Steven Jacobs, Partner & CPO Lakestar

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In this episode of our investor series we speak to Steven Jacobs Partner and Chief Product Officer of Lakestar. 

With offices in Zurich, Berlin, and London, Lakestar is a PanEuropean venture capital firm with $2 billion of assets under management primarily focusing on early and growth-stage investments in technology companies. 

The firm has a diverse portfolio spanning fund focused on four vertices: fintech, deep tech, SaaS and HealthTwech. Some of Lakestar's notable investments include Spotify, Revolut, Harry's and Glovo. Steven is a Partner in the Deep Tech fund so we’ll talk a lot about how to sgrow a company focused on building products that can change the world in this chat and if you want to know more about the sector you can read Lakestar’s European Deep Tech report here.

Lakestar is known for its hands-on approach in nurturing startups, offering not only financial support but also strategic guidance and operational expertise to help portfolio companies scale and succeed in the competitive tech landscape.

Lakestar also has a few Italian investors and is interested in investing in more Italian companies… so we jumped at the opportunity of finding out more about the firm.

TAKE AWAYS

Becoming a Venture Capital Investor (00:04:37) Stephen discusses how his diverse experiences as an engineer, entrepreneur, and product manager shape his approach as a venture investor.

Favorite Part of the Job (00:09:04) Stephen shares the excitement of working with founders and the thrill of learning about cutting-edge technologies.

Overview of Lakestar (00:11:36) Lakestar's focus areas, fund structure, and differentiation in the venture capital space.

Investing in Deep Tech (00:14:21) Stephen explains Lakestar's investment focus on deep tech, including the technology readiness level (TRL) and fund size considerations.

Target Company Outcomes (00:17:20) Lakestar's preference for companies with potential 3 to $5 billion public outcomes.

The ambition of the idea (00:17:53) Investment challenges and market scalability.

Founder attributes (00:18:41) Vision, confidence, grit, passion, communication, leadership, likability, learning mindset, and mission-driven.

Product evaluation criteria (00:24:39) Solving a severe problem for a large market ten times better than existing solutions in a unique way.

Market readiness and commercialization (00:27:06) Importance of solving a problem, value proposition, and willingness to pay.

Investing in the Italian market (00:31:02) Interest in Italian founders and the potential for entrepreneurship in Italy.

European entrepreneurship trends (00:32:28) The concentration of talent in specific European cities and the importance of ecosystem density for innovation.

Building Ecosystems (00:35:36) Discussion on the importance of building ecosystems around previous successes to attract talent and foster high density ecosystems.

European Collaboration (00:36:33) Encouraging collaboration among European countries to compete globally in fields like space tech, rather than competing against each other.

Advice for Founders (00:37:31) Encouraging founders to pursue their passion, push through challenges, and run their own race, emphasizing the fulfillment of pursuing something they are passionate about.

EPISODE TRANSCRIPTION

Camilla Scassellati (00:00:02) - In this episode of our investor series, we speak to Steven Jacobs, Partner and Chief Product Officer of Lake Star with offices in Zurich, Berlin and London. Lake star is a pan-European venture capital firm with $2 billion of assets under management, primarily focused on early and growth stage investment in technology companies. The firm has a diverse portfolio spanning funds focus on four verticals fintech, deep tech, SaaS and healthtech. Some of listers notable investments include Spotify, Revolut, Harris, and Global. Steven is a partner in the Deep Tech Fund, so we'll talk a lot about how to grow a company, focus on building products that can change the world in this shot, and if you want to know more about the sector, you can read Lake Star's European Deep Tech Report and we'll link it in the notes, of course. Lake star is known for its hands on approach in nurturing startups, offering not only financial support, but also strategic guidance and operational expertise to help portfolio companies scale and succeed in the competitive tech landscape. And you'll hear Steve talk about it a lot.

Camilla Scassellati (00:01:07) - Pixar also has a few Italian investors and is interested in investing in more Italian companies, so we jumped at the opportunity of finding out more. Steven. Before getting to know Lake Star, we first wanted to get to know you as an investor, and I'm very curious to hear your story and especially how you got into becoming a venture capital investor. Yeah.

Steven Jacobs (00:01:33) - Thanks, Camilla. It was not intentional, actually. It was kind of an accident. So little about me. As you can probably tell by my funny American accent. Originally from San Francisco, I was born and raised there. Studied engineering, mechanical engineering, and material science. So very much a hardware nerd at heart. And then cut my teeth at Apple, actually as a product design engineer. I was very young, so I don't I don't ever take credit for anything, but it was it was fascinating to be there. I learned a lot about kind of what it takes to build consumer electronics products, and I was doing a lot of the kind of day to day engineering stuff at CAD and, and a lot of the hands on engineering work, and decided I wanted to try that for a bunch of different products at different companies.

Steven Jacobs (00:02:14) - So I spent time working on products for a variety of consumer electronics companies, you know, Beats and Amazon and HP and Google, and just got to see different processes, different approaches, different cultures, and really enjoyed that. But when you're working on different products for different companies, especially, I spent some years as a technical consultant at an engineering consultancy, helping them out. You know, you start to lust for actually getting your hands dirty and working on stuff for yourself. So I went full time to HP for a while and help them build a suite of premium laptops, and then got bit by the startup bug and decided, okay, I'm going to see what I can do, you know, without the infrastructure of a massive company. So that was my first foray into kind of the venture world. But at this time I was an entrepreneur, and so we built that company. It was called Olio Devices. We made high end smartwatches. We ended up selling that in 2017. And then after we sold, it actually switched gears again and went from engineering to product management.

Steven Jacobs (00:03:08) - So more on the strategy side and spend some time both at Google and at Facebook, building and leading product management organizations there. And then, in 2020, my partner and I actually said, hey, it's time for a bit of an adventure. What do we want to do before we have kids? And that led us out to Europe, to Berlin, to be precise, without a plan, really. We didn't have jobs. We didn't speak German. We didn't really know that many people out here. We just kind of showed up and went on a bit of an adventure, and my heart was hers as well. Actually, for that matter, we're really in the startup world. That's just what we enjoyed doing. So I ended up meeting a lot of great founders all over Europe and, kind of help them out and connected them with people and did some angel investing, did some consulting, did some contract work, and then through that got to know a lot of great VCs all throughout Europe, people I, you know, firms I'd never even heard of, kind of even though I was very involved in the the San Francisco and Silicon Valley scene.

Steven Jacobs (00:04:01) - And that led to a deepening relationship with Lake Star. And after we got to know each other over the years, they kind of said, hey, would you be interested in joining full time as a venture capitalist, as a partner, leading our deep tech investment thesis? And I said that that combines three of my big passions. I've always loved investing, I've always loved entrepreneurship, and I've always loved cutting edge technology that, you know, is still on the vine. It's not yet ripe. And so I kind of stumbled my way into venture capital because I happened to be at in Europe at an interesting time for entrepreneurship and venture capital in Europe, at a time when deep tech wasn't really a thing yet, and it was just kind of finding itself. And that's what I had a passion for. So here I am.

Camilla Scassellati (00:04:37) - Yeah, a very entrepreneurial journey, both in terms of having already had the experience of founding and selling a company, but also in taking some risks along your path, as you said, just moving to a new country without a real plan and figuring it out, which are all sort of sides of entrepreneurial mind and spirit.

Camilla Scassellati (00:04:58) - And do you think that that makes you a better investor? Not every investor starts as an entrepreneur. Not every entrepreneur then becomes an investor, but there's sometimes a crossover. And do you think it's a helpful and healthy crossover? And did it help you now talk to founders when you when you meet them.

Steven Jacobs (00:05:15) - so I mean, you definitely need an appetite for risk. Like you can't be an entrepreneur or a venture investor if you don't have a healthy appetite for risk and a willingness to fail. And for better or worse, I have both. I think, my mom probably wishes I had a little less, but, you know, we get by is just innate in most people, right? You either have it or you don't. You either like jumping off cliffs or you don't. And so I think that's definitely necessary and helpful, I guess to the other part of your question, you know, I was very lucky and I didn't plan it this way, but spending time as an engineer, as a cad monkey initially, like literally doing the boring stuff, but the necessary stuff and still some of the hardest work I've ever done, you know, and taking that and doing that for startups, doing that for large companies and really seeing different approaches, they're kind of adding to the toolkit and then starting a company and having experience as an entrepreneurship, which was one of the best jobs I've ever had.

Steven Jacobs (00:06:07) - I've never felt like as alive as I did as a founder. You're like always on the precipice of death. And so to go into work every day and know that every decision you make has a meaningful impact on your survival. Like that is exhilarating. And then tertiary, spending time in product management at some of the, you know, the best companies in the world for that discipline. You can't learn. There's no college degree in product management. You can only learn it at a place that is really kind of figured it out and has built the muscles around it. So having the opportunity to get exposed to that and kind of add that to the toolkit, I think all three of those things in different ways. I wouldn't feel comfortable being a venture investor without having at least one of those, if not multiple experience points. That's not to say there aren't other areas of operational excellence that can't prepare you to be a good venture investor for other areas. But, you know, in my conversations with founders, to really be able to empathize with what they're going through and what they care about, and to figure out where to insert yourself and say, hey, maybe we battle something out together.

Steven Jacobs (00:07:05) - I can be a thought partner. And also times to say, hey, you know what? I'm going to get out of your way. The last thing you need right now is someone else asking you questions. And like it's one thing to understand it at a surface level. It's another thing to have been through it many times and to be able to kind of apply that intuition to engaging with, you know, the the founder that you're partnering with. I find that invaluable. and I think, there's plenty of people who go into many different careers for the right reasons, and plenty of people go into different careers for the wrong reasons. And I think anyone who goes into venture investing because it's a, you know, just because it's a cool job or just because they like finance, like that's that's not the right reason to go into venture investing. You should go into it because you have a true passion and ideally empathy for the journey. Right. And the goal is to like, really meaningfully catalyze success of someone who's taking on an incredible risk in their life, matched maybe only by the person they choose to enter into a long term partnership with.

Steven Jacobs (00:08:01) - And I take it very seriously, and I find it very exciting. But absolutely short answer to your question. it has definitely shaped who I am today. And I think maybe the last comment, because I actually get asked a similar question quite often, I think I'm glad I went in that direction from an operator to a founder, and maybe spending some time in some other discipline, right in a in a center of excellence for it, and then finally moving into, investing so that you can apply all that you've learned to help the companies that you partner with. I find that much easier than starting with, you know, entering into venture capital or any other finance based domain and then trying to move into an operational or founding role. Like the direction matters a lot, in my opinion.

Camilla Scassellati (00:08:42) - And as you said, you you specialize in deep tech. You work, you are a partner for the deep tech fund. And I feel like you need to have that product knowledge in order to be good investor in that specific discipline, but we'll talk about it in a second.

Camilla Scassellati (00:08:56) - I was also curious about what your favorite part of the job is. What do you really like in working with founders or in in what you get to do every day?

Steven Jacobs (00:09:04) - getting in the cockpit, like those, those rare but beautiful times when a founder says, hey, I got to figure this thing out. I've never done it before. I don't know how to do it. Can you just sit next to me and can we talk about it? Can we think about it? Can we battle it out together? Do you know someone who knows more than both of us? That maybe I can talk to? Like those moments of, like, we have critical decisions we need to make, and these happen quite frequently. But, you know, found a rolling pillow. You in some fraction of them. Those are the best. Those are like when I wake up in the morning and I look at my phone and I have a quick note of like, hey, can we chat? We got an important one.

Steven Jacobs (00:09:37) - Like, my day is going to be a great day. I get super excited. And then the second part to that, and the thing that kind of fills in the gaps between those super high peaks, I think is really just the opportunity to learn about incredible things. You know, I think SAS investing is a wonderful thing. So as you know, fintech and health tech and we do all, you know, four of those things along with deep tech at Lake Star, I think they're all interesting things. But the reason I personally chose to focus on deep tech is I just love playing at the very edge of what humans are capable of doing, things that we don't even know if it'll work yet, right? But if they do, they're going to completely change the world. And like, you know, a great new software application is going to help a lot of people. It can be very valuable to society, there's no doubt about that. But when you're comparing that to like, fusion energy or, yeah, space exploration or a number of these new technologies that are just like going to completely revolutionize how we think about what humans can do.

Steven Jacobs (00:10:27) - Like that's that's kind of what gets me excited. The first one, actually, not that you're asking this. I'm going on a bit of a tangent here, but the the thing that sparked this like roaring flame for me was, brain machine interfaces. Like about ten years ago, I started, like, really thinking about some of the advancements that were happening there. And I was like, this is going to the generation that is born natively into a technological era with like brain machine interfaces, where you can just think and then the computer knows what you're thinking about, like they're going to be nothing like us. It's going to be we're going to look so old school compared to that. So there's just so much, fascinating stuff that's happening.

Camilla Scassellati (00:11:01) - It's a big Elon Musk focus with his company, Neuralink. And every time I hear about it, I get a little bit spooked and a little bit intrigued. It's very interesting to see what we're going to be able to do. and they're starting to test and it's working, so it's super scary.

Camilla Scassellati (00:11:18) - Let's talk about Leg Star. Can you just give us an overview? We talked a I, we gave a little intro before our chat, but, of what the focus is for Lake Star as a fund and what you think or what what makes you different from other VCs in, in that operate in your same space?

Steven Jacobs (00:11:36) - Absolutely. So, Lake Star, founded by Klaus Hummels, a little over a decade old. we have offices in Zurich and London and in Berlin, we have a little over 2 billion in assets under management. We're on our fourth generation of funds. Our funds consist of an early stage fund and a growth stage fund. Our early stage fund invests in seed and series A primarily. And then our growth stage fund invests in series BCD. So we're pretty broad in scope. That's been an evolution over time. Some people think we only do one thing or we only do another thing. But at this point we're we're doing quite a bit across the spectrum. Again, seed to series D let's call it.

Steven Jacobs (00:12:13) - And then we have four main thesis areas. The first is fintech. Second is health tech. Third is enterprise SaaS. And all three of those are predominantly enterprise SaaS. But fintech and health tech are so big that we have kind of dedicated teams that that work on them. And then our fourth area is what I focus on as a partner at Lake Star, which is deep tech. Some people call it frontier tech, some people call it hard tech. I don't particularly like either of those, but they're not necessarily wrong. deep tech we define as fundamentally new science and engineering making its way into products and companies for the first time. So there has to be something fundamentally new. You know, the biggest risk, any time you're you're creating something fundamentally new is the timing, right? Like quantum computers is a good example or fusion energy, it's going to happen. But you know, when is it going to happen? This isn't five years, ten years, 50 years, right? Sometimes you get it right, sometimes you get it wrong.

Steven Jacobs (00:13:02) - But that risk of, you know, when will it actually be real? That's the biggest risk because we have a ten year fund cycle, right? Like most venture capitalists, like we have a are the people who invest in us, have a limited time horizon over which they're willing to give us leash to to invest their capital and then return it to them. So we we don't have, you know, infinite control over that. So in order to to harness that timing risk, we actually look for new technologies, as I mentioned, that are solving some of the world's biggest problems. Right. Like ones that are very obvious to people now, climate change or pandemics or social inequality or cybersecurity. Like there are these big global problems that we don't actually have good solutions to. And if breakthroughs in technology that let us do something as a species we've never been able to do before actually help us address those, we think that is the biggest catalyst to those things being fast tracked into production and into a company and a product.

Steven Jacobs (00:13:56) - So we're looking for people doing that, and we're looking at that all across various different sectors.

Camilla Scassellati (00:14:01) - As you said, your focus on deep tech on a deep tech side, do you also invest seed too? Seriously, is it hard to invest in deep tech and series in the seed stage? What do you look for? A lot of our listeners will be in that seed stage. So I'm curious to to know what you're looking for at that stage. For a deep tech company, for instance.

Steven Jacobs (00:14:21) - One good heuristic or measurement is what NASA calls the TRL level, or I guess TRL technical or technology readiness level. and that's applied in most of the world is not just a NASA concept anymore. So Europe uses this pretty uniformly and it kind of defines like, are you like a little bit of research in a lab or are you, you know, a prototype? Are you in production at scale? Like where are you in your journey from 1 to 10? And we tend to invest starting at around TRL level five.

Steven Jacobs (00:14:51) - So it's pretty early. That's way earlier than most funds will even touch anything. But there are some very dedicated early stage funds that are willing to go even earlier than us. TRL 3 or 4 perhaps. so so so we do invest pretty early. The way I like to think about it. I get questions all the time from entrepreneurs, and I like it because it's a good chance to to explain certain aspects of how venture capital works. That isn't obvious when you're an entrepreneur. I can say this having been one like, you know, I'm still learning stuff ten years later. So, venture capital is only really good when you can create significant returns for the fund within. Call it a ten year time horizon. Right. There's two interesting aspects to that comment. The first is significant. What is significant mean. And typically a top quartile fund wants to return 3 or 4 x the invested capital, which means if you're a €10 million fund, right, you want to when you sell your stakes and all your investments have 30 or €40 million to return to your investors, that's still true.

Steven Jacobs (00:15:53) - If you're a half billion dollar fund like, then you need to return 2 billion in capital within ten years to your investors in order to be seen as a top performing fund and thus be able to earn the right to continue to invest their capital, or else they're going to say, invest my capital in a different fund that has better returns. So there's a financial incentive and a constraint on what investors can do. So if you're an. You should look at. Okay, which funds are right sized for my stage of development, like given how long it's going to take me to achieve a certain level of result, and given how big I think my company can be, is it something that's going to be acquired for $100 million, is going to be something that's going to go public for $1 billion? Is it going to go public for $10 billion? That's going to determine what type of fund I'm a good fit for from an investment perspective, because if I plan on selling my company in ten years for $100 million, then I shouldn't ask $1 billion fund to invest in me, right? It doesn't make sense.

Steven Jacobs (00:16:50) - And similarly, in the other direction, right. If I'm a very, very tiny investment for a massive fund, it's just as poor of a fit as if I'm a huge investment for a very tiny fund. They just can't afford to invest that much capital in me. So finding the right size and stage of investor for you at a given point in time is really.

Camilla Scassellati (00:17:08) - Important before the second piece. So if we're thinking about leg Star, what type of companies are you looking for? The company that is going to go public for $1 billion, is that what you're trying to unearth?

Steven Jacobs (00:17:20) - We typically look for 3 to $5 billion outcomes if we see a credible path. If everything goes well to the company, I'm usually going public because acquisitions at this scale are quite rare. So we're typically looking for the ability to go public at about 3 to $5 billion or euros. That gets us in the the realm that is meaningful for our fund size, because we're a pretty big fund. And and if it's not to that scale, if everything were to go well, then it's probably not a good fit for our fund.

Steven Jacobs (00:17:53) - Now, there's this interesting part of that, which is if everything goes well again, we never expect that everything's going to go perfectly. But if things do go well, it has to be able to get big enough. If the market's too small or it's too fragmented or it takes too long to scale because of sales cycles, then yeah, that's going to probably make it challenging for us to gain conviction around an investment.

Camilla Scassellati (00:18:12) - So we talked a little bit about the ambition of the idea that you're looking to invest in. And we always hear of course, that especially at the seed level. But at every stage investors really look for good founders. And so I always love asking this question. What do you look for in a founder as Steven? What's your do you have anything you look for in particular? Questions that you like to hear the answers to, or some sort of spark in their character? They're something that you look for, just curious to know.

Steven Jacobs (00:18:41) - There are, I'd say, kind of five most important character attributes that that we look for.

Steven Jacobs (00:18:47) - And then maybe I'll give an additional, complimentary one. So the first is vision and confidence to make things huge. Right. And, you know, combined with some focus on the execution. Right. If there isn't, a big vision, if they don't have the confidence to really, you know, believe that they can achieve something so incredibly massive, then, you know, the likelihood that they'll actually get there is lower, right? So we're looking for a lot of confidence and a lot of vision. And that doesn't mean that they're arrogant. And that doesn't necessarily have to mean that they're even extroverted all the time. Right. But they have to be visionary and confident the second you hear a lot, which is grit and passion, right? It's hard. There's going to be highs and lows. You're going to get beaten down. You're going to get told no a lot. Like anytime you're trying to change the world, the world is going to push back and say, no, no, no.

Steven Jacobs (00:19:35) - Like that's different than the status quo. And if you don't have like the internal intestinal fortitude to push back on that, you'll never make it. So just an insane amount of grit and passion. And oftentimes that comes from within it's intrinsic. Right? It's not because someone else is saying, you can do this pat on the back. It's like they're like, I don't need anyone to prop me up. I'm gonna I'm gonna do this regardless. The third is, charismatic communication and leadership. They have to be able to hire and inspire. I think that one's pretty self-explanatory, but they just, you know, you got to see them speak and go, wow. Like, I want what that person's cooking. It's kind of fundamental there. You know, one that I like to focus on. And not everyone cares about this as much as I do, but likable along with a learning mindset right? Someone that you know they don't necessarily have to always be nice, right? Like, you know, ideally they're not assholes, but they don't always have to be nice.

Steven Jacobs (00:20:29) - But they do need to be likable. They do have to be able to charm a room. They do have to get people to want to align around them, and they always have to want to be learning, right? If they've shut off their head to what the outside world is telling them, and they're not trying to learn as they go, they're going to be limited in what they can accomplish because you're always going to learn. So likeability and a learning mindset. And the last one is mission driven. This kind of gets back to that like intrinsic motivation. They just jet like it's not necessarily always about making money. It's not about proving to their mom that they're really, you know, a good kid. It's not about it doesn't have to be about that stuff. At the end of the day, it's like, I really want to see something exist in the world that doesn't exist today, and it's just what I want to dedicate my life towards. And if you're not that passionate about it, then it's very hard to work your way through some of the challenges that you're going to encounter along that.

Steven Jacobs (00:21:17) - Journey. And then the last little plus one I mentioned is that, you know, these. These character traits apply to all the founders as individuals. The last one is really they have to work well together. There has to be complimentary skills, right? Like you have to take a group of those types of people and stitch them together with some glue that feels like it's going to last the duration.

Camilla Scassellati (00:21:37) - I was going to ask you about that because I was wondering and maybe whether in your field, in particular in deep tech, for example, you see one person having all five, or if sometimes that's the founder duo, for instance, covers the five. So maybe one person that's more I'm like, it's a bit of a stereotype, but I do see that sometimes someone that's very, very focused on product might not necessarily have number three communications and charisma, but maybe they're coupled with someone that has that and together they're unstoppable force. It's not how it usually works. Not not this particular, but that together they cover the gamut of the things that you're looking for.

Steven Jacobs (00:22:17) - So definitely together they have to cover it. Ideally, the CEO has all of them, and and other founders might have multiple of them as well. The more people that are emblematic of more of these character traits, the better off I think the company is going to be. Like, none of these things you can have too much of, right? You can't have too much of, you know, good communication. Like that's not a problem for any company. So I'm sure someone could find a way to argue with that. But, like I and when we think about some of the best founders of all time. Right. And, you know, everyone kind of points to Steve Jobs as an example. It's an overplayed example. But, you know, we'll use it for now. Like you just kind of like go down the checklist and you think about who he is and you're just like, yeah, I mean clearly index is high across. All right Elon Musk love him or hate him index is high across all of them.

Steven Jacobs (00:23:08) - So I think you know the stronger you can perform across all these like you you end up advantaged relative to everyone else. Because at the end of the day, there's a distribution and skill sets across people, even high performing people. And the founders of companies for companies are like exoskeletons around their founders. Right? When you build a company, what you're really building is this like exoskeleton around you as a person so that you can do more in this world. Right. It's it's helping you lift a heavier load than you can lift on your own. What these exoskeletons require are the core attributes at the heart of the founder that they can then amplify, right? Because companies don't tend to contain attributes that founders don't, they themselves either have or force the company to have the kernel at the the nucleus. At the center of all this are the character traits of the founders.

Camilla Scassellati (00:23:55) - So we talked about mission, vision about the founders and your. I wanted to spend another minute. We talked a little bit about it, but spend another minute talking about product because that's what you're focused on.

Camilla Scassellati (00:24:07) - You're also CPO for League Star. I couldn't find a good way to ask this question because it just is so broad and we don't have a lot of time. But if you're thinking about product, is there something that you look for in a product, as you said, something that is going to change the world we live in, something that has potential to, you know, completely change the way we see the world or interact with the world. But when you sit down and talk to a founder, is there a checklist you have or something that you're looking for or something that usually sparks your interest when you hear it or see it?

Steven Jacobs (00:24:39) - So I have a very boring answer on this, but I think it will stand the test of time. And that answer is what do I look for in product? Something that solves a severe problem for a large market ten times better than existing solutions in a unique way that can't be copied. I think if you satisfy that one sentence, then the likelihood of success is extremely high.

Steven Jacobs (00:25:06) - The challenge is it's very hard to satisfy that whole sentence. And and founders very often satisfy a part of that sentence. You know, they might solve a really intense problem, but it might not be ten times as good, or they might have a great solution that is very good, but it's very easy to copy if you can't satisfy. Each of those criteria are necessary, but not sufficient. You have to satisfy all of them in order to have a product that really can build into a huge business. In some industries, or business models or product types are better than others at being, for example, defensible, right? Like social media with network effects really defensible. It's actually very easy to build defensible into that type of product. So the other parts are what's harder with a deep technology product, if you create the first fusion reactor, just the nature of how hard it is to build one of those actually gives you a lot of defense ability. It's really hard for other people to copy. You probably have a lot of IP around it, right? The hard part is, you know, actually solving the problem.

Steven Jacobs (00:26:06) - And notice in that kind of one sentence, solve a severe problem for a large market ten times better than existing solutions in a unique way that can't be copied like nowhere in there does it mention. Revenue or business model or margins, right. Like I personally and a lot of people would argue with me on this, but personally, I believe if you do something really well, like the money will follow, right? If you if you can build an excellent product that satisfies those criteria, like you will build an enormous business and you will figure out the rest of it, especially if to your previous question, you're an exceptional founder, right? You're you're predisposed to be able to solve challenges as they come up. You don't have to have everything figured out on day one.

Camilla Scassellati (00:26:46) - And on the market side, when you said a large market, do you look for someone that has already an idea of how and where they want to sell the product? Or I guess you need to if you're solving a specific issue, but do you also look for you said not revenue, but you look for case for what this will become and how it will be sold.

Camilla Scassellati (00:27:06) - Because I, I asked this question because I see I hear a lot of pitches from engineers in particular that come out of school. Maybe their PhD was in something very deep and very specific, and they have a great idea, but often there is no commercial to it or it's not apparent when they pitch, and it's very technical and it gets very specific and it's hard to even see what it actually will do. So do you see a lot of these pitches and do you think that's an issue, for instance, when you when you listen to them?

Steven Jacobs (00:27:35) - Certainly there are a lot of companies that have trouble selling their product, right? No one wants to buy it. And that's kind of the typical product market fit slash willingness to pay challenge. Typically, the main reason someone doesn't want to pay you for it is because you're not really solving a problem for them. Either you're not solving a problem, or that problem isn't very big. It's not big enough to change on their side, right? We've all gone through this and relationships and other things, right? You just kind of say, oh, what I have is good enough, right? You know, I'm not trying to change every little thing.

Steven Jacobs (00:28:07) - You're not solving it better than the competition. Right? Or there's some free option out there that is sufficiently good, even if you are better. So. So I think you always have to deliver a value prop and us as individuals, like any company or person, kind of acts the same way you do when you're buying produce at the farmers market, right? You're looking at the quality, you're looking at the cost, and you're deciding, does this have the right value trade off for me, and what is the pain that it's solving? How much do I really need a tomato? Maybe I'm cooking a dish and it's critical and I can't open my restaurant without it. Okay, then I really need a tomato. I'll probably pay a lot for it. And if I'm not, then okay, maybe I don't, right? If it's overpriced or whatever. So I think if you're a founder and you're finding that people aren't willing to pay you for your product, that either means you haven't found a strong enough problem.

Steven Jacobs (00:28:52) - You haven't figured out what the value of that problem is to the customer. You don't know what their other options are, and thus you haven't, like, calibrated yourself to the rest of the market, or you're in some other kind of echo chamber based on your desire to sell your thing. I mean, by definition, most founders are pretty enamored by what they're building, right? They're in love with their own product, as you should be, right? Absolutely. But it makes it hard to see things clearly sometimes. And I think that's where the best founders say, you know, I'm here to solve someone's problem. I'm not here to build a thing. This isn't about me building a thing and forcing it into the world. That'll never work. The world doesn't care, right? What it is, is. And this is the whole, like, Stanford de school philosophy that is kind of percolated all of Silicon Valley, which is start with the problem, figure out who has the problem, how big it is and how much they're willing to pay.

Steven Jacobs (00:29:47) - It could be a severe problem. But if your customer has no money or no budget or no control over the budget, right, that's also broken. And maybe that's a corner case to your question. And then build a product that solves it. And if I may, linking that to deep tech, there's a difference between a technology and a product, right? Engineers such as myself, you know, we we think a lot about technologies, but that's not the same thing as thinking about products. And so, you know, if you're building I'll use Fusion Reactor again just because it's a kind of a simple when everyone's familiar with, you're building a fusion reactor, a fusion reactor like that in and of itself isn't a product. That's a technology, right? The product is cheap energy. And if someone next to me is using like a waterfall with hydro to generate cheaper energy than I am with a fusion reactor, it doesn't matter if it's a fusion reactor, the world doesn't care. What they care about is am I getting cheap, environmentally sustainable energy? I think for founders, sometimes you got to take a step back and make sure that you're not forgetting about the problem again.

Camilla Scassellati (00:30:44) - We hinted at this in the intro, but what's very interesting is that we heard or the yeah, the Lake Star is also looking at investing more in the Italian market. And I know that you've invested in Italian founders in the past, but that you just are looking at the Italian market. Is that true?

Steven Jacobs (00:31:02) - Absolutely. So we invest all over Europe, including Italy. You know, we we make trips out there all the time. And it's not just for the delicious food, it's for the, you know, the talented founders that we get to meet out there. And, you know, quite frankly, the successful people. That are in Italy that want to support talented founders as well. And we're kind of, you know, the conduit in many ways for that. So absolutely, we're investing in Italy. Absolutely. If you're an Italian founder, especially a deep tech founder, and you think you're checking all these boxes and you're looking for someone to partner with, please reach out. Camilla can can put us in touch.

Steven Jacobs (00:31:37) - somehow, I guess. And, yeah, we meet with, Italian founders all the time. Some of them are still in Italy. Some of them have moved to other countries in Europe, to start their companies or to scale their companies for, for various reasons, Italian founders are everywhere.

Camilla Scassellati (00:31:51) - I asked this because sometimes people are shocked or interested or. Yeah, intrigued by the fact that international investors like Lake Star are looking at Italy as a potential, you know, fertile ground for entrepreneurship and a healthy startup ecosystem. Is that something that you see now more than you did maybe three or 4 or 5 years ago? Is has it become more of a focus point or is it just wherever the opportunity is? You're looking everywhere, as you said, but just curious to see if you have any sense of where we're trending in terms of a market and what what level of interest we spark in.

Steven Jacobs (00:32:28) - So we are a pan European investor, which means we do look all over Europe. And so Italy is is definitely within scope for us.

Steven Jacobs (00:32:35) - That won't be true for every investor. Right? So you have to kind of know what their scope is. you mentioned kind of like the last 3 or 4 years, it seems a little Italy hasn't gotten as much love as maybe it deserves. You know, that's such a short period of time in the history of the world. For many centuries, Italy was at the forefront of innovation and technology and science and development. Human beings are, you know, the brains are substantially similar all over the world. You're going to see exceptional talent and exceptional minds working on hard problems everywhere. Companies tend to be born from these exceptional individuals, but they also need to be born within an incubation area that is conducive to their success. And I think that is why, you see, you know, at this point, and generally, I'm actually a big proponent of these cities within Europe that are becoming highly concentrated zones for entrepreneurs working on a similar thing. And one example I like to give is like Munich for space tech, right? Or even Paris for biotech or machine learning for that matter.

Steven Jacobs (00:33:36) - At this point, like we're seeing the European deep tech report that we authored, we author every year. But the most recent one was last year. You know, we talk about for these different areas of deep tech, whether it's novel AI, future of compute, computational biology, you know, novel energy, space tech, etc., robotics, like we're seeing people congregate in various cities all throughout Europe. What's important, I think, to be a global player, to really be able to compete at the global level, is to get as many people thinking about similar problems in the same city at the same time within Europe, right? Europe is really what's competitive. Not any one country within Europe. It's just not big enough. Right? So, you know, personally, if everyone all over Europe chose to go to Munich for space tech, I'd be stoked because there would be such a high degree of talent there that would be going to coffee shops and chatting and sharing information. You would see this renaissance, like what's happening for space tech in LA, in the US, or what has happened for fintech in New York, or biotech in Boston, or energy in Texas, or software in San Francisco, like the US has like one, maybe two cities for each of those things that are really globally competitive.

Steven Jacobs (00:34:46) - Right. And then the long tail falls off really quickly. Europe, I think, needs to pursue a very similar thing, because if you're spread out too thin, you don't have anyone to talk to. You don't have an ecosystem, you don't have a network of people who've done this before and who want to do this, and who are sharing ideas and suppliers and customers and everything within walking distance, or at least within a, you know, a short tram ride to be able to accelerate and incubate these early stage companies. And I do think that's why a number of founders do leave their hometown and go to these kind of high density regions. And to date, not a lot of those are in Italy yet. And they could be. I mean, it used to be during the Renaissance and Florence. Right. Like that was a great example. Or in Athens, Greece, like periods in time where you get this exceptional density of talent around a certain set of subjects and then that becomes that changes the world from that city.

Steven Jacobs (00:35:36) - Right. And so I think I don't know if this was implied in your question, but I'll offer it all the same. The talent in Italy is just as good. That talent should go wherever the highest density is of the thing that they're interested in, whether that's in Italy or not, to have the greatest chance of global success. And then they should give back to the ecosystem and try to foster these high density ecosystems at key points within Italy. In the future. It's unlikely to pop out of nowhere, right? Almost all these things happen as an outcome of great success, right? Wall Street happened and now fintech is in New York. Google and Facebook and Apple happened. And now there's software in Silicon Valley, right? Space happened and a lot of defense contractors that predated them. And now there's space tech. Defense tech in LA. So like, you really have to kind of build around previous successes and then grow an ecosystem and then attract talent there. But if you're a competes with one another, to do that is France and Italy and Germany and the UK are all competing with each other for that, then you're only hurting yourself.

Steven Jacobs (00:36:33) - At some point you got to come together and say, okay, it's going to be Munich for space tech. Let's go. Like, let's let's actually compete with the US and China and India and Russia and other places.

Camilla Scassellati (00:36:42) - You're right. Sometimes we don't think about Europe. I think that because the US is so clearly one country, and we think about ourselves as a collection of countries and, you know, a continent, we sometimes forget the bigger picture and the step out of how we could help each other or how we could create clusters within all these different countries rather than only look at the country level. It was such a fascinating conversation. Steven, I have maybe one last question. given all your knowledge and how you sort of your bearings inspiring the way you answer. So I wanted to ask you if you could leave us or our listeners with one advice like there is, is there one thing that you want to say or do, say to founders when you meet them in terms of how to doing what they're doing and don't give up or.

Camilla Scassellati (00:37:27) - Yeah, what's your one piece of advice that you typically like to give?

Steven Jacobs (00:37:31) - I'll try to avoid the obvious trite ones like, you know, don't give up. Like, of course it's true, but everyone says it. So I think if you think you see something exciting, right? If there's this idea knocking at the back of your head, or if you've been working on a technology and you see where it could go and no one sees it yet, and, and you just you have a vision to pursue that vision, right? No one ever died regretting pursuing something they were passionate about. Right. So, you know, if you have the ability, you know, and again, everyone has different circumstances, right? Between family and personal limitations, health and stuff, like if you don't have the ability to do it, that's understandable. There's no shame in that, right? You should find ways to pursue your passion. But if you have the ability to take on the incredible risk of starting a company, it's going to be draining.

Steven Jacobs (00:38:18) - It's going to be exhausting. It's going to, you know, it's going to be times you're wondering if you made the right choice, but you're doing it because you're passionate about what it is you're fulfilling and you really think it deserves to belong in the world. Go after it. Right. And I do believe it's an intrinsic personality characteristic as to whether or not you're willing to take as much pushback as one gets when one's a founder, right? Some people can handle it, some people can't or doesn't feel good and they don't want to, and that's okay. But if you if you look at yourself in the mirror and say, I can do this, just push through, right? Everyone says, no, don't, don't like, expect that that's going to happen. Don't let that get in your way. There's it's true for athletes, as it is for politicians as it is for entrepreneurs, as it is for anyone. You got to just kind of run your own race, right? March to the beat of your own drummer.

Steven Jacobs (00:39:05) - And, you know, I did that in my own small way. And I'll tell you, it was still the best job I've ever had in my life. You know, it wasn't we didn't reach the heights that we had aspired to. We didn't have that opportunity, you know, which is a bummer in some regards. But it's still the best job I've ever had in my entire life. I would do it again in a heartbeat. So I think you'll never regret pursuing something you're passionate about and doing it to the best of your ability. And if you do that, even if you don't get to the end goal right, if you shoot for the moon and land amongst the stars, so to speak, like it'll still be one of the best journeys you could have in life. Short, we all only have a short amount of time on this planet, so why waste it? Great.

Camilla Scassellati (00:39:41) - Nothing to add there. Thank you so much Steve, for your time for talking to us about your vision and your view of what entrepreneurs should do and be, and it was great to also find out more about Lake Star, as we said, and the fact that you are taking trips to Italy and looking at the market.

Camilla Scassellati (00:39:59) - So as you so kindly offered, if people want to get in touch, feel free to reach out to us and we'll see. See if we can put you in touch with Steve. But thank you so much again.

Steven Jacobs (00:40:08) - It was a pleasure. Thanks for having me.