The Renaissance Man of Venture Capital

Josh Wolfe, co-founder of venture-capital firm Lux Capital, is not a person one might expect to pen a dystopian vision for 2022.

After all, the Covid-19 pandemic has put a torrent of cash in the wallets of investors and has pushed scientific breakthroughs to the forefront of their brains, leading to an incredible run at Lux, a relatively small player in the world of venture capital. In the past two years, its assets have doubled to $4 billion, with 25 of its portfolio companies creating almost $30 billion in value through mergers, acquisitions, or IPOs — including deals with 11 special-purpose acquisition companies.

But the extraordinary run has clearly brought out the dark side of the quirky financier. “Failure comes from a failure to imagine failure,” he wrote in a recent ten-page letter to investors, proceeding to envision what he might be saying a year from now: “2022 has been a punch in the face.”

He imagines a “black Wednesday” stock-exchange hack — “the result of a virtual challenge on TikTok ‘won’ by three 17-year-olds in the Philippines” — that cripples global capital markets for 72 hours and causes stocks to fall 40 percent. This bleak future includes an overreaction by the U.S. Cyber Command, leading to a choking of ports and global trade.

That’s not all. Rolling blackouts send Bitcoin down 50 percent, “with protests in the streets for coal to come back online so HODLers [can] access their digital accounts to get currency out for basic necessities,” he adds, using the misspelling of the word “holders” that has taken root among retail investors determined not to sell. Finally, he suggests a group of “Occupy Fed protesters comprising both crypto-maximalists and goldbugs” will storm the steps of the Federal Reserve Board chanting “End the Fed.”

Farfetched? Maybe — but perhaps not more so than his benign alternative scenario, in which “humankind is capable of cooperation, collaboration, and a chorus of optimism striking a chord of hope for a better future”; the pandemic ends; and the Fed is able to nip inflation in the bud.

Wolfe acknowledges that the truth is probably somewhere in between. But his willingness to entertain the dark side — and to do so in such a fanciful way — is what has made him one of the most iconoclastic VC founders out there. In fact, a number of the companies Lux has financed started out as mere concepts in Wolfe’s brain, leading him to go out and find the scientists who could turn his vision into reality. That could prove to be a competitive advantage in a more circumspect VC world, which until now has been dominated by too much money chasing too many investments.

Lux invests in what Wolfe calls “deep science” or “matter that matters” — in other words, companies you’ve probably never heard of. They tend to be at the far end of what’s possible and include everything from nuclear waste removal and space manufacturing to drone sailboats diving into hurricanes and a far-flung search for scarce genetic traits that could help develop promising new treatments for a variety of diseases.

Still, Lux’s recent successes have made the firm “more — not less — humble and cautious of what may go wrong,” he says.

Wolfe, of course, isn’t letting these worries stop him. That’s because he also believes in what he calls “the inevitable arrow of progress.” In other words, he says — quoting the Jeff Goldblum protagonist in the movie Jurassic Park — “life finds a way.”

My Institutional Investor profile of Josh Wolf continues here:

https://www.institutionalinvestor.com/article/b1w8vbl5c7byww/The-Renaissance-Man-of-Venture-Capital

The rebels of science mural at Lux Capital’s NYC office

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