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Inside the Bradfield Centre, Episode, 45 Bruce Beckloff, Co-Founder and CEO, Bloc Ventures

James meets Bruce Beckloff, Co-Founder and CEO, Bloc Ventures and discusses Bruce's career background, the focus of Bloc Ventures, and the current state of venture and start up funding.

Transcript

James Parton

Welcome to Inside the Bradfield Centre where we tell the stories of the companies, partners and staff that make the Bradfield Centre community so special. I'm James Parton, managing director of the Bradfield Centre. Joining for today's episode is Bruce Beckloff, who is the co-founder and CEO of Bloc Ventures.

So Bruce, thanks so much for taking the time to come on this show today. It's very much appreciated. Why don't we start with just exploring your early career and your connections to Cambridge.

Bruce Beckloff

Okay. Thank you, James. And yeah, thanks for having me on. My career has spanned about 30 years now in the deep tech arena. I'm actually a material scientist by trade, and I studied, I'm an American as well, and studied at Georgia Tech, which is actually quite a top engineering school, but that technical background is actually important to me and actually to where I've gone through. After university, I went to work for a semiconductor company called Texas Instruments. I started my life in in the fabrication plant. So I used to have to dress up in what's called the smock and be in the clean room and such.

And then as that time went on, I learned that there were two directions in life. Either you stay technical or you take your technical skills and move into the commercial arena. And while at Texas Instruments, I moved into the product marketing group and started to learn what marketing was. I have to say making a move from a technical background into marketing was quite a challenge, and we can explore that another time.

But then after that, I spent another few years at Texas Instruments in the marketing team, and then I was called by a UK group while I was living in Texas and asked if I wanted to go out to Silicon Valley and work for them there. And so I joined this group, and it happened to be ARM, and clearly ARM is a Cambridge-based company. I started for them back in 2001. They brought me in as part of their strategic marketing team, looking at a specific application area, which was in the imaging space because that's the activity I was doing at Texas Instruments.

And then after a while, I was able to move up the ladder and took over the overall strategic marketing group there, it was called segment marketing, and our job was to really go understand what the market needed so that we could make sure we were making the right products back at ARM. I then wanted to move in and get into more of a finance role, and so I went to work for the CFO and took on the corporate development activity. So we actually had investor relations within corporate development really because we needed to explain technical things to investors, but also we had M&A and venture capital and overall corporate strategy. And by that time, I was living in Cambridge and lived there for, well I lived in London and traveled to Cambridge, but got to spend quite a bit of almost nine years engaged in Cambridge while I worked for ARM.

James Parton

Right. Really interesting. Yeah. So you've seen firsthand the growth of the Cambridge tech cluster and the village mentality the city has.

Bruce Beckloff

Do you know what? I think when we came up for the brand builds activity, I think I really got a sense of how big things had gotten. I don't travel there as much anymore since I left for my new role, but it's amazing to see how Cambridge has really just expanded the technical cluster expansion, the university expansion and just how that whole ecosystem is really working together to really promote technology on a global basis, not just in the UK. I was really taken aback by just how things had accelerated and grown.

James Parton

Yeah, really nice. So you actually touched on there something that's really interesting. Your career conversion, if you like, from technical to more commercial and business. Honestly, I'm not sure if it's a trope at this stage, but there's often a view that Cambridge-based businesses do lack the marketing and sales skills. They're deeply technical and very IP based, but they lack that commerciality to them. Are there a couple of nuggets or a couple of insights that you might be able to share in that career conversion that you went through being an engineer?

Bruce Beckloff

Yeah. And to be honest, it's almost, and I apologize for any listeners out there about the cultural view here, but in the US, you're brought up in a much more marketing type arena and also we've had technology around us for probably a couple of decades extra. And what I've seen over here, so I've lived in the UK now for 20 years, and what I've seen over here is as we start to see more commercial people with more startups, serial entrepreneurs, I'm seeing a massive change and development where the UK technical skillset is being augmented with also a commercial skillset on top of that. And I think it's great to build tech, but you've got to sell it at some point. Now, one way to do that is to go engage with the Americans, and they're still going to be very good at selling, but we also need to develop those skillsets here in UK.

I think if I look at something like ARM and certainly the transitions it's going through right now, and a lot of the ARM team is now out and free to explore different roles, a lot of those individuals will have a really strong commercial skillset and they'll be able to teach and mentor other technical teams. But I think that's the key learning one has to know, is tech for tech's sake, you really can't build it and people come. You really have to go sell it and then build it or build it and then sell it. And I think we lose sight of that sometimes with how great the technology is. But in reality, you've got to find somebody who's going to buy it before the technology is ever going to be successful.

James Parton

Yeah, absolutely. Yeah. And that does form a lot of conversations and support that we bring in at the Bradfield, is just helping supplement those technical skills with more of a commercial angle on activity. So we totally agree with that. So describing those later stage roles at ARM where you were working with M&A and venture and those kinds of things, I guess that's a natural bridge to then go in to Bloc and setting Bloc up, Bloc Ventures.

Bruce Beckloff

While I was there, I was working with another corporate venture, so I had set up the corporate venturing activity at ARM, and I was working with one of the corporate venturing guys at Vodafone. Essentially, you had two UK technology companies just playing at the absolute global scale, and we wanted to bring the skillsets that we had learned in our organizations out into the entrepreneurial market and into the venture market. And so we both left our jobs back in 2013 to set up Bloc a little bit different. Again, a group that highly respects technical and commercial capability. I have say in the UK, it's not always a natural thing for technologists to be revered when they're commercial and for commercial people to be revered when they're technologists. But our intent was to create a venture capital group that actually did that.

It really helped really great technology gain global exposure. So we set up Bloc, and we've been doing that ever since. So just quickly, we invest in early stage deep tech companies really in early stages, sort of seed plus or series A type companies. And really, we look for things where we have some knowledge or experience in, so if you think of a company that could benefit from the networks formed at ARM or Vodafone, then you're probably somebody that would fit within our deal flow and potential portfolio.

James Parton

Yeah. And you mentioned deep tech. Are there specific verticals of deep tech that you're really focused on or is it a broad view?

Bruce Beckloff

Yeah, no. Again, deep tech can be defined in different ways. We think of a technology stack. So if you think of a stack of technology, one layer on top of each other all the way up to the application layer, take Facebook, and then underneath that, you've got a lot of technology to make that application work, everything from data centers and optical fiber and all those sorts of things. And so we really concentrate on things that are deeper in that technology stack. And if you, again, really get into it because of our ARM and Vodafone backgrounds, we really focus on areas in the telecoms infrastructure, compute infrastructure, semiconductor companies because we think these are the things that, one, form the basis of all technology for the next 20 years, as well as the things that probably less get focused on generally by the venture capital community. And so we thought it was a pretty opportunistic spot for us to engage on.

James Parton

Yeah, absolutely. Obviously, Cambridge is a great place to go scouting for deep tech. So you guys ran a really successful event here at the Bradfield a few weeks ago.

Bruce Beckloff

It is. And again, I think there's a few things that you look for in an ecosystem, and Cambridge has all of those, and we've seen it grow over the last 20 years. So usually, you need a university that's going to be able to churn out the talent, that's going to be able to go work for this early stage companies. You need the actual customers. So you need companies there that are going to then buy the products of the startups themselves, and then you need the capital, and so you need the venture capital money that's there to be able to help these startups come together. I have to say and I'd like to think that ARM was a seed and a helper in this. Clearly, the university was there. And what's not surprising, the venture capital comes as soon as those other two bits are available.

So Cambridge really has all three of those components all mixed together. And again, you won't see it in the other places that you might see the same kinds of things, things like Silicon Valley clearly with Stanford and the whole technology complex there and then the venture capital. You also see it around Austin. You see it around MIT. And probably in the UK, I would say that Cambridge has the best concentration of those activities in the areas that we certainly look at, the deep tech in the semi and telecoms infrastructure. So that's why Cambridge is a very attractive place for us to do our activities like we did at the Bradfield to make sure that we're part of the ecosystem. And just if I'm honest, we're not the biggest brand in the venture capital space, so to make sure that people know we're out there and they should get in touch if they have an idea.

James Parton

So with your perspective of having both the US and the UK perspective, what's your opinion of the differences between the two startup ecosystems? I guess sometimes Europe gets a little bit excited with comparing itself to Silicon Valley. Do you think that's wasted energy or do you think that's a good model to follow? How do you contrast the two markets? What's your take on that?

Bruce Beckloff

Let's take early stage startups and what you find in Europe and UK, especially in UK because of our exposure, and actually probably was one of the reasons for ARM's success and then look at versus the US. So in the UK, it's an overused commentary, but the UK is very good at under-promising and over-delivering. The engineering talent, the level of concentration and effort that goes into the products here is significant. I would say that's much higher than what you find in the US. The US has gotten itself into a much more, what would be an MVP type strategy, minimal viable product where the product is just enough to get something going and then try to figure out if it's going to win or fail. The UK and Europe is less like that, much more about making sure it works before it goes to market.

Now both of those sides have challenges because over in the UK, it's like waiting too long to get the product to market. And in the US, you're taking a half baked product to market before it goes. So those on the early stage front are the two, in our view, key differences. So we like being here in the UK and Europe because we know that the technologies that we're investing in are solid and really thought out on a world-class scale.

The other challenge you've got is the appetite and that's investor appetite, and that's probably the area where we're most disappointed here in the UK and Europe about, is the risk appetite of the investor market on this side of the water versus the US. The US has a much higher risk appetite. That means they're going to pay proper valuations for companies, making sure founders get proper valuations for the companies and the technologies they build. And especially in times like now where the world seems to be under great challenges, you need investors that are really ready to back founders and go the full distance. In Europe, we found there's only a handful that are really ready to go after the early stage deep tech because it's felt like it's a scary space because you have to know about technology. And again, most of the venture capital in Europe and UK do not have the operating and the technical background to be able to make decisions on those kinds of technologies.

So again, I would say the biggest challenge for us as an industry here in the UK and Europe is actually having the investors, and therefore, what you end up having to do is build your product here in the UK and Europe and then ship it into the US once it gets mature enough so you can find the right investment and risk capital to really grow it to a company of global scale. I think, look, that's going to change over time and there's more money and more risk appetite as it develops over here in the UK and Europe, but in the situation we're at in the near to medium term, we are going to look for really US funders at the growth capital stage, but you can really find the brilliant technology here in Europe and the UK.

James Parton

Yeah, that's interesting. Are you surprised then with that more risk adverse style of investment in the European side? Are you surprised that the US VCs have not spent more time and invested more in Europe and UK?

Bruce Beckloff

I'm not surprised because I was reading about Intel when I was 10 years old. So again, technology was intertwined in our culture and our lives, and so we've been around it a bit longer. The fact that the US hasn't spent more time over here? Well, the problem is that there is so much activity going on in the US, even though there's that veneer, they're spending their time. And again, it's an old adage, but most venture capital is invested about two hours away from the home office. The reason is you're spending a lot of time with these teams, therefore you want somebody there. So you're starting to see more of it. You see Sequoia. You see a lot more General Catalyst, a lot more of the US VCs that are setting up. Highland Capital has been here for a very long time, so you're seeing more of it. I think there's still a lack of investment here.

And when you're in a US VC and you're challenging for capital allocation here versus the home office, you're always going to be at a slight disadvantage over here, but again, it's changing. In 20 years, it'll even be better. And in 20 years after that, it would be better. So it's not a stagnant activity, but right now, that's where we're at.

James Parton

Yeah, no, that makes sense. So talking about the markets in general, especially thinking about the founders that might be listening to this, we're hearing lots of scare stories, layoffs in tech, public markets are down especially with tech stocks, potentially the access to capital is going to get tougher over the next 18, 24 months. So on the one hand, we've seen, certainly here at the Bradfield, we've seen our startup series A go from something like $1 million to $5 million to $10 million, $20 million, $30 million. In some ways, the raises are getting larger, but are we getting to that point where winter is coming and it's going to be much harder for founders to raise money?

Bruce Beckloff

I define it as two things that are switched over the last, I don't know, six months, let's say. Last year, you had a lack of employment of work capital, but you had an overabundance of actual capital. And where we're at today is there's a feeling in the market that we've got a lack of real capital, cash capital. And over time, we're going to see the work capital come back because actually, I think one of the most damaging thing to the founders out there right now was how difficult it was to hire people, the hiring of people. And so actually, some of the labor market freeing up and some of the companies that maybe shouldn't have gotten funding probably going under and releasing people back into the system and things like that is actually going to be very helpful to the founders out there because again, it was getting very, very expensive to hire people and really out of the genre of what a UK founder would be able to afford to hire somebody to come in and develop their product.

On the actual capital front, I'm not sure what's going to happen, and I'll tell you why. There was so much money raised. I know everybody talks about dry powder, but you have to really think about the economics of what's going on inside venture capital companies. Venture capital companies are paid on percentage fees that they've drawn down. So in general, most VCs will not get paid until they draw that money down, and they can only draw that money down when they put it to work. So almost there's an incentive for capital to continue to be deployed so that the VCs can be getting their fees to pay their own salaries and such and to draw down the capital.

So there is a feeling to me that I think over the next 12 to 18 months, I don't think, I personally don't think there's going to be a large difference between capital deployments between last year and this year. The valuations are going to change simply because the messaging has changed, because the environments changed, and it's a buyer's market right now. And therefore, in a buyer's market, valuations are going to go down. Now again, as compared to the US, I think the UK is going to be more resilient because they were already more compressed than they were in the US. And so I think we'll see more resilience here on our valuations over here, but I think capital will still be deployed.

Now, the interesting effect will be then in 12 to 18 months, if there is a true winter and the LPs are not prepared to fund the next rounds of funds, then we could see the bow wave of lack of capital coming in 12 to 18 months as the VCs have put their money to work already, but now they're out of capital and they needed to raise a new fund and they can't raise a new fund.

So I would be thinking, well, it might occur more in the '24, '25 range of when the venture market might start to see some ... or maybe late '23, when you'll start to see that as people have deployed the capital they got, the dry powder is gone and it hasn't been replenished. This is all speculation. But the one thing I do think is I know there's a lot of money that's been raised. I know the messaging is very advantageous for venture right now because it is a buyer's market.

Can I say one other thing? The other challenge for the general founder right now is secondaries, and secondary is when somebody that's in a private company is trying to sell their shares. And so there's a lot of established companies out there that are now looking for, and some of the employees and such, that are looking to sell their shares with the venture capitals. And so now you've got what's called primary capital, so the new stuff coming in, trying to compete with stuff that's already there. And I think there is a little bit of a challenge there on where that capital is being deployed. But again, these are some new dynamics of the market that we'll see how they play out. Fundamentally, I think the early stage founders are still going to be in a very robust position to raise money this year, although I do believe at slightly lower valuations than previous.

James Parton

Yeah, no, that's really interesting. Appreciate your insights there. So just wrapping up the conversation, what does the next 12 to 18 months look like for Bloc Ventures? And I'm assuming Cambridge features in that plan pretty heavily.

Bruce Beckloff

Yeah, it is. I think for us, we're staying the course. Nothing has really changed for us. We don't do a lot of in investments. We're very selective. It's because we're a very high conviction, highly active, so we get very heavily involved with our portfolio companies. We now have put a person directly into Cambridge so we can be closer to the founders that we're working with up there. And so I would expect that we will be doing more activity. Actually, Alisa, who is our investment manager, that's represented up there, was just on a panel. We're doing a lot of engagements with the universities around things like quantum computing. Photonics is also a very hot area for us sitting into Cambridge.

So yeah, I think our program is stay the course. I think the deep tech is resilient in these times of economic turmoil because the timeframes for these things to come to fruition are very long term. So I think for us, we're pretty relaxed, and I can see that we will be doing more and more in Cambridge and getting out more to meet people.

James Parton

Yeah. That's awesome. That's really good to hear, and hopefully we can help you on that mission. So, yeah, thanks again for taking the time to come and we very much appreciate it.

So thanks once again to Bruce for coming on today's show. The show was produced by Carl Homer of Cambridge TV. And you can listen to previous episodes by searching for Inside the Bradfield Centre on Apple Podcasts, Spotify, SoundCloud, Stitcher, Amazon Music or by visiting bradfieldcentre.com.

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