they even spit out.
Shawn Flynn 08:07
What’s a DARPA grant?
Kelly Coyne 08:09
It’s a government defense grant. They’re great because they’re kind of loose. They don’t give you that much direction and what you have to do, so it gives these guys years to explore.
Shawn Flynn 08:19
A company that wants a DARPA grant…most grants, from my understanding, takes six months to a year of paperwork to fill out. What’s the process for hardware companies? Because it sounds like it must be very capital intensive then.
Kelly Coyne 08:32
Well, there are two different things. There are two different types of companies. I’ll get into the second one later, but the first type of company is one that spins out of lab. Because of that, they’re used to writing grants. They have the time, and it’s their job to write this grant. They’re getting paid to do that. It’s not just that they’re burning venture capital money while they’re doing that. By the time they spin out, they usually stop writing grants because of how time-consuming it is.
Shawn Flynn 08:56
So, then the people that are used to writing grants, do you notice if some of those players get switched once they go to a spin-off or a company in the sense that maybe their mindset’s not there to grow a company? Maybe they are more researchers in the lab, and they need that sales entrepreneur, crazy guy that used to sell houses and used cars?
Kelly Coyne 09:17
This is a topic that comes up a lot. The answer that I give is I try to not tell an entrepreneur if he should be the CEO or not. What I try and do instead is ask him what he wants to do all day. I say, “Do you want to work on product and innovation and think about what the next thing’s going to be in terms of the technology for your company? Because if you do, that’s a CTO. If you want to spend all day making sure you don’t run out of money and talking to people like me, then that’s a CEO. I’m not going to tell you what to do, but decide how you want to spend your day.”
Shawn Flynn 09:48
How does that dynamic structure then work, when this group of engineers that have worked together in the lab for the last year or two now have to find an outside person to come in and kind of almost take advice or orders from the person?
Kelly Coyne 10:01
I think you just have to be very careful. And oftentimes, I think what works nicely is to bring in an interim person. So, get a high-level person that you’re working with for six months, and then they get promoted to CEO. That could be one way like a try-before-you-buy if you will.
Shawn Flynn 10:17
Tell me what is the investment thesis or focus of your venture fund, Grit Ventures.
Kelly Coyne 10:21
At Grit Ventures, we focus on industrial robotics. Very specifically, B2B. We don’t have anything wandering around your home. We just want to solve these very large-scale tasks that are needed.
Shawn Flynn 10:34
Kelly, a question for you: Why is right now the time for robotics?
Kelly Coyne 10:38
It’s an amazing time to be a robotics venture capitalist firm. Four big changes happened in the world that have made robotics an enormous opportunity at this exact moment.
The first one is the cost of componentry has gone down dramatically. When people think about robots, they generally think about these huge machines that you see in an auto manufacturing plant that cost $250,000 to a million dollars. That’s simply not the case anymore. We tend to see robots costing between $4,000 to $15,000. That’s a huge change in terms of being able to start a company with much less capital.
The other thing that’s been interesting is robotics as a service. It’s an entirely new business model that most people are starting to adopt. I think almost everyone in our portfolio has that model, where rather than actually trying to sell a robot, which if you’ve ever sold hardware is a really painful thing because the next year, you have to figure out what is the new interesting thing you’re going to sell. Whereas, as a service, you have monthly recurring revenue and multi-year contracts. It’s a really beautiful thing.
The other thing that changed, and this point can be debatable, but ROS 2.0, the Robotic Operating System was open-source. This is largely used by people that maybe didn’t come out of the lab, have a long time to work on their code, and build a proprietary codebase. It’s an open-source that allows them to cut off two years of development time because they have a platform on which to build.
Then the last thing, and I think this is probably the most interesting thing for people not deeply entrenched in this space, is that we are seeing massive labor shortages across the world. These are labor shortages in older and traditional industries. This is causing a radical change in how quickly people can go to market in the sense that start-ups used to have their very first client be a mom and pop, and then build their way up to the big guys.
But when you’re dealing with labor shortages, it’s the big guys that are feeling the pain the most. So, these small, little five-person teams living in garages are actually having the biggest names in their industry be their very first client.
Shawn Flynn 12:40
Now, why is there that labor shortage right now? Because in my mind, everyone is so scared that robots are going to take their jobs. Whereas you’re telling me right now, there’s no one in these jobs for the robots to replace.
Kelly Coyne 12:52
We focus on jobs that we call the 3D: Dirty, dull, and dangerous. And so, they’re jobs that human beings don’t want to do, and arguably shouldn’t be doing. We tend to not look at companies trying to do replacement because there is so much labor shortage across the board in construction and agriculture, that it doesn’t make sense not to go after that low-hanging fruit.
Shawn Flynn 13:12
For Grit Ventures itself, what stage companies do you look at? Are they mostly early stage?
Kelly Coyne 13:19
Grit Ventures is a pre-seed company. That means the very first money that you take in after your angels, incubators, and accelerators. The very first time you take institutional funding, that’s a pre-seed round. For us, that means something very different than what people might think.
Pre-seed used to be a PowerPoint presentation, just an idea with maybe one guy, and he doesn’t even have a team. In order to even enter our funnel of consideration for investment, you have to have a working prototype and a pilot that is, at least, in the works.
Shawn Flynn 13:48
For any of these companies that are in your funnel, that you’ve looked at, have you had any stories or instances where maybe their products completely backfired on demonstration? Or do you, yourself, have any personal stories of something failed, when it shouldn’t have failed.
Kelly Coyne 14:04
The thing that I say is, “Because I’ve run beta testing, it is truly my job to try and break the robot upon demo to figure out how to make it wander off the happy path.” Because when you’re doing a demo for investors or customers, you’re always trying to make sure that they don’t ask you to do anything that you haven’t planned for. It is a prototype, so oftentimes, it doesn’t really know how to do that. I remember one time; I was in-house with my flying robot. I was sitting in a chair, and we were testing out in the field. I was about eight months pregnant. All of a sudden, while I was in the middle of a conversation, and in the corner of my eye, I saw this robot flying at me. I jumped off my chair, and it ran right into the chair, where I was sitting. You got to keep your eyes peeled.
Shawn Flynn 14:55
So Kelly, when these companies come to you and ask for the funding, what are the expectations for them to use or for them to build with it? What do you want to see?
Kelly Coyne 15:05
Yeah, so in general, you raise a pre-seed round, and then you raise your seed round 18 months later. At that time, what you need to focus on is the go-to market. I would always say that, even two years ago, every Series A deck or every pre-seed deck that came across anyone’s table had that one slide that had the number of patents pending because it was all about IP.
I think that’s shifted because, especially with the dawning of artificial intelligence, there are a million different ways to solve a problem. Even if somebody has patented one thing, you can figure out a way around it. And so, now, go-to market traction is king. I think that’s a big mental shift for a lot of founders, particularly those coming out of labs.
Shawn Flynn 15:46
What are the largest issues that early-stage robotics and artificial intelligence start-ups facing?
Kelly Coyne 15:52
I think the largest issues are the idea of how to get from that pre-seed, that initial check, to seed, and what do you have to build to be attractive for seed. When you’re analyzing these early-stage companies, there are two different components that you look at. You can look at the product, and you can look at customer validation. And so, that’s why focusing on your beta test, and your go-to market is really important.
For the beta test, as companies begin to form, and even for the most brilliant PhDs, it is not natural to think of how to build a beta test program for commercialization. You tend to think that people will hopefully just wander down the happy path, but really, consumers act in ways that you could have never guessed. And then, in terms of go-to market, thinking through your pilot, and specifically, your pilot contract is extremely important.
One of the things we coach people to do is to build very specific metrics into their contracts that trigger an automatic rollover. Rather than saying, “Okay, we’ll try it out for six months, and if we like it, we’ll buy it.” That doesn’t work for the start-up. Instead, you say, “As soon as we meet these metrics, whenever that happens, you automatically become a customer,” and baking those in. But you have to do so much customer validation before you can get to that point.
For instance, we had one of our portfolio companies. They had been working with this customer for at least six months. They were piloting with them. The customer was thrilled to pieces with the experience, and they had baked two very specific metrics into their contract. The customer wouldn’t sign the contract. So we said, “You need to go back, and do more distinct customer validation.” What they found out was one of the metrics was completely accurate. But the second one was this bizarre revenue-saving method that we could have never guessed in a million years. It took them almost a month to tease that out of the customer that that was the second most important metric.
Shawn Flynn 17:39
Do you find that some of these established companies try to take advantage of start-ups in a way?
Kelly Coyne 17:40
Absolutely. That’s the entire point of working with them on these contracts and actually baking in the metrics. And the other thing is, too, you can’t just even bake in the metrics. You have to be the one giving the data to them. You can’t trust them to come back to you. You need to be the one proving it.
For instance, one of our companies, Viabot is an outdoor debris clean-up robot. Essentially, every night, something like a Zamboni cleans your corporate campuses. You know, a person riding a Zamboni-like thing, and Viabot is a robot that does that. Their very first customer was one of the top three property managers in the United States on one of the largest tech companies and campuses in the entire world. So, high stakes.
By the way, we were five guys under 30 years old in one of our parents’ garages. When we started, we worked with the company. The metrics that we came up with were they need to clean up 80% of bottles and 80% of leaves. The way we decided to feed that back to them was we set up cameras along the parking lot, did before and after shots, and then overlaid them to be able to prove that they had cleaned up 80%. Our secondary metric was there had to be no more than one garbage bag full of leaves. It’s really specific things that can tell, “We met this. Now, start paying us.”
Interestingly, I think this is a great example of the stage that pre-seed companies are at now. All of what I said and all that work we did was even before I invested. And then, when I actually pulled the trigger and invested, they had revenue within one month.
Shawn Flynn 19:16
How did this company survive that long without funding? Did they have some friends and family beforehand?
Kelly Coyne 19:23
They had gone through HAX Accelerator, the hardware accelerator, beforehand. That had been fantastically interesting because HAX had sent them to Shenzhen to build their product. They had gone over there to build their product. When they went there, they were originally going to be a yard clean-up for leaves for homes. So, they were a consumer product when they went there and went into this accelerator.
When they left, they were a commercial product. It was fascinating to me. Because they had been trying to be a consumer company, they were trying to go as low cost as possible. They ended up creating this absolutely beautiful robot built from industrial car parts, so it’s really tough. Their original prototype BoM, bill of materials, was $4,000.
Shawn Flynn 20:05
You’d mentioned they went to an accelerator program. Are there a lot of those resources for hardware companies?
Kelly Coyne 20:11
Absolutely. This is the trend that we’re seeing. So the four options for you taking your first institutional fund are grants and labs, angels, friends and family, and then incubators and accelerators. And that’s how people survive until they get to institutional.
Shawn Flynn 20:26
You mentioned Shenzhen, as well. Shenzhen, China. Is there a lot of activity going on there for these hardware companies?
Kelly Coyne 20:33
Yeah, absolutely. I mean, it’s a place where you can build things much cheaper, and the componentry is cheaper. Yeah.
Shawn Flynn 20:39
You had mentioned “humanized AI.” Could you give us more of a description of that, and what is it?
Kelly Coyne 20:45
Humanized AI is the idea that we are moving from robots and cages inside auto plants to things that are going to have to deal with us in our everyday life. They actually have to interact with humans. When you do that, you need to think about what human interaction looks like. This starts bringing in so many different disciplines, and we’re seeing these much more diverse teams. Not just in terms of male and female or ethnicity, but in terms of what they studied– philosophy, psychology, and all of these sorts of people are starting to get involved in the creation of robots.
I think there’s a really interesting way to think about this. Savioke was a hotel delivery robot. One of the stories that they told me, at one point, was that the thing they were most proud of solving was elevator etiquette. And I love this. I love this because I really think it wraps people’s heads around the battles that we face in robotics.
So, when you think about getting on an elevator, the doors open. You have to assess the scene, and then figure out how to get on without running over a toddler. Then, you have to navigate your way to the button pad, press your button, and navigate back without running over anyone, so that other people can get on. When it’s your turn to get off, you have to get off, and maybe there are people in front of you. The work they had done there was what they were most proud of. I think that’s just so telling.
Shawn Flynn 21:59
So, you’re a hardware VC troll…?
Kelly Coyne 21:59
I think that a lot of people don’t understand what it means to be a robot in the real world. What that has made me do is every time I see one of those little box robots wandering down the street in Palo Alto or San Francisco, and we get to a stoplight. And yet, there’s only one curb that this thing can go down, as it can only go down the slanted piece. I just stand there and see what it does. I’m sure their handlers just love me.
I just want to see what its etiquette protocol is. Haha!
Shawn Flynn 22:31
Before, you had mentioned that the companies you’re invested in are not replacing humans, because the jobs that they’re doing are already vacant right now, or they’re dirty and dangerous jobs. Where are people going to see robots taking the place of their jobs right now? Where are we going to see the trends in the future or the first ones that we’re really going to see?
I think that the first wave that we saw was in warehousing automation. We’ve seen those for the last several years, and that’s a place we’ve seen a few exits as well. The next wave we believe to be more vertical centric: construction, agriculture, logistics, industrial, transportation, of course, and then energy and health.
Shawn Flynn 23:11
It’s interesting that you mentioned agriculture. I just listened to an interview with Jim Rogers, a famous investor, and he talked about the aging population of all these farmers being 68 years old. All retiring. Their farms are being pretty much vacated. I mean, what are the robots that are going to come in and do?
Kelly Coyne 23:28
We’re seeing everything from harvesting. There’s a lot of strawberry harvesters out there. Apple pickers, things like that. That’s a lot of what we’re seeing on farms right now. In construction, what we’re seeing is they’re more centric on specific trades. A lot of these trades like framing, drywalling, and those sorts of things that are very specific and require a lot of training to do, it’s just as you were saying. That population is retiring and getting out of the workforce. It’s not being replaced. And so, a lot of our companies are working really closely with the unions and with job training centers to train up people to be the persons that mind the robots on these construction sites.
Shawn Flynn 24:05
Tell me about some of your portfolio companies. What problems are you solving? What’s exciting to you about them?
Kelly Coyne 24:11
I already talked about Viabot. I’m on the board there, so I have a lot of information there. I have two others that I think are worth discussing.
Diligent Robotics is in our portfolio, and they are a hospital delivery robot. They actually made Time Magazine’s Top Inventions of 2019 this morning, so we’re very excited about that. What they do is they deliver supplies to rooms. Now, you’ve seen these boxes that you can load up, and then they roll down the hall. That’s always been a thing. But this is an actual robot that goes, scans the room, sees what’s missing, wanders down to the supply closet, pulls open drawers with his little hands, pulls things out, and then brings it back to the room.
It’s a much more advanced tech. Here’s what is the most interesting piece about it. Hospitals not only saw that they were able to deal with some of the problems of labor shortage. There aren’t enough nurses and nurses’ aides. But what they saw was a dramatic reduction in falls, because nurses were able to focus on their patients, rather than having to do some of these more menial tasks like stocking the room. It’s those sorts of things that really get us excited about this industry.
There’s another company, and it’s not in my portfolio, yet. It’s an incredibly exciting company. One of the things that is exciting about it is it’s run by a woman. One of the very few women running a robotics room. It’s called Dishcraft. It’s dishwashing as a service. It is very cool. They use a hub model, and it’s just like uniforms. You have your dirty uniforms in a bin, someone picks them up, and replaces them with clean ones. That’s exactly what they’re doing with dishes. The woman running it is this fantastic woman named Linda. She is one of the very few repeat entrepreneurs, who’s already seen an exit in robotics. She’s a rock star.
Shawn Flynn 25:52
Tell me more because I can’t visualize it.
Kelly Coyne 25:54
This is so funny. No one can, so I am pleasantly bringing people by Linda’s office to show them the machine. Essentially, what happens is you have a large bin that you put your plates on. The plates slowly go down each time, so that there’s not just a big stack. They go down into their little bin. You close the bin. Done. And someone comes in, rolls it out, and rolls in plates for you. They take the bin, they push it into a large machine, and a robot hand picks up the plate, scrubs it, and then puts it into a rack. Then it goes to the sanitizer.
Shawn Flynn 26:27
Do you have any other stories or you, yourself, of being a female in this more male-dominated sector?
Kelly Coyne 26:34
I definitely have some that I probably won’t share. But I think one of the most interesting ones was when I was working in-house at a company, and I had a very large team reporting to me. All day, I was managing this very large team, and my husband, who was an early adopter, bought Alexa. He hooked up all the lights in our home to Alexa so that you couldn’t turn them on or off manually, or else you’d mess everything up.
I’d come home every night after running this huge team, and then have to ask my husband to ask Alexa to turn off the lights, because she couldn’t understand my voice. And this went on for several months, where our house was managed by this robot that could not understand me. I still remember, we went on a trip one weekend and came home, and suddenly, she understood me. I had hired some people from the Amazon beta testing team. They overheard me complaining about this one day, and they said, “Oh, don’t you know? There weren’t any women on the beta testing team.” They must have not tested well enough for the frequency and pitch of a woman’s voice.
Now, I will say I had the pleasure of meeting one of the founders of Alexa last weekend, and he heavily disputed this. So, take what you will from the story.
Shawn Flynn 27:50
What technology out there, do you think that we should really look for in the next year or two?
Kelly Coyne 27:56
I don’t think you’ll be looking for it. I don’t think you’ll be seeing it. I’m going to answer the question in the opposite way. I think that 2020 is not about a social robot that plays with your kids or plays with your dog. We are still in the stage where it is much more interesting to focus on the business-to-business aspect of things because that’s where we’re going to see things moving far before we’re ready for the more social aspect.
Shawn Flynn 28:19
What advice would you give an entrepreneur or an investor out there?
Kelly Coyne 28:22
I would give them two pieces of advice.
Number one, the terminology around fundraising has changed. Like I mentioned before, pre-seed is no longer a PowerPoint. Series A is no longer a prototype and pilot. You have to realize where you are, and not try to play above your speed. There is no benefit to raising a Series A when you’re really a pre-seed or seed company. It really isn’t. You will just get a worse valuation if you get funded at all.
The other piece of advice I’d give that I mentioned before is that go-to market is an incredibly important piece right now. You are not going to get funded on a patent alone.
Shawn Flynn 29:00
I think Kelly, is there anything else you’d like to mention before wrapping up?
Kelly Coyne 29:04
Yeah. I came across a really interesting realization the other day. When you start pitching a venture fund, you think very carefully about your messaging, and you don’t want to put off anyone. I started raising right after the “Me too” movement. We thought, “Oh, man! Let’s lean into this.” The first people that we were test pitching on are some of the VC names in the Valley. Every single one of these male VCs told us to take that piece of our pitch out.
It was the piece about leaning into women and who we are. They said, “Nobody wants their hand slapped anymore.” So, we removed that. But it wasn’t until I was in a room with one of our investors. She had told me that she wanted to invest primarily in women GPs, but because of that, her portfolio was heavily skewed to consumer and health. She didn’t really have anything at all in deep tech. That really got me thinking.
This comes back to the humanized AI topic we were talking about before. Right now, at this exact moment, we are teaching machines, what it means to be a human being. That’s what we’re doing. We’re teaching them what that means, and we only have this largely male faces around the table. This is probably the most important place that we can be inserting women GPs and women entrepreneurs. It’s into this world of teaching machines. We don’t necessarily need any more women consumer VCs. We’ve got that covered.
I think this is a really important time to be keeping your eyes peeled for diversity and making sure that we’re truly teaching these machines correctly. I know that we’ve already seen instances of racism and artificial intelligence, and even if you’re trying to keep your eye on it, unless you have those right faces around the table, you can’t think of everything.
While this isn’t specific to diversity, the story that I always think about, around about everything, is Facebook. I believe they used two different artificial intelligence machines, and they told them to haggle with each other. So, they were trying to get to the best deal that was the best for both of them.
Within a very short period, the machines created their own language, because the engineers had forgotten to tell the machines that they had to only haggle in English. If you think about that, the brightest minds forgot that little backdoor of having to talk in English. I think it’s a really good example of there is always going to be something you forget.
Even if you do an excellent job at building diverse teams and thinking of every angle, there’s always going to be something you forget. But you should be doing your best to try and avoid that. The thing that I tell a lot of engineers, or their founders, rather, on this topic is that every man you hire, makes the first woman hire harder. When you’re a five-person team and you’re trying to hire your first woman, that’s easy. When you’re a 10 person, it’s a little harder. But if you had 20, and you don’t have a single woman on your team, that can be a real problem.
Shawn Flynn 32:06
When you say “on your team”, do you mean in the top positions or just at the company in general?
Kelly Coyne 32:12
Ideally, we would want to see a woman in the executive staff meeting, right? Somebody helping drive that decision-making. I know that I’ve rarely seen more than one woman in the executive staff meetings. But even just having one on-premise that is hopefully an engineer or someone in tech.
I work at the University of Colorado Boulder. I’m on the advisory board for computer science. We spent a long time at our last board meeting talking about women engineers, and why so many were dropping out. They have great ratio entering, but then many women drop out. We were trying to decide why that was.
We brought in one of the female engineers that had dropped out, and she said that anytime you were in the lab past 5 p.m., it just devolved into bro culture. This is great. The guy sitting next to me raised his hand and he said, “What is bro culture?” I burst out laughing, “You really don’t know what she’s talking about?”
The thing is, you’re working a lot of late nights, and you’re working together really intensely. The atmosphere is different when it’s 49 men and one woman, versus 40 men and 10 women. The atmosphere completely changes. The jokes change, and just the way you deal with each other changes. So, I think it’s important to realize that even if everyone’s trying to be on their absolute best behavior, women can feel a little uncomfortable in environments, where they’re such a deep minority. This is probably more unique to deep tech, but I think it’s an important note.
Shawn Flynn 33:42
Kelly, this has been an amazing interview and has brought up a lot of topics that I know people at home are going to be thinking about. If they want to find out more information about Grit Ventures, or what you’re working on, what’s the best way to go about doing it?
Kelly Coyne 33:56
We try to make ourselves incredibly easy to find. You can contact us on LinkedIn. Then on our website, we have our emails on there, gritventures.com.
Shawn Flynn 34:05
Great.
I also want to thank Hardware Massive, Greg and Matt, who held the event that I saw Kelly at. She was the keynote speaker that led to this interview. I also want to thank Daniel, who videotaped the interview. If you want to see pictures of it, join us on our social media, or Twitter or LinkedIn, where you can find pictures from the interview.
Once again, Kelly, I want to thank you for taking the time today to be on Silicon Valley.
Kelly Coyne 34:29
Thank you for having me!
Outro 34:31
Thank you for listening to The Silicon Valley Podcast. To access our resources, visit us at TheSiliconValleyPodcast.com and follow our host on Twitter, Facebook, and LinkedIn @ShawnFlynnSV. This show is for entertainment purposes only and is licensed by The Investors Podcast Network. Before making any decisions, consult a professional.
