This is a transcript of an old conversation I had with Rob from Shasta in May 2012. Rob is a diehard mechanical engineer and gear head, and as you’ll see below, was focused on the intersection of hardware and systems before it was trendy. Now this week, Shasta celebrates their initial investment in Nest, and looking at their portfolio, there’s a lot more goodness they can expect. Knowing Rob personally, I can attest to his genuine, long-term interest and enthusiasm for the space, and I’d encourage anyone interested in venture (he founded Shasta Ventures) or connected hardware should pay close attention to how he thinks.
@semil: I’d like to talk to you about what your venture capital firm is investing in. Then, we’ll specifically go into some of the blog postings recently written about the Internet of Things. But briefly, to set the stage, tell me a little bit about why you started Shasta Ventures and what you guys are focused on?
Coneybeer: A big part of the reason that I started Shasta Ventures, and I started Shasta Ventures as a co-founder, is I didn’t want to go through my career in Silicon Valley without starting something new. I’d been at NEA for about eight years.
Together with my co-founders, we saw a real opportunity to bring consumer understanding together with core technology. We saw that the adoption of technologies by end users is where the real future leading startups would be coming from.
@semil: What stage does Shasta focus on? Are you guys investing in seed, focusing on A or doing a little bit broader?
Coneybeer: We focus on Series A. We do some Series B and we do seed opportunistically, but Series A is our sweet spot as a firm.
@semil: Talk to us a little bit about when you formed the firm. What are some of the key driving theses behind that? What are you looking at from an investment point of view?
Coneybeer: From an investment point of view, the areas that we focus on today are mobile, on software as a service. That’s both to the enterprise markets and to consumers and then consumer Internet as well.
There are some themes within those areas that we find very interesting. I think, overriding all of it is that, as we all notice today, mobile is affecting absolutely everything.
Within mobile, one of the areas that we find very interesting is what we think of as collaborative consumption. That’s the idea that you might have fixed assets, like cars such as relay rides, that enable peer-to-peer car sharing.
You could have people that have spare time or looking for odd jobs. That would be like TaskRabbit, where we’re a major investor.
LiquidSpace is about finding spare office space near you to use on an hourly, daily or weekly basis. We think that’s a really powerful trend that’s enabled by mobile. Other areas that we find interesting, right now, include software as a service, next generation ecommerce. There are some themes like that that we’re spending a lot of time on.
@semil: If we dig into one piece of that in the collaborative consumption, how did you and your partners come up with that as a potential theme? And you guys have been very regimented about investing in that theme and have done a number of investments.
Talk briefly about how you came to that idea. Then, what are some of the other representative companies?
Coneybeer: One of the things that we think is very interesting about mobile, is that the first wave of mobile has been about what now we think of as self-contained applications. That might be media, that could be gaming, et cetera. What we’re particularly interested in is how mobile and applications, both as a distribution mechanism and as a way to reach consumers, can affect other industries and really disrupt those industries.
An example of that would be Cherry. Cherry is a company where you have an application. It looks a lot like the uber application where you bring up a map and put a push-pin in the map where your car is. You simply push a button that says, “Come and wash my car.”
We really like this because it disrupts an industry that’s a $10 billion existing industry today. It’s taking something that was impossible before, reaching tens of millions of consumers rapidly to be able to scale an industry outside of mobile, but adjacent to mobile.
@semil: If you’re talking broadly about mobile applications and helping people interact in the real world, let’s talk through some of your blog posts, which I think are really interesting. You’re saying, basically, the first wave is mobile enabled technology information. Can you walk us through your thesis there?
Coneybeer: First off, you might have games. Then second off, you have location based applications. If you think about “Foursquare” for example, and a number of the applications that have come along that are location aware and can give you coupons. They can keep track of where you’re going. They can help local merchants interact with those customers. That’s very interesting.
It harnesses a lot of the sensors that are available in the smartphone, location being one of them, photography being another. Instagram has been this huge recent success. It’s harnessing this sensor that you have on the smartphone that’s getting better and better, very high resolution, great photographs.
Smartphones are one enabler of what we think of as the Internet of Things. The second enabler which is being incorporated into the smartphone, but is also being incorporated into devices, is sensor technology. This is the idea that I can measure things in the real world and convert them into electronic information.
@semil: Here’s a question I see a lot of entrepreneurs or people who are building applications, think about. They say, “We can build this application and it leverages this sensor and that sensor.” Right?
@semil: It’s usually a trick. Then on the consumer end, people say, “Hey, you’re draining my battery. You’re plugging down my system.” What have you seen founders doing to leverage the right sensors in the right way?
Coneybeer: I think, typically, they find something very specific. It’s very simple. I think Instagram is a great example of how they were able to leverage a very high quality imaging sensor that was available on iPhone 4S that leads people to create stunning images that other people want to interact with.
If you didn’t have, say, one or two key sensors that you bring together, they wouldn’t have had, I think, the uptake or the adoption that they’ve had.
@semil: Now, do you still think there are opportunities in the application layer for people to grab interesting data using any combination of those sensors?
Coneybeer: I think where the really interesting opportunities will be, going forward, is taking sensors, but then taking action with those sensors.
Look at something like the Nest Thermostat for example, where we’re an early series investor. It’s packed with sensors. It’s packed with motion sensors, temperature sensor, humidity sensor. It has a ZigBee radio built in, a WiFi radio built in to connect to the Internet.
It can take in this information about, “I want to turn up the heat. I want to turn down the heat.” It can tell whether the house is occupied or not.
Where the magic is in these devices is marrying it with actuation. The very fact that it’s connected to the HVAC system, means that device can take action and save you money by controlling the HVAC system and closing the loop.
@semil: Let’s focus on this Internet of Things. This is something that I and other people probably see written about here. Web 3.0 is about connecting devices or connecting phones to different devices. How do you define Internet of Things?
Coneybeer: I think of the Internet of Things as everything that connects to the Internet that is not a PC, not a laptop, not a smartphone. It’s all the other devices that connect to the Internet and become more useful because they connect to the Internet.
@semil: Now, would an example of this in actuation, or an actuator, be a service like IFT?
@semil: What would you say to entrepreneurs out there who are looking at either building actuators or things? What would you want to see as an investor?
Coneybeer: As an investor, what I’m particularly interested in are people that are thinking about the suite of sensors that are now available in smartphones. That could be location, sound, light, et cetera, imaging. But then, also looking at off the shelf actuators that are available.
Rather than just creating the actuators, think about how they might be able to take action in the real world. This could be things like Nest, for example, with the actuator being the solid state temperature controls that they have built into the device.
You think about something like Fitbit today. Fitbit is a sensor technology. But is there something that you can build into that device that would actually help people take action that would be more of a feedback loop for people? Now, I don’t think people would like a device that shocks them, but is there something that’s able to close the loop out in the real world?
@semil: I see.
Coneybeer: That, I think, is very interesting.
@semil: I hear a lot of people testing out Nike FuelBands and Jawbone Up. I think one or both of them offers some vibration or some LED alert. This is what you’re saying is technology giving real world feedback?
@semil: How do you see this playing out over the next two to three years as you’re looking at investments and the potential investments coming?
Coneybeer: I think what it leads to and, I think, one of the waves that’s coming is, we have ubiquitous wireless coverage and smartphone capabilities. With the touch screen, it can be used as a controller for example. You can start to control these devices that are around you.
Sensors have become very cheap and ubiquitous. With actuators and being able to move things in the real world, what you’re really talking about is enabling a robotics industry going forward.
We’re starting to see the vanguard of it. We see things like the Roomba, that’s more like a toy. Then you start to see things that I think of as toy drones. If you think about aerial drones, today, it’s these military drones that cost millions of dollars. But either of us could go out of this interview, go to a Toys “R” Us or a local shop, and buy a styrofoam plane that has a radio controller packaged with it for $50 that we could fly around. And the same with the helicopter.
These devices weren’t available 5, 10 years ago. They come built in with a HD camera that could have an hour of video on it. These things weren’t capable before.
I think, the next wave that you look at, which is a lot closer than any of us realizes, is the fully automated self-driving car. The reason that’s enabled is, you have very high quality and inexpensive machine vision, and most cars are now shipping with drive by wire actuators in them.
In a lot of cars, when you turn the steering wheel now, it’s not hydraulically connected from the steering wheel down to the rack and pinion. There’s actually a wire at some point in there where your steering input is translated into an electrical signal, and then back through an electrical motor to actually steering the car.
Subsystem after subsystem in cars have been transferred over to these electrical actuators and, as a result, it’s a very natural step to move to the fully automated autonomous car.
@semil: I see. The final question would be, before we get to the autonomous car, we’re looking at remote operated things, right? Things in the real world, whether it’s a helicopter or a little plane drone or something like that. What are some interesting ways that you’ve seen people trying to do stuff around that today? It feels like I have seen these devices in stores and they also offer controlling through a phone application. Are we that close or is it still a few years away?
Coneybeer: I think we’re getting remarkably close. I think, in some industries, you can see that the toy industry starts to become an early indicator of where a lot of these technologies are headed. I think it’s still very nascent stages. It’s an area where I would encourage entrepreneurs to play around with stuff.
A great example would be 3D printing, today. 3D printing is becoming a lot cheaper because the materials technology to build up these three-dimensional devices in the printers is becoming a lot cheaper and more robust. The actuators that you need to be able to actually move these devices around to build up these structures are becoming cheaper, more reliable, and more efficient. These are the enablers.
To answer your question, directly, about where they should be looking, one area that’s really worth taking a close look at as an entrepreneur is, what does 3D printing enable? Where are the opportunities?
@semil: Rob, thank you for coming to the studio. Good luck.
Coneybeer: Great. Thanks for having me.