With Scott Orn

A Startup Podcast by Kruze Consulting

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Scott Orn

Scott Orn, CFA

Reilly Brennan of Trucks VC - The Best Seed VC in Transportation

Posted on: 07/25/2017

Reilly Brennan

Reilly Brennan

Founding Partner - Trucks Venture Capital

Reilly Brennan of Trucks Venture Capital - Podcast Summary

Reilly Brennan of Trucks VC invited us over to discuss early stage transportation startups. Reilly is a seed Venture Capitalist in the sector and also a Lecturer at Stanford. HIs passion is helping founders build their dream companies.

Reilly Brennan of Trucks Venture Capital - Podcast Transcript

Scott Orn: Welcome to Founders and Friends podcast with Scott Orn of Kruze Consulting. And before we get to just a fantastic podcast with Reilly Brennan of Trucks, I just want to give a quick shout out— one to Kruze Consulting, the startup accounting firm that I work at, and which does just an incredible job on monthly financials, taxes, including R&D tax credits, evaluations, anything need, financial modelling, we do everything. Give us a shout if you need some help. And then also, a good big shout out to Gusto for doing R&D tax credits that are letting all of our clients and all the other startups out there use R&D tax credits applied against payroll taxes and get a ton of money back, so I think Gusto is the only payroll provider doing this for payroll taxes, letting startup supply those R&D tax credits, so it takes a lot of work, Gusto is doing a great job with it, and just a big shout out, this is going to be a material amount of money for our clients to get back, so thank you Gusto. And now on to a podcast with Reilly Brennan of Trucks, he is just incredible VC, knows the transportation space, and also just a really nice guy, so I hope you enjoy, thanks. Welcome to Founders and Friends podcast with Scott Orn at Kruze Consulting. And my very, very special guest today is Reilly Brennan from Trucks, welcome Reilly.
Reilly Brennan: Hey Scott, thanks so much for having me on.
Scott Orn: Yeah, so Reilly and I have been fiends or long time, introduced by Ed Aten, the CEO of Merchbar, also podcast guest. That was actually one of my best ones.
Reilly Brennan: It was, I think, I won’t even try to top that one. Ed Aten takes number one, I’m going to try to go for number two here.
Scott Orn: He’s amazing. So Reilly maybe, so Reilly is a VC, also a friend, maybe tell everyone kind of about Trucks and how you got here.
Reilly Brennan: Sure. I started a fund with a couple of partners, Jeff and Kate a couple of years ago called Trucks, and we invest in early stage companies that are changing the future of transportation; so my love and passion is the transportation world,  writ large. So our role is really to help very early stage founders assess risk and when they’re building a company, we help them with financing, but we also help them maybe find a co-founder, workouts some early issues, and it’s really fun to do that at the early stage.
Scott Orn: It’s kind of god’s work because, i say this, it’s very easy to— not easy, but it’s easier to be a late stage venture capitalist, and write like a ten million dollar check and you kind of, nothing is easy right, you’re shaking your head kind of…
Reilly Brennan: I mean, the majority of the work is born by the founder, right, but the decision to invest at different stages I think in some ways the venture industry is a bit of a misnomer when you say early stage investing and late stage is so different, that it almost feels like a different species.
Scott Orn: That’s what I was trying to say, because, and you said it perfectly, you’re closer to the founder, and the founder does most of the work, especially at the early stage. So being the partner/ advisor at the seed stage where you guys are, is really hard, and it’s like you’re doing like real, real work and you’re really helping these people; versus writing— the checks help huge, and going to the board meetings, helping with recruiting at the later stage really do help; but like, this is where the foundation of the company, the blueprint of the company is all set.
Reilly Brennan: Yeah, and also I think, not knowing what the risks are is one of the, I think that’s where the real value is, either from if you are an investor, or if you’re a founder, and that’s one of the things I think that we’ve gotten much better at, since starting our fund, is actually don’t think founders realize sometimes the kind of risks that are out there. And in the transportation space, particularly with an automobile, there is a lot of different ones that you need to think about, whether it’s like the regulatory risk, which is also an opportunity, and also if you’re going to sell into the big supply chain and sell into automakers and suppliers, there is a lot of risk with that, which can also be eliminated really quickly depending on how you’re sort of forming the product.
Scott Orn: Can you explain that a little bit, like how do you sell to the big boys and how do you navigate the regulatory framework? Like, what are those risks, like how do people manage this stuff?
Reilly Brennan: Well, so on the regulatory side, the most fascinating thing right now is that there is a lot of enthusiasm for autonomous vehicles and not a lot of knowledge. And that has created this fairly unique to this period of time, and I would say from today for the next roughly three years, there is a very wide open, porous environment where you can talk to a senator or you can talk to somebody, in a foreign government who is thinking about this policy, and who is authoring the policy. So, in a way, at the moment, the regulatory environment is a BD environment, if you have a startup that’s doing something really fundamental for autonomous vehicles, it almost is, it is just pragmatic to think about regulatory issues.
Scott Orn: It’s malleable too, right, like that’s kind of what you’re saying, the official from another country is actually, they’re talking to you, but they’re also soliciting your opinion, right.
Reilly Brennan: 100 percent, and some of it is starting to get more baked, so in the US, there is no definitive federal policy at the moment, there are some states that are actually further along than others; some states are choosing to follow other states, Michigan and California being two examples that have kind of set the tone for some other states. And overall, if you’re starting one of these companies, you can actually look at that map and pick where you want to do a deployment, so that’s an interesting opportunity, the risk is that at some point, you’re operating in a state which changes this policy or federally something happens that significantly impacts your business, so those are huge risks. But, if you can get to a conversation with those policy makers, it can be incredibly helpful.
Scott Orn: Yeah, is there going to be a federal, like how is that going to work, because I see like Arizona and the Uber in Pittsburgh, and stuff happening in California and Michigan like you said, like are the federal folks watching what’s happening? Is it like a bunch of— sometimes it’s very helpful to have a bunch of different science experiments going on, and  then the federal folks can look and see what’s working and what’s not working, is that the approach they are taking?
Reilly Brennan: Well, I would say the change in administration didn’t help the timeline for the feds, because the previous administration, specifically the head of DOT [07:02 inaudible] Mark Rose kind and Anthony Fox were very much trying to figure out federal level, not necessarily laws at the moment, but by the time they were out, they had some recommendations and were really pushing the discussion pretty far from a federal level, and thinking very wisely about that. Of course, now there’s new administration, there’s a new head of DOT, there’s, the [07:29 inaudible] position isn’t filled yet as this happens in the US during these big changes unfortunately sometimes it’s at the time of an administration shift; so at the moment, the states have been working really hard to do this, like they have been over last 24 months, and I think people are in a wait and see on the fed level, but something from the feds is coming relatively soon, I would say in the next six months, we will get a lot more clarity on that. But, that piece is unknown, but I think if you are a startup that is a huge opportunity to call one of those offices, particularly if it’s in a state you’re operating out of. And then the other thing is, these big companies like, one large automaker seen that there was a vacuum of very little policy yet, they wrote a boiler plate policy that really benefited only them, and gave it to a particular state.
Scott Orn: [laughing] No surprise.
Reilly Brennan: And then in that state, where they do a lot of business, I wouldn’t say rubber stamped it but pretty close, and then from there, that automaker took it to other states and did the same thing. So you can either look at that as somewhat of a Machiavellian play by them, but also quite brilliant, that they were able to say like what you said in the beginning of this question, there’s so many people who have an interest in the topic, but there’s not a lot of knowledge yet, and so they kind of came in and filled that vacuum, and said, well you know, here’s this, why don’t you take a look at it, it’s pretty decent. 
Scott Orn: Yeah, and the folks who are enacting the policies they’re trying to do their best; but this is someone who’s actually providing information in a very formal way and is structured well, and it probably makes sense at a high level.
Reilly Brennan: It’s also a signal about how many laws in our country probably started from the desk of a for profit company that then get fed to a lawmaker and not the core fundamental laws of a country, but a lot of the laws in the books started that way,  and in autonomous vehicles right now that’s definitely the case, that a lot of it you can see coming from one particular organization, it doesn’t necessarily mean it’s bad, just saying the origin of this is pretty curious.
Scott Orn: It happens in oil and gas, it happens to technology, it happens everywhere. The other thing, the other kind of risky was selling to the big provider, the big companies, like how do you help the startups manage that?
Reilly Brennan: It’s gotten a lot easier over the last 24 months where so many of the automakers and suppliers have an office in either San Francisco area or Los Angeles or Boston.
Scott Orn: I didn’t know that.
Reilly Brennan: Oh yeah, so it’s easier to get a POC a proof of concept kind of contract, whereas a couple of years back, if a founder said I’ve got Audi that’s going to give me a POC for this, you’d think well how like, these are incredibly hard working people to have achieved that already. And now it’s more typical that a couple of people with an idea can spin up a very early prototype, get a couple of POCs from a supplier or two and an automaker, and then go on and try to fund raise on it, I think it’s the less impressive to have that notch in your belt at the moment, just because the big people, the big players have moved so quickly to want to work with startups; not to say that they’re great at it, but that’s more of a fluid environment, so it’s still hard to move through— you know, autos you have, there’s the kind of three fundamental areas, there is really the R&D and then, when ideas graduate from R&D they go to what is known as advanced engineering, and then they graduate to production. And that whole timeframe, if you’re working on a really hard technology, it can be a really long period of time, you’re talking years. So, getting an early sort of window into the R&D budgets, that’s an achievement and should not be, I think people should be given credit for that, but then there’s basecamp one of Everest, and then you have a long way to go. I think there’s a ton of value there, and the automakers are getting a little bit faster in working on this stuff. But, you’re in the early stages when you get to that first level achievement, and I think the way to do it— there’s a lot of founders who maybe are technology savvy, they don’t know how to sell into the supply chain, and what typically happens is nine months into their existence, then they’re like we need somebody who sold into this environment before, and  they like pick off a salesperson who used to work at Redbend or Renecis or one of these like tier two suppliers or something, who’s been selling into these people for years, that’s an interesting model to do.
Scott Orn: Is that person, can they get a good enough person, I guess that’s always a danger, right?
Reilly Brennan: It’s tough, because you are typically at a tier one or tier two supplier, that’s like a 300k person, with benefits, who’s a rainmaker sales person, and the likelihood of them joining a startup to make 75k of benefits, it’s a difficult conversation, so I don’t see them necessarily  getting the sort of top performer, but they can get somebody really young on the come, and that’s an interesting way to do it. But if you have experience in sales within the automotive supply chain right now, you could have almost your pick of some fantastic transportation startups that are growing really fast, where you would be wise to take that bet on one of them. 
Scott Orn: Yeah, that’s awesome. That’s exciting, and it’s also an exciting moment, I always compare what’s happening in transportation to like my experience in the late nineties in technology and internet stuff, because it is not exactly the same, but it’s analogous. I would say what do you think we’re in like 1995 right now, relative to like the 1999 boom, and I don’t know, that’s my opinion.
Reilly Brennan: It feels more like 1993.
Scott Orn: Seriously, it could be, right? But I remember reading about things like ebay when I was in college and being like, oh that that makes a lot of sense, or a Yahoo and you’re like it feels like I’m reading about the first wave of the transportation companies right now, and the big eyes are still out there, but there’s so much energy.
Reilly Brennan: There’s a lot of energy, a lot of it particularly on automated vehicles is just simply getting to the task of let’s make sure this thing can navigate safely, and not hit anyone. That’s job one of a lot of these companies. And I think, so a lot of the automakers and a lot of the announcements around this time frame of 2020, 2021, and we’re getting to the point where that’s not too far away.
Scott Orn: It’s like three or four years, right.
Reilly Brennan: That’s pretty close. And I think a lot of the CEOs that made those pronouncements probably think, well I’ll probably be retired by then, so I’ll let the next person deal with it. Nevertheless, that’s coming soon, I think that the first wave of this is a lot of just focusing on the dynamics, is the vehicle actually safe to operate. The really interesting thing in my mind is once you’d start deploying those cars, and you can learn a lot about what the consumer really wants, in my view, there’s probably a brand new company that starts after we get to this first sort of threshold of more or less 98, 99 percent accuracy on the driving piece, that then figures out some more sophisticated things like when the vehicle pulls up to the curve, it should completely sitzfleisch with the curve, so that no one trips getting in and out of the car, and the way that doors are designed, so it’s really easy getting in and out, which will help lower the dwell time getting out of the vehicle and the payment process, and those things which are, you can only learn when you get to the deploying the vehicles.  That’s why some of these companies, Google being one of them, nuTonomy also, that are trying to do really two things at once, they are getting more competent at the driving decision making task, while also deploying a small and growing fleet of vehicles where they can start to pick up these insights because there is so many people that are just working on the driving decision piece, there is at least 12 companies working on that, that you have to I think the deployment consumer facing piece of it is actually where the real money is made, where you as a person, when you get out of the airport in couple of years, are going to have to make that decision like do I want an Uber or a nuTonomy or Waymo.
Scott Orn: Yeah, and like, there are probably using that IT analogy, you are talking about like the, Amazon wasn’t emc; so much infrastructure sits behind all the kind of sites that we’re used to working with, now, 20 years later, I remember all these infrastructure companies. And so there is the infrastructure, then there is the stuff that is touching the consumers that the consumers are loving, but, usually, ultimately, those consumer companies can become humongous, the people who get that stuff right—
Reilly Brennan: Yeah, that’s what I believe the fundamental principle of this whole thing is trust, so, that’s why it’s so curious to me when you see Uber behaving in a way it’s behaved, internally and sometimes externally, it’s just pragmatic to be a trustful company and that just makes total sense to me, so, everything you do should be abut trust, every single touch point of the company, the communications, the CEO, even the colours of the brand, I think that is the truly valuable companies in the autonomous vehicle age are going to be the trust worthy companies. And, if you think back, during the last recession [17:41 inaudible] company had a bunch of brands they had owned, and they sold the bunch of them off because the way the economy was headed it needed to really consolidate, and they sold Volvo for a billion and a half dollars, which was unbelievable, Volvo is still one of the top 10 most trusted brands, it’s right up there with Johnson & Johnson and Disney, in terms of trust for a consumer. Literally, there are companies trying to build autonomous vehicles with zero brand, they are raising almost that much money and the whole Volvo brand for that much is just, insane.
Scott Orn: So, you write an amazing newsletter every Sunday night, and if people don’t know it, they can got o and sign up, so I’ve been subscribed for like two or three years, it’s been awesome, but you’ve mentioned this a couple of different times, and like I wish you could see me sitting on my couch at like nine o’clock on a Sunday night, because I am nodding vigorously— 
Reilly Brennan: Imagine that, imagine the people [18:37 inaudible] that too, that either agree or disagree with that decision; or the people at Geely who bought Volvo for a billion and a half dollars who are wisely nodding.
Scott Orn: God bless them. But it was such a smart purchase, it’s like, you’re exactly right, and Google is trusted, Amazon is trusted, that analogy carries throughout whole economy.
Reilly Brennan: At the time what was happening in the automotive safety, for the longest time, Volvo meant safety, and it still does, to some extent. And, at the time, safety seemed to be permeating everything, where the notion of the safe is car, kind of had become a “me too” thing where everybody had a relatively safe car, even the least safe car in the sort of late nineties period, was pretty damn good, air bags, crush rating, so the whole idea of what we though Volvo’s usp was, maybe in the seventies and eighties just seemed to peanut buttered over all these other brands, so if you were sitting in the board room in the late nineties, thinking like do we really need this thing, we got to raise some cash, you can see how one would get to that conclusion, without having the foresight of when vehicles become robotic, the brand nature of this whole thing is going to be drastically more important. And, that’s why if you think about some of like even Chevy is a super trustworthy brand for a lot of people, GM ignition switch issue aside, the brand sometimes are maybe even more on a consumer sort of side that are not premium, sometimes have a better brand character for trust, so it’s a really interesting space going forward. 
Scott Orn: I’m a total consumer, I know almost nothing about your industry, right, but like in the Fast and Furious, when they hijacked all the cars and the cars are going all over and it’s like, that’s a mass market movie, everyone sees that and it’s like wow, a lot could go wrong with autonomous cars. I really hope when I get an autonomous car, it’s trusted, I feel safe in it, like these are the kind of thing, like very kind of primal things that people think about, that’s why I think that Volvo example is such a good example; like, I trust Ford, I trust Chevy, like, I actually trust Tesla, because, I think the active putting all these videos out on the internet when they are showing the autonomous vehicle stuff going, is slowly building trust in the engineering, like I really like that, I think that’s a really smart way to do that.
Reilly Brennan: For some consumers, that is the way to their heart, right, and I think even more interesting question would be for them, or even a startup, what are the ways that people actually start to perceive trust, and could you then build a strategy around that? For some people, for some people the certain generation, it was beat to your head through broadcast medium advertising, and seeing billboards, and print ads and things like that, so a lot of what Volvo  did was very good about explaining that they were a really safe company, and for a huge group of users, they will always think of them that way, and then, to your point, there is a bunch of new brands that communicate this in a much radically different way, which is, we’re going to show you our process, we’re going to send videos out, and we’re going to make you believe that we’re actively working on this, and that therefore is going to make you trust us. So there is a couple different ways to get there. Also I think it’s interesting if you’re thinking about Volvo getting sold for a billion and a half, actually, I don’t think it’s that bad of an idea for somebody to try to rebuy Volvo for 15 billion dollars. 10X what they sold it for, explain to me mister executive how you plan on getting the equivalent of Volvo value for less than let’s call it 15 billion, it would be really interesting if somebody could prove to you they could do that because I don’t think you can, and I think Volvo is still probably a well bought company.
Scott Orn: How much would you have to pay and how long would it take you to build that brand, it would take forever. So, we talked about the energy around transportation, around autonomous vehicles and a lot of people don’t know that you are a lecturer at Stanford. What are you seeing, are you seeing the energy, like what’s it like?
Reilly Brennan: 100 percent, at Stanford, there are a couple of different really great organizations that do a  lot of sponsorship of the classes and support research projects, one is called “CARS” The Center For Automotive Research at Stanford, other is called “REVS”. At Stanford, over the last ten years, but specifically over the last five, the enthusiasm for working on transportation is just fantastic, so ton of engineers are building autonomous vehicles in the  labs of professors like Gerdes and Kochenderfer, and really amazing experts, and then on the business side, you have a ton of students coming in, so I’ve been teaching or co-teaching for the last four or five years, and just over that time, it seems like every year, there is both more students and then their rabid hunger for wanting to do stuff, and also just people you didn’t think who actually say when I got to Stanford I didn’t think I was going to do this, I thought I was going to go into the health care, maybe I wanted to work in Facebook and now I really want to work at Zukes, or I really want to work at Waymo, that happens all the time. And so, I think that’s pretty neat because there is a lot more smart people going into the industry, there is also a lot more women going into the transportation, whereas before, autos used to be typically the domain of really it was heavily male dominated industry, and still is, at the executive ranks. But, at the Stanford level, you have a ton of really smart women that are going into the auto space now. 
Scott Orn: That’s awesome. And, you are a humble guy, but talk about what that does for you, like you must wake up every day and you are like I get to be around these really smart engineering students, and like, you are also seeing the future probably a little bit, like what  is it like?
Reilly Brennan: Stanford students have I believe that almost every single one of them feels lucky to be there, there is a really interesting quality to Stanford students that I interact with, which is the day I believe all feel like at any one time someone is going to grab them by the scruff of the neck we figured you out, you’re out of here. And so because of that, I just find that they work really hard and they’re happy to be there, which is great quality. So I think that’s somewhat counter to how the world at large perceives Silicon Valley whether it’s your time with the TV show or just the overall idea. Silicon Valley seems to be you know, I’m going to say something like somewhat pejorative but I think there’s a feeling that those people haven’t earned it, and I find that when I go to Stanford and I interact with students, they work really hard and they are happy to be there. So, to answer your question and I think that I love the balance of university and industry, you know, and one of my mentors at Stanford is a guy named David Kelley who started Ideo and he also started the Stanford D school and we’re lucky enough, I’m lucky enough to teach with David one of my classes, and he told me years back that that was one of the things that he thought was really great about his life, was he could go to Ideo and interact with some really interesting clients and his employees, and then he could go to Stanford interact with really interesting students and that sort of balance of the two is really quite fun. He was right.
Scott Orn: I totally get that, because I had the same thing where I’m interacting with a lot of startup CEOs who are really fun, challenging people, sometimes good sometimes bad challenges to deal with, but you learn so much from them; and then we have a team at Kruze that’s like all really smart people in their twenties. And like the ups and downs or seeing young people grow and it’s so satisfying and then there’s also challenges that come with that, it’s probably the same thing for you, but it really is as I live my life more and I get older, I realize that that’s the important stuff you know, those relationships you build or the mentoring you do, and there’s going to be students that you’ve mentored that are going to come out and start the next billion dollar company and hire a ton of people and improve lives across the spectrum.
Reilly Brennan: I mean, the other thing is, I truly learned from, I mean, I think one of the core, one of the really fun things about venture is that you get to, if you care about this part of it, I think one of the best parts is that you get to learn from really interesting crazy people, right; and there’s some people get into it for different reasons, but we start our partner meetings every part of meeting starts with learning, so we go around the table and we talk about the stuff we’ve learned over last couple of days. Sometimes it’s specific to a deal we’re working on, but sometimes it’s rarely tangential and I think that’s also when we talked about the newsletter that you read, for me that’s a learning mechanism where this space of automated vehicles is so busy at the moment, that I don’t have the ability to make sense of it unless I do some sort of mental digestion around it, and my form of learning that’s preferred is I like to write something about it, yeah and so that’s what that’s all about. And the exposure to Stanford students too for me is like, that is 100 percent I get to learn from their world view, their questions in class are much better than my questions, things like that.
Scott Orn: That’s why I do the podcast actually, it scratches, I used to tell people when I was at Lighthouse, I would spend an hour with the expert in the world at whatever they were doing and it wasn’t just they are the most knowledgeable, but they are the most passionate. And that’s like, that’s really fun, you know, so actually the podcast scratches that itch for me, where I get meet you, like you are probably the best early stage VC in transportation, and I get to spend—
Reilly Brennan: By the way, that’s a really small hill, with not a lot of people on it. Left-handed slow pitch softball expert, but it’s funny, you know, when Ed Aten introduced us, and when I started putting together the idea for the fund, I didn’t you know, venture is one of these industries where there’s not a lot of easy ways to kind of break in, there’s a lot of interesting jargon which seems very intimidating, and you are the one of the first persons that helped me through that. I didn’t have anybody that I could ask stupid questions about what does this really mean and how does that work, and there weren’t a lot of people that would offer themselves up, and you were really the one person I could call. I remember those early meetings we had, either over the phone or in San Francisco about that, for which I’m for which I’m eternally grateful, and also for Ed Aten who met you just at a bar in Austin one day, so it all goes back to that one moment.
Scott Orn: Thank goodness for Ed drinking appetite. No, you’re being too kind, and you know, the funny thing is, I’m sure you feel this way when you see the CEOs you are working with are going to invest in or even the students you are working with, I remember meeting you vividly and I remember actually like two or three questions, is was like not even a lot of questions, it was like is like, what’s your normal day and you’re like oh my normal day is at Stanford and I am helping a lot of students and then we also are building prototypes, those kind of stuff, and yeah, I invest in some of these companies once in a while and I am like well how many have you invested, and I forgot the number, it was a substantial amount of companies, and I was like so you already have the investment track record, you already enjoy doing the mentoring, it was like, you just needed someone to be like hey you should do this. It’s not like I did, all I did was sit there and listen to you, I’m sure you feel the same way, like you see people who are so ready to pursue their dream, and you know they’re going to be amazing at it, and a few encouraging words help then that’s great, but like you were the guy who were going to make it happen no matter what.
Reilly Brennan: Yeah, thanks man.
Scott Orn: Starting your own fund is actually really hard, like really hard, so I always admire people who start their own funds, because you’re not just the challenge of being a venture capitalist and making smart investments and meeting tons of start ups and things like that, but you’re actually running a start up yourself.
Reilly Brennan: Starting a fund was the hardest thing I’ve ever done business wise in my life. And, just because so many people in finance have bad behaviour, and the way that they tell you no is really atrocious, so you know, the majority of the people, particularly when you raise a first time fund, the majority of the people will tell you no in a way that makes you feel not only no, you receive their information, but also that you really question yourself that should you even be doing this, and so a couple key things happen for us early on. Our first commit was a guy named Sam Valentin in Detroit, and really a master of venture and mentor, and he committed first, which was really great because it was just at least kind of like your words to me a little bit of a nudge to keep going. Then we had a lot of people who made it difficult for us, and I remember some of the early discussions, one person was like you know, I think you’re, I think this autonomous vehicle thing is at 2030, 2040 you are too early for this, and I was like well I am, this is an early stage fund, so it has to be early, by definition it has to be early. And then, when we were fundraising, I remember, somebody said I think you’re too late, and I think then Jeff and Kate and I just thought this has got to be the perfect time in if we are getting both of these responses, and we were a little bit ahead of the market because some crazy acquisition things have happened in the auto space in the last twelve months, but you know there’s a lot of room to run and it’s interesting fund raising against a market that’s growing. Also, because our fund covers transportation, I think there’s a belief from some investors that what they call single purpose funds have too narrow of a focus, so you know, you’ve seen funds in the past, like we’re the fund that is only going to focus on apps within the facebook economy and things are fairly specific. Transportation depending on how you cut it is the world’s second largest industry behind the arms business or health care dependent you define it, so we believe it’s actually somewhat a misnomer to call it one market, and that’s how we built it.
Scott Orn: And the cool thing is it’s, you know, how old are you, like 35, you’re going to be doing this for like 25 more years and the cool thing about this market is it’s got 25 years at least to run.
Reilly Brennan: People will always want to move around right, so it’s one of the fundamental things we do in life, is we eat, we want to move around, it’s just a core part of life, and there has been a huge company’s built but most of the early value if you are an early stage investor and a lot of those companies from an automaker respective happened 75 years ago at the supplier level happened 30, 40 years ago, so this is just another big opportunity where a lot of changes are happening and if you can get good at assessing the risk, there is a lot of value getting created right now, that’s why you want to invest right now. And also, I think right now is not a great time to be a late stage investor in this space at the moment, I think in a couple of years it will be more interesting, unless you’re into ride-sharing where there’s a lot of late stage deals. Right now, the core really part of the market is in series A and that might change.
Scott Orn: What are some of the technologies or like a sector within transportation that you’re like crazy about right now?
Reilly Brennan: One of the underdeveloped areas is what we’ve called driver monitoring, so a lot of these sensor companies that have made a lot of big press announcements are really sensors that are focused outside of the vehicle, you know, sending laser beams out to really make a 3d map of what’s going on around your car and that’s useful, and we have some investments in that space. But, inside the vehicle is actually super interesting, and there’s not a lot of people focused on that yet; part of it is a cultural thing with there is a belief that people don’t want any of these sensors in their personal space of the cabin inside a vehicle, but as you move to automating the vehicle, you need to have a handshake of some sort with the user, if they’re going to be taking their eyes off the road even temporarily. So I think that the car in the future is going to, not even in future, today there’s some companies that have deployed these, knowing a little bit more about you sitting there, so what I say is that you know, the urinal in the men’s bathroom knows more about me than you know the most recent pick a name brand car manufacturer. They really don’t know if you’re there in the car, if you’re paying attention, and that’s going to change. So there’s a couple ways you can do that, you can do it through cameras point at the driver, if they’re holding onto the wheel, if they’re sitting in the seat, some people are trying to you know build a sensor in the dome light to look down, things like that.
Scott Orn: I think you said that there are some people who don’t think that’s going to be valuable, but that seems crazy to me.
Reilly Brennan: I just think it’s been undervalued, there are a lot more companies working on sensing around the vehicle for accident avoidance then inside; two interesting examples are zen drive, it sits on a phone and through the sensor to the phone can pick up things like acceleration braking actually can make a fingerprint of a lane on a road just by the vibrations in the phone and can also know about distraction, if you’re kind of looking at your phone and things like that. And that’s just the use, being able to match that, distraction and then being able to say this particular intersection at this time a day has a lot of accidents, and there’s a lot of distraction going on. Therefore, if you’re a bicyclist or you’re another driver, you shouldn’t be driving near those people or from a risk perspective, if you can avoid those areas it will give you a cheaper policy momentarily things like that.
Scott Orn: Or maybe there’s something you can do with the lights or you know. I think that’s fascinating because human beings especially in the internet have proven over and over again that they are willing to trade kind of privacy for better service—
Reilly Brennan: Use google maps and you know that they know where you are, but you also get the benefit of getting to your location on time and getting that traffic benefit, things like that. So that’s exactly the point and unfortunately the automakers have not done a great job of leading people into that kind of relationship. So one concern going back to a regulatory point is that there might be a moment in time here after perhaps an event or maybe just the regulators changing their mind, that vehicles that deploy these kind of level two, level three systems kind of what you would describe as the test the autopilot, that they might be forced into having some sort of driver monitoring piece, before you are allowed to deploy them, and if you don’t warm the consumer up to that benefit of why this has to take place, then they might truly hate those systems. So it would really be wise if the industry realized that driver monitoring is going to become a part of the deal in these semi automated vehicles, therefore we have to start explaining them now. yeah well you’re going to give this up, we’re going to get this other benefit, and that’s really cool.
Scott Orn: Yeah companies like Metromile and these other ones that are like I think it’s really smart, they’re pricing based on your behaviour or how far you’re driving, things like that, that’s another example; but that seems like a no brainer, as a consumer it’s super exciting to me— now of course I’m not like doing anything crazy in my car or anything weird so I don’t really care if people are monitoring me or whatever,  and I try to be a good driver so it’s—
Reilly Brennan: Also you have a cultural belief that your experiences with those services in past have only benefited you, and this is going back to our discussion about Volvo to and what trust means you know, there is different kinds of people who would answer this question really differently right, and so imagine if you’re a large scale automaker that sells vehicles not only to Scott Orn, but Scott Orn’s aunt in Nevada, and communicating that, that’s a really difficult challenge.
Scott Orn: It is yeah, actually I’m processing that, I think it takes me back to like the facebook google stuff of most kind of maybe older people don’t even know that facebook and google are watching everything you do, maybe nowadays in 2017 they do, in 2012 they didn’t, but there’s this kind of adoption curve and realization curve that you’re talking about.
Reilly Brennan: Yeah, and we are every day, we have a belief system about the benefits we get from that and I think technology is one of the things where the more you use it, clearly the more you use it, the more benefit you get from it, it’s kind of like one of those things like use a new calendar app, you kind of have to turn your life over to it to really get the true value of the product. And not a lot of consumer life is the same thing, you know you can kind of go in and taste a TV show for a little bit or something like that, in technology tends to be this swallowing kind of behaviour where you have to have the whole thing before you’re like I get why this particular thing is great for me, and why I sold the one car to only Uber. So, that is a cultural value that some people do have and some don’t.
Scott Orn: Yeah and like you said, there’s times where I have turned over my calendar to some new app and it totally bonks and I’m like oh that was stupid. There’s one other kind of transportation question I have is, Vanessa and I were talking about this the other day, this is like transportation efficiency affecting other industries, like is a real estate going to be less valuable in the cities and more valuable in the suburbs, this is like the simplest example, but Vanessa is like you know what,  do you think someday someone is going to create like services to be done inside of a car, because you say your commuting from Tracy to San Francisco, right, it’s so much easier to do that in an autonomous vehicle and then you have so much extra time, do you think about this kind of stuff?
Reilly Brennan: Yeah it’s hard to be a real estate speculator on that, because there are arguments either way about, you can live as far as you want, but there’s also a lot of evidence just humans like being around others and as cities become a little more livable I think great cities are still going to be great with the opportunity to drive and work on your commute. But, the small changes if you think about even just the way food was packaged and the changes in giving people like a driving window and things like that, and or take out window, and packaging food in a vertical fashion so you can eat it in one hand a little things like those are kind of when you deploy autonomous vehicles then you learn things like that, and so the things are on services are probably the same way, but it’s really difficult to handicap which ones are going to become more efficient for people. I know that the working piece is a real thing, if people can get comfortable working in an autonomous vehicle, than the work space environment for [43:20 inaudible] super fascinating so that’s why I think although now we don’t see them thinking about this a lot, a company like Microsoft or Slack or Box or the kind of enterprise stuff that people use every day and gmail of course, becomes really an interesting space to think about. People might not choose to only work in their vehicle, but if you move the entire fleet of vehicles in US to working, the extra commute time when they’re just driving right now, you add a Chicago to the US economy.
Scott Orn: Wow, that many hours.
Reilly Brennan: That many productivity.
Scott Orn: And you would probably redesign the whole cab and you know, yeah that’s the kind of stuff, I think what you’re doing is so interesting because not only on is the fact like kind of pure transportation as we think about it today, but it has all these side benefits of like just changing society, changing culture it’s really cool.
Reilly Brennan: Yeah, it would be difficult to know, I mean I think some people will go out of business or become really wealthy by betting on parking lots right now, because people are trying to answer this question for you, and it’s unknown at the moment.
Scott Orn: That’s cool. Well, thank you for doing this. Maybe tell everyone where they can find you.
Reilly Brennan: So, you can get the newsletter and see some of our portfolio companies, and on twitter @ numberonescottfan— no, @reillybrennan, and thanks so much for having me on.
Scott Orn: My pleasure, thanks man.

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