Weekly Insider (Ex Tenebris Lux & Revealing Everspin)

There’s a Latin phrase I like; Ex Tenebris Lux—from darkness, light. Well, there’s lot’s of activity buzzing here in spite of the economic malaise. Magen was acquired by PPD. Our newest portfolio company Luxtera, the leader in CMOS photonics (optics on chips) announced a deal with Freescale, from whom we also spun-out a breakthrough company in nanoscale memory, Everspin, which is revealed below.

Right now: there’s an alphabet soup of economic trajectories: V, W, L, square roots signs. The slants and their slopes are shaped by investor expectations. Of course fundamentals matter—just less than expectations of fundamentals. Like bending a spoon with your mind—and often as illusory—the collective psychology of markets bends the shape of expected future outcomes. Exuberance and optimism inflect expectations upward. Despondence and pessimism yank them downward. A sunny day with expansive landscapes and vista views makes investors happy, calm and confident. It’s like standing upon a ridge, clear skies as far as the eye can see, investors lengthen their horizons, lower their discount rates and take long-term view on assets. Exploration and risk-taking are the order of the day—life is good. But when an unexpected storm full of fury hails down, so does panic. Fueled by fear, investors run for cover turning sad, nervous and uncertain. Huddled in the herd, staring downward barely focused beyond their footing, time-horizons shorten, discount rates skyrocket. Forget the future, the here-and-now triumphs, survival is the order of the day.

But here we celebrate those inventing the future. And today I share an exclusive Forbes sit-down with CEO of one of my venture firm Lux Capital’s most exciting portfolio companies, Everspin.

Aurangzeb Khan is president and CEO of Freescale Semiconductor-spinoff Everspin Technologies [full disclosure: my venture firm Lux Capital is an equity investor]. Earlier, he co-founded Altius Solutions, Inc., where he served as president and CEO through its merger with Simplex Solutions, Inc. and contributing to a successful initial public offering (IPO) in May 2001.  He then served as an executive vice president and general manager at Simplex through its acquisition by Cadence Design Systems [CDNS] in June 2002. Aurangzeb has also held several engineering and general management positions at Cirrus Logic [CRUS], Tandem Computers (now part of HP [HPQ]) and Fairchild [FCS]. He helped deliver several industry-first systems and SoCs to market, several of which received industry-leadership business and technical recognition and have achieved $200 million to more than $1 billion in annual revenues. Aurangzeb received a master's in electrical engineering and a master's degree in engineering management from Stanford University, and a double-major bachelor of science in electrical engineering and computer sciences and nuclear engineering from U.C. Berkeley. Aurangzeb holds eight patents in IC circuit design, has contributed to more than 90 technical and business papers and has received coverage in more than 100 published articles.

Let’s start with Everspin.  You are a Silicon Valley veteran, what attracted you to join as CEO of the company?
Everspin pioneered the integration of nanomagnetics with semiconductor devices. Many companies have tried to build this kind of memory (MRAM), but the folks at Everspin were the first to pull it off. I had been following the team’s work for a while, and what I particularly liked about Everspin’s approach, besides the leading-edge innovation, was that they did everything with commercialization in mind—with a view of producing something that could be manufactured in high volume with high yields. So that was a big part of what attracted me to the company.

Also, over the last few years I’ve done a lot of work in system-on-chip design, including work with Sony [SNE] for the PS2, as well as other consumer, networking, and telecommunications devices. I realized that in all of these devices, memory plays a critical role in the performance of the systems, so creating a breakthrough new memory could make a dramatic impact. I saw Everspin facing an enormous market opportunity, and that excited me.

By joining the company, what were you hoping to do?
I wanted to help the company grow and scale, bringing a bit of my own experience in both founding and building new companies as well as contributing at large organizations that brought new, industry-leading products to the market.

Let’s back up for the readers - define MRAM and why it’s important.
MRAM is a type of computer memory that consists of a nanomagnetic tunnel junction device and a single transistor to read and record data. It’s similar to other types of memory, except for the key difference that it’s non-volatile. That is, if you take the power away from this device, it doesn’t lose its memory, and that’s because the information is stored as a magnetic state, not as an electric charge. Physically, it is a very simple design, so there is a lot of headroom to scale the technology forwards.

What kinds of products do you envision MRAM being used for?
From the baseline technology we are building, there are three classes of products that emerge. The first are standalone memory chips. These are chips that you or I could go buy to install into our systems. The second is memory for system-on-chip applications, where Everspin’s memory could be integrated onto one piece of silicon with the other components necessary for a given system. The third application is sensors, and it comes from the fact that our devices are actually very sensitive magnetic sensors, relevant for consumer, automotive and other applications where high sensitivity is important.  So those are the three markets we are able to address. 

What are some of the early applications where Everspin MRAM is being used today?
In one application, Siemens’ [SI] Industry Automation division—a customer of ours for two years—is placing our chips into human-machine interfaces and programmable logic controls for industrial automation machines. In these types of applications, non-volatility is important. In the past, people would try to make a form of non-volatile memory by connecting a static, volatile memory chip to a battery. That way, if the power went away, the battery would have enough charge to write the data from the memory to some other more permanent location. We have heard from our customers that these types of systems are unreliable and often malfunction, whereas our memory is intrinsically non-volatile. Just recently, we issued a press release announcing that Siemens has shipped over 100,000 systems with our memory into the field without a single failure. They assessed our chips as having perfect quality and reliability, an accomplishment we are very happy about.

Another customer of ours is Emerson [EMR], a global leader in electric power support. Yet another customer uses our chips in casino gaming systems to keep track of user data, configuration settings, and transaction data.
We are also getting a number of design wins in avionics, and in one example the Japanese space agency is using an MRAM chip in a satellite launched into orbit early this year to measure carbon dioxide levels in the atmosphere.

When you think about the future of MRAM, what do you think of as the greatest market opportunity?
I think storage is a very good opportunity for us. In areas where mission-critical information needs to be kept available and reliably stored with integrity, our solution is excellent. From the consumer perspective, imagine being able to turn a computer or device off and on instantly! MRAM gives you that ability because when you power the device off, it retains all of the information, even if the battery life runs out.

I think instant-on computers would be an instant hit with the public. How far away are we from seeing that kind of capability?  
Well our density today is probably inadequate to serve as the boot up for a full operating system, but if you look at our roadmap, it’s conceivable that in the next several years we will have a meaningful level of density where at least part of that function can be implemented.
Today, for example, people are already using our memory in devices like studio cameras to maintain configuration settings for fast content switching.

Everspin itself was a spinout of Freescale Semiconductor. Tell me about the relationship with Freescale and your plans to speed up MRAM adoption as an independent company now.
Freescale is an investor in Everspin - it has a stake in the venture and believes in the technology, but we are an independent company managing our own destiny. Today, we are essentially a tenant of Freescale, so if you came to visit, you’d find me sitting in a facility that is part of the Freescale campus. Everspin has its own nanomagnetic fabrication facility, and that fab resides in a clean room space built up by Freescale.

After spinning out from Freescale, a lot of our work over the last year has been focused on the sales and marketing aspects of our business. We now have a global network of representatives, distributors and direct sales staff to uncover and serve the new market opportunities that I mentioned. Once folks become aware of where MRAM technology is today and how far it has come into its production history, a lot of opportunities open up because it gives designers a flexibility that they didn’t have before. Our team has also been very busy working on the technology and product development aspects of the business, and now we have 50 different part numbers in our portfolio of products. We have continued to expand the product, with new kinds of interfaces and new kinds of density footprints. Later this year we will introduce both a serial peripheral interface and a 16Mb design that will further expand our lead in this market.

You are approaching the one-year mark of Everspin being an independent company. What would you say is the biggest accomplishment to-date?
Considering that we are going through one of the most severe economic challenges in the last 25 years, I am just delighted with the level of market and customer traction that we are seeing. I think that in itself is a huge accomplishment, and the Siemens zero-failure news that I shared earlier underscores an incredible amount of hard work by the whole team to reach this milestone of being a demonstrably reliable innovator and business partner.

What other things should people be looking for over the next year from Everspin?
We are actively developing another kind of MRAM technology that several other folks are working on, called spin torque (ST-MRAM). This team has been working on spin torque since the very early days of MRAM, and we will continue to develop that technology and integrate it into our roadmap at the right time.

Geographically, are you seeing increasing patterns of demand or competition in certain parts of the world that have surprised you?

We’re not seeing much competition in the MRAM space, because there is no other supplier with comparable capability in the market today. In terms of demand, we are seeing good growth in Europe and Asia and we are in the early stages of getting wins in Japan at a number of accounts. We are seeing a lot of interest from the major multinationals who will try us on a first product, and after they have had some experience with us and see how well the product works, we are seeing customers expand the use of our chips into other products in the same business units, and subsequently giving us introductions to other business units within those organizations.

When you think a few years hence, what do you hope everybody will look at Everspin and say?
Our goal is to bring breakthrough products to the market in a way that shows that we are not only a leading innovator, but a reliable business partner as well. I think those two aspects together are very powerful - the combination of bringing truly industry-first technology to market and doing in it in such a way that companies can depend on us to be there with the right product when they need it is pretty special. That’s a big part of the Everspin brand: agile, responsive, and customer focused so as they are successful, we have a chance to succeed as well.

Who is your favorite author of all time?
Growing up I read a lot of Bertrand Russell. I like the fact that he was very inquisitive and also an iconoclast – he didn’t just take the conventional wisdom as received knowledge, and I guess I aspire to be a little bit like that. 

Weekly Insider (Mensch on a Mission with Kleiner Perkins' Komisar)

When my Lux Capital partner Peter Hebert recommended we interview our co-investor from Kleiner Perkins, Randy Komisar I jumped—not because of Kleiner’s long-standing track record of investing early in companies like Amazon, Google and Genentech, but because Randy, like our partner Larry Bock, is a rare breed of VC: “a mensch on a mission.”. When VCs invest with other VCs they’re really investing with partners at firms—not the firms themselves. VC investing is a relationship, access and entrepreneurial-mentorship business. We work for two customers who we tirelessly serve--and the day we make the decision to manage money for someone or invest it with someone is the day we start working for our investors and working for our entrepreneurs. Randy Komisar is a great embodiment of this principle. Feed you brain or miss this exclusive interview at your own intellectual peril.

Randy Komisar is serial entrepreneur and a partner at venture capital firm Kleiner Perkins Caufield & Byers. Prior to his current role, he was a co-founder of Claris Corporation, served as CEO for LucasArts Entertainment and Crystal Dynamics, and acted as a "virtual CEO" for such companies as WebTV, Mirra, and MondoMedia. He was a founding director of TiVo [TIVO] where he is currently chairman of the Nominating and Governance Committee. Earlier, Randy served as CFO of GO Corporation and Senior Counsel for Apple Computer [AAPL], following a private practice in Technology Law.

Randy also works with social ventures to translate the strengths of for-profit entrepreneurship to for-benefit organizations. He has been an advisor to GlobalGiving from its inception and helped to launch Ignite Innovations. He serves on the International Advisor Boards for the UCSB Engineering School, the UCSB Institute for Energy Efficiency, and the National Entrepreneurship Network in India.

Randy holds a BA in Economics from Brown University and a JD from Harvard Law School. He is a Consulting Professor of Entrepreneurship at Stanford University and author of the best-selling book The Monk and the Riddle, as well as several articles on leadership and entrepreneurship. He is co-author of an upcoming Harvard Business School Press book on planning innovation. Randy frequently speaks in the U.S. and abroad on such topics.

What was the career path that led you to become a venture capitalist?
I never set out to become a venture capitalist. I’m actually a serial entrepreneur! I started my career as a rock promoter and as a director of a community development program in the city of Providence. Once I realized that everyone I was negotiating and doing businesses with was a lawyer, I decided to go to law school. After graduating and practicing for a short period of time, I did my first entrepreneurial stint spinning out a company from Apple called Claris Corporation.

Claris was a great success and a terrific experience. I was young, I was hungry, and I worked with some amazing people. I caught the startup bug and began doing more companies after that. I went off and worked as the CFO at GO Corporation, one of the early hand computing companies. I then ran LucasArts Entertainment for George Lucas, and then another game company backed by Kleiner Perkins called Crystal Dynamics. Around the end of the boom, I created a new type of position called “Virtual CEO,” where I would help to run a portfolio of early-stage companies. I wouldn’t take the formal CEO role, but would act as a senior leader, decision-maker and mentor. Through that role I did a whole series of companies including WebTV, TiVo, Mondo Media, and some not-for-profits like GlobalGiving.

Around 2000 I started teaching at Stanford, did a few for-profit and some social ventures, and was then invited by John Doerr to come join Kleiner Perkins in 2005. That was the first time I ever thought about venture capital!

When you have the choice between investing in a great technology or a great person, which takes priority?
My priority is always the person, and the reason why is pretty simple: I generally believe that plan A, the business plan that I’m investing in, is not the plan that will ultimately succeed. The path from plan A to plan B or whatever plan is ultimately successful is going to take some zigging and sagging—and it requires a great team to navigate that path. So first and foremost, I’m investing in the team. Secondarily, I’m investing in the team’s existing hypothesis about their market and their product. It needs to be compelling, but I’m not foolish enough to believe that it’s simply a matter of execution.

What are 3 attributes of both good and bad entrepreneurs?
A good entrepreneur is highly creative. They are slightly deaf and slightly dumb- meaning they are not oblivious to the market, but they are tenacious to their core beliefs—and they are capable of sufficiently communicating their vision and purpose to be able to recruit their constituencies: the employees, investors, and partners necessary for success.

Bad CEOs are fairly analytic and fairly rote. They might be very smart analytic types, but they are fundamentally not the creative types. They are people who are incapable of articulating or persuading the constituencies necessary for success, and by-and-large they are people who are completely dogmatic about their view of the product or the service that is going to deliver the ultimate success to their company.

In good markets and bad markets, people are always quoted saying: “it’s a great time to be an entrepreneur.” Is there ever a bad time?
I was just having this conversation with some students from North Carolina State, who came on an annual trip to get a sense of the Valley. One of the students asked: “What the heck are we ‘gonna do now?” I looked at him and I asked: “Do you have any debt?” (Not much, some student loans). “Do you have any dependents?” (No, I’m single). “Do you have any assets that just got devalued in this last crash?” (No). And so I said: “You’re in great shape!”

There’s probably no better time to go off and start something new. My general sense is that the passionate entrepreneurs are almost irrepressible, and there’s never a bad time for that personality type. The reality is that in the market we have right now, it is difficult to get traction, it is difficult to acquire capital, and it is difficult to convince constituents. That’s largely because of the uncertainty that each one of those constituents face in their own businesses. So I wouldn’t want to be Pollyannaish about what’s going on today, but we’ve seen some of the best companies built out of these types of circumstances. Google [GOOG], for example, was basically born out of the bubble-bust of 2000-2003.

Do you have a preference for first-time vs. repeat entrepreneurs?
I love the repeats, and in particular I love the repeats who have had at least one failure in their history, because I think you learn so much more in failure. I would be cautious with the 23-year-old who came out with a good idea, caught the wind of the market, found a liquidity event, claimed victory and then tried to repeat the performance at 28 or 29. That individual probably isn’t humble enough to have learned what they needed to learn during that first experience, and so they’re set up for a fall when that wind slows down. That’s why I particularly like to find someone who may have actually failed before.

How do you distinguish between innovation and entrepreneurship?
I think innovation is well distributed on a global basis wherever there are smart people. Entrepreneurship, however, is not. Entrepreneurship is a profession, though we may treat it more like a rogue characteristic or personality trait. The reality is that in our economy today, the innovation industry, which is driven by entrepreneurship, is the equivalent of an industry sector. In a way, it has become the R&D for many different industries ranging from pharmaceuticals to telecommunications to entertainment, and now we’re even seeing it in industries like the automobile industry.

You’ve mentioned a whole slew of industries. What areas are you bullish on, and conversely what are some areas that you wouldn’t want to be funding today?
I am excited about alternatives and energy, because I think there’s a big problem to be solved. My attention focuses on where there are large problems that businesses can help solve in the next 4-10 years, and energy is an area that is clearly going to need many new solutions over the course of the next decade. The problem, of course, is the near-term pressures from the commodities markets and elsewhere that make it very difficult to rationalize investments in today’s markets. The good news is that policy will be highly supportive and give a helping hand to this industry to get through what could be a very difficult time – the sort of time that killed the first alternative energy industry that sprang up at the end of the Carter administration and died with $20 per barrel oil in the 1980s. While I like the energy sector because it solves a big problem, I’m nervous about that sector in the near-term, and I think you have to be careful about how you invest in it.
I’m very excited about what’s going on in mobile digital communications, entertainment and applications, and I think the revolution we saw around the PC in the 80s is extending itself today into mobile. It’s a global phenomenon. It’s difficult to figure out where the winners are going to be, but it’s a significant market trend.

I’m not that excited about investing in areas that surround retail. I’m not very interested in many new retail ideas, and even e-commerce to some extent is suffering in that I don’t think there are big problems to be solved. We have very good online solutions and we’ve got good physical solutions, so areas like retail are very uninteresting to me.

When you think about venture capital as an asset class or industry? It’s been almost a decade without having hugely receptive capital markets for IPOs. Big companies are struggling with potential M&A, and stock currency has been obliterated. How do you think about the venture industry and what may need to change or evolve?
I do think the venture industry is in the process of changing and needs to change. I don’t think we’re living in the world that existed in the mid-1990s, when VCs with small funds and no leverage were able to make small bets and reap huge returns. I think that structural era has changed. Venture capital is now global, and as a result if you’re going to be in the VC business at scale you have to think about how you want to participate in those global phenomena, and at least make very clear decisions about where you are not going to participate. I think as we look at industries like green energy and alternatives, if you believe in those industries and want to invest in them, you’ve got the difficulty of having to invest huge amounts of capital over the course of building those companies to reach a cash-flow positive state. As a result, you’ve got to have a different model about how you deal with leverage, how you remove risk with early capital, how much you invest in later stages of those companies, and where the ecosystem is for continuing investments. I think the notion of building businesses with very little capital that are going to have outsized returns - the Googles of the world - are going to be far and few between. I think where we see small capital invested, like in the Internet, we are going to see generally relatively small returns, because these days there are very few barriers to entry.
I do think VC is changing. It’s becoming more of a scale buisness, more of a global business. It takes more financial engineering than it did before because of the amounts of capital necessary to take some of these companies to fruition, and timeframes are also going to be longer as a result.

What is your contrarian view about the world?
I think that the issues we’re seeing today that we ascribe to markets, to politicians, and to global politics are all human issues, and that the human psychology and the human character are really where we need to focus our attention as individuals and as a society if we want to resolve any of these larger dilemmas.

What’s your favorite book and favorite movie?
I have so many favorite books, but on I go to over and over is Moon in a Dew Drop by Eihei Dogen. Timeless wisdom.

Same with movies, again, so many favorites, but my pick in the last year was Man on Wire about Philippe Petit, that extraordinary man who walked a tightrope between the Twin Towers. He epitomizes great entrepreneurship. This movie elevates one's soul.

Weekly Insider (Steve Jurvetson at the speed of thought)

In yet another exclusive interview, this week I sit with Steve Jurvetson of DFJ.

There aren't many investors as sharp, quick or multidisciplinary as Steve Jurvetson, managing director of Draper Fisher Jurvetson. His firm is a leading venture capital firm with affiliate offices around the world and one of the most active energy and clean-tech investors. Steve was the founding VC investor in Hotmail, Interwoven and Kana. He also led the firm's investments in Tradex and Cyras (acquired for $8 billion), and in pioneering companies in synthetic biology and molecular electronics. Previously, he was an research and development engineer at Hewlett-Packard, where seven of his communications chip designs were fabricated. His prior technical experience also includes programming, materials science research and computer design at HP, the Center for Materials Research and Mostek.

At Stanford, he finished his bachelor of science, electrical engineering, degree in 2.5 years and graduated No. 1 in his class. He also received master of science, electrical engineering, and master of business, administration, degrees from Stanford, and serves as co-chair of the NanoBusiness Alliance and president of the Western Association of Venture Capitalists.

Creative Disruption - Writing The Code Of Life

Forbes: The late science fiction author Sir Arthur C. Clarke once said, "Any sufficiently advanced technology is indistinguishable from magic." What's some magic you've seen lately? 

Jurvetson: Some of the most interesting magic I've seen recently is in the domain of genetic alchemy, where you can change one organism into another by swapping DNA. We are on the cusp of being able to write the code of life as if it were a poem or computer program. That gives us a whole new set of capabilities, in what I would call a second generation of industrial biotech, where we don't just cut and paste from nature but we actually write code from the ground up however we choose.

Five or 10 years ago, folks would have said it's impossible to change one organism into another by swapping out 100% of its DNA, yet this has been demonstrated in the past year by Craig Venter and his team at Synthetic Genomics. This is just a precursor to the next step, which is putting a fully synthetic chromosome into a single-celled organism.

Have you invested in this science? How does it work?
Yes, I sit on the board of Synthetic Genomics, and we have two other investments that are also in this new generation of modifying organisms for building chemicals. They're really focused on designing systems to produce evolved organisms to do useful work. They do this by starting with an organism that naturally makes a small amount of a chemical of interest. Then, they'll analyze its metabolic pathways and cripple the organism along all dimensions exceptfor the one they want to make chemicals.

Therefore, in order to survive and reproduce, the organism is forced to evolve to produce more of the chemical that you desire. Some early work in this space by a company called Genomatica has shown a 20-fold improvement in yield from this directed evolution technique.

What's the business case for developing highly advanced technology to produce what are essentially commodity chemicals?
It is true that some folks are going after commodity chemicals, like fuels, where you're selling into a huge global market with commodity price swings. What they're betting on, though, is price position. Although they won't have international protection for their end product--you can't patent ethanol, for example--they can create protected pathways to make chemicals that are far more cost-effective than any other petroleum-based process.

So whether these new processes are consuming waste feedstocks, or stranded feedstocks that were too expensive to ship around previously, or true free wastes like CO2 from the air--you are unlocking value with this technology.

Another interesting aspect to this directed evolution approach, and what separates it from prior generations of biotech, is that your process can actually get better over time.

In past production systems, organisms would "drift" over time--that is, they mutate away from producing the chemical you want, because it is a profligate waste of their resources and energy. But in directed evolution, you've tightly coupled the reproductive pathway of the organism to the chemical of interest, so as time goes on, even if you're not trying to modify the system in any way, the process itself gets better over time instead of worse!

View my complete interview with Stever Jurvetson at Forbes.com.