Lyft’s former COO Jon McNeill has had a fairly storied career as an operator. A Northwestern University economics major who worked at Bain & Co. out of college, he went on to start and sell five companies before being introduced in 2015 to Elon Musk by Sheryl Sandberg and spending 2.5 years as Tesla’s president of global sales and service.
He was apparently so good at his job that Lyft’s investors asked him to join the car-share company to help it go public. There, he helped build up the company’s management team, got it through its public offering, then decamped last year roughly four months later.
At the time, the move left some shareholders scratching their heads. It also drove down the price of Lyft’s shares. Now, McNeill says he had too many ideas percolating to stay. He has so many, in fact, that he just cofounded a business that will launch other businesses.
It’s called Called DeltaV — an engineering term for a change in velocity — and the idea is to formulate startup ideas, get them up and running, then when when they’re at the Series B phase of life, seek outside funding while hanging on to roughly 80 percent of each company.
It’s a tall order, but McNeill thinks he has the team to do it.
Along with McNeill, DeltaV was founded by Karim Bousta, who spent eight years with GE before joining Symantec as a vice president, where McNeill lured him away to Tesla, then brought him to Lyft as its VP and head of operations. (Bousta more recently logged a quick five months as an operating partner with SoftBank Investment Advisors.)
DeltaV also counts as a cofounder Sami Shalabi, who spent nearly a dozen years as a top engineer at Google after it acquired a company he cofounded called Zingku; Michael Rossiter, a business operations exec who, like Bousta, worked with McNeill at both Tesla and Lyft; and Henry Vogel, who has cofounded a number of companies and was among the first partners at BCG Digital Ventures, the corporate investment firm. (Vogel was also McNeill’s roommate when the two were college freshmen.)
As important, McNeill also thinks DeltaV has the structure needed to pursue the founders’ collective vision of investing in fewer companies that they themselves start and grow. Specifically, the five have rounded up $40 million from a dozen investors — mostly family offices — for an evergreen fund. What that means: investors are committing to allow them to recycle capital, rather than aim to return it after a certain window of time. (Most traditional venture funds, for example, have a 10-year-long investment period.)
Evergreen funds have never gained much traction in the venture world, even while — or because — they alleviate expensive management fees. Still, there are precedents for what DeltaV is trying to do and, in fact, McNeil volunteers that they largely inspired what the team has built. After spending time with as many accelerators, incubators, and startup studios that time would allow, McNeil says he walked away the most impressed with what two firms have created, and those are Sutter Hill Ventures in the Bay Area and Flagship Pioneering in Cambridge, Mass.
Both operate evergreen funds, and both of which have enviable track records. Since its 2000 founding, Flagship Pioneering has formed and spun out 75 companies and 22 of them have gone public since 2013 alone, McNeill notes. Meanwhile, Sutter Hilll, a much older outfit that also sources ideas internally, then tests them against the marketplace with the help of roughly 40 in-house engineers, has founded 50 companies, at least 18 of which have gone public. (Another, the cloud-based data warehouse company Snowflake, may be Sutter Hill’s next big win. It was valued at $12.4 billion when it most recently raised a round in February, and its CEO, Frank Slootman, suggested then that the company’s next financing event would likely be an IPO.)
We don’t know how Flagship or Sutter Hill are structured — beyond that they manage evergreen funds — and it wasn’t McNeill’s place to tell us.
But for its part, DeltaV doesn’t collect fees. Instead, its investors own a stake of the company, alongside the founders. While evergreen funds also sometimes provide limited partners with the ability to exit or change their investment in the fund every four years or so, DeltaV doesn’t restrict them at all. Investors instead have board representation and will have a say in how much is recycled versus distributed, and can distribute or shares driven by their needs, without any set windows.
Whether that works out for everyone will take take years to know, of course. Our sense of things is that DeltaV itself aims to become a public company at some point.
In the meantime, it needs to get some companies cooking, and McNeill says there are already four in the works, including one that should be out of stealth mode by early summer and another that the firm hopes to introduce to the world this fall. One is a pricing and profit optimization service that aims to help e-commerce players better compete with Amazon, and the other is an automotive service business. McNeill wouldn’t share more than that right now, though he adds that a separate idea — one that revolved around the gig economy — has been shelved for now, given the coronavirus and its impact on contract workers, not to mention everyone else’s bottom line.
It begs the question of why McNeill thinks right now is a good time to start DeltaV. He laughed when we asked about this earlier today, explaining that his cofounders came together in January and hit the fundraising trail roughly five weeks ago, just as the United States began to come apart at the seams.
It forced the team to “change some of our priorities in terms of the companies” that Delta V eventually hopes to launch, which is many. (He says they expect to have two dozen engineers within the next year or two.)
McNeill also believes in the old adage that there’s no time to start a company like during a big, fat downturn. “We’re actually accelerating a bit in terms of making much more forward progress,” particularly where it concerns the firm’s profit-optimization startup, which he thinks the world needs more than ever.
Says McNeill. “We want to make this a very long-term, durable business. We want to create dozens of companies over time.”
DeltaV’s team is made up of operators who know a thing or two about repeatable processes, he adds. Now, they’ve just codified what they’ve been doing all along.
