Ben Marcus — UP Partners

Wednesday, August 10, 2022
Ben Marcus is the co-founder of UP Partners, a new $230M fund investing in the moving world.
 
Ben tells us about electric vertical takeoff airplanes, drones delivering packages from the roofs of Walmarts, and how flight is going to connect humanity.

Ben Marcus is the founding managing partner of UP partners, a new $230 million fund investing in companies that are transforming the moving world.  UP partners has made 13 investments to date. Previously. Ben was the founder of AirMap, which is traffic management software for drones.

Let’s start by talking about UP Partners. Why did you start up? I started up because I love to fly. I started UP when I was 10 years old, actually my, my best friend Cyrus and I met at the Santa Monica airport, both very passionate about aviation. And that’s when we started going up So, grew up as a pilots and flight instructors went to college together, started working our first jobs together And then in 2006, we started our first company together called jet Aviva, which today is the world’s largest broker of business jets. And then in 2014, I co-founded AirMap, which has grown into the leading provider of unmanned aircraft, traffic management software in the world.

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And the common thread that’s tied. All of these things together is a passion for flight.

So we are really motivated to help make people in goods, move in better ways, more efficient ways, safer ways, more environmentally sustainable. So we invest in entrepreneurs that are developing, enabling technologies that make transportation better.

That’s great. Did you say, or did I hear that some huge percentage of people in the world have never been on an airplane?

Yeah. Uh, one in five people have flown on an airplane only 20%. So 80% have never been on an airplane before.

Wow.

we happen to live in a very affluent place and we, we get to benefit from many of these, incredible technologies. But I think what we’re seeing now is that a. Really exponential trend in, technology is bringing the cost of transportation down and springing accessibility up for example, Uh, company we, care deeply about called zip-line, is using small autonomous drones to deliver packages.

It’s something that we’ve dreamt about in the United States for a long time. You’ve been hearing about Amazon, maybe someday delivering your toilet paper or your toothbrush by drone. But today zip-line is delivering thousands of packages a day using drones in Africa. And it’s a humanitarian aid so that they’re delivering blood and.

Medicine and vaccines to people in need. And there’s no other way to get the goods to where these people need it. so zip line, you know, is it going to be one of these things like mobile penetration That leapfrogs in other countries, or, you know, I’m I going to start getting my, my Walmart delivery or whatever? I get my whole foods delivery, I guess, delivered via drone.

That will eventually happen in urban areas in the United States, but I think it starts in more rural area. And in places like Africa and other developing parts of the world that have relatively poor transportation infrastructure, this kind of technology, whether it’s sip line or any other company that’s transporting goods by small drone, they really are leapfrogging the roads just in the same way that cell phones, leapfrogged, landline phones in those, areas.

And I like to call it a Low latency, freight link. So, you know, if you think about being able to get your goods, moved from one point to another, in a very short period of time, it allows people in rural communities, in developing economies, to connect with a global marketplace. For example like to use the example of, Congo. I use it just because on a recent trip to Malawi, I stopped in the Congo. And, on the trip into the Congo, I was sitting next to a very interesting man who for three hours told me about what life is like in Congo.

And one of the things that I learned is that Congo is very rich in natural resources. And it’s also a. rich agricultural climate equatorial climate. So they grow great food, And yet they’re not able to export it, because they don’t have any transportation infrastructure. So, they may have the very best in the world, but they’re only enjoyed by the not by somebody in in another city or in another.

So if you’re producing, you know, the world’s best goods, but you can’t transport them to. Other customers who are able to pay a high price for them. , you’re relegated to trading in your local community and that may not be the most efficient way to do it. Right. Makes sense. Um but before we get too deep into drones delivering blood and the full Jetson’s future let me quickly ask it’s a $230 million fund one what is your check size and general strategy

Yeah. So we’re investing in early stage companies, typically seed and series a companies. Uh, we’re typically writing checks of one and a half to $7 million in our first check. Can we reserve significant capital for fall on? So We’re investing in technology company. Sort of the picks and shovels that go into transportation, Uh it’s things like sensing and perception for autonomy, electrification financial services, like insurance for various mobility verticals, precise positioning navigation, all of these sorts of things that, are critical to making transportation better.

So let’s talk about a few of those areas. How advanced are we in autonomy in the air versus autonomy on the ground? so I would argue that flight autonomy is very advanced. The technology is very capable. Zipline’s not the only company doing this. There’s lots of companies that have built very sophisticated autonomous flying system. Even the seven 40 sevens that you’ve flown on, in the airlines have been capable of auto land for decades.

If you land at lax on a very foggy night, most likely that was an auto land, not the pilot actually landing the airplane. So. The technology is there. The issue is one of policy and implementation.

So how do you take this really fantastic technology and make it acceptable to the public, and fit within a regulatory construct that the federal aviation administration in the case of the United States understands.

So if it’s harder to land on a foggy night and that’s when we trust the autonomous systems. Then i would think the regulators would be eager to see more of that

Yeah. I mean, every airliner, essentially every airliner that flies today can land itself, but they still have two pilots in the cockpit to make sure that. Autopilot is doing the right thing. There’ve been experiments with ups and FedEx that, fly those same airliners, but with cargo and not with peopleSo these things are in progress but still quite a ways from commercialization. I expect it’s going to happen with cargo first because there’s less risk when you don’t have people on board. And I expect it will happen in rural environments first, not in urban environments. Cause again there’s fear of people in harm’s way.

And, and once we collect a lot of data and the industry is able to prove to the regulators that, that this can be done safely. Then you’ll start to see them flying over populated areas and eventually with people on board.

And what about drone regulation? I believe that most drone operations still requires line of sight between the operator and the drone. Correct. Yeah. In the United States today, uh, the vast majority of drone operations are within visual line of sight of a human operator. There are some beyond visual line of sight operations that are just starting, but The regulators are still really struggling, figuring out how to do that at scale.

And there’s currently a beyond visual line of sight operations, aviation rulemaking committee. That’s ongoing. But it’s a long process. And I imagine it’s still going to be several years before autonomous drone flights are routine in the United States.

Okay, but you’re the founder of AirMap. So do you believe that we can have maps in the sky and maybe there are highways in the sky where drones can carry blood and cargo, et cetera.

Yeah. So I expect that the low altitude airspace generally below about 400 feet will be the domain of small drones and that these small drones will be able to fly. Unstructured routes, basically you freely determined routes on a moment’s notice not like I was in the sky, but a more dynamically planned routes based on the current conditions and other traffic and, uh, temporal restrictions.

For example, if there’s a parade on main street, you may not be able to fly over main street at that particular time, but other times, You can, and you can’t fly over the high school stadium cause there’s a football game going on. these things are going to play into whether a drone flies, one route or another route.

So, that’s what I expect what happened in the low altitude airspace. And then above that, you’ll start to have a chunk of airspace maybe from like 500 to three. thousand Feet electric, vertical takeoff and landing aircraft will fly passengers in an urban air mobility, sort of a service flying from Santa Monica to Pasadena in five minutes instead of driving for 45 minutes.

Um, and then above that will be started the domain of conventional aviation, where the airliners fly above 3000 feet. And that won’t really change for many decades.

Let’s talk about that middle space above the 500 feet where we get to fly from Pasadena to Santa Monica, because I am pretty eager for that route. I believe you said that it’s electric vehicles. So tell me why that’s important.

Right.

So electric, vertical, takeoff and landing are basically electric helicopters that also have fixed wings, so they can be efficient in forward flight. And. That’s necessary when you talk about an electric aircraft, because you don’t have very much capacity for the fuel, which goes into batteries and the batteries don’t store as much fuel as, liquid fuel tanks do.

So these aircraft will be. Quiet. They won’t admit any, carbon when they fly. They will be fast, smooth, comfortable, and I think we’ll develop a very compelling, service. Now. I believe that the sort of long pole in the tent and seeing that service come about is the development of the infrastructure, where these vehicles will take off and land.

Aircraft certification is certainly going to. A long road. There’s many companies that are well on their way to certifying these aircraft. Uh, but I think an even longer road is going to be the actual development of the Virta ports, where you’ll board and deep plane, these electric vertical takeoff linear aircraft

I didn’t even know that term. Can you say it again?

Virta parts.

Oh yeah.

Yeah. Yeah. Um, it’s a, it’s a term that was coined actually by Uber back in 2017, Uber launched a program called Uber elevate and they published a big white paper about this future, urban air mobility service. And, uh, so there will be a future where in Los Angeles there’ll be hundreds of Virta ports, where you’ll be able to board at any Vitol and fly just about anywhere in the city.

But it’s going to take quite a long time for that infrastructure to be.

And tell me again, why it’s different and better with electric vehicles versus helicopters.

So helicopters are fantastic machines. They’re amazing. You know, to be able to fly vertically insane, but they are very complex machines. They’re very expensive to operate there. And don’t have a great safety record. Um, in round numbers, there’s about one accident for every 1 million flight hours in a helicopter, which isn’t a big deal.

If you know, if you’re a helicopter pilot, full-time, it’s all you’ve done your whole career. You might’ve fallen 30,000 flight hours. So very, very low likely that you’re going to have an accident. But if you’re talking about a transportation system where. Thousands or millions of people are flying around Los Angeles every day.

having one accident for every 1 million flight hours is too much because if you have two or three accidents a week with these things, I don’t think the general public is going to accept that as a transportation system. These electric, vertical takeoff and linear conference going to be much simpler.

They don’t have as many moving parts. And I think they’ll have much higher reliability. And once they’re autonomous, um, they’ll also be safer because pilots cause most of the accidents. uh, not to mention the noise and the pollution, all the other things that, that people don’t like about.

And so there just seem to be different axes, right? Like the, the motor versus the autonomy. is it having an electric motor that makes it have your moving parts? That makes it safer.

yes.So he could have an autonomous helicopter.

Yeah, you can make a helicopter autonomous. In fact, the military has had autonomous helicopters for a long time. Again, the question is. Are they safe enough And even if they are autonomous, they still have all the complexities of Copter, they have, you know, a internal combustion engine or a jet engine. Uh, they have a transmission, they have a rotor, hub with lots of moving parts that articulate the rotor blades, all of these things with electric, vertical takeoff and landing aircraft, you have distributed electric propulsion.

So you have, you have multiple electric motors each with their own propeller. And for that reason you don’t have as many moving parts. You don’t need a, rotor hub, and swash plate and all the other complicated things that come with a rotor that allow a helicopter to, to maneuver.

 So , those are some of the examples of, of how these things will be simpler.

 where are we right now on having these

So there’s several companies that are in development at the moment, uh, some have specked in the last year. You may have heard of

Joby aviation, for example. Yeah. Great company. Um, there’s another one that is going to DC back in two weeks called Archer aviation. One of our portfolio companies is beta technologies.

That happens to be our favorite. One of these Evie toll manufacturers. When, When we started our fund, we swore we would not invest in any vehicle companies, including evil companies, but beta technologies. That really a special case. We met the founder of Kyle Clark back in 2018. He’s a tremendous founder.

He’s like Elon Musk, but without the ego, In addition to building the aircraft, he’s building up the recharging network. So if you’re an operator of these electric, vertical, takeoff and landing aircraft, you can land at any one of his recharging spots and recharger aircraft.

And the other thing that we like about it is that they’re going after the logistics market first, not the passenger. And we see that the logistics market is much more viable as, an entry point than moving passengers, not just because of the safety aspects, but most importantly, because of the infrastructure aspects, you don’t need to build lots of verdict ports in a city, to move goods from one warehouse to another warehouse.

wow. can you go take a trial ride on one of these, beta aircraft?

Yeah. If you’re friends with Kyle, you can definitely go

get a trout.

Have you done?

I haven’t yet given rides to a very small handful of people. But Joby aviation thus far has been flying unmanned. So they’re, they’re operating in a test range in Northern Cal. Without a human being on board, it’s all remotely piloted.

But they’re well on their way to certification. I expect that, uh, the first certifications for these DB tools will likely come in 2024, 2025.

Cool. So let’s, let’s stay on the topic of electric. Where are we unmoving to electric or just cleaner jet fuels and the greening of air transportation more broadly.

Well, you know, EVs, I think we can all agree are here to stay now. So, I’m very excited about that. , look at Tesla, for example its market cap is in excess of all of the other us car manufacturers combined. So, you know, I think, I think that the world has come to understand that electric vehicles are the future of ground transport in aviation.

Batteries can provide fuel for a short range air. But as we go into longer range aircraft, there’s not enough energy density there. So there’s a couple of solutions to to greening aviation. One is hydrogen and hydrogen can be consumed either through hydrogen fuel cells, turning the hydrogen into electricity that then turns electric motors or hydrogen can be consumed in turbine engines in the same way that jet fuel is consumed interpret engines.

And so depending on the range and speed and payload of these. You can either have hydrogen fuel cells or hydrogen jet aircraft. Um, There’s going to be a bridge to this hydrogen aviation future, which is sustainable aviation fuel. It’s basically making jet fuel out of sustainable sources instead of out of fossil fuel.

And there’s quite a lot of work ongoing. There there’s some limited production of sustainable aviation fuels. We have a long way to go before. There’s a sufficient supply of sustainable aviation fuel to replace all of the fossil jet fuel that’s consumed today. But lots of really interesting ways to do that.

There are companies turning municipal, solid waste into jet fuel companies, turning forestry waste and other biomass construction waste factory waste into jet fuel So there’s a variety of, cool projects ongoing that, that are working on that. And, and these sustainable drop-in fuel replacements not only for aircraft. There’s sustainable fuels that are being developed to replace diesel for road transport and maritime fuel.

So it’s a very exciting space.

Does drop-in mean you solve the same motor?

Exactly. Yeah, you just, you can run a diesel engine. You can run a Marine engine, can run a jet engine, just the same as you would without any modifications.

Got it. Okay. So let’s keep talking about all your super cool portfolio. I mean, we talked about beta, uh, zip line. Those are both extremely cool. you might have the coolest portfolio of anyone in LA.

If you like transplants and automobiles, you’ll like our portfolio. Yes.

 So happy to talk more about our portfolio. We’ll give you a couple more examples of, some awesome companies that we’ve partnered with. One interesting company partnered with is called Voyant photonics.

Voyant has developed a LIDAR system or for those of you who aren’t familiar with Weider, it’s basically laser, uh, system that can map the area around a vehicle or a. And they’re typically very expensive. Sometimes cost as much as a hundred thousand dollars. Our company Voyant Photonix has figured out how to build a LIDAR. It’s on a chip. That’s so small. It can go on your fingertip. And the cost is less than $200 for one of these LIDAR chips compared to a hundred thousand dollars.

For most, most lidars. so your team is use Cyrus and Adam. Cyrus is your, as you said, your, your, best friends since like age 10, how do you guys get up to speed on, you know, LIDAR investments or something that maybe you’re not extremely deep in already?

Yeah. The three partners here are Cyrus, myself and Adam grocer, who is an incredible human being. He likes Cyrus and me. He started his career as an engineer, then turned entrepreneur, then turned investor, but he’s been doing that 20 years longer than we have. Did 10 years of early stage venture at foundation.

And then the last 10 years was a managing partner at Silverlake Kraftwerk, in growth equity, particularly in, uh, energy companies. So, those are the three partners, but we have, we have a much broader team than that. We have a fantastic investment professionals on the team with us, Allie Warsan, who joined us from acne capital, Fred Daso who joined us from Boeing, Aaron, Peter Mann, who came from Boeing as well.

So to answer your question about how we come up to speed on interesting technologies is really through an extended network of technical advisors. We have a great group of, technical advisors who are very deep in their respective domains that we can call on for help.

Some of these are our LPs. We have really a tremendous uh, group of, of uh, LPs that, have businesses in various sub domains that we’re interested in. (next section had several drop-outs and speed-ups – fixed what could be fixed and noted what couldn’t) We also have, many events that we host our big one every year we call the up summit and the up summit brings together our community, our entrepreneurs. (drops out – ___??__ investors) So investors are corporate strategic partners, and so on and so forth.

And, lots of magic comes out of those. So, you know, we, we really think that what we’re doing here is We build community and the thing that pays the bills is the investing. But really most of the work that we do is building community.

So up fund one is new, but you’ve been building community and in this space for a while. Let’s go backwards and cover a bit more of your background

So in 2006, my best friend Cyrus, and I started Jetta Viva, which is today the world’s biggest broker of business jets. Uh, when we started in 2006, we were 24 years old and we, um, essentially wanted to build an aircraft management company that was going to be focused on very light jets. Very light jets was a new category of aircraft, small, you know, for passengers.

Business jets and relatively inexpensive compared to previous business jets. And there’s a whole new category of people who are buying these things. Who’d never owned anything like it before, and really needed a lot of help with operating these. So we established Jetta Viva to be the operational partner for the life of the ownership for these folks.

And over time we found that really the demand was. To manage these aircraft for them, but to help them buy and sell them. And so We sort of pivoted and became today, the leading provider of, aircraft sales and acquisition services the world. So that’s the first thing that, I built with Cyrus.

So what sort of business might consider buying one of these or like who might consider buying one of these lower cost airplanes?

Yeah, smaller aircraft ownership is actually becoming more and more viable for more and more individuals and small businesses. It used to be sort of. You know, only reserved for the wealthiest of people and the biggest of businesses, but, especially post COVID the interest in small aircraft ownership has skyrocketed,

People prefer not to fly in the airlines anymore. And you know, I think. For a long time have been able to afford these aircraft have finally figured out that they’ve been able to afford it and don’t want to have to deal with the TSA lines and, you know, all the masks and everything in the airplane.

And we find that it’s really a broad range of businesses that. Find that this is valuable for them. Some are businesses that are very regional in nature and need to move their people from, you know, cities to small towns.

For example, a lot of the agricultural businesses in the central valley that growing nuts and fruit and things, fly daily between Santa Monica and their farms in the central. Um, sometimes 10 times a day. There’s quite a number of people that are in technology and fight back and forth.

For example, between the Los Angeles area and the bay area. I’m one of those, uh, I can get in my small airplane here, right at my office. And in one hour and 28 minutes, I can land in San Carlos or Palo Alto. And, uh, , that’s a lot more fun and a lot more convenient than taking the airlines. So it doesn’t cost that much more actually.

And how much does it cost?

Yeah. I mean, there’s a very broad range of, aircraft types and, associated expenses. Uh, The flight for me and my little airplane from Santa Monica to San Carlos or Palo Alto, costs me something like 150 bucks in fuel. So it’s not that much more than a Southwest airlines ticket. And, you know, again, I can go whenever I.

And, it’s a lot more fun. So, you know, of course it, it requires some brain damage. I mean, you have to be willing to deal with, with all this stuff of finding a hanger and paying for the insurance and, you know, not yet a pilot learning how to fly or hiring a pilot there’s things you have to do, but, but it’s worth it for those of us.

And then after Jetta Viva, you started AirMap.

Yeah. So in 2014, I co-founded AirMap and really the. Creation for this was seeing that these electric vertical takeoff and landing aircraft were going to come to market someday. I had always dreamt that one day I would be able to fly to work and that everybody else would be able to fly to work too.

And, um, I remember in 2003, right after I graduated college, I was working in long beach selling a small single engine airplane Sesnas for a for assessment dealer. Basically, I was. Working as a car salesman, but for airplanes and I would fight all around LA there’s 30 airports between the Mexican border and Cambria.

And I would fly between all these airports and give people demo rides and sell airplanes. And as I was flying over the highways, I would look down and I saw millions of people stuck in traffic. And I was like the only person in the sky And so I started asking the question, why is it that I’m one of the lucky ones that gets to be up here in the sky and everybody else is stuck in traffic.

How do I get all these people up here in the sky with me? Um, so I actually wrote a business plan at that time to start a real commuter airline that would fly people from outlying areas around Los Angeles, like Corona Temecula, Lancaster, into. Airports and the city center like Hawthorne, Burbank, Santa Monica.

And, I figured out that if I wanted to move 5,000 people a day to work, so they didn’t have to drive, I would need 190 Cessna caravans, which are eight passenger airplanes. And then I did a whole bunch of operational modeling and, Discover that there was this real problem, which is if I want 190 of these airplanes flying over Los Angeles, there’s not really a viable way for them to avoid colliding with one another.

And, and so that’s why one of the big reasons why I didn’t pursue that business back in 2003. And so in 2014, when I started hearing that companies like Joby were developing these tools. I thought, okay, well nobody’s solved this air traffic control problem yet. Maybe this is an opportunity to go help figure that out.

so that was the inspiration behind AirMap. , in 2015, we started to build the technology by the end of. 2015. We were integrated. Our API was being used by all the major drone manufacturers in the world. We were supporting, uh, more than a hundred thousand flights per day. Initially the, basic use case was geo-fencing keeping small drones away from places where they shouldn’t be.

And then as more and more of these experimental, autonomous beyond visual line of sight operations started happening. We began providing efficient routing services. So you can think of it like ways in the sky. If you need to go from point a to point B, you need the safe and efficient route. And AirMap would provide that to you, using the context of everything else that’s going on in the airspace at any given time.

And I’m pleased to say that at the end of November, we were acquired by a great company called grown-up and join up is partnered with Walmart and many of them.

A really interesting, retailers and other large enterprises Wow. Wait, so drone up today. I don’t think I knew that Jonah today does deliveries for Walmart.

They do.

Oh, um, and is it to consumers or is it more like you were talking about like moving goods, you know, around their warehouses

it’s to consumers. So drone up has just begun operations with Walmart, but, Uh, I anticipate that they will be scaling that operation over time. Interesting fact, is that something like 90% of the us population lives within three miles of a Walmart.

So if you are flying a drone off the roof of a Walmart and you can maintain visual line of sight with it for up to three miles, you can basically serve 90% of the U S population. Congratulations not to get too distracted on this, but like, how does that work? If the drone comes and delivers me a package, like, do I catch it or does it like drop it on my roofers or on a spot that I circled on my lawn or something?

Yeah. So it lowers the package from the drone on a cable. And, uh, so the drone is never, you know, close to the ground. It’s never close to hitting your dog or anything else. The package drops to the ground. The little box opens up the package is left there and hopefully your dog doesn’t need it. So, and that’s how it works.

wow. It’s still kind of a trippy future for me to imagine all these drones flying from the roofs of Walmarts and dropping packages all over my porch. Um, and yeah, my next question, I really want to ask, but I’m not sure if it’s appropriate. So you tell me. How did you raise a $230 million first fund

So the real answer is. Cyrus is a secret weapon.

Oh,

Um, Cyrus is, is unlike any other human being I’ve ever known. He is the world’s best salesman. because he’s the world’s best relationship builder. I mean, he, he knows how to really, really get to know people and, how to understand what they need and how to deliver to them with they need.

and, uh, he doesn’t really special ways. So, yeah. Um, You know, through, building jet Aviva together you know, we met really incredible entrepreneurs and investors. Who have been successful in business. And, uh, we built real affinity with them. You know, they entrusted us with teaching them how to fly their jets.

And sometimes we would, teach their spouses how to land these things in case they had a heart attack or something. And that was just a great way to build a relationship. And then, you know, as, we’ve done other things in business, they’ve wanted to partner with us in everything that we’ve done.

That’s great. I love that. I think that’s, it makes a ton of sense. I mean, like you build all these relationships over years, and you’ve, you’ve also been salespeople before.

Yeah. I mean, that’s, that’s kinda how we got our start. But you know, for us it, sales has never been like selling. it’s always

been. Just doing what we’re really passionate about and doing it well, you know, and I think what was interesting is, you know, starting Genoviva when we were 24 years old, a lot of our customers.

You know, who were entrepreneurs themselves They, um, they felt like they wanted to be our mentors know, cause we were 24 years old or starting this company. And so like all our customers became our mentors So, I, that was kind of the start the whole thing.I love the history of the community. Last question do you have certain places that are your favorite places to flyWell around here. There’s some really fun spots. I mean, Catalina island is great. there’s a cool little airport on the top of the Mesa there. Um, Restaurant right on the airport. so often we’ll, fly over there for lunch and come back. Um, Santa Barbara airport is great too. You can, park your airplane at the airport and, uh, five minute walkaways is the beach side cafe on the beach in, uh, Santa Barbara.

So that’s a lot of fun. I love it and it makes me want to go fly. then, you know, Thank you for coming on the podcast. Congratulations. It’s really exciting to see what you’ve built.

Thank you so much.