David Fleck — FreeFlow

I deeply appreciate David’s approach to life and work. He founded FreeFlow to invest in startups coming out of Caltech that have the potential to improve our world.

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David Fleck is the founder of FreeFlow, a new seed stage venture firm that exclusively backs Caltech startups. Prior to FreeFlow, David was chief strategy officer at Disqus and also early at Google. But I don’t just know David from Google. David and I go back almost two decades and I’m pretty sure that I introduced him to his wife, Lauren. And David, as always, nice to be chatting with you. Nice to be chatting with you.

Thank you. Yes.

Well well, let me just let me just say thank you for for bringing up the personal piece, because it’s actually, to be honest, it’s actually one of the reasons why I wanted to do what we’re doing. But just because there are so many amazing people that you can work with and choose to work with. And once, you know, once you once you taste that, it’s pretty addictive, actually.

As you know, I almost was like, maybe I should be working at FreeFlow because it’s a great thesis and you’re a great person to work with. And I’ve known you for decades and you’re also a great surfer. So there you go.

You lie. But that’s not true.

Well, I have a lot of fun surfing with you. Give us give us a little bit of the origin story. I mean, I know you, but our listeners don’t.

Yeah. So I’m an Indiana guy. I was born in Fort Wayne, Indiana, went to Miami University then went to Kellogg for my MBA, went to Bain and Co., the consulting firm, and again worked in the private equity group for a couple of years and then was an early PMM, so marketing manager at Google still within Rosenbergs or for those who were tracking at home.

And then actually at a few startups actually along the way, culminated actually with the Disqus, whereas the chief strategy officer for about seven or eight years and it was just an amazing experience because it was one of those companies that we had to it was a good outcome, but we had to earn it, if that makes sense, you know, oh yeah, it didn’t come easy.

But then, you know, I reached I reached this point where in twenty seventeen, you know, over that Disqus we’re of seven years. You know, you know, I lost my my, my my father, I lost my brother and had also had three young children born Lulu, Leo and Fiona and and I wanted to go into the next phase of my career with with intention is how I literally was describing it, I was drawn to science and really want to work on things that I thought were large and impactful.

And so started to, in essence, explore more around Caltech, I really started to become interested in and obsessed. I don’t know how else to put it, but just that that that founder obsession and just became obsessed with, you know, the amazing, number one, amazing scientists that are there in the number two. I just wondered why the ecosystem, the venture ecosystem around Caltech was was was what I considered to be underdeveloped. 

I’ve been following along closely and I think you saw this opportunity at Caltech.

And, you know, I think people kind of try to throw some barriers and tell you, oh, you’re not scientific enough, you don’t have a professorial background or you don’t have enough of a venture background or this, that and the other.

And what you said about being stubborn, I just think you you almost had a founder mentality and just said, I see the opportunity. I have this vision, I’m going to will this into existence. And I was very impressed by that. Is that an unfair characterization? No, you’re making me blush, it’s but it’s true, I mean, sometimes you have to, you know, in my you know, some moments, you know, you just you literally have to say, I don’t care.

It’s a good idea. And I don’t really care what anybody else thinks. With all due respect. Everyone has an opinion. Everyone has opinions. Opinions are like assholes. Everybody has one.

So I didn’t know the punch line, but.

But everybody is going to have an opinion, right? So you have to kind of really be considerate or thoughtful about who you actually care about. So, yeah.

Tell me more about what it was that you saw about Caltech and sort of the startup landscape that led you to start FreeFlow.

Yeah, so. Really, what it boils down to is just do you think there’s enough deal flow there, I think conventional wisdom is cast a wide net, you know, kind of, you know, within, you know, have a thesis, but within reason. Let anything come in and at least give it, give it, give it, give it a look. See. Whereas for us, we took a pretty different approach, which was, visiting or speaking with Caltech professors about entrepreneurship, I think is a bit off the beaten path for most VCs.

I think they really respected the fact that we were dedicated to them and understood that, and so were willing to really spend time with us just as we were willing to spend time with them, oftentimes not even knowing if there was a potential venture there. We start out really just curious about what people are researching. Right. And then we get in the translation all the time.

Sorry. Go ahead.

Yeah, no, I just want to make sure I get the basics of FreeFlow, which is like you’re just investing in Caltech startups and not even Caltech alumni or, you know, I understand from you, I’ve watched you just kind of go lab to lab, professor and professor at Caltech, but maybe you just sketch out, you know, your investing, you know, when someone is, you know, just commercializing products out of Caltech or how do you approach that?

Yeah, no, but you’re right. I mean, we know the way that I describe it is our core is is is is physically Caltech itself. Right. And that and professors more specifically at Caltech. 

And how do you think about the sort of time to revenue and the amount of money that these companies will need? If you’re, you know, out of Caltech, you’re looking at a lot of things in life sciences or that sort of field where there might be longer regulatory horizons or it might still be more fundamental science.

We’re almost always, you know, have have line of sight to revenue actually and sometimes the companies already have customers. But we do have we will have some that will have longer time horizons in that way. So, for example Appia bio. You know, that one is more kind of FDA.

They’re doing basically cell therapies, delivering a more effective, lower cost cancer treatments. So we will do some of those, to give another example, so of a different flavor is Entos, so this one is founded by Tom Miller of Chemistry Division at Caltech and really is this beautiful partnership between kind of what I would think of as traditional, you know, machine learning and AI cloud infrastructure, but then also quantum chemistry. So how do you how do you basically, you know, use those things together to find new targets? So they basically allow for order of magnitude improvement in terms of time of time to find different molecular targets, targets that could be for drugs, for drugs.

Exactly. Like targets. Could be for drugs. Targets could be also for industrial applications to serve as chemical companies. Think about. You know what they’re manufacturing, how are they manufacturing it. 

So, I mean, I had a D.A. Wallach on the the L.A. Venture podcast, and he said that the pharma companies, Big Pharma, is spending 15 to 20 billion dollars a year acquiring startups, which was amazing to me. And so is that do you think about that as sort of potential exits for for some of these companies?

Yeah, yeah. I mean, it’s it’s there’s there’s different ways that you can work with with with the big companies, but they’re extremely acquisitive. And that’s almost the model, you know, you get to sometimes, you know, complete the stage two you know, some people believe in that religion or stage three. But, you know, right around that time frame is when there’s oftentimes interest because it’s been de-risked. And conventional wisdom is, oh, you need to get any, you know, company like biotech company or one that’s going after a target, etc.

, you know, they need at least ten million dollars. Where is that we we don’t we think that conventional wisdom is false and a lot of times it’s because of some of the some of the tooling that’s going on with that really, you can go back to the computer science, you know, where they’re beginning to be so much smarter in the lab.

You know, that’s actually that’s essentially what Tom Miller’s company, Entos, is doing. Right? They’re trying to make the that the chemists, if you will, or the people that are hunting down molecules so smart that they’re they’re they’re very, very prescriptive in how they think about their tests and spend a lot more time in the cloud, you know, looking at the data and thinking about how they want to construct the test and they spend their time in the lab much more efficiently to make back.

So, you know, it makes sense. Right.

And I assume the lab is where the costs are. And if you’ve got great software helping you out, that makes it more capital efficient.

Yeah.

So tell me tell me more about Caltech, I mean, Caltech, it’s amazing that there hasn’t been a whole lot of innovate.

I mean, there hasn’t. But it is amazing. But there have not historically been a ton of startups sprouting out of Caltech.

In terms of IP production, you know, that they produce twice as many patents per researchers at MIT and three times as many as per year per researcher and Stanford.

That’s amazing. 

Tell me about if you’re going from, you know, getting a patent, say, do the professors actually have that IP already and then license it to the companies that are spinning. Tell me about that relationship.

Yeah. There’s an office in a Caltech. It’s called the Office of Technology Transfer. And and generally along the way that, you know, an office like that is the one who’s going to be filing the intellectual property for all these scientists, not only the ones who say, hey, I might want to do something translational, but just kind of do this.

I call it it’s hygenic exercise, right. Where they’re just they’re doing this for for a lot of the researchers, you know, just to kind of cover themselves, you know, and all the amazing IP that’s being produced. But it’s the you know, the researcher said, hey, I actually think I might want to start an entity and actually pursue this translationally.

There’s economic terms that are associated with that in a very, very fair. It’s generally, you know, a royalty and or equity in the company.

And there are a pretty low amount. You know, again, they’re pretty low single digit percentages on those. And and. Then they assign the IP to that entity for the duration of it into perpetuity. So it’s really it’s really fairly done, I have to say, and so but, you know, but as but that’s just the IP, but IP doesn’t really get you very far. Right, right.

So you’re pairing them with the business. You know, I don’t know. Does Caltech have a business major. I bet they do. And I bet it’s like theoretical econometrics or something.

The way we think about it, who’s the who is the scientific founder, you know, who’s the scientific soul of this thing? And that person needs to be coming out with it.

And we have flexibility on how much time it requires. But we need we need that fully dedicated to. And then also who’s going to who who’s at least the first and least business person or business people that are also part of this. Right. And so as a professor. You can either take 20 percent of the time and dedicate to to your your your company and retain your lab and retain your professorship and things like that. Or you can also, in many instances, also take a sabbatical.

Well, say the 20 percent thing is like a that’s like a standardized thing that Caltech says you can take 20 percent off of your time off. So did Google copy Caltech was going to be my question with this whole 20 percent time.

I don’t know the historical background of that.

And do do do a lot of your companies get an undiluted funding as well? Like, do you come up? I don’t really know iCore.

I know SBIR some I don’t even know what it stands for. Small business something.

Yeah, the amounts generally for the SBIR in the Rothenburg and others individually are generally, you know, start out on the small side and could be like 100, 250 or something like that.

And if you get to, you know, particularly on the SBIR side, can definitely be one of seven figures.

I’m taking a slightly different direction. But you are.

FreeFlow is independent of Caltech,we’re a friendly face, a friendly voice. But we also know that or think that the best decisions are made when you’re completely independent from, you know, an entity like that where independent means.

You know, we don’t want to have anyone else impact who we invest in, how we invest, those types of things, we want to be completely independent and not have, you know, a person’s role there or, you know, relationships, their impact, whether or not, you know, at the end of day, it’s an investable idea. You know, our customers are the professors. Caltech’s most important customers, or at least one of I think they might even say this is the most boring. But like is is, again, the professors as well. So we have the same customers.

What you were just saying about the professors, is something that a lot of people don’t understand about universities, is how much, you know, sometimes you’d say, well, why doesn’t that, you know, computer science department go in this direction or that direction?

Really, it’s because the professors are really, you know, sort of very independent entities and you can’t so much tell. My dad always says my dad, who is a professor at Caltech. So he’s telling me about how important the professors are.

Yeah, well, I mean, it’s true. And I mean and I mean, we we’ve had several people tell us that what we’re doing is is, you know, it’s against our own very beginning way, but solving a pretty important strategic. Potential strategic issue, which is, you know, Caltech needs to attract and retain the best talent in the world. And when you think about it, the expectation now for professors at the world’s largest research institutes is if I come across something I want to be able to do and it has translational potential, then I want to be able to do that.

I want to I want to explore that optionality. And we’re just trying to make that a lot easier, a lot more seamless.  

Yeah. Is there anything else we need to hit on FreeFlow? 

No, I think we are OK. Well, you know, I’m interested in Disqus I know you had different phases of your career, but you were discussed for a long time.

I’m curious, sort of what do you think you got right there? What you what did you guys you know, what went wrong or what would you have done differently? 

You know, that one was probably the biggest few lessons from that. One were number one, you know, we talked about just stubbornness or resilience.

That one just is that writ large, right, where you just have to believe in what you’re doing and that you don’t get to and a good outcome. You know, you just have to keep with it. And so that was just stubbornness being a good thing in this context.

And I think everyone now calls it grit, Fleck. So if you just would call it grit, that’s very trendy to be stubborn nowadays.

Hashtag grit, I need to ask you more about your personal life, because, you know, I know too much. I’m dangerous.

But like you are, you know, stubborn could be one word, but it’s it’s actually kind of chill is the way I would have said that, which is, you know, people can throw shade, say this, say that not to you, but like, you know, and you’re just like, yeah, we’re going to get there.

Like, you remain positive, you know, how do you how have you built that up I mean, if you’re asking for tangible things, meditate for 30 minutes a day. It’s it changes the wiring. And it doesn’t mean that you’re not thinking about that stuff. It’s coming through, but you’re not attaching to. And so I find that stuff very useful.

When you get to just how do you. You know, drive through the wall, if you will, I mean, sometimes you have to drive. You might try to drive around the world and if you can’t see, just say, screw it, I’m driving through it.

I have to feel connected to it. You know, that it matters that I care about it if I care about something. I mean, forget about it, I’m I’m going to I’m just I’m going to be tenacious. I’m just going to be pretty fucking tenacious if I care about something. And and that’s that’s really what I you know, in some ways I feel like I’ve lacked for I’d like at certain times in my career. You know, I mentioned I lost my my dad, my brother. But even when I was younger, I was 18, I lost my mom. And so, you know, that’s why I forget to be happy. AP I just had so many different things for me personally. I mean, I’m like, yeah, man, I’m in it.

And we’re going to win this thing because this problem is just too damn important. I’ve been really impressed, actually.

You know, obviously, I know your family situation and yet you’ve managed to channel in positive ways.

How do you what do you think? Like what are you focused with teaching your children, like when it comes to like values and and how they should think about their approach to the world?

Oh, man, that’s a great question. Well, we’re in it, we have I mean, you know that I have a third child the same age because your wife pressured me to do so.

So so I’m thinking about the same things. You know, I mean, one thing that’s just showing them the passion that that that I feel for what we’re doing, and we do try to educate them on some of the problems in the world.

Right. Well, you know, the two most relevant ones recently are, number one, why are we not going to school right now? Why are we in our home for six months? Or why is the air versus smoking? Why is it so smoky every autumn, like every September and October? Why is the air so smoky? And those are really important problems, right? Really important issues for us to to resolve. And what I tell them is I’m working with people and I say I’m not the person, but I’m trying to help people that are trying to solve those problems for us.

Having them understand that you can go after a role and a job where you can actually try and go after some of the big some of the big issues, you know, that’s you know, that’s one of the things that began to frustrate me to some degree at the at the tail end of my maybe more traditional Silicon Valley career was.

What about all the people I work with, amazingly smart people like me, and this is the question really wrestling with, this is what we’re trying to do, why aren’t we trying to do something? You know, this is going to sound judging. But why are we trying to do something more meaningful? You know, about the people in this room could actually solve carbon sequestration.

You know, why are we trying to do stuff like that? Right. And so I think it is a day when if I had to explain, we’re trying to make that a more palatable and an obvious direction that people can go into, too, and say, you can do that, too. These companies need you guys just as much as as Google or Facebook or name your, you know, big company that is, you know, kind of harnessing and capturing a lot of the, you know, top tier talent.

No, that’s great.

I mean, I think it’s a really a great note to end on and sort of about why you’re doing what you’re doing. And I’m I’m really glad that that Freeflow exists and that you’re here not only in L.A., but actually in Pasadena and doing what you’re doing. So, David, thanks so much for coming on the show today.

Thanks for the invitation, Minnie. And it’s always a pleasure.