Cantos Ventures closes $70M Fund V with decade-long thesis on hard tech and defense startups

appreciate it. Thank you guys so much. Talk to you soon. Yes, sir. Gentlemen, thank you guys. Much love, everybody.

Thank you. Yes, let me tell you about public.com investing for those who take it seriously. Stocks, options, bonds, crypto, treasuries, and more with great customer service. And we are backto back with two guests in the TVPN Ultra Dome.

The men 11. We we got shirts. I like this embroidery new logo as of this morning.

I like it. Very nice. Well, walk me through the logo design. Well, first introduce yourself.

Tristan just gave our pitch by the way.

You guys You guys must be co-investors.

Yeahelcome coin investors.

Welcome to the show. I'm sure we got a

Castellian shirt.

We got a cast on a tear near us as well.

I like the nearest orange. I didn't realize that they were they were verticalizing orange. It's a good color. Anyway, sorry. Introduction, names, titles, everything quickly and then we'll go into it.

Ian Roundtree, founder and general partner at Kantos.

Yeah. joined by Grant, a partner in Kanto House.

Fantastic. When did you guys get started?

Investing.

10 years ago.

10 years.

Almost exactly overnight success. Uh and the latest, the newest fund. Take us through it.

New fund we just announced is 70 million. Uh last fund was 50. We kept it.

It's even louder.

It feels even better than I expected it to.

You feel it in your bones. feel it in your bones. Um, first of all, did you ever did you ever consider uh Roundtree Capital because you got Sequoia, you got the Green Oaks, like there's already a long lineage of iconic firms that are sort of tree related or themed.

Not for a second. No.

Um, no.

Where where's where's the name come from? Where's the logo come from? I want to know about the name.

So, so I named the term Kantos as because the the the um chapters of an epic poem are Kantos.

Okay. Yeah. And

I always I always thought we're drawn to startups, these missions that are greater than ourselves.

Um

because we want to be we want to be part of some grander story. And I think of founders as the modern day hero and and the startup as the epic. And I had these delusions of associated grandeur that I might partner with people who like

Yeah.

change the world in a way that's remembered in in story and song. Yeah.

What was uh what was the strategy early on? Like were you trying to lead rounds? Were you going very early stage with whatever would work strategy?

The strategy was

write checks into startups.

Okay. Just get allocation in good companies. Got it. Okay.

Yeah. I wish I called fund one fund zero because it really was just like lessons. Cobbled together four million

writing tiny checks. Just trying to learn.

4 million. Wow. What a start. That's amazing. Yeah,

I feel like the Yeah, the lessons there probably uh there's some people that should be would probably be better off if they started with 4 million because it really is a constraint, but that breeds ingenuity, I'm sure.

Well, I I also was like, you know, I I was early at SoFi. Crazy to go to the US men's opener at Sofi Stadium, by the way. Surreal cuz I I joined them and they were like 20 people.

Um and just started

and that deal I think it's like 20 million a year for 20 years or 400 million to just get the name of the race. I think they bought it.

What percent of our market cap was up?

I think. Aren't they on? Aren't they on a rip? You probably sold a long time ago.

I did, unfortunately.

Abraham, it's only it's only $23 billion stock.

Yeah. But but but I mean that's a that's a perk of being in the private market.

I sold secondary to Silver Lake, I think, in the series D. Okay. Maybe. But that helped me to get off the ground. So, uh, but but so fund zero, fund one, uh, you know, whatever the right tool for the job is, whatever the right deal is, you'll get in as long as it's a good company. Uh, how rigid are you today? Do you want to be specific uh specific uh first money in seed series A? Do you want to take a certain ownership perspective percentage? Like what guard rails do you have, if any? Well, we feel like the um constraints breed creativity in a way. You want to be focused enough that you signal to the market what you do. And we kept the fund relatively small because we want to be able to look a founder in the eye when we write a $1.5 million check and me and Grant and me, our principal, can look a founder in the eye and say, "Your company at this stage is a meaningful percentage of my network

is important to you."

And if you get too big, you you you can't really say that.

Yeah. When I think about the names like Nero, Castellian, there's a bunch of others like I'm that the the 70 million like feels like Yeah. very intentional about like we want to actually just keep doing what we're doing.

Totally. That that said,

a lot of the best investments look like exceptions and you need to know when to bend.

Sure.

And Grant led Castellian seed round when he was at Entreason and the first thing he said when he joined Kantos was,

"Hey, I know they're about to raise a big series A but Yeah, but let's do it. Yeah. Yeah,

it makes sense. The logo, the new logo. What's the etmology?

Um, so this is a a quill.

Yeah.

Um, and and we also we also like that it

it implies a vector. We talk a lot about tempo, speed, velocity really matter for a startup

because time compounds just like money.

Sure.

And um I like that it looks like a diving paragan falcon or something.

Yeah,

dude. I was just watching videos about a par falcon.

This is what you do in your free time.

My fouryear-old fastest creature fastest creature on earth and they are incredibly incredibly violent. Like they just go after other birds like at literally they're like a missile. Sounds like some of the founders.

Yeah. Yeah. Yeah. Paragrin falcons.

Uh state of defense tech. We were talking about this. Are we are we past peak defense tech? Um in terms of not in terms of the size of the companies but in terms of the the rate of formation it feels like

post anderal awareness there was a boom there were a lot of founders that came into the category from other areas experience from SpaceX etc. But is it picking up still or

you guys have the blessing of like you're in Neuros you're in Castellian you're not like oh we need a we need our drone

we need to find more. Yeah. And a lot of founders, a lot of wouldbe founders, if they're if they're at like Boeing and they're bored and they want to do something more exciting that like they could go work near us, you know, like like there are so many options now if you want to go have an impact at the early stage broadly that you might not need to start a company. But what are you seeing on the ground? Well, one of the ways we look at these like the cinematic universe here broadly is

go down like the top, you know, hundred companies by market cap and as soon as you start to not recognize the names, it turns out that those industries are super big and massive. Yep.

Defense was one of the ones that now there's enough people like Anderrol Palunteer that have paved the way

and people are realizing that the venture scale outcomes. But one of the amazing things about Kantos when I was at Andre was just observing how Ian and the team were able to find these categories that people still didn't feel comfortable about. I mean Tristan's talking about a right like 10 years ago like people were like oh let's do a tech and everyone's like it's a horrible place. You're never going to make money. Yeah.

And then, you know, we turn around a few years later and Kantos is leading the seed around for

Shink.

And it's like fish killing robots. That's really weird. Yeah. Yeah.

Jealous.

I think I think it was the preede. Weren't you guys in the preede or what are you?

It was a small seed.

Small seat.

Yeah.

Yeah. There's some crazy egg tech things. We had the founder of the laser weer on.

Oh, yeah. No, I Yeah. There there there's a bunch of cool things.

Have you heard about this? No. It's a It's a tractor, but everyone's worried about pesticides. Very obvious solution is just fire a laser at the exact weed. So, you just burn it. No one has a problem with like having a burnt weed next to your tomato. So, it's fully pesticide pesticide free and it's just something that's you obviously like you can back of the envelope how that's built very quickly, but it's enabled by computer vision and you know small actuators that can adjust where the laser is going. And there's a whole bunch of like somewhat commodity technologies that are just put together in this very interesting way creates a great product.

Yeah. But it's how you package it. Exactly. That's one of the lessons like when I got into deep tech is like

in technology is not inherently valuable in and of itself. It's valuable in so far as it solves a problem creates value in the world. Yeah.

And if you're better at packaging things that are off the shelf

in a novel way and contextualize that in a business that makes money,

that's a lot more interesting than like,

oh, I did my PhD in this crazy thing and it sounds really cool. How do I sell this? By the way,

um,

where do you see yourself uh punching the hardest in terms of value ad? like you're you're making investments in a way that uh you are an important voice around the table to the founders that that's clear but are they coming to you with go to market consult consultation or hiring or strategy or marketing like where do you feel like you're if a founder calls you about a particular problem you're excited to talk about it as opposed to saying like oh this is kind of new I can help as much as I can but

yeah I mean there's all there's all the like when I'm fundraising next we're sort of the in-house bank or whatever relationships and we have we have very high hit rate there something like you know over 90% success rate and getting your next round investors too and that's an advantage of of being a $70 million fund is that there's no signal to like yeah I'm actually not doing the $und00 million round it's like yeah

well the other I think the other thing that's different about Kantos and maybe we talk about like you know joining from injuries and going here like

I think one of the things was really clear about Ian and the team was they're so concentrated. Yeah.

And so, yes, we don't have the follow- on signaling dynamic here,

but we also when we go to another firm and say, "We think this company's amazing," they're going to take it that much more seriously. And also, because we're concentrated, we can just devote more time

to our relationships here. So, we have a lot more context on any company in our portfolio probably than the rest of the entire cap table. Yeah.

And, you know, there are times when founders don't want us to be involved because they're busy and they're crushing. Sure. But most often early on you need a lot of help. And that's where I think like we've just they've been doing this for 10 years. I've been doing a good amount of time too. Like we have enough pattern matching. And I think the other thing too is for these categories like I'm fired up that everyone's coming in to the cinematic universe here.

But also not a lot of people I think have like as strong opinions for how to build a company or what types of founders you need you need to have. Um, and I think with the lessons here, we can package a lot of that and have this cross-pollination between the portfolio companies that's pretty distinguished. Uh, and helps out a lot.

But a lot of times the founder, they they have the intuition. They know what they need to do deep down. They kind of just need to hear from someone they trust that like

Yep.

Like when we when we invested in Shink, right, they were still licensing robots to fish farms.

That's right.

And they kind of dabbled in in selling fish, having their own brand. Um but they weren't capitalized well enough to go do that. And so we stepped in we were like hey why aren't you doing that thing anymore and safe was like honestly because

everyone's saying no. Yeah.

We were like that's absolutely what we should do. And he it was like we had given water to a man in the desert like

he wanted to do it. He knew he needed to do it. The other investors were being more koi about it. And we were like no let's go direct man. Like use your own robots. Don't sell them. Just sell better fish with those

super vertically integrated. It's great. Uh where's the office? Do you have an office here? Uh San Franc I'm in San Francisco in LA. If

you could open an office anywhere in the world, where would it be?

What? Uh

no. Uh post LA and then maybe there's a boom in Austin. Where's the next next boom

for entrepreneurial talent, hard tech, defense tech? Where's interesting?

Texas has been good to us. We're investors in Syen and Venus Aerospace in Houston. Resurgent Industries in Austin more recently. Um there's there's a couple CEOs that that live there as well in the portfolio.

We're going to see a bunch of these states though start to be really compelling. Like

LA is so strong in many ways because Tesla and SpaceX

Austin's starting to get that with a bunch of other companies there.

What we're also seeing though is the so many companies were started in the Gundo. They kind of graduate to Torrance or Hawthorne, but then event like Castellian for example, they're not going to be able to test their missiles in LA. Obviously that'd be terrifying. And so a lot of these companies graduate radiant same thing for nuclear.

How many times you meet a Gundo founder and you're like don't test your product.

Don't do it here. You can do it somewhere nearby. We're we're not too we're not far enough away for me to feel comfortable.

You start the Gundo or you start somewhere else. You move to the Gundo. Series A. You move to Torrance and then you start building a factory. In Texas, Tennessee,

Tennessee, New Mexico. I think you'll probably see uh we've seen a number of companies out of Seattle because a lot of the Starling team is there.

Oh, interesting.

And like within SpaceX, that's a crack team.

Yeah, that's right.

So, you'll you'll see people that probably want to stay.

Yeah, I know Avalanche, the fusion company's up there and there's been a few others that we've talked about

the lumber manufacturer.

What is What is great look from an R&D cycle or an execution standpoint? because like I it really just feels like there's such a like on TVPN we're 90% of the time we're having founders 95% of the time we're having founders on that are like actually like shipping and making like really meaningful progress and then there's like the 5% of hard tech founders some of them raise a lot of money and we're sort of curious but are not really shipping and that's like kind of like that's people

people a lot of people have been burned by companies like that over the years where it's like cool idea, deep tech, and then they just don't they keep raising money but don't ever make anything, don't ever get like real contact with the market. Um maybe like quantum uh related companies.

Well, there there's different types there's different classes of companies like we have some that like we we put out a deck last year on what we're calling like the state of venture capital. Yeah, there we go. Delayed delayed. But it's it's like 286 slides and there's a chunk in there that talks about like how deep is the deep tech company.

Sure.

And you know if you're doing quantum or like fusion that's going to take a long time. The the time to revenue is long. Capex whatever.

I think the companies that we like are higher up in that score where the the time to iteration is really fast. You want to build break and iterate. And I think what a lot of people got wrong in prior hardware eras is they just assumed yes like you only get a few shots on goal. You have to be really deliberate. Sniper shot it out. You can't spray and prey your way to greatness here. Um, but that doesn't mean that you can still not like test quickly.

If you look at Nuros, if you look at Shink, Castellion, all of them are like constantly in the fielding their systems, seeing what's working, what isn't, and they know early on that those are not going to be the best ways. But the most expensive part in building in hardware by far are the people. It's not the hardware. And you hear Elon talk about this all the time, like

the cost of Star Shield and Starship

and all these systems there in the grand scheme isn't a lot. It's the hours of of labor that go into it. And so the sooner that you test out and see what breaks and refine it, I think the better off. I think we're seeing a bunch more founders that have appreciated this that have learned it at SpaceX or in other places now and they're coming out and doing a lot more. But, you know, I think there's like the other challenge here is a lot of people that are coming in and are excited to make a bet in defense or energy or what have you.

They they I think are missing that way of evaluating companies and their ability to test quickly.

You you have to get on the learning curve as quickly as soon as possible. You can't you can't sit in a lab. You need you need to feel technology. And we find that getting back to tempo, vector, speed, like we find that if we're diligencing a company in like a week, I used to think, oh, that's not a lot of time. Of course, they won't have made progress.

But we've started,

we've backed so many people now that like a a week to them is like a month to everybody else. And they'll just blow your mind with how quickly they move.

And if you don't, again, that compounds. If you don't get that feeling in a week, you're not going to get it in a month, a quarter, a year, all of a sudden a decade,

you know, is a lot shorter than it used to be.

Are you feeling the pull of the AI vortex? Uh it feels like we're seeing like

like No, not at all.

I didn't notice it.

No, it feels like it feels like uh we've seen a number of hard tech companies sort of pivot or expand into AI related projects. Boom. Supersonic like Castellian. I can imagine that somebody's going to try and figure out how to bolt that thing to the ground. It's going to wind up being like security for AI data centers or something. Um, obviously they have fantastic businesses, but like are there examples or like how do you negotiate or what do you what do you say to a founder who's saying like, "Yeah, we have a we have a six out of 10 market right now. It's going to be a couple years, but I got an interesting call from a Neocloud and they think that they could put our thing to work a little bit. We were having this conversation recently. We've made we've made a general robotics investment that that's still in stealth. We're really excited about it.

Um, and it will be general, but again, we want to get on the learning curve. Ideally, we want to commercialize as quickly as possible. And we're thinking about where do you start?

And we're just throwing spaghetti at the wall. And one of the ideas was like, should we start a car wash,

you know, have these like robot arms wash your car for you?

I love it.

And then we're like,

but they're sneaky good businesses.

No, no, good business. Also extremely fragmented. And with self-driving cars, the need data centers could use some of of the two, it seems like a pretty obvious answer. I think there will be a lot of technologies that can ride that wave. When I when I first invested in Radiant, we were we were talking about military applications. Totally. And the behind the meter application for data centers is not even really on the radar.

Yeah. Yeah. I interviewed Doug a couple years ago and I was like so like you're going to get calls and he's like h we really like the idea of going to Mars and stuff and I'm like you'll get there.

Yeah.

But you're going to power some AI stuff first.

We got hand all the energy companies got handed a huge gift. We had no growth in in and grid.

Yeah. Nothing.

30 years. Now all

and there's these like niche applications like oil and gas exploration stranded energy and stuff and now it's just like Yeah. there's obvious obvious demand and it's going to be so much easier for these folks and then all that technology will get commoditized and it'll go everywhere and it'll be great and you'll still get

what's what's the state of IP coming out of like universities today is that is that a pipeline of

gradu we have a no PhD policy at Kantos I learned this the hard way

like I mean there's there are some PhDs that are like like the Solian guys like John Gmark at Astronis who are very business-minded Yeah.

Um, but if you find someone who's like trying to commercialize their PhD, their doctoral thesis,

that you've got this hammer, you're looking for nails that like hardly ever works. You're also trained exactly the wrong way.

Sure.

When you're defending your your thesis,

like it's all caveats and what could go wrong and you get dinged if you, you know, overpromise. And

it's like the old school way of thinking about hardware. Like it's just it's like east coast mindset of we're going to sit in an ivory tower, think about all the ways that this could make a lot of impact as opposed to just hey we're just going to like shink is just going to put the robot on fishing boat and see what breaks and turns out a lot.

Yeah, let's do it.

Yeah, you'll find like you know the space

put the gun on the truck.

Where are you doing this by the way? No, this is John's like bid on a Allen control system where he's like, "Oh, the gun on the truck company,

but they failed to consider that there's a YC company that's just gone on the ground."

Oh, yeah. Nine mothers.

Yeah. Nine mothers just gone on the ground.

We have multiple use cases.

Gun on everything, I suppose. Anyway, congratulations on the fund. Congratulations on a decade you guys. Yeah. Decade in

decades to go.

That's the idea. You know, we if you look at our website, kantos.vc BC, we have these plaques and sort of our version of Trajan's column because we aspire to back people whose companies will be engraved in stone and metal in a thousand years. And if that's not you,

don't email us.

I love it. I love it. Know who your know who your your your customers are.

Hit the gong for us. I want you to take him for a spin.

Oh yeah. Take this.

This guy's big. Whack that thing

back in. Interesting. Thank you for watching TVPN. We'll be back tomorrow at 11:00 a.m. Pacific.

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