Lux Capital’s Deena Shakir sees space and frontier tech going mainstream right now

Deena Shakir joined Lux Capital as a partner last year after spending seven years with Google, the last of them with GV, Google’s venture unit.

While Shakir seems to fit right in with the firm — known for its wealth of PhDs and moonshot investments — venture wasn’t something she was focused on as a career, as she told us during a lengthy interview last week. An Iraqi-American who grew up in Silicon Valley after her parents immigrated to the region, Shakir put herself through both Harvard, then Georgetown’s School of Foreign Service through a mix of merit scholarships and work and thought she might become a doctor or nab a PhD in anthropology.

Instead, an internship with the BBC saw her cover an historic White House speech, which led her to spend more than two years at the State Department, working for then Secretary Clinton. When she later headed home to be with her family, she was aware that she wanted to make an impact; she didn’t foresee making it through her investments, yet that’s what’s now happening.

If you don’t know Shakir, it’s worth listening to our conversation here at some point; in the meantime, here are some lightly edited excerpts that shine a light on where she is placing her bets and why.

TC: Lux is known for investing in rocket companies and satellites, though its website actually lists 21 different industries in its portfolio. Did the firm’s deals arise from these industries that interest the firm or because of teams that interest the firm and that happen to operate in these industries? 

DS: I actually find some of this industry categorization as problematic because if you look through the portfolio, you’ll see we love healthcare, meats, robotics, AI, food production, industrial IoT, and data meets FinTech. It really is intersectional in terms of how we approach industries; that’s the nature of how we think about investing. But in terms of how we think about where we want to make investments, we certainly have areas where historically we’ve spent a lot of time that have given us insights into where there are white spaces [such as having worked on] autonomous vehicles and having insights through that experience into the types of software platforms that could power the next generation of autonomy. So there’s definitely a lot of generational and evolutionary investing.

TC: Last week, Lux participated in the seed round a startup called Varda that is centered around manufacturing in space. What is it trying to make in space and why?

DS: There are few companies that I think would be perceived as more of a Lux fit than Varda. We pride ourselves on companies that turns science fiction into fact [including in the] space space. We were in Relativity Space; we’re in a number of satellite companies — Orbital Insight and Planet and several others.

But this is not only a space that we’re interested in, but also the founding team is one that we’ve had the chance to get to know over time and felt very strongly about. It is not an intuitive company, which is probably part of the reason why you might be asking about it, like: what exactly do they do, right? At the end of the day, it’s quite early, but they’re working on two things that we really love — manufacturing and space — abd there are some really interesting innovations that we’re just at the very beginning of understanding their application in space [including around] physical processes and the supply chain. And this team is at the forefront of taking those on.

TC: Is it going to be manufacturing carbon nanotubes in space to take to the ISS? What’s the need it’s addressing?

DK: At the end of the day, the need is around cost and supply chain. It’s still extremely expensive to launch anything into orbit — we’re talking tens of millions of dollars if not more. That’s the key problem that they want to solve. Manufacturing in space is the hypothesis here. And they have some fascinating and confidential, at this point, hypotheses as to how they will be able to do that.

TC: Is there enough later-stage funding for companies that will need a lot of capital? Lux is now managing $2.5 billion in assets, after raising $1 billion last year. But some space investors say there is not [enough to go around] partly because there haven’t yet been enough liquidity events.

DK: That’s interesting, because we got excited about what we now call frontier tech before that was really a category — certainly before it had any venture-return profile. Now, it’s becoming increasingly clear that frontier tech is no longer at the frontier. It’s becoming a key part of many large enterprises. And we’re seeing huge companies producing rockets en masse. We’re seeing private companies launch rockets into space and collaborate with NASA. We’re also seeing venture-funded companies that previously sounded like science fiction that are approaching just phenomenal valuations. So it does seem like we’re at a turning point here. If you take a look at the cap tables [of] these types of companies, you’ll see players that may not necessarily have taken those types of bets earlier on.

TC: One of your bets is Shiru, which is leveraging computational design to create enhanced proteins to help feed the world. What does it say about your interests and process?

DS: I spent a lot of time, especially at GV, with some of the alternative protein companies in our portfolio. And a big part of what I’ve done since my days in government, and certainly throughout my time at Google, has been talking to commercial partners, Fortune 500 companies, and understanding what their needs are. A big part of my role at GV was helping to plug in these large, behemoth companies with up-and-coming tech companies and help them to meet the innovation demands that they have, and that’s a large part of where my thesis came from.

I genuinely believe that there is a huge opportunity in food that enables these Fortune 500 food companies to meet the increasing demands from consumers, environmental demands, and cost demands [related to] animal-based ingredients. Shiru’s approach is an interesting one because they are taking a business model that has worked quite well in pharma . . .in enabling the production of novel IP. In this case, [it’s] novel plant-based proteins, using machine learning and computational biology and actually licensing it to these food companies so they can go on to produce their own versions of the Impossible Burger or Beyond Meat or simply replace a costly animal-based ingredient in one of their products.

TC: Another of your deals is AllStripes, which aggregates and analyzes medical records, then sells the de identified data to pharma companies to help them develop medicines. So the common thread is machine learning?

DS: Yes, so for me, it’s about machine learning AI that’s streamlining a really analog industry, whether it’s education, whether it’s finance, whether it’s food, and certainly healthcare, where I spend the majority of my time.

TC: What are some of the areas you’re digging into?

DK: Within healthcare, specifically, I am spending a lot of time looking at women’s health and within women’s health. I am looking a lot at fertility tech, and I’ve seen everything from robotic cryo storage to embryo selection to consumerized clinics for IVF. And it’s definitely an interesting market and one that’s growing, especially if you look more broadly at demographic trends in terms of women having children later in life, as well as what we’re seeing in terms of IVF rates and other countries as well.

I’m a mother of two young kids and had some pretty scary medical experiences myself with with both of their births, and that definitely inspired a look into that space as a patient, but also one where I think there’s really been underinvestment. I get really frustrated when I hear anyone talk about women’s health as niche, there is nothing niche about it. From the pure numbers perspective, [women] represents obviously half the population. But women also account for over 80% of dollars spent in healthcare and so companies that are focused on women in the healthcare space are also excellent wedges into other areas.

So outside of those areas in women’s health, I’m looking at menopause and at aging in place for anyone across the gender spectrum. Mental health is a huge one, too. I come from a family of physicians. My father is a psychiatrist. In fact, that’s the reason I grew up in the Bay Area. He came to Stanford in the ’70s for his residency in psychiatry and I’ve had a lifelong fascination with mental health. In fact, like many children of immigrants, for a hot minute I thought I was going to be a doctor myself and and even interned with VA’s psychiatry department right before going to college.

Part of why I get excited about it is because it is one of the fields in medicine that’s still so untouched by tech — certainly on the data side in terms of being slow to adopt EHRs. On the diagnostic and therapeutic side, there have been some really interesting non-pharmacological interventions for mental health, like TMS (transcranial magnetic stimulation), but it has been elusive to attack and, of course, it’s top of mind for many folks right now with the mental health burden on everyone at the pandemic. So we’re seeing a lot of really interesting novel approaches emerge, as well as tailwinds propelling some companies that have been around for a while in a space.

TC: Lux actually formed a $345 million health-care focused SPAC, or special purpose acquisition company, in October. Is that one of many to come and also, is the idea to perhaps back a company that Lux has funded earlier in time or an outfit it has no association with whatsoever?

DS: We believe that SPACs are really powerful for companies that have an exciting big story to tell and whose value isn’t necessarily best evaluated by looking in the rearview mirror. And given the changing nature of health care, particularly given everything the pandemic has done, it’s a particularly salient and interesting opportunity for health care.

We’ve have gotten some really interesting inbound from some of the top companies in the healthcare space. As you can imagine, it’s just a very, very interesting time for healthcare. We’re not looking at our own portfolio companies. But a number of our companies are going down that path, and we’re encouraging them to [pursue it].