#495 – An Interview with Eric Klein

Chris Gammell: This is The Amp Hour Podcast. Released June 7, 2020. Episode 495. An interview with Eric Klein. Welcome to the Amp Hour. I'm Chris Gammell of Contextual Electronics.

Eric Klein: And I'm Eric Klein, partner at Lemnos Labs.

Chris Gammell: Welcome, Eric. How are you? I'm good. It's good to talk to you. Yeah, we're both in lockdown, but we're surviving, and we're going to talk a bit about some venture capital. And so, you know, we've talked about it a little bit in the past on the Amp Hour, but Lemnos is another big company in the space, and you're investing in interesting companies, and I'd love to get your background and how you, you know, generally, maybe we should start with that. How do you think about hardware in 2020, and what are you excited about?

Eric Klein: Well, it's, of course, a very interesting time. You know, when you work in the venture business, you tend to think macro and think micro. So at the macro level, as we're all aware, it's an unprecedented event occurring. And like almost every other business, venture capital is just starting to figure out how to come back to work for the first part of the crisis. We were just sort of turtled up, for lack of a better phrase, trying to make sure that our existing investments had the capital that they needed to be successful and to try to help them navigate through, you know, this difficult period.

Chris Gammell: Yeah.

Eric Klein: And now we can start to say, all right, let's get back to our job. It's amazing, you know, how much, I think we all learn how much, you know, physical interaction or, you know, being together is important to us. It's hard to, it's hard to contemplate investing, you know, five or $10 million into a company and into a group of people when you can't, you know, sit down and talk with them.

Chris Gammell: Right, right. Yeah. Look them in the eye. Get a good feel for who they are. And like, I always hear about, you know, here, I think you have talked about this and other investors talk about, you know, you invest in the person. And it's like, yeah, if you can't be across to them, getting a good feel for who they are, how could you, how could you develop that picture and trust enough that it's not going to be like, well, $10 million down the hole and what's the big deal?

Eric Klein: Yeah. We always learned one of the things we loved when we invest in an entrepreneur is one of the last things that we do is we go out and have dinner with them. And we just talk about the rest of our lives. And it's a great way to understand the individual you're about ready to go on a, you know, potentially a five or 10 year relationship with. So we're just getting back to that point, you know, underneath this difficult time we live in as a, you know, someone who loves hardware and invests in technology that involves hardware and software brought together. I tell you, it's incredibly exciting. I think the things that we've, that we're unlocking right now in terms of new markets and new opportunities is huge. If you go back to Chris Anderson and, you know, he always says that for the longest time we lived in the benefits of the iPhone revolution, right? With a low cost SOC, low cost accelerometer, all the things that we put into smartphones that we, you know, we brought the price down. The same thing is happening today, right? Right now in terms of robotics, right? The low, lower, as we, you know, massively decrease the cost of things like ESC controllers and battery technology for robotics. And we're opening up markets in the same way. Robots that used to cost, you know, robotic solutions that used to cost 50, $100,000, right? Think about how much LIDAR used to cost, a Velodyne LIDAR puck, right?

Chris Gammell: Sure, right, right, right.

Eric Klein: Now you've got folks working on solutions where they're trying to get that, you know, well under $1,000 and trying to head for 100. Yeah. All of a sudden we get LIDAR for you, LIDAR for you, right? Right, right. So that's, it's almost always happening and it's fun to, as a technologist and someone who loves hardware to go, oh my gosh, now we can incorporate that. What could we do that maybe, you know, we technically could have built before, but we couldn't have done it at a price point that would allow adoption by the mainstream.

Chris Gammell: Yeah.

Eric Klein: And so I think it's really exciting times.

Chris Gammell: Yeah, that's great. And so actually I'm going to make one broad reference here to a Mark Andreessen post that we did talk about and laugh about a little bit on the Amp Hour, but that was actually what interested me. I was like, you know, we really should get someone in VC on here to give us some real talk that is actually doing hardware stuff, you know? So to remind people, Mark's like, oh, we got to build things again. And I'm like, well, some people are building things. And it's like, you know, I had very awkwardly sharp comments about that stuff, but you have been and you are investing in people and hardware. And so what do you see, you know, is there more money going into this space or is there more interest broadly? I mean, does Mark's comment represent more of the VC industry than what you've seen? I mean, what is your take kind of like from a very high level on the industry and interest in hardware?

Eric Klein: I probably have an outspoken opinion on this and we've been doing it for about 10 years. So I guess we've earned a right to have an opinion at least.

Chris Gammell: Yeah, right. Well, I mean, you have a Twitter account. Everyone has an opinion on there, right? That's all I needed. I think you actually have some like some bona fides as well. You know, that's the real thing.

Eric Klein: I think when you go all the way back to the beginning of venture capital, venture capital, you know, it goes all the way back to the 60s, right? And it invested in Fairchild and Intel and it started in hardware. Right. But I think as we've entered the modern era of venture capital, I think you see two opposing forces. Number one is venture capital, I think is much like me. You know, we're excited about the future and we're excited about what you can do with atoms and bits coming together. So I think there's this natural desire to invest in things like, you know, rockets and robotics and all different areas. But I think that natural desire is sort of thwarted or dampened because venture capital, as much as it is, it's designed to take risks, it doesn't like the risks associated with hardware in the sense that a traditional software startup, you know, 60, 70, up to 80% of them, depending on which survey you read, die of natural causes, right? Yep. Yeah. Hardware startups are inherently more difficult. We always say hardware is hard. I always say, just think of the capital requirements and the fact that in the first 15 employees, you often can represent eight, nine, 10 distinct disciplines that must come together effectively to do a very, you know, difficult thing, which is to bring together hardware and software. They, by their inherent nature, are doing software and then adding hardware on top of it. And so there is more risk associated with a hardware startup. Hopefully the returns are commiserate. But I think most venture capitalists, if they, you know, took a look at a software investment with a certain rate of return and a hardware investment with a certain rate of return, they would almost naturally take the software investment because there's less risk.

Chris Gammell: Yeah. Well, I always talked about margin too. I mean, like, so one thing that, when I went from a hardware company to a software company, I just remember there was, you know, like once you buy chairs and nice computers and everything else, it's like, you're not buying parts, you know, like just the pure margin, like the accounting level of like how much is your cost of goods sold? It's not just people anymore. It's stuff. It's like, you know, and it's, I guess if you equate bits to brain power and atoms to the thing that you have to put together, you know, you need both, like you're talking about, you need both in a hardware startup and a software startup just doesn't have that whole element on a profit and loss statement.

Eric Klein: Yeah. I always, I always quote the, the very standard line. It comes from the consumer space, but right. I, I need a software, sorry, I need a hardware company in the consumer space to carry a Forex, you know, multiple on their bomb in terms of their selling price just for the math to work. And they're like, oh my gosh, that's a, that's a huge, it's a huge markup versus my bomb. I don't understand. And I'm like, yeah, you'll understand as soon as you try to run a hardware business

Chris Gammell: and exactly

Eric Klein: and float your inventory and, and pay for marketing and do all those other things. So, you know, uh, venture capital assumes and expects that a hardware business can run it at, you know, 70 to 90 points gross margin. Right. And that's really, really hard to do early on. Right. Right. Where your MOQs, you know, your, your, your order quantities are low. You're not getting the best pricing yet. You're still figuring out your manufacturing process. You're not shipping huge, you know, crates of, you know, in, you know, can shipping container crates, you know, over yet. Yep, exactly. It's hard to do that. So there, I think, unfortunately, it is hard. It is much harder for a, a hardware startup to attract venture capital and to be successful through the cycle. And I think over the last 10 years, we've seen that, which is a lot more venture capital did try to flow into, especially consumer electronics in the last 10 years.

Chris Gammell: I was hoping you'd bring up this distinction. Yeah. Because in, you know, you've been talking about robotics and, and there are some robotics in the consumer space, but like talking about consumer versus industrial or, you know, medical or other non-consumer spaces, how does that end up tracking with the companies that you go and invest in? And does it have to be by definition, non-consumer?

Eric Klein: Yeah. I think when we started our business and I came from, if you look at my background, I'm, I'm more consumer. I had plenty enterprise time, but I, you know, I think some of the things people know me for come from the consumer space. So I knew how to ship consumer hardware. And so when we started 10 years ago, I think probably 30% of our investments were in consumer. Today, I might do 5%. Every once in a while, I'll see something in consumer. But in general, we and many other venture capitalists, at least temporarily, have drifted away from consumer investing because of what happened both in the market and what happened in the overall market for consumer, the changes in terms of the concentration of power. And then I think the other thing is just the, the, the, the death rate.

Chris Gammell: Right, right. You might have some really big wins, but, or some big acquisitions, but you might not get that many.

Eric Klein: Well, unfortunately, if you look there, that's the challenge from ventures perspective. There are, there haven't been, the ratio of death to success is, is so far skewed to failure right now that it really scares venture capitalists away from consumer.

Chris Gammell: That's interesting. And so, how do you start to make these decisions? So like, you're, you know, your partner at Lemnos, you are big name in the space and stuff like that, but, you know, you see these kind of broad macro trends and then that, that drives your future investing decisions. But like, is it like you kind of develop this thesis and then build upon it later? Or like, how does it end up shifting from a 30% to a 5% over time?

Eric Klein: We're always looking to the future. This is one of the, probably the most exciting parts of my job is I'm always, to, to that point I made earlier, I'm always looking at the intersection of where markets are going and where technology is going and trying to answer a simple question. You know, what new solutions are, are going to be opened up in the next, call it one to five years where we can, you know, combine some new technologies, combine a change in the market and, and a company could come in and change something and create a large business. I do go back to this example and I can point out a few others, but I always go back to the example that three or four years ago, we started looking at, at the lowered cost of a bunch of components and we said applied robotics, not the general purpose Jetson, you know, the, the Jetson's TV show, you know, computer running around, but. Rosie,

Chris Gammell: Rosie the robot.

Eric Klein: So not Rosie, but, but, you know, where I could combine an arm, you know, a KUKA arm or a, or a, and I could put a Lincoln electric TIG welder at the end of it and I could add a bunch of software and, and AI and things and I can make a, a welding system that acts more like a traditional welder would, would think and act when it, you know, it's presented with a problem, right? Not a perfect jig, not two perfect parts. You know, how do I weld them together?

Chris Gammell: Not an assembly line where you have the exact same thing every time you're saying it's more of a flexible solution kind of idea.

Eric Klein: Yeah, where I'm looking at a quarter inch piece of chrome steel going on to a, you know, a, you know, three eighths flat steel at a weird angle and I'm like, I think I could get those two welded together in a pinch. It may, you know, and I'm going to do it the right way, right? Welders take a look at imperfect conditions and make a perfect weld. That's their job. Right, right. And I, I can tell you that, you know, three or four years ago, those sort of problems, we started to look at advances in, again, computer vision, point cloud generation via LIDAR and then the fact that arms and stuff were already relatively inexpensive and getting less expensive and I go, wow, I think we, as an example, we could augment the work that, that welders do. Right. And, and across the board, robotics was coming into its own. So you, you say, all right, I'm going to invest more into that space and you start looking for entrepreneurs and solutions there.

Chris Gammell: So it sounds like a lot, a lot of like Venn diagrams almost of like you have, Oh yeah. these different things like, Oh, crossover. I see it, you know,

Eric Klein: remix. That's a great analogy and you're just looking for a more intersection space, right? If you're too early, right? You're, you know, the classic phrase shooting in front of the dock. I've never heard that one. It's just the Venn diagrams. There's not enough overlap, right? But you, you want them to be there and you're trying to push them together. You can't do that. You, you're, you know, venture's job is to not be too far in front and not too far behind. Too far in front, that that's R&D, right? That's, that's DARPA and universities and things like that.

Chris Gammell: What's, what's a recent example of something that you would have been too far in front? Like where maybe, maybe you have an actual example too of something like a company tried to integrate it, but it was like, ah, it just wasn't there yet.

Eric Klein: Oh, I mean, I can give you an example. I was just literally, it just came off of a call. One of the things that we think a lot about right now and everyone's trying to guess, are we at the edge of it or not, is, is the transition from ice or internal combustion, gasoline, petrol, over to an electric based infrastructure, right? Sort of the, one of the underpinnings of a fourth industrial revolution. We've clearly started down this path, right? You can see the, the increased investment in renewable energy, solar, wind starting to kick in and, and become a predominant source of power. But underneath that, to move that power all the way through the grid to the point where you could, for instance, charge your, you know, your, your Honda car or your Tesla or your house and maybe even bank and store energy at your own home. How we make that conversion and how we build in new pieces of infrastructure and potentially even remove old parts of infrastructure. I think a lot of us in the industry are like, are we three years? Are we five years? Are we seven years? I don't think we now believe that it's 20.

Chris Gammell: Right. I don't even think

Eric Klein: we think it's 10. And so now all of a sudden VC starts to wake up and we go, oh, have we reached the window? And so some, for some VCs like me who sit farther out on the edge, I'm like, I think it's time to go. Probably. It might be a little risky, but we got to go.

Chris Gammell: Yeah. So you start to see people that are coming to you with proposals or pitches and they say, hey, this actually plays in this space and your ears perk up and you say, oh, okay, this is part of what I'm interested in now. So you might start,

Eric Klein: you'll spend more time on it. So I invested recently in a company called Electrify and it's a software company, but deeply tied to hardware, which is when you start to have hundreds and thousands of fleet vehicles, you have to manage when and how they charge because they can't all just show up at the five charging stations and, you know, sit for an hour and a half when you have large fleets. You don't just add a charger for every new node. Yeah. Capacity problems. Capacity problems. And by the way, I've got a, you know, I have an inrush problem. All of a sudden, if they all ask for power at the same time, I'm asking for more power than potentially big parts of the grid could give you.

Chris Gammell: Oh, that's yeah.

Eric Klein: And then you have to think about where the load is going. Like for instance, if it's a bus, where's that bus going? When does it, when's the optimal time to charge it so it can have maximum uptime? So it becomes a really interesting math problem, but you can only have this problem when we have enough nodes, enough vehicles that are electric. And by the way, think of this. When, if the LA County bus fleet was converted to electric, think about how much stored potential energy all of a sudden you have. You create these amazing second order effects and we're going to have to use software and hardware to manage that. So I'm betting that the world is going to start moving over from ice to electric just because of the cost savings associated with those fleets. Yeah. But the timing of it is, is everything. And so that's what we spend a lot of time doing is, you know, where are areas, have they matured or maybe there's less opportunity for investment or it's become a cold environment, AKA consumer. And then there are hot areas where I think, you know, ice to electric is going to, it's going to be fundamental and that, that, you know, it's, it's a great time to be investing in these type of companies.

Chris Gammell: What were the second order effects? So you mentioned that for the busters. What, what, what are some of the second order effects you think about with that?

Eric Klein: I'll point out a, I'll go back to the welding example. So everyone goes, oh my gosh, that means welders are, are, you know, we're, we've sent the robots to take out the welders. Oh no.

Chris Gammell: Right. They took our derbs.

Eric Klein: That's South America. Yeah. I'll tell you two things about that. Today, the, in the United States, there are over 200,000 open welding positions. The average age of a welder in the United States is 56 years old. Wow. 20 years ago, you know, we glorified white collar jobs. I mean, I grew up in that era, right? It's, you know, you gotta be a banker or a lawyer or a software coder, right? And, and we, we took the vocational arts and, and said that maybe it wasn't the great, you know, the best path. And that has repercussions. 10, 20 years later, those amazing welders who, who built America and build America every day, there are just less of them because they're getting older and retiring, but we didn't renew because we, we didn't, we didn't, in essence, glorify. We didn't honor vocational work. And so now we have this huge gap. This isn't, this isn't about, you know, welder, you know, robots taking welders jobs. This is about the fact that Newport News, one of the largest shipholders in the United States, can't get enough welders to, to do the work they need to do.

Chris Gammell: Right. And you can't just turn that on, you're saying either, right? You can't just say,

Eric Klein: I can't just snap a finger and have 200,000 welders. And then if you actually, I, I was just in Cleveland not too long ago and I was, you know, at a muffler, at a place that makes performance mufflers. And when you actually work with a welder, a lot of the work that they do, there's, you know, what I'm going to call simple welds and complex welds. A welder doesn't wake up in the morning going, I want to run the same, you know, you know, six, six inch or 12 inch diameter weld a hundred times today.

Chris Gammell: Right.

Eric Klein: Right. I want to, I've been welding for 20 years. I want to do that weld that's tricky and hard that really requires all of my knowledge as a master welder. So if I can build a robot that can do the simpler welds, it frees that company up to take their master welders to go work on the really hard weld, right? The, the one that, that makes that muffler do amazing things because it's a, it's a complex, you know, operation. Right. And so right now we're still at the stage, robots aren't taking anybody's jobs in the, in the, you know, sort of, sort of most terrifying way. But they can augment and get rid of a lot of really crappy jobs like washing dishes and picking weeds and doing simple welds repetitively so that we can take our workforce and, and have them do the things where you've got to use your brain and your brawn to get it done. Yep.

Chris Gammell: Yep. I always, I always like talking to roboticists and, you know, and you always, you know, it's fun to, you know, poke them a little bit and be like, yeah, you know, Terminator and, and they're going to take our jobs and all that other stuff and, you know, the roboticists just look at you and like, have you programmed a robot lately? Do you know how hard this is? Like, and it's like people are trying to make it better but it's just not easy. You know, there's just a lot of literal moving parts and it's, you know, there's a lot of programming there and reverse kinematics and all that other crap that goes into it and it's like, okay, well, maybe it's coming but it's not there yet. So, yeah,

Eric Klein: it, you know, it's the same thing we talk about AI, right? Right now, if you ask an artificial intelligence expert, we're really doing machine learning and in essence, primarily, we're doing reinforcement learning. We haven't, we haven't broken through to the general purpose AI that, you know, achieves, you know, massive levels of human intelligence and again, that's the point. I think a lot about what we're doing right now is augmentation. Yeah, right. Heck, anytime I don't have to do a repetitive, you know, annoying job, I can go off and do something that's far more rewarding and challenging and that's where we are I think with a lot of these new technologies is we're trying to remove some of the mundane work that we can, you know, augment or automate. So, I tend to look for those type of investments and then again, they're second order effects. This allows that welding company to concentrate its master welders on new business or on more complicated operations so that they can make more money. They're like, look, if I don't have more welders, if I can't do more welds, I can't grow my business. Yep. It's not about shrinking, it's about growing. They're like, boy, if I can get a robot to help us grow, I'd gladly do it.

Chris Gammell: Yeah. You know, I've talked about, I think about automation and like the, you know, one thing I've mentioned recently is like for my consulting work and what I've been doing is like, I'm not taking someone's job, but basically I, in the same way, I'm allowing people to grow in that they don't usually have a technician having to go out and push a button to reset something or go measure something out in the field. That's what basically, that's the value proposition of like IOT generally is, is to remove the need to have a technician going out in the field. That's why it's so popular and industrial in my opinion. And it's like, it's not taking jobs now, it's maybe taking future jobs, but like you're saying, it's, it's enabling that future, uh, higher level, higher level thinking that many of the technicians are good at anyways.

Eric Klein: No, I, I liken it, you know, I think a lot of your audience probably engineers, I always liken it to whenever I find a new tool that, that cuts some process out, right? All of a sudden I get a brand new library. I'm like, I don't have to write that library anymore. Right. Yeah, right. Right. I'll take any, I'll take any small improvement I can because the, the amount of work in front of me is nearly infinite. It's just, you know, if I can trim off something that, that I don't have to do, it just adds one more thing to the queue in front of me.

Chris Gammell: Right. Um, it's not a value judgment. It's just a, I want to get better. I want to do these things faster, make more money. Like you're saying.

Eric Klein: Exactly. So, you know, that's, that's where we are. And that's the, at some level, the crux of what I think, uh, deep tech or frontier tech investors are looking to do is to bring in new processes, new techniques, new technologies to make, you know, businesses go faster, bigger, stronger.

Chris Gammell: Yeah. So what are some of the other bubbles on your Venn diagram? So you mentioned robotics and I'd love to hear about some of the companies that you're investing in that are doing robotics, but are there other bubbles that are like exciting to you right now? You mentioned the, the electrification or batteryization or whatever you're calling it. What else is on that list?

Eric Klein: Definitely electrification is a huge one. again, moving from, you know, uh, from, from ice or internal combustion to electric motors and systems. And I'll, uh, I'll, you know, jump from that one to another industry that's changing a lot, which is, uh, if you look at, at aircraft and transport, we're definitely, I've invested in, in more than one autonomous aircraft company. How interesting. Uh, and, and, and you're like, well, how do those two fit together? A lot of what happened with autonomous aircraft was the intersection of, of, in massive increases in sense sensory and sort of local compute capacity. You know, for, for anything to be autonomous, it's, it has to think and it has to sense. And over the last few years, again, I think we talked about this a little earlier, camera technology and then the software stack behind it has, it has changed fundamentally, right? Our sensor capability has gone up and the cost of that sensing capability has come down. Imagine what you can buy and put on your bench today right now in terms of, you know, camera sensors, LiDAR, infrared, UWB, or ultra wideband. I can hit any part of the radio spectrum at a much lower cost.

Chris Gammell: Right. Without, without having a ham license, right? You don't have to like make your own antennas anymore and all the other stuff where it was all custom previously and now it's off the shelf modules or chips or whatever you need.

Eric Klein: Exactly. And the, and the software behind it, like I can, you know, I don't have to write my own mesh library to get five or 10, you know, 900 megahertz nodes to talk to each other.

Chris Gammell: Right.

Eric Klein: So sensing communications and compute, we've had such big advances on that, that now we can talk about, you know, adding limited or, or, or focused autonomy to things. And at the same time, that's, that's this electric, electrification push opened up low cost motors. I think five years ago, if you wanted a motor of the capability that, you know, gives a Tesla the torque it has, try to buy one of those, let alone source it. Right. That used to be esoteric. Go wind your own windings. You gotta, and, and you, and you literally, you had to find a vendor who could consistently wind a motor of that capability. And you had to marry it manually with an ESC controller and, and, you know, an ESC and then try to make sure you don't blow the motor or blow the board. Now those are off the shelf parts. So all of a sudden, if I'm building a, a drone that could fly, you know, for, you know, an hour and carry a hundred kilo payload, what was impossible, uh, just maybe five, seven years ago. Now you see examples like, I have a company Elroy air, uh, that is looking at, at autonomous air cargo delivery, uh, both for military and commercial applications. They started purely electric. What you realize is we do hit the edge of certain things like battery technology. Yeah. And you end up in hybrids where you use, you know, oftentimes you'll use a gas engine to power the electrical subsystems and to keep the batteries in a, in a good charge state. But, you know, vertical, uh, takeoff and landing aircraft that are capable, uh, of autonomously delivering cargo, you know, a couple hundred kilos over a hundred kilometer distance is now truly possible. We do it. And that was something we couldn't do years ago. And so the, the implications as an example for people in remote areas, like in Alaska, I'll, in, in fair, uh, I'll just take Alaska or, or, you know, Northern Canada, they rely on manned air flight to get basic supplies.

Chris Gammell: Right.

Eric Klein: Yep. Right. And so all of a sudden, if we could do that autonomously, unfortunately, you know, bush pilots occasionally die. It's a, it's a, you know, it's a rough job. Weather conditions can change a lot. I would much rather crash an autonomous, you know, cargo craft than lose a bush pilot.

Chris Gammell: Yeah, totally. Yeah.

Eric Klein: And, and we can do that. We're, we're building that type of technology. The military looks at it the same way. I,

Speaker ?: you know,

Eric Klein: unfortunately if we have to go to war, I don't want to lose a pilot when I'm trying to deliver cargo or anything. So I think transportation, whether it's wheeled or treaded or in the air, you know, it's fundamental. I'm personally an investor in zip line, right? It's a, it's a company using, uh, drones to, to basically bypass ground infrastructure and fly medical supplies from point to point.

Chris Gammell: Oh, I've seen that's the one where the, uh, the plane gets there and it like lands in like, it's got like a, a zip, uh, like, like a, a catch, a warrior catch,

Eric Klein: like on an aircraft carrier, right? It goes into the equivalent of like a net or it gets captured and it's slung out and then it uses the motor to fly. So it's like the catapult of an aircraft carrier. And then in flight, they, you know, it's, it's, it's a winged craft and it, it just efficiently approaches the target and then they catch it on the other side and reuse it. But, you know, it, it was originally started in Africa in, in situations where unfortunately due to civil war and, and a lack of, uh, infrastructure investment, it's hard to get, you know, medical supplies quickly from point A to point B, but the air is, is wide open. And if you do it autonomously, if something, again, if something happens and, and the, and the mission fails, you just, you know, launch another one. You, you're not, you're not unfortunately dealing with a loss of human life. So these are the sort of things that I think are, are, again, if you, if you had told me we could do this 10 years ago, when I started in the business, I would have been like, nope, we don't have the battery tech. We don't have the motor tech. We don't have the vision. We don't have the mission planning software. We don't have all these things. And now 10 years later, we're doing it.

Chris Gammell: Right. I think that's the crazy thing about it is like, no, this is actually, this is a real thing. Like you could get a package dropped by an autonomous, you know, drone onto your doorstep. I mean, well, maybe not in a city, none downtown Chicago, but like if you were in a rural area or in Africa somewhere, this is a real thing.

Eric Klein: It absolutely is. And, and in fact, you know, another one of my investments was, uh, is a company called marble and they were doing, uh, a few years ago, they were doing, you know, point to point remote delivery, you know, like you could put food, groceries, anything in a robot that just rolled up and down. The sidewalks from a technology perspective, we were there, but then we quickly found out, you know, like the city of San Francisco was like, uh, there are no rules about this. We didn't know there were no rules about it, but now there's a rule. You can't do it. And so sometimes we race in front of, uh, the rest of society and we almost have to wait for, for regulations and, and best practices to come into play. To your point, we can point to point drone delivery things today, but you know, the FAA has got to figure out, well, how would I regulate the airspace when that many objects are simultaneously below 300 feet? Yeah. Right. We built an entire system to manage, you know, anything from a thousand to 38,000 feet, but underneath it, you know, we had some loose regulations because there was no technology to really flood that area. Yeah.

Chris Gammell: It's like a Gibson, the Gibson quote about, uh, futures already here is just not evenly distributed kind of thing. Right. Exactly. In the, uh, in that gradient somewhere, there needs to be regulation so that someone doesn't get bonked in the head by a drone or bonked in the shin by a drone or whatever might be capable.

Eric Klein: I always love to tell the story. When we were looking at marble, we went and pulled all the regulations for major metros about what could and couldn't be on a sidewalk. And the closest thing we could find that was regulated was hot dog stands, food vendors, because it was, you know, sidewalks were for people and dogs at best. Right. And you, you know, the only rule is don't let your dog pee or poo on there. And you know, if you're a food vendor, here are your rules, but no one, you know, they hadn't, I guess they hadn't been reading their science fiction. They, they didn't realize we're going to have a robot go up and down the sidewalk. And so there were no regulations. And so part of what we had to do as a company was to work with local regulators, to try to figure out how to make rules.

Chris Gammell: Sure. Sure. Well, you know, the, you know, you really missed an opportunity. You just, you throw one of those hot dog heaters on the top and boom, you're done. You've already matched your regulations. It just happens to also have storage where you're speaking your packages out of it. Have a hot dog for free. And also there's a, you know, delivery, delivery as a side service, a hot dog and your groceries. That's right. That's right. Yeah. Oh boy. Just sloshing hot dog water all over the sidewalk. It's really not a pretty picture. So what is, so what is the story of then? So like a company like that, are they just kind of in limbo right now as, as regulations kind of catch up?

Eric Klein: Well, two things. Number one, they invest in, they have to spend time working with local communities to, to help create those rules. And, and so across that industry, I, you know, there are other companies like starship and Robbie and others who were also founded around the same timeframe. You know, some of them retreated and said, well, okay, if there are regulations about streets, where else could I go from point a to point B? And I'll give you two other examples, right? So on a college campus, all the sidewalks are owned by the university. So all of a sudden you have one regulatory body and you say, well, wouldn't you like to be able to move supplies or books or food to dorms from places without having cars all over your campus? And they're like, Oh, I sort of like that. So I think starship went and did a lot of university deliveries. And then if you think about a large industrial factory, right? Multiple buildings on a larger site, you're moving whip between buildings all the time, right? Yep. Work in progress, right? I got to move a, Hey, here's a half. Well, you know, I got a weld on it, but I haven't done finishing, move it over to the next place.

Chris Gammell: Right. And you, and you might build in that, that infrastructure. Like I was in a fab and there was, you know, these movers that do this thing automatically, but if you're not investing in that infrastructure, you might want to have like a quote unquote off the shelf thing, like,

Eric Klein: absolutely. And, and, and again, you're always moving things around. If you think about logistics, logistics is exploding right now. And, and Amazon prologis, anyone, DHL, FedEx, anyone who's got a huge number of packages, they're always just moving them around. That's their job is to move. That's right. So they, they need things that can move five, you know, five feet and they need things that can move 500 miles. And so they're investing heavily in, in transportation, robotic solutions, uh, for, for all different scenarios.

Chris Gammell: Yeah. Yeah. Actually, uh, past guest of the show, uh, Greg Charvat, he works on humatics and that's, uh, like, uh, indoor tracking for, I think for third party robots that are doing that kind of thing. When you need to track where a robot might be in a factory or, or something like that.

Eric Klein: Oh, heck of hard. That's, that's another great example. Five and 10 years ago. Like how did you, without GPS, how did you track something inside of a building? Well, it was a lot of custom radio and a lot of finger crossing.

Chris Gammell: Right. Exactly. Yeah. And there's multi-path and all the RF craziness that happens there. And, uh, yeah, you know,

Eric Klein: in a building full of metal and maybe flew. Exactly. Exactly. Yeah.

Chris Gammell: Yuck. Right.

Eric Klein: Right. So, yeah, that's another thing that, you know, with UM, a bunch of technologies and, and hybrids, fusions of different technologies, all of a sudden we can track things inside of building buildings with a degree of accuracy. I've seen amazing stuff at six gigahertz, like, uh, looking at examples where we can look through walls and, and, uh, and, and the applications of that, like in elder care, no one, no one wants to get tagged and bagged, right? No one wants to wear a tag that, you know, they always know where I am and I don't like it. I wouldn't want it, but what, but at the same time, if, if you fall and I need to know if I run a hospital or a nursing home, but how do I sense without having to be intrusive on a patient or on a, on a, on a, you know, on an individual, we're inventing that tech now. So again, this is that cycle. We invent a new technology and you've got to figure out how to change the world with it, but, you know, not be too far over your skis, not too far in front of what the technology can do or the market is ready for. And then also, you know, not be too far behind.

Chris Gammell: Okay. Well, that's great. And actually that, I mean, I, I always like to ask when people are in VC, you know, we have a lot of engineers listening, like you alluded to, that might be thinking about getting into the, you know, the entrepreneurial space, either pairing up with someone on the business side or trying it themselves. What is something when, when you're looking at an investment or you're looking at a new space like this, what, what do you like to see when people are approaching you with, uh, you know, in terms of the technology, but then also the presentation to someone like you, uh, so that you will actually consider it.

Eric Klein: Yeah, I, um, as you said earlier, the thing that we invest in first and foremost as venture capitalists is people. You're again, if I invest in your company, I'm going to be working with you, hopefully five, 10, 15 years, right. As your company grows from two people to 2000.

Chris Gammell: Yeah. So, so you heard here first folks, stop finishing your product and go to finishing school. I,

Eric Klein: it's, it's, I gave a presentation to a bunch of entrepreneurs who are at, at auto in auto desks residency program yesterday. And I said, the thing that you, you didn't go to study in college, uh, that that's going to surprise you that you need now is storytelling. I always say that, you know, I always put up a slide. It has a picture of Steve jobs holding up an iPhone. And I said, his superpower at some level was storytelling.

Chris Gammell: Sure. Yeah. You got to create a vision that people believe in, right? I mean,

Eric Klein: I went to work there in the, in the, you know, in, uh, 1991, I think it was an intern in 1990. And I, I was like the Pied Piper. I was like kid out of, you know, still in school going, I hear a sound and I must be there. Right. It was the allure of California and this, you know, the Apple computer, that I worked on, you know, while I was in class and after school and stuff.

Chris Gammell: yeah. Yeah.

Eric Klein: He was a storyteller. And so bringing this back, you can be the greatest mechatronics engineer or EE or ME, but what you're creating as a team, you're, you're, you as an individual need to put the assets around you that can build a company. And so when I think about a hardware company, I think about three or four components. I always think, all right, who's in charge of the hardware, who's in charge of the software. Who's in charge of the business. And who is that charismatic outbound person who can put it all together and make it a story. Because early on investments, we always call it, we call it dream and team, right? Early on in a pre-seed or a seed investment, the earliest rounds of funding, you may have a proof of concept, right? It's the, it's the bubble gum and rubber bands and a, you know, a dev board. Right. Right. And it barely works, but it, it points to a future. There's a story that wraps around your first prototype. It's a vision. It's a belief. Your ability to communicate that is everything.

Chris Gammell: Yeah.

Eric Klein: But we didn't go to school. Like when, you know, when I'm, when I was sitting in the, you know, CS department writing, gleefully writing code on a, you know, on a sun workstation, I wasn't thinking, wow, I should get over to the English department and, and, you know, study effective communication schools. I was like, I, I, my code's gotta be 5% more efficient. Right. Then you come out and become an entrepreneur and you realize you, a big part of your, your job as a storyteller, you have to convince people to come and join your organization. You have to convince people to invest in it. You have to convince suppliers to do unnatural acts, right? To give you credit, to give you credit. Absolutely. To give you credit, to sign, to, to sign an MSA, right? To, to actually agree to a, to, to pick up your little product on their factory line. Versus a bigger contract. Yep. All of that is, is communication. And so. Eric, this is very frustrating.

Chris Gammell: I have to say. Someone wants to similar. Well, no, I mean, it's your, I get it. Like, you're totally right. It's just like, man, I, the more I hear it, the more I'm like, yeah, damn. Like, yep. But I think that that is a good thing to hear up front. Right. It's like, because the expectation is there, you know, maybe someone who's listening is like, you like technology, stay in this technology space. Right. It's like entrepreneurship is, it's, it's separate thing. And so we had John Saunders on here. Who's, uh, uh, NYCCNC. And he talked about like the, you know, the hardware versus the entrepreneurship thing. And he kind of melded it in that he made a company that was also making hardware, but it was like the, you know, it's basically on the services side, but it's like, if you're making a thing, then like you're talking about, you have to get people to help you make that thing. And there's so many elements around it that aren't just the, what's inside of the thing.

Eric Klein: You've just, and again, I'll, I'll bring it back. This is why hardware is hard. You've got to have somebody to run the business, to sell it. By the way, you want to talk about a polar opposite creature than a lot of engineers is the sales guy. Oh yeah. And, and, you know, I've watched entrepreneurs flail trying to figure out how to hire a salesperson because they don't know how to interview them. They're like, I've never been a salesperson. I don't understand anything about what they do. And, you know, I used to besmirch the sales guy and now I need one. And you're like, Oh, now you understand, you know, their superpower. Right. And so hardware is about bringing together all these disparate disciplines into a cohesive team. So when I go back and answer your question about a founder, I'm looking typically for two to three founders because it's really hard to have the charismatic, you know, super amazing mechatronics engineer who also was a sales guy, right. Or a sales woman, right. It just, they, that's a magical, it's a mythical creature. So you typically, when you're thinking about starting a company, you're like, okay, who are, you know, one, two, or three people who can join me as either founders or early employees who are the yin to my yang, the, the, the chocolate to my peanut butter, right. The, the create a team. And that's what we invest in is that small team. And you may not have every piece of it. Like I can help. I often will say, Oh, you guys are wonderful, but you need to meet Eileen over here because Eileen, her, you know, her mechatronic skills are amazing. And you've got the idea or you, you know, you understand how to sell to cat dealers. Right. And you guys should make a heavy, heavy robot right there. Right. You guys are the perfect, you know, team, but it is that part of it that I look for more. More than the technology by far. I, I, I always tell entrepreneurs the vast majority of the time I say, no, it's not because I didn't believe in their technology or the market. It's that I, I didn't see the right team to persevere through what's going to be a really hard journey.

Chris Gammell: Right. Right. Yeah. Oh boy. That's well. So, okay. So then you go to somewhere like a peer nine and you're given a talk to Autodesk folks and something like that. And it's a bunch of technical. Nerds like me. And me, I'm like, I'm like brethren, let's come together. Yes, exactly. Right. Let's kumbaya. And also here's how we make it happen. So where, where do you source the, the storyteller management salesy types and, and actually get along with them? You know, like you just said two separate things, right? Well, well I know, but I was, what I was really getting at, I don't think most of them are listening. So I, I'm cool with that. But like, is it, I mean, is it an MBA program? Is it a, is it just someone who naturally is already in a sales position? Like what is, what is the, you know, so if, if someone is listening to this, they love the technology, they want to push their thing out in the world. They know they need that person. Where do they go and seek them out? Yeah.

Eric Klein: Yeah. I think that I'll give you answers that are sort of relative to where you are in the world. I think at university, the great thing is you can leave the, the engineering building and one to your point, wander over to the business building. Right. And, and that that's, you know, that that's a stereotype that those two folks aren't all, you know, we don't have crossover folks all the time. Right. Right.

Chris Gammell: Yeah.

Eric Klein: Or Hey, if you're at, if you're in engineering school and you're like, Hey, I think I'm going to be an entrepreneur someday. I, I, you know, I feel like that that's my path. I would start taking classes, like take your electives in the business school. Right. Sure. Yeah. Drop the photography class and head to the business school or, or by the way, go over, go over and go to the comms building. Right. And pick up some comms classes or theater. I mean, theater helps to theater helps. All of it does. And, or go get your MBA after your technical degree. Right. And make, make yourself your own peanut butter and chocolate. Right. Go ahead. And if you think you have that, that proclivity, that desire to do that, then train up knowing that it's not just technical prowess. I can show you so many technical founders who woke up one morning. They're like, man, one day I was writing code and the next day I didn't get to write. I didn't, I don't do anything technical because now I'm the CEO and I have to deal with HR and, and legal and fundraising. And man, I used to be a really good mechanical engineer. What happened to me? I'm like, what happened was, is you became an entrepreneur, right? You have to become a leader and a multidisciplinary. And that's the definition of an entrepreneur. Right. I often, I do career development once I bring my founders in. And one question I asked them is I call it cell division. It's as your company is growing, you're trying to get someone smarter than you in every other job function that needs to get filled. But as the founder, you get to ask yourself a simple question when it's all said and done, what job do I want to do? I'm the owner of the company. I shouldn't make that decision. And I say to them, look, if you love technology, if at, at midnight, you're in front of a, you know, an IDE, or if you're sitting there in, you know, in Eagle or, you know, Altium or wherever you are, and that's your love.

Chris Gammell: Around here, we do Kike at Eric, but it's, it's cool.

Eric Klein: I know you do. I was just trying to see if I could rib you there. You got me. You got me. Damn it. Fate taken. Um, if you're in the tool of your choice, all right, um, and, um, and, and that's your love, then do that. Stay up, stay in IC and you'll always be a founder. If, if you love looking at the strategy of technology, be the VP of engineering or be the CTO. Um, but an entrepreneur, or like you end up having to be a great communicator. You have to understand a balance sheet, uh, and you got to be prepared to fly to Shenzhen and negotiate. Yeah.

Chris Gammell: Drink, have a, have a couple of drinks and, uh, and get to know your new teammates from.

Eric Klein: So in university, you have other disciplines represented by schools. When you go out into the work world, the thing I always say, let's say you're working for Caterpillar, by the way, you know, if you're in engineering, there's a business group over there. Go meet them, go talk to them, go network because someone over there may be thinking of an idea and you're like, well, I could build that in a heartbeat and, and, and, you know, network in your professional community as you leave university, because it's the same thing. Someone is cross training too, or their, their functional discipline is the one you're missing. Yeah. And so I think in the hardware community, we try to create happy hours and things to bring them together. I, I just, it's, it's hard to convince, uh, some of the business folks to come to our hardware happy hours. Cause they're like, Oh, it's a bunch of nerds staring at show off their prototypes.

Chris Gammell: I just know that this is going to go. I mean, I love,

Eric Klein: you know, I love bringing my prototypes to it, but you know, I think we do try to create it. And as a venture capitalist, that's part of my job is to go, Oh, Hey, I know the greatest business person you don't know, or the head of manufacturing that, you know, you haven't, or salespeople. I can, I can augment that. But as you're doing it before you get to talk to VCs or anything, I think it is, it's really, again, it's networking. It comes back to that thing. We said, like the thing we're having trouble doing in a Corona.

Chris Gammell: Talk to people. Oh man.

Eric Klein: You, you, you do. Again, as much as I love sitting at my bench, uh, you know, I guess that's, you know, the thing is you got to networking and interacting with people. That's a big part of being an entrepreneur.

Chris Gammell: Yeah. Yeah. I, I just, uh, I just recently signed up for lunch club. Have you heard about that?

Eric Klein: No. Tell me more.

Chris Gammell: So lunch club is lunch club.ai. And, uh, I'll send a link because I think I get like some points if I do that, but, um, I'll have a link in the show notes, but it's, uh, basically it's just a pairing. You basically say, Hey, I'm technical. I want to meet someone in either the similar technical field or whatever. And they try and pair you up. And, uh, it's a cool idea. It's a, it's basically, and then you like get on like a, you know, zoom call or just Jitsi meet or, or similar. And you just chat for an hour. It's basically, that's awesome. It's speed dating for nerds. Um, you know, potential. I mean, it could be founders, but it doesn't have to be. And so I met two people so far in Chicago and I'm going to keep trying it. So I like, I like it so far.

Eric Klein: No, I, I think it's super important. That's why when I love, what I love is when I get to get on the road, whether I'm in, you know, Denver or Cleveland or Boston or whatever, it's just meeting other entrepreneurs, other engineers, because in that I can go, Holy cow. Like I remember years ago, I met Kip Bradford, this, you know, super poly. Kip's the greatest. And like, I could talk for, with Kip for hours, but if I hadn't gotten off my button and left my little lab, I wouldn't have met the, the awesomeness of Kip. Right. And now when I have questions about refrigeration or about nine other things, I just call Kip. I'm like, yeah, what do I do? Who do you, you know? And it's that networking that small businesses, you thrive because you can't solve every problem yourself. You need, you need friends. Right. I don't understand why my radios are conflicting. Like, okay. You know, there aren't many RF engineers. You better, you better know someone who knows one because there aren't that many of them. Right.

Chris Gammell: Either make friends or be prepared, be prepared to, to, to pay a couple hundred bucks an hour to, to, to buy their time. Exactly.

Eric Klein: So again, I just keep always coming back to that. You know, companies are about people and, and entrepreneurs are there. They're glue. They're the, the, the center point of the whole thing.

Chris Gammell: Yeah. Well, let's hear some more about the companies that you have invested. I mean, so this is a long list. People can go to lemnos.vc slash companies and, you know, all, all of your companies are listed there. Are there others on this that we haven't talked about yet? So we've talked about Electrify and Elroy Air. But what about like a, a camp six or drop labs or dish craft? What are some of these other ones doing that are interesting and exciting?

Eric Klein: Yeah. Like I'll give you a great example is dish craft. Have you ever washed dishes? I have. I have. It's something a lot of us have done. It, it's not necessarily the funnest job. And then I always ask the second question. Have you ever washed dishes in a restaurant? I have actually. Yeah. Yeah. Well, is that a, is that the job and path of your life that you.

Chris Gammell: Oh, no, it was not a long-term thing, but I actually liked it because you got to control the radio. That was always the thing for me. So I worked at a frozen custard place and I got to like control the radio. And I was back there for like two or three hours a night and just kind of like, you know, you're the last one to leave, unfortunately, but I did like the radio part. I will be honest about that.

Eric Klein: It's a job today. If you, uh, if you look at another, I haven't happened to look at macro trends minus the politics of the universe, um, migrant labor coming into the United States, which by the way, power so much of what we do. It peaked around 2010. And so there, there are less people coming into the United States and, and, and entry level jobs for folks who are maybe still learning the language, going to night school and all those things. They're harder to come by. One of them, a big one is, is, um, back backside of the restaurant, everything that you as a restaurant go or don't see. And, and, and, and one of the hardest jobs in there is, is dishwashing. It's a hot, humid environment. Remember that water is, is heated up to a hundred, 125. I think it's one 25, one 40. The machines are hot. It's damp. It's it's, of course, it's just food waste. And, and it's, it's not a job. Most people aspire to make a career out of. Yeah. And with migrant labor sort of peaked out, the problem for restaurant people is they pay, uh, they often pay their dishwashing staff almost the same rate that they pay a sous chef. So like over $27 an hour. And the, and those people, they just burn out because it's, it's a crappy job. Um, so dishcraft looked at this, Linda, the CEO, who was one of the original founders of, uh, not I robot, the other, the other robot vacuum company. Um, Oh man, it's eluding me. Not I, uh, I got,

Chris Gammell: I got, I got a room at home. So I'm sorry. Yeah, I know. It's Scott Miller.

Eric Klein: We love you.

Chris Gammell: Yeah.

Eric Klein: But, but she was a, uh, she was a experienced robotics founder and, and she looked at this problem and said, Hey, can't we automate this? Right? So if you've worked in the backend, you know that there's this big dishwashing machine called a Hobart, right? And it sits back there and you have, you put that, you have to put that, you have to get the dishes that come in sort of haphazardly. You got to separate them into there. Is it a spoon, a fork, a cup, a glass, you got to rack them. You got to pre-wash them. And then you got to run them through the Hobart. And on the backside, you got to do the whole thing in reverse, right? You got to resort it back out and get it recirculating because restaurants spend all their time thinking about plate counts. Which is just how many times in an evening can they turn a table? And so what you're thinking about is throughput. And if your dishwasher walks out or that don't show up one day because they're just tired of it, or they're hurting and aching, all of a sudden you don't have throughput. You can't serve, you know, you don't have the plates to serve. You bottleneck and you break down. And so Linda looked at this and said, well, couldn't we automate this? Isn't it time? And you're like, oh, that's got to be an easy robotics problem to solve. Oh God, no. Oh gosh, no. Like sorting, like, okay, you know, someone brings in a big bucket full of stuff. You've not only got to figure out what's in the bucket, but you've got to be able to figure out how to grip a spoon versus a plate.

Chris Gammell: I was just imagining a robot arm just crashing through a stack of plates, you know, like, like when there's no sensing like feedback, it's like, it's just a lot of cracked porcelain or ceramic rather.

Eric Klein: So we funded her to tackle the problem. And now she can, with incredibly high throughput, wash dishes for the, for restaurants. And, and, and they looked at different business models and, and now they do it as a service. So literally people send the, the dirty dishes over and they, they turn around and truck back out clean ones. And the same way linen gets cleaned.

Chris Gammell: Oh, interesting. Does that mean that they, they have more, they need more plates up front, but then the company like fronts them that, that stack of plates.

Eric Klein: Yeah. In essence, you're guaranteed to have every business day, the number of, you know, plates and, and silverware and serviceware that you need. And at the end of the day, you send it out, but no matter what the next morning, you always have what you need. Yeah. That's the way linen works. Like again, no one, you know, or diapers. It's diapers. Yeah. Yeah, exactly. But the problem on the backend is, is, you know, if, you know, you could either hire, you know, hundreds of dishwashers, which think of a, I'll give you a great example. Um, in Las Vegas, you, you think about all the restaurants, right?

Chris Gammell: Mm-hmm.

Eric Klein: Think about the, at, at a large casino, they serve 10,000 plates or, or, you know, plated meals a day for the staff. Not even. Yes. So the, in the backend, you never saw that. 10,000 place settings had to go through on a day just to feed everybody. Not even the front end staff, not, not, not you as the. That's your break even.

Chris Gammell: Yeah.

Eric Klein: And so you, you, the scale of that problem, think of airlines. When an airplane lands, how much dishware has to come off and come on. There's all these great hotels, a convention center. So she went after what, you know, when I, as a venture capitalist, I'm like, wow, that's a huge problem. And as a technologist, I'm like, how are you going to do that? And we thought of all these different ways of gripping and, and, and, and capturing plates and sorting it. And she hired a world-class folks of, you know, group of folks from SRI and, and they solved it. And so that, that's a great example of a company that is using, you know, applied robotics to solve one particular problem that again, 10 years ago, I don't think we could have economically done it, but now she can offer something where it's cheaper for a company to engage her service, to deal with the dishware rather than keeping all that equipment and staff on site.

Chris Gammell: Yep.

Eric Klein: That also when, and that savings, restaurateurs, they're going to probably put some in their pocket, which thank gosh, we need them to do that right now. Right now. Right. Of course.

Chris Gammell: Yeah.

Eric Klein: But a restaurateur always says, if I have a dollar to spend, I'm going to try to put as much of it in the front end experience, what the customer experience is. So anytime you can save them money, they can be a more profitable business, but they can also invest in you, the customer. Right. And so that's how we look at these problems. So it's exciting because I get, again, I get to understand the technology of the solving the problem, but I had to try to work, you know, with Linda and the team to, to look at the, at the business of, of dishes. Um, because again, she could solve the problem, but if we didn't do it from a business perspective in a way that was profitable, both for her and for her customers, then the technology didn't matter.

Chris Gammell: Yeah. So like a company like that too, I mean, and, and just speaking more broadly, like when they go into, uh, like a customer and they, you know, they're trying to price out their product, like a dish service or something like that, I guess they're not selling the robot directly. So it might be a little bit easier on like a, a service basis, right? They're saying like, Oh, well it's, you know, a price per plate or price per month or something like that. But if there is a, I guess maybe other companies that you, that you invest in, like what is the maximum payout time that, that companies could charge, right? So if like, Hey, you're paying 30 grand a year to a dishwasher, our device costs 120 grand. So it's a four year payoff or something like that. Like what is, what does that math look like if, if there is a hardware element in it?

Eric Klein: Yeah, there's, there's two sides of that equation. I'll, I'll say that one of the things that, and we'll, we'll stay in robotics for a minute. In applied robotics. There are some companies who want to treat the robots purchase as a capital expenditure, right? They buy it. They want to write you a check and own the robot.

Chris Gammell: Right.

Eric Klein: Right. Think of Ford motor company, all those big arms that are moving F one 50 parts around. I'm pretty sure Ford owns those things, right? They have the capital budget to do it. Then you turn around and there are some businesses like a restaurant that are more cash driven, cash in cash out. And so what they want to do is spend OPEX money, or, or, or, or, you know, cash in cash out. They don't want to spend $10,000, but they'll gladly give you a thousand dollars a month.

Chris Gammell: Right. Yep.

Eric Klein: And so one of the things, venture capitalists love reoccurring revenue businesses, right? Because they, they love SAS, SAS, um, unfortunately, software as a service, uh, software as a service. And when, when,

Chris Gammell: when, uh, Scott Miller, who Eric mentioned earlier, it was on recently, he was talking about product as a service is another newer thing, but that's, Oh,

Eric Klein: you can, I always say you can put anything in front of an ass, uh, which is robots as a service product as a service flight as a service thrust as a service. GE, you know, famously will sell you thrust as a service. Everything's been made into it as a service, but, uh, venture almost over indexes on your ability to do that. Whereas I always say, you know, if, if somebody wants to write me a $500,000 check for a robot, I'm, I'm going to, as a business owner, I'm going to take it, you know, you're, you're as a service be damned. Um, but underneath it, I'll sell you a service contract in addition to it, but also I'll take the big chunk of money up front. Exactly. So I, I think there's a natural conflict where a lot of businesses are used to paying for, some businesses are used to paying for things up front. And when we try to sell it to them as a service, they're like, no, I want to buy that robot. And, and the venture capitalists say, no, I only want them to take it as a service. And I'm like, no, you're a business owner. You're going to take the cash, however you can get your hands on it.

Chris Gammell: Stick it in his savings account every month. You get some money out and that's your, there's your, as a service. Yeah.

Eric Klein: Exactly. But again, a big part of when you're a startup, your job early on, and a lot of the initial money that I put into a company is to, to do two things. Um, this is what the seed, what we call in, in the venture business, the seed round is for it's, it's to prove primary product market fit. And to reduce technical risk to prove that I can take the, the, that there's a customer that wants to buy it at the price that we think, we can sell it for that's primary product risk, just proving that. And then the second part is, can we build it and manufacture it at the price that the customer need that, that, that will match the economics. And if during the seed phase, if we can prove those two things, that means we're ready to ramp the business up. So when I give money to a company, part of what that entrepreneur is doing is going in and doing customer interviews and saying, Hey, restaurant, if I could make a thing that would wash your dishes, how would you pay for it? And how much would you pay? And how much do you pay your, how much do you spend currently? And, and then you go back and you look at it and go, well, they are, they spend a dollar. Could I give it to them for 50 cents? Because if it's 90 cents, they're going to go, eh, why do I have to incur the, the, the, the, the, the switching cost? Right.

Chris Gammell: That's right. Yeah. Yeah. Yeah. Yeah.

Eric Klein: You know, we all, we all know, like when you change, like I'm changing a development environments right now, super painful, right? Switching cost. Um, and so you, you have to provide so much benefit that it overwhelms the switching costs. And so that process early on is what entrepreneurs have to learn how to do. And that, that's a lot of both primary customer interviews and then a lot of research. You spent a lot of time reading papers about businesses and, and understanding again, how much, uh, how much is a single dish to wash? I had to go learn that, um, so that we could look at this particular business. And so, yeah, there's a lot of research that goes on to say, oh, in this business, half 30% of the people do CapEx, 60% do OpEx, you know, and how would I build a variable pricing model? How could I sell some, some people want to buy it. Some people want to rent it as a service. How do I build a business around that?

Chris Gammell: Yeah. And is that something that you expect? So again, to go back to what you expect and what you kind of hope for when someone approaches you, is that something that you'd want to see, uh, presented to you as a, you know, Hey, here's, here's, here's the reality of the financial situation.

Eric Klein: Oh, I mean, idyllically. And again, in the land of magical unicorns, you know, someone walks in with the perfect business plan and a, and a well, well-developed prototype with a clean manufacturing plan. And I'm like, wow, I don't feel like there's any risk. You're probably like, am I getting punked? Exactly. That is, that would be the VC equivalent of getting punked. In reality, what I'm almost more evaluating is their logic, like how they would attack, the problem. I love it. When an entrepreneur comes to me and say, says, I know this and this, but I don't know the answer to this. Here's how I might try to solve it. Because they may or be right or wrong, but number one, they're, they're honest.

Chris Gammell: Yeah.

Eric Klein: Yeah. They're, they're, they have humility and we can have a dialogue because then I can engage and say, okay, you don't know the answer to this, but maybe I know the person who does. And we can help that person. We can bring that person in to help you solve that. But it is really an assessment, like any great problem of, you know, what do we know? What do we not know? And how would we remove the fog of war to the best of our ability? An entrepreneur that comes in, who's just cocky, who says, I know the answer to every question. And, and I, I'm just, I'm feeling it. And I'm like, you have a power I don't have. Because whenever I stare at new things, I'm like, Oh boy, I don't know. Right.

Chris Gammell: Right.

Eric Klein: And so you're, you're looking almost for problem solving capability more than the answer to every problem because you, and you know this, you, you know, you run a business there, there are days you wake up and you're just like, well, that's a new one. I haven't seen that yet.

Chris Gammell: Yeah. It's been happening more than I like lately, but yes, yeah, it does happen.

Eric Klein: And it's how you approach that is it forges the metal. Of an entrepreneur, which is, you know, how do I solve problems? Because I'm going to see new ones every day.

Chris Gammell: Yeah.

Eric Klein: I always say that for me, like my job as a VC is, is to communicate and, and impart wisdom and knowledge. Cause I, I've been building hardware for 20 something years. It's not a badge of honor. It just means I have a lot of scar tissue. And if, if I can help you not make the mistakes that, that I and others like us made, you can make a new spectacular mistake. That none of us have ever thought of before, which the solution to maybe creates an amazing breakthrough.

Chris Gammell: Right. Eric is like the robot that makes the weld over. It tells you about the weld that has happened over and over again. So you can go make that new weld, which is that new, huge mistake. I mean,

Eric Klein: that's what we all do, right? You're, you're able to, to, to look at things and tell people, Oh, Hey, did you think of this? Right. It's, it's, it's that it's, it's the 10,000 hours, you know, behind the stick. It's that's, that's our greatest advantage. And if you can accumulate enough people around you of various disciplines with that flight time, then you have the best chance you have of, of, of creating a company. That's, that's all it is. It's, it's not ego. It's, it's scar tissue. Yep.

Chris Gammell: Yep. Definitely. Well, and people can hear more about your scar tissue because you have a podcast. You've done three seasons of the Lemnos into the forge. Can you tell us about that real quick? Yeah.

Eric Klein: I, uh, over the years I ended up becoming a, you know, a hardware guy. I started in software and, and drifted into hardware. And then I, you know, I ended up becoming an angel investor and a VC. And when people asked me about that journey, I was like, well, you know, the thing I realized is that, uh, there are no rules. Like you just, if you want to do something, you just got to go and learn and do it. And I realized that there was no one path to being a founder, right? We, we, we glorify the MIT, you know, super graduate with the 16. Well, in my day, 1600 SAT score. Now I don't even know what number it is. Actually, I think they're getting rid of that now. Aren't they saying like school is going away from it? Yes. And I, I'm a, I'm appreciative of that, but you know, we, we, we, we glorify the perfect quote unquote, the perfect path, right? The, the amazing student who, you know, went to the perfect college and then went to the perfect company and became an entrepreneur. I can tell you without a doubt with massive statistics to prove it founders come from every walk of life.

Chris Gammell: Yeah.

Eric Klein: And what I wanted to do with the podcast was capture those stories so that when someone's thinking, I've got a great idea, I think I might be able to do it. I didn't want them to be dissuaded because when they looked at themselves in the mirror, they, you know, they don't see the, you know, the rat on the ring, AKA the MIT degree. They don't, they're like, am I a founder? And, and so when you listen to 10 different founders, you're going to hear 10 different stories of people who didn't work on hardware until they started a company. Right. Or, or people who grew up like me, you know, sort of, you know, I had a chance between a, buy a dirt bike or a TI 99 4A. And, you know, you probably guess which one I bought. Right. Those stories though, I created this podcast so that other founders or people thinking about the path to creating a company could hear not only that backgrounds are very diverse, but to hear the stories of real founders, not the glossy, it's wonderful. You get kombucha in the morning and it's all wonderful and money rains from the sky, but to hear, you know, what are the hard parts of it? What are the things you have to grow into? What are the challenges? And, and how do you grow as an individual? So I created a podcast just to interview founders, not about their companies and their product, but about their journey.

Chris Gammell: Yep. Yep. That's great. And I think that's good too. I've been asking what people listening here can go and be interested, you know, and how they can approach you and, and, and approach the entrepreneurial process. But it sounds like it's just, you know, just as easy to listen to how other people did it and, and model behavior off of their experience and their scar tissue, like you talked about.

Eric Klein: No, we, we all have as, as entrepreneurs, we all have a story and, and I love those stories more than anything else. Cause I find them inspiring because again, it's, it's not an easy path. Like my wife always, whenever I end a job, cause I've, I've, I've, you know, built a bunch of companies and some, some failures, some successes at the end of it. She always goes, why do you keep doing hardware? Like, it's just, it's crazy. And of course my wife, my wife works for hardware companies most of the time. So it's ironic. And I'm like, I don't know. I'm like, uh, I'm a, I'm a moth to a, uh, you know, a flame. I, you know, when I, when I'm done at the end of the day, I run to my bench and make some goofy prototype of something. That's just who I am. But inside of it, you know, inside of the, the difficulty that it's, why are we, you know, why, why do we aspire to do it? What inspires us to do this? Those stories. I just, that's candy for me. And so I wanted to, to give other entrepreneurs that. And, and it, and it goes to the, the thing, you know, for the, you know, listeners in this audience and, and across the board, uh, people always say, well, how to, how to, you know, oh my gosh, you're a VC. I don't know how to get ahold of you. VCs never return calls or anything. It comes back to networking. I, you know, I, I started in engineering. I'm, I, you know, I'm staring at my bench right now. Um, it never hurts to ask. I have found the one thing I love about hardware is that we're a smaller community. And I have always found that if I pick up the phone and call a peer and I go, Hey, I'm stuck on this or I need this. We just take care of each other because we know how hard it is. The thing we're doing. So never be afraid to, to, to network. And, and, and, and I think you create this podcast. I have a podcast. We're all trying to, you know, increase the collective intelligence of our small community, but always network because hardware folks are just, they're nicer. I think at the end of the day.

Chris Gammell: Yeah. We just want to show our prototypes and talk about cool, weird stuff. You know, like that's, that's all that.

Eric Klein: That's our dream, right? Is to go to super con and just go look at this. And you're like, wow,

Chris Gammell: that's awesome. So many LADs.

Eric Klein: I, this is my greatest fear this year is I've, I've been working every year. I started going to super con a few years ago. I was late to the party and I, every year I go, God, I, I got to focus. So this year I'm like, I'm bringing this cool thing that I've been working on for a while. And I'm like, please don't have it be canceled this year. I'm finally ready to bring my goodies.

Chris Gammell: So I've been, I've been pushing the supply frame folks. I'm like, Hey, look, it's November. We're going to be like, yeah, a lot of stuff got canceled. Okay. Summer's out, but like, come on November. We're going to be fine by November. You gotta, you gotta do it.

Eric Klein: I'll wear a mask, but we gotta go. But it's that networking. Again, I come back to it because it's, it's a great, it's, you know, just, you know, take pride in the, in your barely working prototype. That's going to crash when you try to demo it to somebody and know that being a hardware entrepreneur is hard. And I always tell stories and people are like, are you just trying to scare me off? I'm like, no, what I'm trying to do is tell you if you, if you're a ship and you're in a Harbor and it's got some mines in it, wouldn't you like to know where the mines are so that you could sail around them and get out into the open ocean? If you knew that that's where folks like you and Scott Miller and me and any others who, who've, you know, had some time in the water. It's our job to help you get around those things so that you can be successful. Cause that's,

Chris Gammell: that's awesome. Yeah. Yeah, totally. Totally. I will put a pitch in as well for the, we are doing virtual hardware happy hours right now. I don't know if you've heard about those, but I have. You've been to San Francisco one, hopefully.

Eric Klein: I, I, yeah, I've, I've sponsored a bit of the ones. And in fact, there's a, I, I would have to give you the link, but I think maybe it was supply frame. Somebody created a master list of all the hardware events that are going on, like a calendar. And you, that one, the Chicago one appears on the calendar. Oh, great. There's, there's these, it's this great, this great feed where somebody was just accumulating all the virtual stuff that's going on right now in the hardware space. And I was like, oh my gosh, my calendar's full. I feel so, so enabled.

Chris Gammell: I think it's great too. It's like, so like you mentioned, you have, you know, hardware on your bench and talking about super content and stuff like that. I really liked that as like a motivating force to like get some stuff done because you want to show it off there or get feet, really get feedback on it too. That's the important thing is like, you know, maybe if you're stuck on something you could show, I think showing half finished prototypes is, is as valuable or more valuable than the finished thing. Just because it's like, someone's going to be like, well, why'd you do that? And then you explain it and you know, you kind of go back and forth about what's, what's going on with it. And that can really build camaraderie, but also like help you get free advice and answers and, and brainstorming. You know, that's awesome.

Eric Klein: No. And I, I would, I would really amplify that. I mean, the first year I went to super con, you know, I, I have my own history, but when I went there the first year I had a massive dose of imposter syndrome. I was like, Oh my gosh, the people there are so much smarter than me. I like, I'm taking, like I'm, I'm learning EE now. Like again, I'm, I'm pretty good with, with software and I'm not, I'm sort of learning. I'm not bad with mechanical, but EE is a new art to me and I love it, but I go there and I'm just intimidated, but, and I have sort of half baked stuff and you know, they, what is it? Perfect is the enemy of good. Don't when you go to share, I always, you know, I'm always terrified that people are going to look at it and laugh at it. And then I'm like, no, that's the thing. If you can get past that barrier of feeling like you shouldn't be in the room or that your thing isn't good enough. And it's never true. Like if it, if it, if it came from you and from your inspiration and your heart and your, you know, your ability, the people around you, I found it like super kind. They embrace it and are like, Oh, did you think of this? And Oh, we could do this. And, and then they, you know, they show you theirs and it falls over halfway through and you're like, Oh, that's so cool. Right. Yeah. Yeah. But getting past imposter syndrome and, and, and the, you know, I don't want to share it if it's not perfect, I think is, is one of those things that if you can do it, then you can really, the community can embrace you and you can embrace the community because none of us get it right the first time or the hundredth time.

Chris Gammell: Yep. That's more true than I wish it was, but yes, it's very true. Yeah. I was like, uh, I love when someone brings their first PCB to a meetup because they're like, Oh, it's just this small little thing. And I'm like, that is amazing. Like the making that jump to making a first thing like that with PCB is like, so enabling. No one, no one is surprised by me saying this, I'm sure. But like, uh, I love when people bring it though, because it shows that they are like on the path and, and trying new things. Like, I think that's just the number one thing that I want to celebrate when people are out at, at meetups and stuff.

Eric Klein: Oh yeah. Like getting to blinky. I mean, it's, I'm on that joint for journey right now. My first, like I'm building stuff and I need, I'm like, I need a PCB that routes power to here, here, and here. And I'm like, all right, I get, it's time for me to jump off the cliff. Right. Yeah. Don't call a friend, do it. That's right. That's right. But it's, you know, the first thing I'm, I'm sure I'm going to reach out cause it's, it's going to, as I, as I learn, uh, it's going to be, it's, you know, I'm going to, I'm going to be a new territory, but again, that's entrepreneur. As I bring it back to entrepreneurship, uh, imagine that journey that you do with your functional discipline that you've gotten good at as an entrepreneur, you end up having to do it across five or six different disciplines simultaneously. Right. And, uh, that, that's, that's being an entrepreneur and, and the, the way that you, you know, learn and grow in it is to surround yourself with others. Cause you just can't learn fast enough across. It's too many fire spigots in your mouth at the same time. That's right.

Chris Gammell: That's right. That's right. Well, Eric, this has been a great conversation about entrepreneurship and, and the hardware companies you're investing in. Where can people find you and your stuff online?

Eric Klein: Yeah. Uh, you can, you can reach me over email. Uh, I'm just Eric, E R I C at Lemnos, L E M N O S dot B C. Uh, up on Twitter. I'm, uh, um, Sir Coolio, S I R C O O L I O. And, uh, I can barely, you know, you barely remember to spell your own handle. It comes from back when I worked in video games. Uh, Oh, nice. Uh, and, uh, and, and again, I always say my, my, my, my,

Eric Klein: my,

Eric Klein: my,

Eric Klein: my,

Eric Klein: you know, send me an email, reach out to me. I'm always happy to chat. This is the, my passion in life and I'm always happy to share any knowledge or connections or, or wisdom or anything that I can offer.

Chris Gammell: Awesome. Well, thanks so much. And, uh, I'm looking forward to season four of the into the forge and hearing more, more podcasts from you.

Eric Klein: I am too. I'm, uh, I'm excited to increase the audio quality. I'm a, I'm a, I'm not a bad interviewer, but I'm a, I'm learning audio engineering as well. So that's a new, a new field to learn. Andy.

Chris Gammell: Well, thanks so much. Thanks for joining me.

Eric Klein: My pleasure. Thank you.