Bloomberg Beta On Investing In The ‘Future Of Work’

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The future of work is increasingly top of mind for tech investors, who have a range of opinions about whether and how to address the growing income inequality that appears driven, in some part, by the winner-take-all dynamics of technology and globalization.

Longtime VC Steve Jurvetson told this reporter back in September that income inequality will “kill us long before climate change” if we don’t alter our current course. Y Combinator cofounder Paul Graham more recently and controversially  wrote that “ending economic inequality would mean ending startups.”

Meanwhile, current YC President Sam Altman is planning to fund research around basic income, writing last week, “I think it’s good to start studying this early. I’m fairly confident that at some point in the future, as technology continues to eliminate traditional jobs and massive new wealth gets created, we’re going to see some version of this at a national scale.”

Roy Bahat, who heads up the venture outfit Bloomberg Beta in San Francisco, says that he and his partners have actually made the future of work their overarching investment theme, and it’s something he wants their entrepreneurs to be focused on, too. We talked about it over coffee Friday, where he also gave us an update on Bloomberg Beta, which is backed entirely by Bloomberg LP.

Ry BahatTC: You set up your debut $75 million fund almost three years ago. How has it evolved since you got started?

RB: We’ve always focused on being as transparent as possible. We open sourced the model for our fund and it’s all been updated continuously over the years on GitHub.

We weren’t sure what our check size would be initially, though we’ve hit on what we think works, which is investing between $500,000 and $1 million in companies as early as possible, often before other seed funds are willing to invest.

We [separately] realized that as a small fund focused on the early-stage market that you can’t see all the deals in your space, even in a narrow domain.

TC: What did you do about that?

RB: There are people we love working with, so we started backing them through a program that we call our Open Scouts Program. We run it through AngelList and instead of making soft commitments, as many do on the platform, we’ve committed to giving these three angels (Max Simkoff, Shruti Gandhi, and Parker Thompson) a certain amount to invest behind every deal they fund.

TC: What can they see that you might not?

RB: It’s astonishing. You think you see everything in your space, but in the seed market, there’s so much dark deal flow.

TC: Are you afraid someone at Bloomberg is going to say, ‘Wait, what are we paying these VCs to do?’

RB: No, it’s one of the advantages of having an [investor] like Bloomberg. They want us building a window onto the world of startups, and the mechanism for doing that is a fund that seeks returns. This [capital that’s going to angel investors] is a small percentage of our investment capital.

It’s not like our strategy is to give it out and be a fund of funds of angels – though, by the way, somebody should do that.

TC: What is your investment strategy? What are you most focused on right now?

RB: We’re very focused on machine intelligence, which is an even bigger deal than we thought. My partner Shivon Zilis did a study of 2,500 startups in the space in December 2014 and she refreshed it this year, and we’re just seeing it all over the place. It’s going to be much more profound than people realize.

We’re also focused on the future of work and how it will be organized. Like, what jobs do people have? How many new jobs are there? The tech industry in general has taken the stance that it will all work itself out, and we fundamentally disagree with that stance.

TC: How do you invest in the future of work?

RB: Our first responsibility is to find great companies, and they’re focused on everything from data infrastructure to business intelligence applications.

Then we want to help them understand the effects they’re going to have on the broader ecosystem and to address those effects at the right time.

Obviously, if you’re just getting going, your priority is to exist two years from now. But down the road, you do need to start paying attention to the broader world. A great example of a company doing this well is a portfolio company of ours called Flexport, which offers online booking and tracking for cargo shipment, and they write regularly about the cost of hard goods to help raise awareness. Another [of our companies] is Orbital Insight, a machine intelligence company that analyzes satellite imagery to determine if markets are growing or shrinking; it’s also putting its findings to good use [by sharing them].

TC: Was there a particular impetus that got you thinking about all of this?

RB: There was a time when tech was the outsider, the underdog. Now it’s The Industry, and it’s time to act like it, which means taking responsibility for the things [that we’re introducing into the world]. Take self-driving cars. One of the top professions for U.S. men is truck driver. I think the top job across both genders is cashier [another role that’s being disrupted by technology].

I also think the reason we’re all becoming obsessed with this stuff is because the effects of technology automation is coming to the jobs of the people who write about and talk about these things, so software developers, VCs, and journalists getting automated has all of our attention.

TC: Bloomberg Beta is a young fund. Any exits yet?

RB: Our very first investment, [the machine learning startup] Newsle, sold to LinkedIn. Another company has sold to GoDaddy. But it’s early days.

TC: Will we see a new fund this year and will it be larger? Also, how does it work with one LP? Is there much of a negotiation in terms of how big a pool you’ll be given to invest?

You have to persuade them like any LP. Like anybody else, people don’t just hand over money. But we’ve been very fortune to be supported by Bloomberg and it’s an unusual model, because we don’t invest for strategic returns; we’re not a classic corporate VC. We invest to make money like a plain vanilla venture firm because we think that’s the best way to forge relationships with the startup world, and they’ve been very supportive of that.

To answer your other question, I think it’s highly likely that we’ll expand the size of our fund. I can’t comment [publicly] about when, but we have no desire to grow dramatically.