Investing on the Cutting Edge: Innovation that Pushes Boundaries
We asked the STVP team to name the ETL episodes that have stuck with them. Stanford lecturer Ravi Belani had several picks (stay tuned), starting with Josh Wolfe, cofounder of Lux Capital, and his window into risk-taking in investing. The episode offers hard-hitting entrepreneurship advice—highlighting how Lux’s investors see the value of thinking outside the box—and insights into tackling challenges differently from others.
We contacted Josh for updates since our June 2023 conversation. Here’s his update, and be sure to listen to his newly re-released episode.
On the leading edge in entrepreneurship:
The cutting edge has shifted from an era of abundant capital chasing growth-at-any-price to one demanding scientific and technological superiority. We’re seeing this most clearly across three key themes we call inner space (breakthrough biology and tech), outer space (manufacturing, aerospace, and defense), and latent space (AI models and computational infrastructure). The real cutting edge today isn’t just about having novel tech – it’s about having defensible, hard-to-replicate scientific breakthroughs that create genuine competitive advantages.
On how Lux’s investing has evolved:
While our fundamental philosophy remains unchanged – believing before others understand – our tactical approach has adapted to the higher cost-of-capital environment. We’re doubling down on three specific strategies: 1) de novo company creation with high ownership at inception through our internal Lux Labs program, 2) special situations where we can acquire strong tech at attractive prices, and 3) strategic consolidation where our well-capitalized companies can strengthen their positions. The market distortions have created opportunities for those with dry powder and discipline, allowing us to execute these strategies effectively.
On navigating entrepreneurship today:
“Remember that the best companies are often built in the toughest times.”
– Josh Wolfe
First, husband your cash wisely. The days of endless free capital are over. Second, focus on building genuine scientific and technical competitive advantages – mere software is no longer enough. Finally, remember that the best companies are often built in the toughest times. We’re seeing incredible opportunities at the intersection of disciplines – biology and computation, aerospace and autonomy, defense and AI. Those founders who succeed today share one defining trait: they see those directional arrows of progress that point to inevitability, even as others see impossibility, and they’re founding ventures with the aim to improve the human condition through breakthrough science and tech. Whether it’s new drug discovery platforms, advanced defense capabilities, or computational tools that democratize access to cutting-edge research – they’re focused on matter that matters.
