From First Investor in GreatCall to founding an AgeTech fund – an Interview with Dominic Endicott from 4Gen Ventures

In this episode of the podcast, I got to interview Dominic Endicott, a veteran AgeTech investor who was the first investor in GreatCall (acquired by BestBuy for $800M), through his fund Nauta Capital. Today, Dominic is a venture partner in Nauta, but is also a founding partner in 4Gen Ventures, a new AgeTech fund. A transcript of my conversation with Dominic, edited for length and clarity, follows.

Tell us a little bit about 4Gen ventures, what’s the size of the fund? Who are the other partners?

It is a fund focused on what we call AgeTech, which I see as the intersection of the longevity economy and digitization. To some extent it builds on what we saw at GreatCall, where we saw a very large company being built, premised on targeting segments of the population that weren’t well served and bringing digital solutions to that. My belief is that this is going to be an exploding and very large segment. 

I’ve teamed up with a group from Northstar Ventures in the UK, to start 4Gen Ventures. And our goal would be to raise the first fund somewhere in the range of £50M to a £100M, and to invest in somewhere between 10 and 20 companies, typically at the later part of seed or early part of Series A, but we’ll also be starting a few companies from scratch.

So you’re also going to have a venture studio as part of the fund?

Correct. And, we’ll also work with accelerators that may have companies that they’re developing, that fit our thesis, and partner with them.

What can you tell me about your involvement in GreatCall?

I was first introduced to the company in 2006 when it was very small. A former colleague of mine and friend, David Inns, I happened to think could be a very good CEO. I ended up introducing the CEO to the company. He joined GreatCall in 2006. And then we were the first investor in the company in 2007, and after that we attracted a number of other investors. 

So, we got in fairly very early. And we also were instrumental in bringing in the CEO, we did this under Nauta Capital and then have been involved for the last 10 years until the company was sold. We sold it in 2017 to a private equity shop and then one year later, they sold it to Best Buy. So, I was in involved from about 2007 to 2017.

Do you regret selling it before it was sold to Best Buy?

I think one of the interesting lessons is that, companies often take a while to really see the value accretion. And for many reasons it made a lot of sense for all of the investors, including us, to sell when we did. So, we were very happy with that sale, but I think it does illustrate that the value continues to grow.

I think today in 2019, I would assume GreatCall is worth even more than what Best Buy acquired it for. So, there are many companies that you have to be patient with, but at some point they really start to take off and gain a lot of value.

You mentioned that you are looking to invest in late seed stage companies. So, what are you looking for in a company? Like what do you need to see from the founders before you can write a check?

One of the things we’ve seen is that, typically from the moment of ideation to what we’d call late seed, it could be three or four years of pretty hard work to first develop the concept, then start to build some technology prototypes, then start to get some revenue. And that’s a really tough space. And there are a lot of specialists that are doing that kind of stuff, accelerators, angel investors and so on. 

And what we see is that, often companies get to a point where they may have, $30,000, $40,000, $50,000 a month in revenue, so maybe about a half million a year. And they start to really take off, but they are often still too early for the Series A funds, the proper A funds, and yet they need maybe $2million or $3 million to make the next jump. And we find it attractive because to some extent, a lot of the early risk is being taken out of that point.

Very few start-up companies ever get to that point, so in fact we were looking at fewer companies. But from their perspective, they often need somebody that’s going to give them a small amount of capital but not require them to build a unicorn. This gives them optionality to see what happens and decide later where they want to go, what kind of path they want to follow. 

So, I think it’s both a good place to invest money, but also a very good stage for entrepreneurs. And a big part of this is to give them optionality to say, if all you want to do is raise a couple million dollars and that’s enough, we’re fine with that. It may not be the perfect outcome for our fund, but we are performing a great role and we’ll probably get a nice multiple. And if this is the beginning of building a very, very large company, we will be extremely excited, but we prefer that you, the entrepreneur, are the one that makes that decision.

Sounds good. So, you basically want to take off the risk in investing in an early, early stage, but still come into the company at a relatively reasonable valuation.

At a reasonable valuation, but also a company that still has a lot of shaping to be done and give us an opportunity to participate in some of that shaping. So typically, it may be a company that has fewer than 10 employees. It’s really still getting going and so there is an opportunity to work with entrepreneurs to develop the strategy.

Would you describe yourself as a smart money investor?

Well, you know, it’s a tough space and luck is as much part of it and so is timing and there are many other factors. But I think specifically in the AgeTech space, one of the things that we have done, and we’ve spent a good part of the last couple of years doing, is to get smart in the sense of just reading up on everything, talking to a lot of people, trying to think about problems that need to be solved. 

And one of the things that I see as a macro shift in Venture Capital is that it’s going from a technology-out to approach, to one were you think about a problem and then develop ways to solve that problem, and then determine how you harness the different technologies that are available and which ones are the best technologies to solve that problem. And so, we have thought a lot about, what is longevity? Is it just about old people? The answer is “no”.  And, what is the intersection of longevity and digital? And how is that going to happen and what are ways to build interesting companies and to solve big problems?

I think that depth of thought and the fact that we’ve done quite a bit of writing, hopefully materializes in making our discussions with entrepreneurs valuable. And going back to the GreatCall discussion when I invested there, I didn’t do it specifically because it was about dealing with older people, but more because I thought they had a very good, simple solution. I thought a big part of the market, not just old people, but everybody wanted something simpler. I liked the fundamental economics of our customer base because they didn’t churn very much. And the cost of acquisition was very good, but I wasn’t deep into my understanding of the longevity sector. So, I’ve tried to spend a good part of the last couple of years reading up and thinking about it and becoming smarter.

That’s a good attitude to have when establishing a fund for sure. Do you intend to invest in companies from all over the world or are you focused on the US-UK market?

I think for now given that most of my background and experience has been in the US East Coast and the UK, but primarily the US East Coast those would be the two areas that I would be gravitating to. We think of 4Gen as a global proposition and we think that there’s really interesting stuff going on everywhere. Israel as you know, is a hotbed of activity in AgeTech as in every other area. So, we’d be very excited to partner with Israeli companies.

We see some interesting stuff happening in areas of Asia, like South Korea, Japan, Singapore. China will be a big market, continental Europe has some very interesting propositions. I think we want to stay fairly global in mindset, especially as we look at start-ups that may be working with large companies, we’ll definitely want to be pairing up with Fortune 1000 companies. But probably for the sake of staying focused, we want to stay initially in the band between London, Boston and New York.

Because that’s where all the partners are based?

Yes, right now the partners are between the UK and US. Northstar is in Newcastle in the Northern part of UK. I’m between London and Boston and we have other people we’re talking to that could be entrepreneurs in residence or eventually other investment professionals that are somewhere between London, Boston, New York, and Newcastle.

What made you make some of your past investments? 

Having already spoken about GreatCall, let me sort of pick up on some other investments. One of the things I’ve been doing quite a bit over the last five years is investing in B2B companies with what Nauta calls a capital efficient model. And the basic idea is that one of the hardest problems in Venture Capital is to solve the power -law paradox, which is that a very small percentage of companies drive the majority of the returns.

Most VC’s are not going to be lucky enough or good enough to be the ones making those investments. And therefore, if you don’t think you’re in a set of top 30 VC’s, which by definition most people are not, how can we play? And, the solution to this was to develop a capital-efficient strategy, which basically means that you could still have a very good fund, even if you didn’t happen to hit a unicorn, and the way to do that is to carefully manage the investment that goes in at early stage, in the first two or three years of our investment strategy and then wait and see, let in a sense the market or the entrepreneur tell you whether this is destined to be a very big company and then you go much heavy on capitalizing. Or if not you let it go in a different path where maybe a company that only raises in its history, 3 to 5 million could sell for $50 million. And the entrepreneurs make a lot of money, we get a nice return for our investors.

That’s been my investment strategy and I like that. I think it’s worked well. I’ve had a few exits where, we’ve been able to get very good returns even though they haven’t sold for huge amounts of money. If you look at the exit market, the median of the top quartile of Venture Capital returns is roughly like a $60 million exit. So if you’re doing quite well, that’s probably where you’re going to be, so tuning your model to that has been a big part of what I’d been doing and that I’d like to continue doing in my future investment career.

When you’re looking at the AgeTech market, which you have been doing for a decade plus, what are some of the gaps or opportunities that you see today?

This is a monster. So just by thinking about the numbers, roughly the longevity economy, which is the underlying sector that we’re investing into is about $20 trillion in GDP per year. If you compare that with say, financial services, which gave rise to Fintech, that’s about $11 trillion. So, it’s actually bigger than the underlying basis for Fintech. And yet Fintech has become very quickly a huge venture vertical. 

There’s a big opportunity for AgeTech to get very, very big. The other thing that’s interesting is that, today the biggest players in what I’d call AgeTech, which is at the intersection of the 50 plus economy and digitization, are actually very familiar companies. Amazon, Apple, even Facebook is getting pulled into it. Companies like Airbnb are rapidly becoming increasingly focused on the 50 plus and the 60 plus customer. Initially when you think about AgeTech it feels about, older people, senior care solutions and so on, it turns out it’s a highly vibrant, highly competitive space. It’s also where the bleeding edge technologies are being developed. Effectively, one of the problems with a smartphone or an app is that it’s not fully accessible for everybody. So older people often find that they can’t use it that well. 

If you look at things like artificial intelligence and voice and gesture detection and robots and wearables, partly what these are doing is making it easier for people that are older or that have problems accessing technology to get access to that. But they need more intelligence, more processing, right? So, I see that as a really interesting space.

I think one of the big gaps is that there’s a lot of ageism. People do not design for older people. I think there’s a lack of business models. I think very few companies have figured out how to make money. And one of the things we did well at GreatCall was to do that. But I think we also learned some of the mistakes that you could make by becoming too much viewed as an old person’s company. And every time we tried to go younger, it got harder for us. 

I see those as big gaps. And then the last one is the intersection of longevity and the real estate world. I see a massive opportunity to rethink how a home looks like, and that could be absorbing ultimately billions and billions of dollars of capital and building a lot of value. And that’s a huge gap that is not well treated today.

If I could add to that, a lot of the housing for older people is designed to be very segregated and just for a bunch of older and older people. I don’t think that model necessarily works. The thing we see as a really exciting opportunity, is actually recombining different generations into housing solutions as well as different incomes.

Rather than the segregated path that much of the world is on, this would mean recombining, and bringing people of different ages back together and I see that as a huge opportunity and that a lot of the sort of the traditional senior care is really not in that direction. So, I think there’s a way of thinking about it across all generations. And to some extent our name 4Gen is really a nod to the fact that you always have to design for all generations simultaneously.

There are some models all over the world of organizations trying to do that, but we haven’t seen anything like the WeWork of multi-generational housing. Maybe there’s an opportunity to try and build that.

Stay tuned. We’re developing something like that.

We will stay tuned and I will update once you reveal it! So, where do you see the space in 5 to 10 years?

I think by size the global spending will have grown from $20 trillion to about $30 trillion. And I think the AgeTech economy, which today I size roughly about $800 billion a year will probably be somewhere in the order of $2 trillion. So, it’d be a very large economy. As I mentioned earlier, I think that the dominant tech giants are going to be increasingly well positioned in AgeTech to some extent, you could say…

They already are.

They already are, but, but they’re quiet about it. For a number of reasons and I don’t think the mainstream Fortune 1000 companies are truly aware of how well positioned these companies are. If you think about the 50 plus customer, they’re ultimately the jewel in the crown of many traditional consumer companies. And so, you think about financial relationships, healthcare, and so on, the digital tech giants begin to encroach more deeply into those areas, and that’s going to eat away at core profits.

I think what you’re going to see in 5 to 10 years is that will become much more than it is today. I also think that creates a lot of opportunities for Venture Capital because I think traditional relationships are going to get broken up and older people are going to be looking for new providers. 

Part of this has to do with the longevity issue itself. In the past, you would work until you’re 60 and then you just knew you’d retire and that’s what you did. Now people are getting into their 50’s and realizing that they may have another 40 years, they probably have another career in them. So, they are going to have to reinvent themselves. That may require them to do radical things like downsizing their home.

They may have to go and take some new courses and learn something new. They may have to find new ways of doing work. Their world is going to be very different. Why would your traditional insurance company or a bank or healthcare provider necessarily serve those needs?

In fact, one of the things that I’ve seen is that traditional companies have been so focused on chasing the millennial dollar, that they’ve become unaware of the fact that their most profitable, most valuable, most loyal customers are actually under a process of massive change and that they’re not necessarily going to be serving them that well. That creates opportunities certainly for the digital tech giants, but also for new start-ups that really understand these needs and position themselves to serve them. So, I think it is going to be a very vibrant space.

It’s gonna be interesting. So, if I’m an entrepreneur and I’m starting a tech company that will serve the older population, what advice would you give me?

I’d say two or three areas. One is, whenever possible, try and think about solutions that will work for everybody, not just for older people. And you know, the classic example of this is the OXO brand. But even if you look at a lot of the features of the iPhone, even though they don’t feel like they’re for older people, they actually to some extent have been designed around the needs of older people, but they’re appealing to everybody, right? So, I think from a design perspective, think multi-generational and think radical.

It may be that the best strategy to eventually target older people is to first attract younger people. I’ll give you an example. If you think about an electric scooter, it feels like that’s not for a seventy year old and yet, as more and more young people adopt electric scooters and they start to change the rules on the ground and now you get better paths, better consensus around a shift away from cars and cities and towards new forms of electric vehicles, eventually you start to see electric scooters that are a bit more robust, more stable, some versions that actually older people can take.

And also freeing up some of that space. I mean older people tend to be the most hurt by drivers. If you look at the rate of who gets killed by cars.

They’re also hit by scooters, we’ve had some casualties here in Tel Aviv.

Okay, fair enough. So, it’s a little bit of a wild west but ultimately, you know, the combination of micro mobility, broadly defined electric scooters, electric bikes and it has to be managed, right? So, you have to manage the speed cause yeah, certainly something that’s going at 30 miles an hour, whatever it is, could actually cause serious injury. But cars are killing a million people a year around the world. I mean it’s the biggest problem in terms of mortality that we don’t talk about and it impacts older people. 

And so paradoxically, some of these developments could eventually benefit older people, even though initially you may target younger people. Another example of this is, if you want to make a place that’s truly multi-generational and exciting, for 50 plus empty-nesters, you may want to first attract younger people to move in and create a little bit of buzz and that will tend to attract older people. Whereas if the first people that move into an apartment block are older, that tends not to attract younger people. And, maybe that’s not the way it should be, but it probably is.

Thinking around how different generations coexist and, the different linkages between them, is important. If you take Airbnb, the first wave of users or guests were younger, it was mostly young people hosting other young people, today I think 60 plus are about 30% of Airbnb in terms of the hosts, but also 60 plus are growing fast in terms of guests. Older people are much more comfortable today than they were five years ago to do Airbnb. And so, it’s become a great service for them. So, I think the main point is to think multi-generational. The other piece is to think truly from the perspective of an older person.

In fact, one of the things that GreatCall does very well is its designers put themselves not just in the mindset but also in the body of an older person and wearing, for example, special suits to enable you to at least get closer to what is the experience of having arthritis, having problems walking and so on. And that I think that’s gonna be very hard given that the design world tends to be so focused on younger people. How do you take yourself into somebody that’s going to feel about things very differently than you do today?

That’s great advice and that was actually my last question. Is there anything else you would like to add?

I’d be happy to talk to entrepreneurs that are going down this path, I learn from every interaction as much as I can give ideas. So, my door is always open.

Dominic, thank you so much!

Thank you.