Interview with Phil Morle
For this deep tech journey, I am humbled to share the perspective of legendary deep tech investor Phil Morle. Phil is a Partner at Main Sequence and writes the Building Out Loud newsletter, but I’ll let him tell his story in his own words.
How have you ended up involved in deep tech?
My father sold semiconductors so I grew up surrounded by early computers in a family that loved to code. I resisted this path to begin with and became a theatre director in my first career. It was here that I learned how to make something magical with very few resources. I made websites on the side to pay the rent and eventually needed to flip the emphasis to this career. At the height of this I was CTO at one of the big file-sharing companies - Kazaa. There I experienced what was possible leading a startup with millions of users and wanted to do that again. Australia at the time - about 2008 - had very few startups so I co-founded Pollenizer with Mick Liubinskas as a foundry to create startups. Towards the end of that period, we designed and ran CSIRO’s National Science Accelerator and realised the incredible power of combining the depth of science with the ambition of venture. Main Sequence, where I am today is the manifestation of this at scale.
What do you advise investors (angels, VCs, CVCs) who are considering the deep tech sector to do in order to be successful?
Deep tech investing is more like the origins of venture than the SaaS-based venture capital industry we have developed over the past 10 years. Deep tech companies are more like Fairchild Semiconductor than Canva. What does this mean? They are more likely to involve ‘atoms’ over ‘bits’ - with founders building companies around molecules, materials, machines, factories, rockets, sensors. These technologies need world class science, engineering and business development skills, probably have regulatory hurdles to get through, and probably require a revolutionary change in supply chains. These are not for the faint of heart but when the companies pass through, they have impenetrable moats around them and they sit at the centre of whole new industries that can deliver excellent returns for investors.
Know what you are investing in and support the company to do what it needs to do, not to force it into a SaaS mold.
Get out of the lab as soon as possible. Help the company work with customers to learn precisely what they need ASAP.
Don’t waste time on perfect science at the start. Commercialise the science you have.
Have a strategy for non-dilutive capital such as grants and debt. Dilution may not be venture or founder friendly without it.
Use the existing supply chain as much as possible. Try not to re-invent a wheel that may have taken decades to build.
Can you give an example of an Australian deep tech company you’ve been impressed by?
Cauldron Ferm is creating a ‘Taiwan Semiconductor for Biology’. Scientists have figured out how to re-program nature so that simple organisms such as yeast can brew things other than beer. The pharma industry has been doing this for years with drugs like insulin which is brewed like wine in tanks instead of harvested from a pig’s pancreas. We can make proteins for food, fibres for clothes and molecules for fuel this way - all without emissions intensive fossil fuels and animals. Cauldron will do this at giga-scale, seeding a whole new industry.
What more do you think Australia needs to do, before we have deep tech startups regularly mentioned in the same breath as Atlassian and Canva?
Keep going. This is a whole new wave of innovation that is maturing. Whole new disciplines of breakthrough science are figuring out how to scale their impact, new financing models are emerging, founders are learning how to build. And all this is happening in a world that is pulling these companies into existence through geo-political turmoil and climate change. We need to hold our line and keep going.
The companies are coming. In 5-10 years we’ll also be talking about Cauldron, Q-CTRL, Samsara Eco…
What should an investor look for in a deep tech startup coming out of the University sector compared to one that is formed outside of it?
No matter where the company originates, it needs a technology that is hard to replicate, a market that feels vast and a team that can get the business to the next bases.
Is the technology ready to commercialise? That is, can they start working with customers in pilots and discovery projects?
Is there clarity on how the science will be integrated into the company? Are key researchers spinning out of the university or will there be an agreement for the university to develop the IP internally? Either way there will need to be a science leader that is IN the company as this can’t be arms-length in a deep tech company.
Are there funding opportunities such as Australian Economic Accelerator programs that can fund the science that will help the company?
Is there an aligned approach on equity/royalties with the university? Sometimes universities expect too much equity without any plan to help the business going forward. Sometimes investors expect universities to have too little, even though they are an essential partner going forward. Look at each deal on its own merits.
What podcasts/books/people have influenced your perspective on fostering deep tech?
Podcasts
Acquired - for playbooks that have built the biggest companies.
Transparent Venture Capital - great conversations about Australian startup news from a founder perspective.
Turpentine VC - interviews with the best investors
Grow Everything - great podcast on biotech companies
The Scenarionist - deep tech investors and companies.
Books