Techworld spoke to former research scientist Uzma Choudry earlier this year about her unusual journey into the venture capital industry, which started out at Octopus Ventures in 2018, where she now works as an early stage-VC investor focusing on deep tech startups. Below is a lightly edited transcript of our discussion from the video interview.
Hannah Williams, online editor at Techworld: I'd like you to just tell me a bit about your career to date, and how you ended up in venture capital?
Uzma Choudry, early stage VC investor at Octopus Ventures: Thanks Hannah, lovely to meet you too, and thank you for giving me the opportunity to come and talk about diversity and inclusion and a bit more about my role.
I am a through and through scientist. So when I was at a very young age, my parents got me [the book] 'How The Body Works' and several different volumes of the encyclopaedia. I think that kick started the making of a scientist. I've always been really curious about the way the human body works, or various different objects work, so I've spent a lot of my time watching channels like Discovery and National Geography just being a naturally curious person.
I think it was no surprise to my parents that I ended up deciding to do a PhD. My PhD was in biophysics and synthetic biology. I really enjoyed taking learning to the next level, and not just learning and absorbing knowledge, but actually contributing to knowledge – and I think what I realised during my PhD was that I got really excited by the commercial side of science and how all of this breakthrough research is being done at universities to be translated, and how that changes the face of our future.
During my PhD, I spent quite a bit of time with the university's tech transfer office in assessing commercial opportunities and seeing whether these could be patented, whether these could be commercialised or spun out, whether we could find co-development partners for these opportunities, but then also understanding the broader market landscape of some of the tests being developed at the university. Some of the challenges we might have, both technical and commercial challenges, taking them from the lab bench to the market. That's when I realised that I actually love being exposed to the diverse range of research being conducted.
I felt that my PhD was very specialised in a very niche area and the fellowship from the tech transfer office was quite refreshing because I was assessing things from the School of Medicine to the School of Aerospace and Mechanical Engineering.
Just the breadth of technologies that I covered was super exciting. Not only that, but I used to see these technologies at the point where it gets interesting: so at the point where you think actually, this could have a commercial application, this can be used in the market for X, Y, Z. That's what I found exciting, and I think at that point, when I heard from Octopus that they were looking for someone to join the team, I just felt like it was a natural fit, because I'd be assessing a lot of deep tech opportunities, I'd been exposed to cutting edge breakthrough research, but at that point where it gets super interesting and exciting as then it's probably five to seven years for commercialisation, rather than still 10 to 20 years of R&D before it can get to the commercialisation stage.
I think nothing excited me more than speaking to some of the most brilliant, brilliant minds and some of the best entrepreneurs in the UK when I started in VC. Just being able to pick up the phone to some of the best people doing research in quantum, or some of the best people working on CRISPR in the UK, but also abroad and understanding how they see the future and how they can get there. That's super exciting.
So I think for me, VC was a natural step and also almost like a dream job because I'm also someone who quite enjoys a multi-dimensional sort of job. Whereas, as a scientist, I felt I spent a lot of time doing experiments, collecting data and analysing data, and that's your focus. Whereas as a VC I'm doing quite a lot of technical due diligence and understanding the technology and the science underneath the actual technology, but then looking at the commercials, looking at it from the commercial angle, looking at the market.
That multi-dimensional aspect is something that also appeals to me, and through the lifecycle of a VC, you can start off with doing more sourcing and executing of deals. You'll be attending lots of events, you'll be looking at a lot of due diligence and putting investments through your process. Then you'll start sitting on boards and you learn more about how these companies progress through their lifetime. Eventually, you'll be driving an exit. So it's a continuous learning curve, and quite a steep learning curve. I've always enjoyed learning, and that part of VC appeals to me.
HW: Since you entered the venture capital space, how would you say the industry's changed?
UC: I've only been in VC for a couple of years, and I came into VC completely with a non-commercial background. Totally green, as an academic. So I guess the world of finance, and the world of VC was totally new to me at that point. However, I think there are certain trends that I have noticed, I think that when I joined, I felt there was a good level of diversity at the junior level, or at my level, I could see that sort of diversity across the peer group.
I think that what I'm also starting to see – and this obviously does not reflect the entire VC industry but some firms – we're starting to see more diversity seeping in at the top. We know the VCs that have a more balanced sort of partnership and I think I've seen an increasing trend towards investment into deep tech.
Although there has been investment in those areas, they haven't had the sort of investment that I've seen in the past few years. This comes from actually seeing the number of funds who've been able to raise money, and deep tech focused funds that are able to go out and raise money quite easily. So yeah, that's the general trend that I've seen in the couple of years that I've been in the VC industry.
HW: On the deep tech point, you seem quite passionate about that space, is it something that you always wanted to go into? And how have you seen that going in the diversity and inclusion space?
UC: As a scientist involved in frontier tech, deep tech research I have always been on that side of things when it comes to my background, but maybe not from a financial side.
I got involved in VC a couple of years ago, and when I was offered this position at Octopus, for me, it was a bit astounding because of the VCs investments. Are they looking for someone with an economics or financial background? You know, someone who might have done consulting or investment banking, but that was probably because I didn't know much about the world of VC. And so when I did discuss this with the team, they were looking for someone who had a more academic background, who could understand the sort of technologies that we would want to invest in.
As a deep tech investor, we spend a lot of our time with incubators and universities, and a lot of the investments we make will be out of university spin-outs, so would have come out of the university at some point – so it was my ability to be able to really understand those technologies and spend quite a bit of time and diligence in them.
For example, if you look at quantum computing, for us to make an investment in quantum computing, we need to be able to understand the different types of quantum computing hardware if we go down the hardware road. Having an academic or a scientific background helps you understand, or it puts you in a better state to be able to review those technologies or those investment opportunities.
From a diversity perspective, I guess deep tech is a lot of hard science engineering and you're probably aware that this is also another area which is male dominated. A lot of engineers and hard scientists are men, so when I have done diligence or when I do meet those companies, it's typically a lot of male professors or male founding teams.
I guess the increased focus of STEM at universities and pushing people from minority backgrounds into science has started to change this. We certainly see a different balance in some areas like hard sciences, physics and engineering, you'll see more guys or more men in that space whereas, with biological and life sciences you'll see more women or more of a balance in that space.
HW: For yourself, and Octopus Ventures, how important is diversity and inclusion when you do get to speaking to these kind of companies?
UC: Absolutely, I think it's important on both fronts, and at Octopus, we take that very, very seriously. We have a diversity and inclusion team and our hiring processes are specially thought out to ensure that we encourage more diversity in groups and avoid group-think within the team.
I mean, a third of all of our investments in the past two years have been in female-led teams. Currently we have 10 portfolio companies that are all female-led founders and that is a large number. I think part of that comes from the fact that, actually we are seeing a lot more women move into startups and entrepreneurship and starting their own ventures. But we're also seeing more women on the other side of the table. So a large number of women are starting to enter VC, so I think that's contributing to that.
In terms of how we then further promote that diversity is at the investment stage, we bring this topic up, diversity and inclusion, and we try to find out what the founding team and what the entrepreneurs are doing currently to foster diversity and inclusion within their team. We give them further guidance and assistance on ensuring that all of their processes around hiring and inclusion go further to promote and foster that.
So it is one of the questions that we do cover as part of our investment process. But also, the first board meeting is something that we bring up and we like to discuss and understand the team's vision and how they can grow towards that, to ensure that we get a diverse team in place. I think the partners have always mentioned that they want to avoid group-think. They don't look at culture fit but culture add, and so our processes include blind questions, so candidates would provide no other information. They're just identified by a number and would answer a number of questions. There is then a process where we put our CV through a gender neutralisation machine. So to ensure that we haven't got wording that would appeal to males only or people of a certain group, we ensure that when we start off with the applications process that there's at least a 50/50 split for gender in that sense.
But also I guess now that we're seeing certain initiatives where, for example, Diversity VC provided internships to people from a diverse range of backgrounds to help increase the diversity in the VC world [called Future VC], we're ensuring that when we do post these jobs, we do actively reach out to those interns, and are encouraging them to apply. And so these are some of the broader thoughts we have around diversity within our team.
We've also spent quite a bit of time thinking about unconscious bias and it's been a repeated theme for our offsites where we're trying to better our investment making decisions and our investment decision. It's understanding that people have inherent unconscious biases. How can we recognise them? And how can we work around these? Even that step of actually first going and trying to pick those sort of blind spots is something that we spend quite a bit of time around. We have our own diversity and inclusion champions within the team. We regularly, I think even on our website, you'll see that we have reported our diversity stats for the team.
HW: What more do you think can be done to really narrow down on diversity and inclusion at the startup level?
UC: I think from that perspective, the line of thought that I have taken is that, okay, a lot of deep tech founding teams that we invest in are teams that come out of spin-outs and when you look at engineering and hard sciences, it's typically very male dominated, and universities have got their own initiatives around STEM and really encouraging women, and I guess other people from different minorities, to go into those areas, to go into hard sciences, to go into engineering.
I think that's where it starts – actually filtering more diversity at that level. Then obviously, that means that when these academics are fostering diversity within the team, and their teams are then spinning out startups from the research that they're doing, we'll see that diversity seep up into that level. But then also, I guess it doesn't really have to be at the technical level. When you do get running with the startup and hire around yourself, you can bring in that diversity around all the other capacities.
Rather than just going for founders with a very technical background, or because they're hard scientists, it's about seeing how you can fill that diversity across these different roles and as I said to your point earlier, I think diversity is important on both fronts of how the VC achieves their outcomes.
I think there's been stats carried out by Harvard Business School, that show that ethnically, more diverse teams produce success rates and IPOs. I think, educationally diverse partnerships produce 11.5 percent higher rates of success with acquisitions and IPOs. So it is really important from the outcome level as well as the more moral grounds.
HW: So what sort of changes do you hope to see going forward in the future, and how is Octopus Ventures going to help towards that change?
UC: I think probably focus more at seeing that diversity at the decision making level and at the partnership level. Most VCs that you'll see, most of them will have male partnerships. So actually seeing more diversity, not only in the form of gender, but also in the form of educational background, ethnicity, sexual orientation in all these different forms, seeing diversity at the partnership level, because I feel that when you do look at the partnerships across most VCs, it's quite staggeringly sort of male, white and you know, a certain demographic.
I mean saying that, in our ventures team, although we're an all-male partnership, we have decision-making power further down. The partners alone don't make investment decisions, so the decisions are made on a consensus basis so I think when it comes to the decision making team, there is that diversity within our team for people that are making investment decisions, that's probably something that really comes to or strikes me as an improvement that I'd like to see over the next five to six years is actually seeing more diversity at the at the top level, but also, seeing more diversity at the investment decision making level.
Even now, I think the number of women to men in VC is something like 30 to 70 [percent]. Whereas when you look at the London workforce, it's more like 45 percent women. So really bringing that up as well, at that level and ethnic minority so we're seeing more people from different ethnic backgrounds in VC because I think that's where I was really shocked to learn that that's such a disparity. I think gender is one that stands out, I was really shocked at the ethnic minority within VCs which is even lower.
HW: I think it is definitely something that when people do speak of diversity and inclusion, gender does tend to be the first thing that comes to mind.
UC: Yeah, and I guess it's because VC is all about networks and they bring with them their networks. That's how you can get more investments into startups and ventures that are led by people from various different ethnic backgrounds. So I think that is one way where you can really, really easily address this issue, is having that ethnic diversity within your team because that opens up a whole network of people who can come up and ask for investment and VC is a lot about your thesis and what excites you.
What you find in common, and I guess being a scientist, I get excited by science, so I spend a lot of time with my scientists. Equally, I think having that diversity is really important in the team because you can then ensure that you're not missing out any sort of outliers or any other areas where you can find extremely, extremely great businesses.
I think within academia, historically and now, Oxford, Cambridge, Imperial are known to be for deep tech universities, churning out some of the best companies, but we're seeing that actually spread out as well with the likes of Unit DX in Bristol, having had an exit to Novo Nordisk of £800 million. That's not an Oxbridge university.
[We're] seeing GraphCore out of Oxbridge, but some of the other quantum companies such as PsiQ, which has recently raised a large amount in the US. Furthermore, in Scotland and Manchester, seeing that innovation coming from all various different pockets of the UK rather than just Oxford, Cambridge and Imperial, which have historically been brilliant at churning out some of the best companies that we've seen.
So that also really excites me seeing that critical intellectual markets actually spread out and seeing entrepreneurship being spread across various other parts of the UK as well UK universities. And so I'm really excited to see how all of these other tech transfer offices and innovation offices across other various parts of the UK can really get up to speed on that and start churning in a similar way to what Oxford, Cambridge or Imperial are churning in terms of innovation and in terms of great technologies.