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6 Questions with Ex-Khosla Partner Andrew Chung on his New $200m VC Fund

February 24, 2016

A former partner of the venture capital giant Khosla Ventures, Andrew Chung, today launched his own venture firm, 1955 Capital. The fund, which has raised $200 million at first close, will invest in startups in the energy, food and agriculture, education and health sectors.

The name of the firm is taken from the year that Albert Einstein, penicillin discoverer Alexander Fleming, and jazz legend Charlie Parker died, and the year Bill Gates, Steve Jobs, Vinod Khosla, and Google’s Eric Schmidt were born.

The fund’s mission is to invest in the US and European technologies that can be exported to developing countries — primarily China — to solve world challenges across the energy, environment, food, agriculture, health, and education sectors.

“In a lot of ways, this is a very natural extension to the five years I spent as a partner at Khosla. I was helping a lot of different entrepreneurs think through their global strategy, and went to China 13 times last year, which is probably more than any other investors in Silicon Valley,” Chung told AgFunderNews.

During those trips, Chung was negotiating venture deals and licensing agreements with Chinese companies on behalf of Khosla’s portfolio companies and gave the example of LanzaTech, the biofuel startup he helped land key pilot projects with Chinese steel manufacturers.

“Having that kind of experience at Khosla, where we had the largest portfolio in clean tech, gave me a really great position to get to know a lot of powerful companies in China and then fast forward to late last year and I got the entrepreneurial bug again. The fact that I was able to raise $200 million in a relatively short period of time is validation that this type of firm is needed,” said Chung.

The fund, which will also look to export US technology into other emerging markets like India, will invest between $10 million and $15 million in total in each company, according to Chung. It will likely invest at Series B or Series C round to ensure companies are ready to enter these markets, he added.

The fund will also look to export US technologies into other emerging markets such as India, where Chung also sees a need.

Some of the food and agtech companies that Chung has worked with on global expansion include Hampton Creek, the egg-less mayonnaise manufacturer, Impossible Foods, the meat-less burger maker, and BioConsortia, a biotech startup.

AgFunderNews caught up with Chung to find out more about the fund and its plans, particularly in food and agtech.

Andrew Chung
Andrew Chung

Considering your experience investing in food and agriculture technology at Khosla, and looking ahead to 1955 Capital, which subsectors of agtech are you most excited about?

Overall it’s become a more attractive space for a lot of venture capital and private equity firms, because on one hand, the market need has never been clearer. The large ag firms are going through some big changes, whether it’s pesticides not working out so well, crop productivity going down, or soil quality issues rearing their head. And lots of folks think that the large companies don’t necessarily have all the answers, but that they need more fundamental breakthroughs to improve the global situation. Then on the other hand, with advances in machine learning, computer vision, big data, drones, genomics and all that’s going with the emerging bio-ag companies, it’s a perfect storm of increasing market need and great tech innovation. It’s a great time for entrepreneurs to be looking at this space, and the investors that have generally been quiet in this space, are now looking more carefully at it.

Why have you decided to take this China commercialization focus?

There are a lot of areas in food and ag that are nice to have in the US, but could mean life or death in China or India. The populations of these Asian countries are growing along with the middle classes who can afford to buy good food, and they want safe and plentiful and varied food to choose from. Unfortunately, they’re saddled with terrible soil conditions, not enough arable land, insufficient controls over local farming practices, and tech could be the answer to that. We can help to bridge that gap, and that’s why the initial investor group came together, on both sides of the Pacific, to support bringing western innovators to greater challenges in the Far East.

What food and agriculture technologies are particularly needed in China?

It’s hard for me to come up with one clear sector where China wouldn’t need the technologies coming out of the US. Having said that, there are many different mechanical technologies that could help improve farming techniques and productivity in China. Blue River Technology, one of Khosla’s companies, is a perfect example of a relevant hardware. It’s combining machine learning, computer vision, and robotics to improve the way inputs are administered.

On the data side, there’s a revolution over here with farmers becoming increasingly sophisticated in managing data on their land, but that’s only just beginning in China, and I think that type of tech will be very much needed.

Biologics is another area; if a company can present different ways to improve the way crops are grown at a biological level using different genomic techniques that are not necessarily GMO, the Chinese could love that. BioConsortia, for example, is working on understanding the microbial effect of various soil conditions on crops and their impact on yield rates.

And then in alternative food production, we’re already seeing a lot of interest in China. I spoke to Hampton Creek’s CEO very early on about the importance of bringing the opportunity to China and that followed with a Series B round led by Hong Kong billionaire Li Ka-Shing’s VC firm and other Asian investors.

Are there any agtech startups that might not find a market in China?

I think there’s a market for most of it. What’s more important is whether a technology can differentiate itself enough to have a successful partnership in China. From a demand perspective, whatever you need here they probably need there, but if it’s a software on an iPad that might improve data collection by 5 percent, a Western team will be way outcompeted and will not be able to win versus a local team there. China’s entrepreneurs are actually very innovative in software development and distribution strategies, so you need a fundamental improvement breakthrough, with core intellectual property.

What challenges do you see for US agtech startups going to China?

The first thing is the language and cultural barrier, which is not trivial over there. A lot of executives don’t speak any English and there’s very little Chinese over here. Even in the subtleties of how you sit in a room, how you address the chairman, and the number of people who show up at a meeting can translate into profound implications in whether you get them to work with you or not.

Ensuring real tech differentiation as I mentioned before is a challenge. If you have a marginal approach, the chances are that they’re not far behind, or they might even be ahead. Either way, they will be proud of their homegrown technologies and will be protective against any competition to where they think they can be in a year or two. 

You’ve got to be willing to be creative about how to work with the Chinese. You can’t assume traditional business practices will work. It’s simple things like networking. Over here, I can connect with someone on LinkedIn and can meet them and get a deal done relatively quickly. The Chinese work in very long cycles and have to build trust up to a level where they want to work with you. They want to feel like you’re part of the family, and that’s very different here

What about the regulatory landscape for agtech in China; could that be a challenge for startups?

It depends on which aspect, but when you have a situation where government and society are really behind that type of social movement, it means the regulations can be loosened just to get it done. It’s different in the West, where we have politicians driving policy; it’s not about survival for us whether we get a tax on that solar panel or not, or a farm subsidy. It might effect jobs and economics, but it doesn’t affect the survival of the state of the country. Lots of entrepreneurs might find it hard getting through regulatory approvals without the right partner. Lots of people complain about Chinese regulations, but often it means they don’t have the right partner and advice. There’s so much money locked up in solving these big challenges, and politics backing it, that there are definitely some advantages to being involved in these sectors.

Are you hiring?

I am already interviewing dozens of people and suspect that after today’s announcement there will be more people reaching out. I am hoping to recruit a really high-quality team, which can focus on executing the strategy. That’s the benefit of having already raised funds I don’t have to hire just for the sake of fundraising as lots of firms do. Now I’ve got a first close done; I can pick those I want to work with for a long time and that have the right qualifications to execute.

Will you have any staff based in China?

Initially, we’ll be based out of California with lots of flying to Asia. The first priority is to build a local team to execute on the strategy here, and we could have people based there later. It’s a big risk to run a team in another country that could end up being distant and independent and not of the same company culture. You want to be methodical and thoughtful about opening offices elsewhere, so I’ll be taking my time. If someone dropped in that I’ve known for a decade and they’re based in China, then I might do it sooner, but there’s no need to rush into it.

*Fun fact about Chung; he was a finalist in Hong Kong Idol and turned down record contracts with music labels and artists in Hong Kong before moving into the world of venture capital.

What are your views on the agtech landscape in China? Get in touch on [email protected].

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