Good day and welcome to another edition of our Digital Industry Leadership podcast. Today I’m pleased to host an industry investment veteran, Dr Frank Klemens, the former Managing Director of Dupont Ventures. Over 29 years Frank worked closely with the Dupont business to capture new and strategic opportunities, primarily in IoT, Machine Learning, Biotech, functional food additives as well as electronics and imaging, and construction and transportation solutions. Part of this role he was Director of Licensing, helping start-ups develop and commercialise Dupont licence technology. He currently sits on the board of directors and advisory boards for several start-ups, Frank received his PhD in master’s degree from Purdue University in the area of bio and organic chemistry. He received his Bachelor of Science degree in chemistry from John Carroll University in Cleveland, Ohio.
Frank, welcome to our Digital Industry Leadership Podcast.
Many thanks Ken. It’s truly a pleasure to be here and having the experience to discuss what I’ve done in the past, and I’m looking forward to a great discussion on lean partnership.
Absolutely, and so that is really the bi-line for today, and I think a phrase and process that you’ve really coined, and so I’m looking forward to the conversation as well. I know you and I had a chance to interact a bit while you were at DuPont, looking at potential co-investment opportunities and such, so this podcast has been probably long overdue and I appreciate you finally taking the time for us to be able to do it. So, let’s start with your professional journey, tell us a bit about your background and how it has informed your views of digital industry.
Yes, as you stated I started at Perdu, a great chemistry school, and from there ended up at DuPont which I really have enjoyed the entire process there, my experiences there. But along the path I had a very diverse set of experiences from bench science, to project management, to licensing, all the way up to the venture world. During all that one thing I always wanted to be was more efficient and more effective in the data presented to us. That was hard and some of the digital solutions in the 90s and the early 2000s weren’t really there as they are now. So, for me, digital solutions that help us really dig deeper in the issues that are really lying in the data, that’s one thing that I really always wanted to find and to find solutions to that.
You were truly a lifelong industry leader and DuPont, so coming as you say from a bench scientist to ventures, first of all I guess, what attracted you to the space in general and DuPont in particular?
I think as I listened to some of the former podcasts, when I left Purdue I never really had an idea of what my career was going to look like, and so DuPont I knew was an extremely diverse company in the area of technical areas, the ability to move from the scientific world to the business world was there, and so that really intrigued me, and for me I wanted my career to evolve. I knew you need the depth of particular area, and so my years as a bench chemist in the crop protection area really gave me the understanding of what DuPont was looking for in their science, and how we interacted with regulatory agencies and our customers. So, for me that was a great learning, and then as I moved along and became the Managing Director for DuPont Ventures, that was the highlight and the fun part, because to me I enjoyed really working with start-ups. But if you told me that in ’91 that I would be a Managing Director of a venture firm in a corporation I probably would have thought you were crazy. And so, for me that was really the evolution of opportunities that came along, taking that risk and trying something different.
It’s funny you say that, when I look at your work heading up licensing, which by the way included both in-licensing and out-licensing, that really puts you at the forefront of a wave of at least then, new outside and innovation models. What were some of the key wins at the time, both for DuPont and your startup ecosystem?
In-licensing technology coming in is pretty straightforward and we had the technology teams inside that would take care of that in-licensing agreement, however the out-licensing of technology that was developed within CR&D that DuPont wasn’t going to commercialize, to me that was always interesting to find partners to license that technology. For me if we weren’t going to develop it or commercialize it, then there are people out there, startups, and that’s where I was introduced into the startup world, had the fortitude and also the enthusiasm to take the research and the commercial potential forward. So, a lot of the time especially with startups, I would work with them to help them execute the commercial product, and that to me was extremely rewarding and this was just not a ‘Here’s the deal, and off you go,’ to me it made sense that the sooner the startup of the license started making money, the sooner we would be making money.
And so the partnerships there were a lot of fun, really enjoyed working with them, their energy, and their willingness to pivot after being in a corporate world at that point for over 10+ years, it was nice to see the movement of technology moving forward and the commercialization going forward. So, to me that was really energizing and really a nice intro to the start-up world.
In some sense what you just described there is exactly what a lot of corporate venture capitalists do. So, it’s usually less about finance returns, more about synergies, strategic alignment if you will sponsorship, and that does flow both ways, so I loved all the words you used all the way up, including ‘pivot,’ in the sense that you were already well-engaged. I think it was about 2016 when you became the Managing Director for DuPont Ventures. In some sense you already had pretty good traction I guess in terms of being able to align these startups to what DuPont was looking to do. What was your inspiration to create this new team and capability at the time?
It was an opportunity that just opened to me. Great question. Dow merged with DuPont at that point, and DuPont Ventures was going to be split into two, one to go with the AG businesses, and the remaining one would be with DuPont. They didn’t have a leader for that and I threw my hat in and really said there’s the four businesses there, really needed to tap that external startup ecosystem. To me that was something that was really missing, I wanted to change the whole process which was more throwing startups over the wall and pushing them up the hill, I really wanted to figure out what was the cause of this friction of working with startups within DuPont. The largest concern was, working with startups is very risky, I heard that across the board when I went out and listened to my customers.
So, to me I knew I had to de-risk the process, I had to figure out what would make the businesses more comfortable working with the external ecosystem. To me that was the start of the entire process of bringing everything together that I’ve learned in my prior experiences and coming out with a product that a lot of people kept saying, ‘Gosh DuPont Ventures is like a startup because you guys keep pivoting’. We did, we pivoted a lot in the first couple of years just because we were learning as we were going on, what worked/what didn’t work, and what didn’t work we kept changing and improving based on our customers responses.
Certainly some things much have worked because I see several solid exits including an IPO among your portfolios, so there was ChromoGenics, OxyMem Xyphos Biosciences, just to name three examples. What did you look for in the startups in which you were investing at the time?
Yeah, the big thing Ken, great question, to me Xyphos which is one that was acquired was really an interesting startup, because it started from an avid bionics that split into two Xyphos and Vilum Bioscience, and Xyphos when they got acquired really showed us that it is worth working with startups; the financial returns are phenomenal, and even OxyMem where we’re working with them, de-risking with them and ended up that we acquired them ourselves. So, to me I think what I look for in a startup is to connect the What in the business, so the What, it’s a capital What! To me that’s the important piece of anything that we were doing is understanding what the business needed, and I’ll talk more later on in this podcast, but understanding that What, and finding that solution fit in the startup, that was really the number one piece.
The second piece that we’re always looking for in startups is the startup team. The management team to me can make it or break a commercialization of a technology, so for me and the team we did due diligence from the moment we started with the startups, all the way down the path. In one of their earlier knockouts where this is just a technology play, there is not a commercial bone in any of these, the members of the startups. So, to us that would be a very difficult path forward, that would increase risk at our end. So those were the two things we really looked at: connecting the What, and the people in the team.
You had a great observation platform in the sense that DuPont was right in the middle of a number of your peers who were also trying different industry innovation and investment approaches, one might say they were pivoting as well, but I believe the whole industry was kind of searching for the best way to innovate outside the four walls of the company. What were some of the trends that you saw along the way in how corporations manage external innovation, and, what models I guess particular did you see working?
That to me Ken is a very tricky question, and you might ask why, why do I say that? To me I think every corporation has a different process in place, and they have different stages of evolution on their innovation ladder. To me I think what people try to do is work on the ‘how’s’, for example the hackathons, the internal accelerators, the incubators, they’re great tools but again they all are the how’s. I think where we’re seeing success working with the external innovation ecosystem is when people have figured out what the What is that the business needs. So corporate venture world to me is very much a different beast than the VC world, and so for me it really is an area where you’re looking at trying to figure out what that What is, what is the concern, what is missing, what are you looking for? So, once you know that What, any process you put in place has a better chance of success. And so, the toolbox we have out there for innovation I think is huge, and I agree the execution of the how is very important.
But I think the ones that work the best, and I’ve seen that across different corporations in the groups that I was in, there is not one solution that will produce success for everybody. I think you really need to understand your corporation, what will work, what won’t work, and then build a process around that, figure out the what to make the how.
Let's dig down into the process that you really helped develop and continue, and that is this lean partnership process. Can you tell us a little bit about the concept and the value you’ve seen created with it?
Absolutely. To me it was all about de-risking of the partnerships, and so in the hard-technical areas that we were in this is a must before entering any agreements in my eyes. I think it was foolish for anybody to go into a JDA or a commercialization agreement, or even an investment without understanding or de-risking the critical uncertainties. So, first thing, you’ve got to define, the What; what is the business missing, not at the 30,000-level ft. right at ground level, it either has to be extremely deep discussions here, and they don’t have to be long. For example, one of our groups in cybersecurity came to us and we were sending them startups, great startups but no, we got a lot of no’s and so we finally pulled them in and said, ‘Okay, what didn’t you like about this, and what are you looking for?’ Well, within 30 minutes we had the answer, and then we were able to send them the startups that would actually help them get to a solution for the problems that they were having.
So, when you say cybersecurity, you look at, ‘Oh my gosh it could be almost anything,’ but when you really got down to it there were four areas that was really painstaking issues for that group, and once we understood what they needed, the What, we were able to then send them great startups and they’re working with several of them right now. So, the What is extremely important, the de-risking, and so before entering agreements doing proof of concepts, knocking out the critical uncertainties there, to me is something that is so simple to do but its many times overlooked. They’re fast, 6-8 weeks, in the life sciences it took a little bit longer, could take 6 to 8 months because it’s the life sciences. They’re relatively inexpensive, some were as cheap as $10,000 all the way up to $150,000, but you’re still not spending the millions you are when you’re doing upfront fees in any of the agreements. So, POCs to me, proof of concepts, are an extremely important tool for de-risking any partnership that you have, or you’re going to be having with a startup.
While the technical is being de-risked, our team did a lot, the ventures team did a lot on the finance and the team, and working with the team, it gave us a little bit more time one-on-one with the founding teams and also making sure that, okay yes they have the solid runway, the people in there, yes they are business driven. To me, any time working with a startup, you need to have a commercial product in mind here, this is not an academic arena where we’re just going to keep developing and developing, we need to get a product out soon because that I think is one of the clear signs of a good startup is when they can commercialize.
Then we also had some startups that had some great PoCs, but they didn’t move forward and so we asked the question why, and a lot of times it was they didn’t understand the market-space, this technology was so unique and so new, what is the market going to be? And so, we had to do PoVs Proof of Value, and so really define what the market-space looks like and the commercial pathways. Both of those tools are great tools to de-risk your partnerships before you get into any of the five agreements possible, or any combination thereof of investments, commercial agreements, sourcing agreement, licensing agreement, or the JDAs, the Joint Development Agreements. For us it was really lean partnerships came out of working very quickly with the startups, figuring out can they do it or not? Can they work with us or not? Can we work with them, vice-versa? It was a mutual partnership. And so, it gave us a nice understanding of the startup before we even went out for the five agreements. That to me was the value of creating something like this lean partnership.
A lot of this goes back I would say to your licensing background, in and out-licensing and specifically having to incubate if… I have to use the term but maybe larger incubate these companies. How scaleable was that model? i.e. I could see you certainly doing it with a Series B startup what it scaled down to, let’s say like a seed style company?
Oh absolutely, during my days of the managing director role, yes we did seed investments all the way up to A&B series investments, and follow-on investments. The seed investment we did – did this, we had to de-risk it even though it was really early, parts of it you need to ask what is the critical uncertainty? Again, just like, the What, it can’t be so broad that everything knocks it out, there are certain critical uncertainties that any technology brings forward, and if that doesn’t come true then it’s going to get knocked out. So, I think even with our seed investment that was something that was extremely tested. But again, for the amount that we did on that seed investment, I think the PoC should reflect the amount of money you’re investing, or the value of the agreements you’re putting in place.
You know what’s interesting about this conversation is that when I think about the, let’s say corporate venture capital, or corporate development groups that we deal with, leaders there will often identify themselves as, ‘I’m a corporate venture capitalist,’ or, ‘I’m a head of MNA… ‘ or immigration, or strategic partnerships, etc. What we’ve seen is they’re actually a spectrum, it’s all external partnering in some sense that even commercial agreements could be one end of that spectrum, and you move up to potential as you say, joint development agreements, investment in terms of equity investment, joint ventures, and then ultimately if you really want to consummate the marriage, you get married at the end of the day, right.
I’ve seen this play out much more in how particularly Japanese companies, but generally I think it’s more the Asian corporate mentality, in that you take a step at a time to develop the relationship over time, you don’t just go out and acquire the company per se, right? So, I think your idea of lean partnering’s pretty interesting because its meta to just invest, or meta to just acquiring, or meta to develop… all of those are as I think you said earlier, kind of arrows in your quiver in some sense, you choose the right one depending on the partnering that you want to do. So, I think it’s a very powerful concept, and again it feels like it emerges larger because of the early work that you did particularly on the licensing, having to help a lot, stepping in and really helped align these companies, I think it’s a great concept.
I guess one of the questions that I’m sure is on the minds of the listening audience is, what’s next for you Frank?
Somebody wise told me Ken, that your career is a jar of stones and you have big stones and small stones, so I’m filling up my jar at this time. I’m doing a lot of advising for accelerators, incubators, VCs, FedTech and Surge supercharge to that, I’m helping define what will work with corporates, what won’t, then also being advisor to startups. I think in the long-term I’d like to find a place where I can connect and solve the business issues and concerns with the external ecosystem. To me like I said earlier, that was really the fun part of that experience I had as the Managing Director for DuPont Venture, was understanding the business, and finding solutions outside, and bringing them in.
So, to me that was really an excitement, every time I would come back from California where we had our West Coast office, my boss here would say, ‘Frank, you need to get off the ceiling. It’s that excitement that you see when you’re working with startups can sometimes blind you, but we had strong What’s, the What’s were very well defined, and so I think that to me is something that I would like to do again.
I think you’d be quite well, in the age of I understand it’s almost a trillion dollars in dry powder, sitting among private equity, at least in North America, and of course the phenomena of SPACs now which everybody is talking about; so much of the same lean partnering approach in terms of finding the companies, helping to develop the companies ultimately ingesting cash and such. It seems to me that you are a hot commodity one way or another, so well placed at the right time shall we say.
As digital industry investors we always like to know what startups you see as the ones to watch.
I have a couple, Dispel a shout out to Ian in New York, a graduate from Yale, he was amazing, remote access tools that you can connect securely and quickly to operators in their own networks. To me he blew me away, he blew our whole IT organization away. So, Dispel is one that I am keeping my eyes on and also being a Chemical Angels Network member now would be one that I definitely would want to invest if the investments in the reality of the money that I could afford at this point. So, phenomenal startup.
Opal AI was the other one that really was a wow. They’re the ones that help data-scientists discover… help the data science in their discovery timelines, especially on the East Coast where we have the problem of keeping data scientists, because they all flee to either Toronto or to the Valley. For us we had to make sure they had the tools there that would make them extremely efficient, and so the Opal AI team really optimizes the discovery process of our data scientists, really-really enjoyed working with them.
Then on the business decision, it’s always been interesting to me how to do that better. A business decision is only as good as the data you give it, plus the data you can get through. Sometimes you have so much data that you can’t see the information in there. Prevedere was amazing on that front, so really enjoyed working with them. Others, People-Flow, Quid – loved working with Quid, and LearningPal. Those are the ones I would, definitely the ones to watch.
Wow. So, Dispel, Opal AI, Prevedere, Quid, People-Flow, and then LearningPal.
Thank you, we will have links to these in the podcast transcript as well. So great selection there, and actually interesting not any that have crossed our paths, so I’m looking forward to looking these up relatively quickly.
The reason for that Ken is, I think it’s because we were looking for very distinct solutions, the What’s were very specific for a materials company, and so the concerns that we were having they really were the groups that came to the forefront here.
Excellent. So, in closing can you provide any recommendations of books, and/or resources that inspire you?
Yeah, I read books all the time, I look over at my bookshelf and it’s getting too packed, but "Range" by David Epstein, a phenomenal book on a generalist. I consider myself a generalist because even with DuPont Ventures the breath of our growth areas were immense; you go from life sciences, from alternative proteins and the microbiome, all the way to lightweight materials and transportation, and bendable electronics in the electronics industry, or construction how to make that safer and better. So, I found that book very good, it’s a good read.
And then "Moonshots" by Naveen Jain. I met Naveen during one of our potential investments, a phenomenal individual. He to me is an out of the box thinker, and he really does think differently. So, "Moonshots" by Naveen Jain is a phenomenal book on how you get your mind out of that box, think differently and look at the world differently.
Yeah, you can tell the books I read are mostly how do people find the next thing, if we’re all sitting in boxes, which my boss said I could never fit into one, which I took that as a positive and not a weight issue or anything!
To me, I was never in a box, and I think that’s something that really helps, especially if you’re in the innovation world. Naveen has a phenomenal startup in Seattle, Washington, Viome, and he’s revolutionizing the microbiome area right now. So Viome is another great startup, his book was really-really interesting.
Excellent, all good suggestions, and Moonshot’s actually has come up a number of times in our prior podcasts. So, you have Range, Nine Lies about Work, and Moonshot, again, we’ll have links to these in the transcription. So Frank, thank you for providing this insightful interview.
Thank you Ken for having me. It’s been always fun chatting with you and I really want to thank you for taking time to put this podcast together, and your staff helping out. It was really a lot of fun, so thank you.
Excellent, yeah and I appreciate the time you put into preparing for this as well, and the conversation has been really great.
This has been Frank Klemens, former Managing Director of DuPont Ventures, an industry investment veteran, and I’d say the unboxable one.
Thank you for listening. Please join us next week for the next episode of our Digital Industry Leadership Podcast Series.