Episode Summary
Executive Summary: George Zachary, partner at CRV, discusses his career investing in transformative companies like Twitter, Uber, and Shutterfly. He reflects on missing Google at Moore Davidow due to a partner's rejection, and the importance of betting on founders over management. The conversation covers venture capital dynamics, health scares that shifted his focus to bioengineering, and concerns about the coronavirus pandemic and societal risks from bioweapons.
Main Topics: Venture Capital Philosophy and Missed Opportunities (Priority: 5/5): Zachary discusses the importance of betting on visionary founders, overcoming groupthink, and the challenge of funds growing too large to multiply. He reflects on the missed Google investment due to a partner blocking the deal, and how firms must empower younger partners to champion consumer internet ideas. Health Scares and the Healthcare System (Priority: 5/5): Zachary shares his personal health journey, including an incidental tumor discovery and difficult navigation of the medical system. He critiques lack of price transparency, the difficulty of second opinions, and the need for patient advocacy, leading to his investment focus on early cancer detection and biotech innovations like immunotherapy and organoids. Coronavirus Pandemic and Societal Preparedness (Priority: 4/5): The conversation analyzes the COVID-19 outbreak, its transmission dynamics, and potential impact on society. Zachary argues that modern air travel enables viral supernova events, and that society lacks memory of past pandemics. He advocates for ceasing handshakes, embracing tele-everything, and investing in pandemic preparedness. Biotech and Future Innovations (Priority: 4/5): Zachary details investments in AI-driven drug discovery, organoids for Alzheimer's research, and cell-based meats like salmon from Wild Type. He discusses immunotherapy as a cancer treatment and the ethical dilemmas of CRISPR, designer babies, and conscious AI, cautioning against immortality and bioweapons targeting genetic profiles. Politics, Social Media, and Polarization (Priority: 3/5): Zachary expresses concern over extreme voices dominating social media and the rise of political extremes like Trump and Sanders. He advocates for pragmatic centrism, criticizing overspending and debt. He supports Bloomberg as a moderate candidate and worries about erosion of reasonable discourse.
Key Arguments: Venture capitalists should bet on visionary founders and their leadership, not just management skills; leaders inspire while managers execute. The Google miss at Moore Davidow was due to a single partner blocking the deal, citing arrogance and a crowded search market; this highlights the cognitive bias of dismissing disruptive entrants in crowded spaces. Fund size matters: large funds (>$500M) struggle to triple returns because they need a $15B exit (10% ownership), which is rare; top-quartile 3X funds represent only 11% of the top quartile. Healthcare lacks price transparency and consumer empowerment; patients must advocate aggressively. Incidental findings ("coincidentalomas") can save lives, but the system resists second opinions and data sharing. Coronavirus is a new terrorism — invisible, uncontrollable, and capable of overwhelming healthcare infrastructure. Societal memory of past pandemics is absent, and global air travel enables rapid spread. Concentration of wealth and power in older generations could stifle innovation; thus, immortality is undesirable. The paradigm must shift with new generations. Biowarfare is a genuine threat: DNA profiling (e.g., 23andMe) combined with bioweapons could allow targeting of specific ethnic or genetic groups.
Data Points: Google fund size in 1995 at Moore Davidow: $105 million - Fund size when the firm passed on Google. Google post-money valuation rejected: $48 million - Price at which Moore Davidow could have invested; would have owned 16%. Startup failure rate (seed/Series A): 70-80% go to zero or 1x return - Zachary's estimate of mortality rates for early-stage investments. Top quartile 3X fund incidence: 11% - Only 11% of the top quartile of venture funds achieve a 3x multiple. Alzheimer's drug development timeline: 12-15 years - Average time to develop a pharmaceutical drug. Coronavirus fatality rate: 2-3% - Zachary's estimate, compared to 0.02% for swine flu and 10% for SARS. COVID-19 case doubling time: 7.4 days - Based on New England Journal of Medicine modeling. Coronavirus severe/critical cases: 18% - Proportion of cases that become severe or critical. U.S. critical care beds: 100,000 - Capacity constraint if outbreak reaches millions. MRI cost variation: $9,500 (hospital) vs. $900 (third-party) - Example of price dispersion in healthcare. Cell-based fish company tasting readiness: Not yet ready for mass market - Wild Type salmon not yet price-competitive with farmed fish.
Pivotal Quotes: "The key thing is not the thing you passed on. The key is what you did." — George Zachary: On venture investing and overcoming the Google miss. "This is the new terrorism. It is terrorizing people. You can't see it. You can't stop it." — George Zachary: Describing the coronavirus pandemic as a microscopic insurgent. "If you're doing really well in venture, you have so much money that you are not really paying attention to what consumers need because you can basically get whatever you need through money." — George Zachary: On why older VCs lose touch with consumer markets.
Implications: Venture capital must empower younger partners to back disruptive founders despite consensus. Healthcare demands systemic reform for price transparency and patient advocacy. Pandemics and bioweapons pose existential risks that require societal memory, precautionary behavior, and investment in tele-solutions and preparedness.
About This Week in Startups
Jason Calacanis covers startups, tech, markets, media, and all the hottest topics in business and technology. He also interviews the world’s greatest founders, operators, investors, and innovators.