Take one glance at Playground Global’s portfolio and a theme emerges: The firm’s investments are forward-looking, longer-term plays, a strategy that runs counter to the fast-return ethos that permeates certain Silicon Valley sectors.
The Palo Alto-based VC firm is banking on the future with investments in capital-intensive and technically complex pursuits, including robotics, autonomous driving, metallic 3D printing and infrastructure. It’s an investment strategy that isn’t for the faint of heart.
So, how does a firm that embraces futurism handle the present-day disruption of COVID-19? It looks ahead, of course.
When co-founder and CTO Peter Barrett joined TechCrunch this week for an Extra Crunch Live panel, the pandemic dominated the conversation. The executive noted that a new and common thread has emerged throughout the many discussions among Playground executives and the startups in which it has invested.
Priorities are shifting toward finding ways to be of service.
Everything feels different these days. Recent months have caused many in Silicon Valley to reconsider their investment priorities, roll up their figurative sleeves and begin the process of helping the world survive and, eventually, recover from the seemingly endless COVID-19 pandemic. Like many others, Playground finds itself at a crossroads — determining how it can be of service, while examining the ways in which a crisis like this can be addressed.
“One thing that underscores this pandemic is a realization that we need to be doing other things if we want to avoid being stuck inside for six months to a year,” Barrett said. “The biggest trend is a recognition that we need to make the investments that give us agency over our biology, and to build the tooling and infrastructure, so the parade of maladies which is behind COVID won’t have the same consequences that COVID-19 has.”
The pandemic has also driven people to reflect on what they want to do with their lives, Barrett said, suggesting that this phenomenon could influence which startups emerge from this period as well as what venture capitalists choose to invest in.
“If you’re an entrepreneur, I think a dating app looks less appealing than contributing in some way,” Barrett said, adding that entrepreneurs are looking at areas that “put us in a position where we really don’t have to be stuck inside because of a thirty kilobase virus.”
Playground has a number of startups that are in position to offer some support, though, as is the nature of the firm’s tendency toward long runways. Most, however, appear better positioned to consider how we can prepare ourselves for the inevitability of some future pandemic, rather than the one we’re currently battling. Click through to read the highlights and watch a video with our entire conversation.
Nearer term plays
Playground’s portfolio is a mix of companies that are building things on a longer timescale that have the capital and patience to weather this pandemic, Barrett said.
However, in the near term, there are categories of companies that have an opportunity to be of service and grow their business.
“Companies that are looking at automation, logistics — dealing with how we continue to supply everybody with what they need under these circumstances, there is a significant tailwind there,” Barrett said, adding that if you look at the number of people Amazon, FedEx and UPS are hiring, it is clear that there is an appetite for logistics and automation.
Logistics, automation and delivery are all nearer-term bets that will likely pay off in this COVID-19 era. Companies like warehouse robotics startup Canvas Technology are hot commodities today. Canvas, of course, is already out of the mix; that Playground portfolio company was acquired by Amazon in 2019.
Long-term plays
Then there are the long-term plays, Barrett noted, that include life sciences and computation.
“There’s a wide variety of efforts that can contribute to solving this problem,” Barrett said. “Even in the abstract, there’s computation, which is a tool that we need to use in order to be able to address these viruses in a more direct way.”
More specifically, this includes startups working on better classical computing, ideas that get over the Moore’s Law limitation that limit GPUs and CPUs, and quantum computing, as well as computational methods used to program RNA and target maladies in new ways, he said.
Barrett is particularly interested in automating life sciences, as well as startups that are seeking out new ways to develop and test drugs, noting that it will be important to invest in companies seeking to automate the process of life sciences, which he says hasn’t had its industrial revolution yet.
“It needs a whole bunch of tooling around data and protocols and governance, all the way down to automated machines, which have never been automated before,” Barrett said. “All of that stuff needs the same breadth and depth of automation that manufacturing does.”
Barrett has come across all kinds of companies that are constructing new technologies and are additive to this.
“We see the portfolio evolving in ways where those puzzle pieces are fitting together and then complementing each other in interesting ways,” he said.
Quantum computing is also high on Barrett’s list of worthy investments that have become even more important during the pandemic. Playground has invested in PsiQuantum.
“It’s kind of embarrassing the way we develop drugs, the way we develop monoclonal antibodies,” Barrett said. “There is a lot of fiddle with it, and try it, and see how many mice die — and that’s the cadence at which we can make progress. All of those things can be engineered with the right computers. We don’t have those computers today, but we are only a handful of years away from having such machines.”
Barrett said we need new quantum systems to understand the mechanism of something like COVID-19 and how to address it, or to be able to design directly from a viral genome, an antibody which would attach to it.
“The way we do it now is incredibly artisanal,” he added.
A new way forward
Barrett, and by extension, Playground Global’s, focus on some of the big and challenging problems has been a priority since before COVID-19, but Barrett said he hopes others follow suit and look beyond consumer product investments.
“It seems unconscionable to put too much energy into stuff that is just piling wealth on wealth — we’ve got bigger fish to fry,” he said, referring to the investment community’s near-obsessive focus on near-term consumer products over moonshots that could have a positive effect on the world.
He said this focus on consumer products persists because they’ve been so successful in generating returns. “You look at the software IPOs in the last couple of years, there’s crazy multiples — you know, everybody seems to have done well,” Barrett said. “And so it’s a lot of ‘more of that… let’s just do that again,’ which is fine. But I think you ignore the rest of the world and the physical layer at our peril.”
Barrett also believes a lack of diversity has contributed to that, where VCs get into patterns of continuing to invest in startups with the same demographic of straight, white males.
“The problem with that is that venture capital operates on entrepreneurs and talent and if you only draw upon 20% of the population for that talent, you’re missing out on people who are going to create these watershed things that do have a different perspective,” Barrett said. “We’ve got to break out of that for self interest as well as for the fact that it’s just wrong not to draw upon a broader audience to build the companies and the technologies that are going to fuel on civilization.”
He noted that Playground has “done a pretty terrible job” in diversity at the partnership level of the firm. He said that while the company’s team and its portfolio are gender balanced, there is more to do and it requires measurement.
“And our entrepreneurs are demanding more of us, candidly, and I think that all entrepreneurs, when you’re looking to raise money from somebody, ask them what they’re doing about diversity, ask them what they’re doing about those perspectives,” Barrett said, adding that investors have to measure their pipeline as well as who they’re meeting and what they’re talking about. “You also have to cultivate a pipeline that goes deeper through the networks into high school and in the universities that makes people understand that if they want to be an entrepreneur, there is an opportunity to get investment at Playground.”
Pre-COVID, the company was opening its 80,000-square-foot facility and had what Barrett described as regular meetings with engineers and academic interests as a way to draw a diverse group in the building and share their perspective on diversity and investing. Still, he said that measurement is critical.
“We’ve got a set of tools that most of the folks don’t have, but you still need to measure us by, ‘OK, a year from now, what did you do?’ And we need to collect the metrics to be be able to say one way or the other.”