Business for the Post Covid World, a VC’s Vision – Pablo Fernandez, Low Gravity Ep 7.
April 16, 2020
Listen on Spotify, Apple and Your Favorite Podcast Platforms: https://cosm.to/p
On this episode of Low Gravity, Jonathan Calmus and Pablo Fernandez, talk about the challenges for the VC world in the times of COVID-19 and also how the companies and the Tech industry in general have to re-evaluate the way businesses are built. Industries are moving towards a more prepared society for the coming changes and the shift of thinking required to create more value from business. Less Unicorn thinking and more purposeful and impactful business.
To learn more about Pablo Fernandez check out his Linkedin.
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Low Gravity: A Cosmic Podcast
Episode 7 – Pablo Fernandez
Jonathan Calmus: Hello. Hello. Welcome to another episode of Low Gravity, a podcast brought to you by Cosmic on the start-up hustle tech and Shared Mobility. Today I am joined with Pablo Fernandez, who is one of our greatest supporters at Cosmic, he comes from Endurance and the Alyssa Fund in Chile and I hope to say by now a friend as well. Hello Pablo, how are you?
Pablo Fernandez: Ha Jonathan, thank you for inviting me. I’m super happy to be part of the podcast and I’m super happy as an investor in Cosmic.
Jonathan Calmus: Thank you. Thank you. Thank you. We’re trying to keep it that way as well. It’s kind of a weird times. Before we get into that, we’ll just give a little background on yourself. How did you end up doing what you’re doing in investments at Alyssa? I know that you spent some time at Stanford. Tell us a little bit more about you and your path to here right now.
Pablo Fernandez: So basically—so before getting here I used to work at the government at the ministry of economy in the innovation division. I was part of the team that developed the whole innovation strategy for the whole country. And I got a close relation with CORFO which is the Chilean Development Agency, the Carnosine, which is the research agency and a bunch of other institutions supporting the innovation and entrepreneurship ecosystem. And before that I used to work for a university as a consultant and a professor in matters of innovation entrepreneurship. So I was more used to work on entrepreneurship at the super early stage side from like getting the post it on the wall to the first prototype. But four years ago the founders of Endurance approached with the idea to launch a super early stage VC Fund. They had a bunch of experience dealing with more traditional companies. They ran a private equity fund who has already invested in like four or five companies by the time I joined. Now they have around eight. But they didn’t know much about how to deal with start-ups and founders and entrepreneurs. So that was basically what I bring into the table when I decided to join Endurance.
Jonathan Calmus: What I really liked about meeting with you and your associate Leah, is that you kind of—in all of the other conversations we had had with VCs specifically out of Latin America, we were really forced to be hyper focused on, this is the solution that’s going to be the solution forever. And we were still at a phase where we were kind of discovering ourselves as well as a company and the conversations we had, you guys almost encouraged you to a certain degree, but you also reinforced how important focus is and how important it is to get very deep and narrow within a certain concept so you can really capitalize on that market and the efforts you’re putting forward. What has been your struggle with taking a lot of the Western cultures from investment and that cowboy approach, which Silicon Valley is and bringing it to more of a rigid structure like Latin America?
Pablo Fernandez: I think that the major challenge, it’s basically the idea that most of the VCs that we usually have in Latin America are run by financial people who are more used to spreadsheets and an Excel and don’t have much of a real experience. I don’t have much on my own. But what I truly appreciate on entrepreneurs is the willingness to try and to exercise different strategies to approach to a goal. What I have been really appreciate from the entrepreneurs that I’ve got to know is if when they are capable of sort of like picture the new future that they’re trying to shape and they find a way to try to invite you to be part of the dream. And it has like a crazy part, but at the same time you can tell that they know what they’re talking about. And I think that that’s something super important when you’re trying to launch like a company to be aware that you’re taking like a big leap of faith. But at the same time that you do have a number of certainties in some matters where you know exactly what is going on.
Jonathan Calmus: It’s an interesting take because definitely to start a business from nothing, you need a level of hubris. There is no evidence other than your past experience and a gut feeling for where the market is heading. But that hubris has to be balanced with the decisions for the here and now. And that’s always the kind of perfect balance of not only survivability but also growth .So yeah, I totally agree with that. It’s something we’ve experienced a lot and it’s something that I think our entire team has learned a lot is that being rigid doesn’t mean you’re inflexible. It just means you’re really trying to stick towards a certain direction and then that’s where the little micro pivots come in and adapting to the market and everything else.
So I think this is a great segue for the current situation that we’re at. You’re sitting at your house. I’m sitting at my house. We’ve spoken a couple of times now about crisis planning and how to deal with the whole Covid situation. What’s going through your mind? I mean, we’ve spoken at the investor level, but just like what’s actually in your heart right now? You know, not in these big group conversations.
Pablo Fernandez: First of all, I think I’m pretty lucky to be leading a fund who have already finished their fundraising. I don’t need to be looking for money right now, which I think is a terrible time to be looking for money. Second part is that I’m happy that I’m getting a chance to be working with companies who are trying to shape the future world and a world which is definitely going to change from last two to three months. And I think that makes me very lucky in terms of like being here or being working in like an airline who are like going down, almost going bankrupt or like a big corporation who might be struggling with how to change under the current circumstances and how to make it fast and make it quick. So to me that’s the first take that I have on the current crisis. I mean, how lucky I am to be working in an environment where we’re used to uncertainty, we’re used to change, we’re used to be flexible.
Jonathan Calmus: It feels much less scary than I thought it would. I mean, this is a global pandemic in the entire world is on fire and it kind of just feels business as usual. Obviously we need to move faster and make decisions faster because we don’t have that luxury. But totally, it’s just, it’s a world of uncertainty.
Pablo Fernandez: Exactly. But we’re lucky enough to be sort of the captains of our own boat. I mean, and in a way you have the chance to shape your company and decide which way you’re going to go and you have the flexibility, some sort of flexibility to do it. Which I think that’s something that many big CEOs, in huge corporations don’t have. So I think that that’s something that is good, we’re lucky to be part of that work.
Jonathan Calmus: Totally.
Pablo Fernandez: But yeah, and also we are way more used to these kind of uncertainties. I mean, chances are that every now and then you face like a new competitor or there’s a change in your market or like a new regulatory scheme or something like that that forced you to change. Now that’s something that everybody’s going through and yeah, I feel like that start-ups are a little better prepared, maybe don’t have as much cash as some other big corporations but definitely their mind set is more adjust to these type of challenges than the big companies.
Jonathan Calmus: Most of the big huge stories from the last twenty years that we use as examples have all started in positions of crisis or even I would say go as far as forty years, because of exactly that, you’re forced to be nimble, you’re forced to make really quick decisions and if something is failing, you address the problem faster and move on to the next thing because you really don’t have that luxury anymore of waiting it out.
Pablo Fernandez: Yeah.
Jonathan Calmus: You experiment, which I think is actually has been one of the–if I’m looking at the silver lining, has been one of the greatest things of this quarantine is our team is forced to communicate a lot more. Everyone I’ve been talking to has been saying the same thing that, you know, they’re working a lot more these days because you’re kind of just inside and time is bleeding together. Collaboration has gotten much better.
Realizing how resources translate into execution, being more realistic with goals, being more micro with experiments and not saying, okay, we’re going to do these. All of this stuff starts to emerge during these periods. So if people can kind of,( and this is me more talking to myself) if we can move past the idea of just complete panic and terror and the world is coming to a dead holt and understand where the opportunities are. They’re not always—-capitalize on the situation. It doesn’t mean you have to pivot from a software as a service to start making a protective masks. It’s not necessarily the direction, it’s more what can you do right now to really maximize when we’re at the end of this cycle and at the end of this rainbow, what did we just get done? Like how did we amplify our efforts for all of this and how did we adjust the new world? What are some of the things that—-what are some of the conversations you guys are having with your investors? Like how are they reacting to all of this?
Pablo Fernandez: I will say that for many of our investors, they are not like, I mean they are completely worried about their other investments but not here. In many cases I feel that for many of them, we don’t have investors that are like professional VC investors. For most of them this is the first time that they’ve been part of VC fund. So this is kind of like the way how they’re learning about it. For many of them I will say that this is some sort of a place where they can like change or switch their mind-set from like a more traditional approach to a more bold approach on the programs and how to deal with these types of challenges.
So I feel like they’re not in panic regarding their investment in our fund. They are, I will say their excited to know about what are the answers that the companies are working on. They knew that there was like a lot of risks in these types of investments. I feel that these kinds of crises is sort of like a marginal sum of a risk. I mean, for many of them I will, they will expect—they didn’t have any like a yield return on their minds about how much these fund or we’ll get back to them. So, what they have been asking for is that, okay, so what are the companies doing? What are their takes? How are they facing this? and that’s what got them really excited. We usually do like a newsletter every three months now we have to—-we did a special Covid-19 one, to let them know how the companies are working.
We got a lot of questions about which ones are the ones that were struggling with the situation. We have a bunch, like two or three companies who were working on developing test, quick test for the Covid-19. We’ll have another company who is working on how to manage people in the quarantine to exactly know where they’re going. So our investors are super excited about the type of answers that our start-up could bring as a solution to the crisis.
Jonathan Calmus: I think your portfolio too, Endurances portfolio is really well-equipped. I mean it’s been a lot of like biotech and I was thinking about that the other day. A couple of your start-ups are really well equipped to make serious impact right now. And that’s kind of the interesting thing to look at as well as a lot of these solutions have temporary place in market because there’s such a shortage of things and so much fear right now. But when we get out of this, there’s going to be that reverberating impact of how does Covid testing necessarily play into daily life in six months from now or a year from now when testing is easy access and things like that?
Pablo Fernandez: I think that that’s one of the many questions about what change are going to be permanent and which ones are going to be for like a short period of time. And I think that that’s the biggest question that most of the companies should be asking themselves now. In terms of like, my feeling is that e-health will have a major change on the train. I mean, everybody’s going to start investing in those types of solutions, medical devices, early tests. Anything that goes from that area will have a huge impact because I mean we will need to be ready for the next crisis. I’ve got also the got the feeling that all that is related with, food tech in terms of like how to get products not for money miles, but from other sources will have a huge also impact.
Jonathan Calmus: It’s an interesting point. So like a year ago, I love living in the future. And so like a year ago, a year ago, I got on this habit of just asking everybody I met, how would you feel about getting in an autonomous vehicle like a robotic Uber? And a lot of people said, no, I’m super uncomfortable. I don’t want a human driving me. I’m sorry. I don’t want a robot driving me a human safer. And then I would always include the second part of that. How do you feel about eating lab grown meat? And a lot of people responded like, Oh, that’s so nasty, but let’s rephrase these things. Sterile transportation and pharmaceutical grade food. And it’s a really—and now all of a sudden is…
Pablo Fernandez: I think it’s a great idea.
Jonathan Calmus: I think it’s the perfect time for this. The last mile robotic delivery services that seemed more novelty and cute seem very, very important right now all of a sudden because there’s little human intervention in the centre.
Pablo Fernandez: I mean the whole idea of like robots taking care of the elderly, that’s definitely something that it will become way more popular right now when we cannot approach our sixty something or seventy something or eighty something grandparents. So yeah, I mean I think that this is going to bring a new perspective about what are we doing or how are we thinking about the type of development that we want to work on. I think that this will really bring a lot of question and challenges in terms of like the type of society that we are working on. And what are going to be the next issues that we will have to face?
Jonathan Calmus: It’s been something that’s been talked about a lot. I’m sure you saw, some of the articles written by Bill Gates and some of his speeches and stuff. It’s been a big topic. I just think that it like three years in start-up land sometimes, at least I lose track of what three years actually is. To me, three years is not a lot of time at all. To a lot of people three years is a lot of time. Sit back and let’s wait and see and then all of a sudden you get hit with a global pandemic or something like that.
What I am is that there’s going to be a heavy drop in regulation around a lot of these experimental techs, because the tech is there. It may not be that cost effective to grow a hamburger in a laboratory or to have a Robotic Uber pick you up. But the biggest blocker is simply the implementation and the regulatory stuff surrounding it. Now all of a sudden the heaviest regulated industries like medicine are accepting donations from a guy with a three D printer, which is completely unheard of. That is I think, one of the greatest opportunities here.
Pablo Fernandez: But I think that we’re going to have mixed results in that area because at the same time we will have to be super careful about what type of biotech developments are we pushing forward in terms of life if we believe that this is like a biotech crisis that we’re facing from a virus that mutates from a pangolin to a bat, to a pangolin to something like that. So I’m not exactly sure how the regulatory framework is going to change there’s going to be a little more pressure in terms of like, we need to develop a new technology faster, but at the same time I think we’re going to be a bunch people arguing with good reasons that we should be a little more careful in some of these aspects about how we’re pushing forward for them.
Jonathan Calmus: Totally. It makes sense. It makes complete sense. Why you would want that level. I think just by force though, like at least doors are opening now regardless of what’s about…. Because the time of crisis and when you’re level headed, there are two different strategies. So a bunch of regulators postulating and sitting around and talking about whether or not something should be implemented is different than the necessity of the here and now, that today we need three D printers. Even if you’re a thirteen year old kid, contribute no more Medtronics. I don’t care if you’re an MIT student with ventilators or if you’re a huge company, help us out. And it will definitely slow down, just because this is a form of triage right now. Bu it’s also the little window, the crack. I mean Cosmic right now is working with government, not in terms of a business deal, just in terms of us providing vehicles so that essential workers and government employees can move around the city. But that deal happened in days, literal days, no bureaucracy, no anything. It was yes, you have resources, let’s go forward.
Pablo Fernandez: I think that’s going to be interesting in terms of how we address local needs with sustainable solutions in terms of, we were used to have all the factories in China for example. Now I think that companies will think twice about where to put the factory. Can we have factories closer to home? Can we have our vegetables closer to home? I think that in that matter it’s going to reshape a little more what is going on. And at the same time, it’s going to put a little pressure on the Mom and Pop Store, that thing we’ll have to digitalize the services that they’re providing.
So right now many people is in quarantine a big percentage of the population and you’re not allowed to go do your groceries. So you need these all small Mon and Pop Stores. Need to have either a Rappi or some sort of delivery system to keep…
Jonathan Calmus: To keep alive.
Pablo Fernandez: Exactly. To be in the business. And I think that that’s going to change forever. I mean we will be way more used to than we ever were being, to have things be bring back home. I mean to be things delivered to your home.
Jonathan Calmus: I’m sure the part that they’ll start seeing is, this is not an isolated case and they need to be risk adverse. And the problem with a lot of Mom and Pop Shops and even start-ups I would say is that because everyone’s always cash strapped and trying to try to move from month to month, they don’t really see any of this stuff as important. And this is the slap in the face that I think a lot of society and culture needed. We’ve been living in this weird duality as society. We live between the old times and the new times and I kind of just mean pre and post-internet and we’re continuously making decisions through the frameworks and filtering of thinking that we had at different scales and different distribution channels. The world is bigger than it’s ever been before. There’s more opportunity than there’s ever been before.
And communication and education is distributed freely. And we keep making decisions as if, you know, for example, I was reading an article that was saying the title was CFOs are loving remote work, you know, virtual work. And the answer is obvious. Everyone’s working way harder now because there’s no such thing as time anymore. There’s no morning and there’s no evening and there’s no offices, there’s no utilities. Yeah, obviously. But this has been, I mean the inspiration of the gig economy and what was so attractive to it was the idea that you could have decentralized workforces. And now all of a sudden the corporate world, which is typically very slow moving is forced into it and they’re realizing its benefits.
But to read an article like that is kind of silly because this isn’t an experiment of five minutes. It’s been twenty years since countries like Japan have been talking about many different countries talk this stuff all the time. So everything’s kind of moving in this rapid change, let’s bring the future now direction it feels like.
Pablo Fernandez: Yeah. Yeah. I think that that’s going to be something huge. I mean, in terms of like how we were used to work and how we will have to start thinking about working. We might even start thinking about, okay, well why do I have to do like a five day works and two day rest? I mean, right now I don’t even know exactly when it’s—because every day it seems the same. It’s like almost that you’re working almost like seven days a week or you’re working less hours per day, but more days in the week.
Jonathan Calmus: Yeah.
Pablo Fernandez: So it’s weird. I mean, not even to say about what is going on with schools and universities where everybody’s having their classes online. My kid have not seen their teachers for like four weeks.
Jonathan Calmus: It’s such an interesting concept because when you’re talking about these institutions like Harvard or Stanford or anything, a lot of it is the pedigree. I mean, that’s the reality in addition to all of the benefits. But a lot of it is the pedigree. And if you said that you took online classes from Harvard, people would say that’s not the same thing, but now it actually is the same thing.
Pablo Fernandez: It’s the only thing. There’s no other way around. I mean this is the only thing that you can do.
Jonathan Calmus: It’s just all of all of the theories, all of the, everything is being tested now. Universal basic income. There’s no other option. It’s either shut down economies or give someone some form of a stimulus. All of a sudden these kind of futuristic things hit us at the same time. So I think there’s a lot of benefit here. As silly as that sounds.
Pablo Fernandez: I think it’s going to be super complicated for a bunch of people who are not used to change. For a bunch of people who don’t have all the resources to adjust to these changes. And like I am lucky enough that I can work from my home. It’s a little more difficult because kids are around all the time. I have to do lunch, I have to clean things a little but I can do it. I mean I just need internet connection and a PC. But there’s a bunch of people who don’t have the chance and they have to go to their office or the places where they work. So for them is going to be complicated, I mean number of people who will maybe lost their job, not temporarily but forever because supermarkets will adjust to have less cashiers and have automated cashiers and there’s going to be no way back. So…
Jonathan Calmus: I’m sure that there’ll be… One thing that I’m observing is there’s a lot more creativity right now on the internet. Like a lot of jokes, a lot of videos, lot of everything and all of that in the new world, all of that you can monetize.
Pablo Fernandez: Yeah.
Jonathan Calmus: Whether or not it’s going to be easier or harder in terms of competitive landscape is different. But I mean, people are going to just be forced to adapt.
Pablo Fernandez: Yeah.
Jonathan Calmus: If you don’t know how to make money on the internet in the very near future, you will figure out how to make money on the internet.
Pablo Fernandez: I mean, I’m not—I’m a truly optimistic in terms of, I think that things will be better, but there’s some number of people who will suffer because of the changes.
Jonathan Calmus: Yes. Diffidently.
Pablo Fernandez: And that’s something that we need to be aware of. We need to have some sort of an answer for them because otherwise it’s going to be traumatic for everybody. So, it doesn’t matter if you care or don’t care about people just in a practical way, you have to think about what’s going to happen with these profile of people who are not ready to adjust that fast or at easy.
Jonathan Calmus: Or not even adjusted. But they’re also the people that we tend to depend on. They’re the least, you know, the least connected the least what we would say part of our day to day life on the internet and how we run our businesses and everything. These are the people that support us, that take care of our kids, that bring us our food, that give us our shots a lot of times. It’s definitely going to be a really complicated time in the micro. I think if we look at it from the macro though, I really am optimistic like you, I think that there’s going to be a lot of very positive change and at least set an—-like for a long time my form of being political is just saying, I don’t think that the current framework makes sense anymore. I think we have to rebuild it for the new rules of life and I think that we’re forced into that. I think that’s one of the greatest macro benefits is that if this has the effect that I expect it to over the next twenty years, society will totally change and people will be closer to the type of humanitarian living that we’re all looking for. That people aren’t necessarily equal. But we’re taking care of everyone equally, which is a very different thing because for a long time, everyone gets on their soapbox and says, everyone’s equal. And I’m sorry, it’s just not opportunity is given at random almost, as you said, some of us get to be at home and continue earning money. Others don’t. But at least we can take care of everybody equally and try to grow into a world like that.
Pablo Fernandez: Yeah. Well, I mean that’s one of the good discussions that I think are happening right now in internet and in many places about the type of society that we will decide to reveal from now on. And I think that also have to do a lot with the VC culture. I mean, in terms of like, how you can make it, not so worried about finding Unicorns and having like huge returns but rather to try to build companies who have a purpose, who have an impact on people’s life in a more sustainable way. To me that’s one of the major challenges that the VC world has. I mean, I think that the companies that are not sustainable, that have been built on a crazy manner and I think that could hurt a lot the industry and basically could hurt a lot the major goal of the VC that it’s to bring new technology developments to the world.
Jonathan Calmus: Yeah. I totally agree. Pablo we’re almost at the end here. If you had to leave our listeners with one piece of advice right now navigating through these times, what would it be?
Pablo Fernandez: Well, it’s pretty obvious, but I think that to take care of yourself and your families and your close ones. I think that it is a time of uncertainty and that it’s hard, that everybody’s called to, we have a social isolation and that could be like super hard for some people that are alone or something like that. So my biggest advice will be call your mom, call your father, call your family, try to be close to them. What I’ve not been doing, actually right now after this call I’m going to call my mom because I haven’t called her yet today. And the other one, if you run a company try to have cash in your bank account that will be my second advice.
Jonathan Calmus: The first one is I think is most doable for most people, but the second one is a great piece of advice as well.
Pablo Fernandez: Pretty obvious, but way more complicated to accomplish.
Jonathan Calmus: Pablo, thank you so much really it was awesome talking to you and I always enjoy talking to you too.
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