Steve Juvertson: “We're looking for companies that are unlike anything we've seen before”

Venture capitalist with Estonian roots Steve Juvertson, founder of the US fund Future Ventures, gave an interview to BalticVC in which he spoke about his vision of the future of AI and other modern technologies. He also explained how he chooses companies to invest in and gave some advice on how Baltic startups can find their place in the international market.

We sent Steve a list of questions before the interview. Juvertson sent an email answering the question, “How is the Baltic venture capital market doing compared to the rest of the world?” It was not a standard answer. Steve used a conversational AI chatbot assistant Grok, available on the X platform, to generate some conclusions in a humorous way. One of the final ideas was "If the venture capital world were a game of chess the Baltics would be playing 4D chess while the rest of the world is still figuring out how to move the pawns".

Thank you for your funny letter about Grok.

AI sometimes does a wonderful job playing with the English language. I've noticed that it can make up new phrases that have never been used before online to describe things. I'm actually going to make a post later today about a new satellite technology. And it did a lovely job of describing this new satellite as a space peacock because it comes in all these different colors.

Ages ago, no one would believe this would be possible, that a computer could just have a dialogue with you in plain English, in a way that feels just like a normal person talking to you. That it would be considered passing the Turing test. People would say that's a sign of intelligence. Now we know it makes mistakes. It's not obviously as intelligent as humans, but it really does a good job in summarizing a text, or distilling its essential concepts into a paragraph or two, creatively describing things. 

But there are arguments about applying AI in creative jobs, there are complaints from artists, script writers, etc that AI can steal their work. And someone who uses AI in his job may just have copied materials from another one. Can it create more problems in the future?

Well, depending on your point of view, there's definitely a lot of issues. If your job is to make logos or stock images, this is very threatening because it definitely does a good job at making logos.

The other area is call centers. I think it's the largest or second largest employment category in the US, people working in customer support, call centers, answering questions, responding to things. Those jobs are all going to go away. 

Globally, just under 20% of all jobs are driving ones. Driving cars, driving trucks, driving trains, buses. All those jobs are going to go away in probably the next 20 years, if not sooner, but certainly within 20 years, it'll be clear. But in the long run, to your question, humans won't have to work, they won't have to have a job in the traditional sense of needing to labor for a large portion of their life to earn enough to buy food, shelter, clothing, and other things they might want to do.  

The question could be, where will the jobs be, just in general, if machines can do everything better than a human, and it's not necessarily a bad future. I mean, there are people like Peter Diamandis, who wrote a book called Abundance, who looks forward to this future. He says, look, if we're not, if we have no human slaves, first of all, because humans are not good at anything, there's an interesting, that's an interesting correlate. Finally, we get rid of human slavery because the robots are better slaves. We would live in a period of abundance.

It's kind of an interesting future to imagine. It's hard to imagine how you transition from where we are to that, by the way. So I think the biggest worry for humanity is how do we get to there from here in a peaceful manner, where politicians don't think that far ahead, where policies around making sure people can provide for the basic needs of food, shelter, and clothing, the bottom of Maslow's hierarchy of needs. How do you assure that in a way that doesn't lead to public unrest and huge instability in the society? So I don't know the answer to how we get there from here. I do imagine, though, that you could imagine a very wonderful future where it's better for everyone, which has been the long arc of history as well, the long arc of history and technology, as it gets better for everyone, including the poorest people on earth, having a better life than they did just 100, 200 years ago.

You said that people who are working in call centers, drivers, their jobs will disappear in the future. But they have to have other professions, so they have to get a better education than. And it's better if they get into the technology sector?

Exactly. I believe every industry becomes an information business over time, eventually. If you ask the leader of any sector, be it construction, agriculture, finance, real estate, pick any sector of the economy and you say, how do you compete? What makes you number one? How do you beat your competitors? The answer will be something to do with the way they process information. That's already true in a way that wasn't so obvious a few years ago in automotive and aerospace spheres. So, for example, in the next ten years, it'll be obvious that you would never purchase a car or a truck for any reason other than its autonomous software stack. That'll be the single purchase criteria. It won't matter if it has good batteries or if the electric motor is a little more powerful. You won't trust your life to a bad software stack. That'll be so much more important than everything else because it will do all the driving. And so therefore, it follows that's the single most important feature. Everything else is a commodity. Similarly, in rockets, for example, with SpaceX, anyone can build a rocket. There's no patents. SpaceX has no patents on the rockets. It's very straightforward on how you build these things physically, but the software layer that allows it to have all the control algorithms so they can come back and land on land or on a boat is really hard. They've spent a billion dollars on developing that capability. 

I want to ask about the strategy of the Future Ventures fund. You said that you don't usually look for startups, opposite - they are searching you, for example, writing emails. How can startups attract your attention, and do you have any criteria of evaluating startups? Is it important for you where startups are located? 

So I look at all the emails I receive and I don't send them to an analyst or anyone else to look for me. I do that every day. My partner (co-founder of Future Ventures), Mariana Senko, does the same. And we have a new analyst, Nico, who's increasingly receiving opportunities as well. We usually receive emails, maybe through Telegram sometimes, or Signal. And we try to look at all of them now. 

We're looking for companies that are unlike anything we've seen before, which means that there's a whole large category of things I can say no to right away. So anything that's consumer facing, that they want to sell something directly to random consumers, we just don't do that. Or enterprise software, software as SaaS businesses, cloud computing, for example. Those are probably the largest sectors of venture investment. And so there are plenty of entrepreneurs who assume we would do that, but we don't invest in that.

You asked about geography. We are much more open over the last few years to geography than we were before. So we would look at companies from all over we've invested in Estonia, Germany, Netherlands, Norway. And it would have been a lot harder before Zoom to have those pitch meetings to meet and move quickly and invest in companies in overseas geographies. Now, that being said, there's still some resistance to investing in any place. Like if there was middle of nowhere Texas or middle of nowhere Africa, a startup, my hesitancy would not be, oh, how I can easily have a meeting, but how are they going to build a great team? So totally different question is, is there technology talent in human capital in whatever region someone's pitching from? So there's still some areas of the world, of course, like Silicon Valley, where, where it's much easier to start a business than others. And so that's still the case. But, it was tough on entrepreneurs ten years ago. Like, if you were in the remote geography, getting that meeting usually meant you had to go to Silicon Valley, you had to fly for every time you want to do meetings. And that's just, it's a big pain in the ass, frankly, just to get meetings, okay, process wise. So there are a lot of filters we use to try to figure out what we want to invest in. One of the ones that I want to emphasize though, is that we try to invest in companies that are unlike anything we've seen before but are adjacent to where we have been. 

How do you select from, for example, you see 100 startups that work in agriculture, do you search for them on the Internet?

No, we do not get enough information that way. Most websites of young companies which just started, do not say everything about what they are doing. They don't want to announce to the world prior to their first product and we're trying to invest before they even have their first product. It isn't helpful for us to try to find those companies because they're very hard to find. We get a bunch of referrals from our growing portfolio. And that's why I always think of it as almost like expanding frontiers, where we invest in things that are new but close to where we've been.

I've invested in a lot of things that have been re-engineered over 20 years now, reengineering algae or bacteria or yeast to make food or chemicals. We invested in a variety of new approaches. How do you manufacture meat or meat substitutes using fungi, etc. And all those companies and all those executives, they see interesting things and they recommend us to people they meet. So the word of mouth spreads through our history of experience with other companies in related sectors. And I personally have been investing in this deep tech which has so few venture capitalists going after it. It's crazy, but I've been doing it for over 20 years. There's tons of people who think of us. Certainly imagine a space company. How would they not think of us given that we were earliest investors in SpaceX and Planet Labs and now Xona space as well. And those are highly visible early winners in those categories. 

We see tons of business proposals in space, but we actually say no more times than in another sector, because we see so many things, hundreds of companies doing the same thing. So we can easily say no to all of them. It doesn't mean there shouldn't be a variety of companies in the same category, but for instance, there's over 200 companies that design small rockets dedicated to launching small satellites. It doesn't mean that none will succeed. Maybe one or two will. But our fund is not going to try to pick the winner out of a field of 200. For a variety of reasons, and it's probably not innovative enough. If 200 different companies had the same idea, what's the chance that it's such an incredible breakthrough that one of them is going to become an incredible company? It just becomes less likely.

Talking about this investment in Woola, Estonian startup producer of wool packaging. Do you remember how you found this startup? And in general, are you in touch with some investors from the Baltics or not?

Yes, to the last question. Yes, I'm in contact. Regarding Estonian startup, I think one investor has forwarded Woola to us. So…. the introduction came from this guy Ryan, a US based person here in San Francisco, who worked at the time for a startup called Space VR, like virtual reality. And he'd been trying for months to get me excited about the idea that we'd somehow put on VR goggles and look at the earth from a satellite. But we did not pursue that. He's the guy who sent it to us. He made an introduction. He knew that my parents were from Estonia, and so he knew enough about me to know that I might be interested in this. And he introduced me to Anna-Liisa in September 2021. There was no email or introduction from any Estonian investor. And then we met with Anna-Liisa. She's just an amazing entrepreneur. And so there's something hard to describe. You can't write it as a formula. Say, here's what every entrepreneur should do to be an amazing entrepreneur.

I know of course Jaan Tallinn, Metaplanet’s investor and we also invested quite a bit in the most recent rounds. And I spoke with them about that in person. One of the few meetings was not in a Zoom. And to your question, more generally, I'm most in touch with Sten Tamkivi, who I've known before. Before he even joined Skype. He's such an incredible networker that we managed to have a beer or two in Tallinn while he was at Helmes before joining Skype. I stayed with Stan at his farmhouse in Sarma. And as you know, he made an incredible career…

And Jaan, I see him physically less often. He's more of a virtual. He's like in the cloud. He's an AI guy. Just joking. When I see him, he's usually dancing... He does the robot, which is his famous dance move. Very metaphorical as well.

One question is a little bit tricky. Like, there is some boom, a boom in Europe and in the Baltics. There is a big interest to develop and invest in defense startups. So what do you think from a moral point of view? How is it to get involved in military startups? Is it worth it?

That's a really good question. When we started Future Ventures, we had a short list of things in which we would not invest in. In general, it was military, and things that prey on human frailties. What we meant by that was, like, if there was some highly addicting online network or gambling site, we would never invest in that. Additionally, we've generally tried to avoid investing in companies that have the government as their primary customer, because in many cases, the government is not representative of the market at large. Military would be a classic example. If you make a bomb, who else are you going to sell it to besides the military. And so, yes, there are dual use technologies, as we call them, things that have commercial and military use, and those we might be open to more than others. But if it was just going to be military, it's like, it's just a classic business judgment case that says if there's only one customer, then that's not a great business to try to be in.

Now, after Putin invaded Ukraine and just the horror of Russia as an occupying nation, Estonia has felt it. Any nation that's felt it and knows how horrible it is. It has made my partner and I revisit that question, and we are contemplating, but we have not yet invested anything. So remember when I said every business becomes an information business? So too, does the military. It should be obvious to all now. It was obvious to investors in the sector and to the US government. But now the entire world knows that tanks are useless, traditional weapons are useless, in the face of an AI drone army, everything that moves is going to be an autonomous vehicle. Everything that moves, every car, train, tank, projectile, will be fully autonomous. And the more intelligent they are, the better they are. And so it shifts the battlefield dynamic to that of AI and edge AI, as we call it. So we do have companies who started out in our portfolio focusing on industrial automation, security cameras, even consumer, you know, Alexa voice interfaces. And they now have found most of their businesses in drones, making drones more capable. Drones are not just flying, flying drones, driving drones, boats, submarine drones, everything, you know, a human is going to be removed from every weapon system, and every weapon system will be fully autonomous. I think the answer will come out of this is we'll only want to invest in things that, again, have a dual use, that have, yes, maybe they help a drone fly better, but, gosh, wouldn't that also be great for all the non military drones? Again, if everything's an autonomous system, every airplane will be fully autonomous, every helicopter will be fully autonomous. So it doesn't have to just be military. That seems like the easy way to migrate, that way to say, okay, we'll speak with companies that are starting with the government or the military as their customer, but have a dream of doing a lot more, just like right now. That's what the world needs. We've also seen a number of proposals from Ukraine, of course, specifically in this area, but we have not seriously pursued those just because of it. We're new to it. 

What do you think about future of electric cars? Can they in nearest future displace traditional gasoline cars? Because there are a lot of problems. Energy is expensive because the more cars we produce, the more energy we need. There is some statistics that maybe in Europe the sales are falling slightly, but can they displace in the nearest future or it can be only 20 years?

It'll probably take 20 years to really displace all new sales. The reason is that people don't replace their cars that often, it's between eleven years and 20 years on average, depending on the region of the world. And so there'll be a long time when existing gas cars are going to need gas stations. And people that make these gas cars will increasingly have to lower prices to sell them. So it'll take some time for the business dynamics to work out. It is also inevitable that, of course, they'll all be electric, all of them, and so they can and should be. So let me address some of the things you mentioned. Even if you wanted, for some weird reason to burn gasoline, it would be better to do so to generate electricity at a central plant called cogeneration (combined heat and power) plant, transmit the electricity to an electric car and then drive the electric cars around, than to do what we do today, which is put that gasoline into a bunch of little engines in the cars and trucks that lose 80% of all that energy as waste heat. So you can think of a gas burning car as a heat generating machine that happens to make a little bit 20% of that energy moves the car and actually only 1% moves the passenger because of the weight of everything and the overhead of the vehicle being so heavy. It's insanely inefficient. It's one of the most inefficient things on planet earth. It blows my mind that we still do this at all, in a sense that it's just, I don't know.

The cost of electricity? Absolutely. A third or so of all electricity would go towards vehicles. That's a lot more that we're currently producing and consuming. Estonia should just build a nuclear power plant and reduce this dependency on Russia and have more energy and independence. The fear of nuclear energy is insane. It will look back as the dumbest thing humanity did, certainly the dumbest thing in energy policy, was to be so scared of nuclear for the last 50 years when we could have gone continually down on the price of electricity. We have no investments, by the way, in nuclear fission, traditional nuclear. So I'm just saying this because it's true. In the long run, there'll be plenty of energy. Batteries are easily recyclable. In fact, the lithium ion cells in electric cars have positive recycling value. In other words, it makes good economic sense to recycle them. And there's startups that are ramping up. There just aren't enough of them, frankly, to make those businesses thriving yet. But in the long run, it makes business sense to recycle the lithium ion batteries. You have better chemistry in development, dry electrodes, things that won't use nickel metal and copper, quite the same abundance. So batteries are just getting better. 

To continue to make these batteries, we need the metals. And the metals at some point will finish.

No. There's plenty of metals, for example, the deep sea, that hasn't been exploited. The largest metal deposits, specifically nickel, magnesium and cobalt and copper of any place on earth. And all we have to do is go pick them up. And of course, there's environmental discussions as to how best to do that. So there's plenty of that. And then once that's in circulation, vehicles, as vehicles come towards the end of life, the recycling later kicks in, so you don't have to keep mining more and more. It's not like gasoline that you burn it and it's gone. Batteries get recycled at the end of their life. You don't necessarily even have to recycle them into raw materials. This makes more business sense in the near term to say, imagine a Tesla car at the end of its battery life, which might mean it's 80% or 70% as good as it used to be and the owner wants to swap it out for a new one. That battery is fantastic for stationary storage, meaning that we can put a pile of them for a utility grid to smooth out demand curves around intermittent sources of supply, like solar or wind. For renewable energy, you need batteries. And those car batteries that, let's say 80% as good as they used to be are perfectly fine because it doesn't matter how heavy they are or how much space they take, up by 20%. They can even be 50% of what they used to be. And it would still make sense to just have stacks of them as backup power. So there's a lot of uses. It's easier to recycle that stuff than the exhaust pipes of cars, which just poison the atmosphere.

How should Baltic startups scale out of the region? Should they grow inside of the country, and they don't need to go to the US. Does it depend on the area where they work? 

Some businesses are inherently global. So, think of Skype. Great example, obviously, a famous example for Estonia. There's no reason to have a physical footprint in any country that you're serving because it's a global service. And importantly, it's viral. The term viral marketing I “made up” many years ago. The use of the product propagates the product, right. You don't have to do marketing in other countries, you don't have to be there.

The worst would be if you're building physical things. So if you have to build and ship them, and especially if they're heavy. So big, heavy physical things, you want to be geographically dispersed. So think of cars. You would like, if you're a big car company, to have a plant in each continent, one in China, one in America, one in Europe. But then the question is, how about in between little physical things that you could mail around? Not as good, right. You still might need a presence. And I think consumer hardware is the worst investment category there is for venture capital of all, anything that people buy. That's just the worst. Thousands of companies have gone bankrupt trying to make cameras or just anything. 

It's mostly software and information products that. The tricky category is complex software that you sell to businesses. Do you need a sales team in different parts of the world? Maybe, as you scale. Again with Zoom, you can do sales calls from anywhere a little more easily. You can at least start without having a presence. Then over time, maybe some of those look like Israeli startups where you have the tech team back in the home country, and then you have a sales office or what have you in America for security software or whatever it might be. It's easier to communicate over Zoom, it's easier to deploy software over cloud services. Everything about the Internet has become more mature, such that you don't have to physically be near your customer as you used to in the past. And the only thing to watch out for is there are going to be thousands of startups coming out of Africa in the next few years as they get connected to broadband too. 

If the Estonian startups decide to make batteries, should they go, for example, to the Asian market?

I wouldn't make batteries. Frankly, I think it's a horrible business. There are thousands of failed startups in batteries specifically. One of the reasons is it's very hard to do accelerated lifetime testing. In other words, you have to do a lot of rapid charge discharge cycles to tell if your battery degrades over time. That still takes months. And none of the large manufacturers will let an innovation be integrated into their process without sort of stealing the idea if you send all the products to them. My advice for Estonia is information technology. Software. Those are the best businesses. Build some nuclear power plants and, yeah, don't be distracted by hydrogen or building batteries.