The head investor at a $4 billion early-stage venture capital firm explains why he's all-in on cannabis and scooters - and reveals what he's most excited about for 2019
- We spoke to a principal at $4 billion DCM Ventures about two of its hottest investments right now: scooters and cannabis.
- Kyle Lui, head of seed investments for the California firm, says regulation will be the hot topic for both industries in 2019 - and could actually be a good thing.
- DCM led Lime's first institutional round, and says the return has been great so far. He'll be first in line if and when the scooter startup sets out to raise another round.
Kyle Lui has had a good year.
As the head of seed investments at DCM Ventures, which manages about $4 billion in assets, he's particularly excited about the early bets he made in cannabis companies and scooter startups - two areas that have been particularly hot this year among investors and consumers alike.
"We were actually the first Silicon Valley VC to invest in the cannabis space," Lui told Business Insider. DCM is the largest investor in Ease, a company that aims to be the "Amazon of cannabis" and ship cannabis-derived products straight to your door across the country.
When his firm made the investment in 2015, "we were really the only one on Sand Hill that was invested in the space," Lui said.
In addition to what Lui calls "next generation" investments in finance, consumer products and enterprise startups, the firm is also focused on what Lui calls "the future of urbanization." DCM led the first institutional funding round for the bike and scooter startup Lime back in March of 2017.
"The growth has been phenomenal," Lui said of Lime, which now operates in more than 120 cities across seven countries, and has raised $467 million in funding. "When we first invested in Lime, it was two guys, a PowerPoint, and a very compelling vision to solve last-mile transportation."
For now, the competition is likely to stick around, Lui predicts, but there are several key ways that scooter companies may begin to differentiate themselves from the competition.
"In this space, there's actually relatively low initial barriers to entry," he said of how cheap it is to buy scooters and build our a rental interface for customers to use. "In the absence of regulation - and the assumption that capital is free flowing - there could be lots of players."
While most scooter startups use the same hardware from third-party vendors like Segway and pricing structure, Lui predicts we'll soon see subscription plans for bikes or scooters much like recently announced by both Uber and Lyft. Importantly, both companies also own a bike share service.
The next generation of scooters will be "somewhat proprietary" to Lime, he said.
Lui also thinks Lime can be much more than just a bike and scooter brand - as evidenced by its recent rollout of vehicle rentals in Seattle, which it's calling "Lime Pods."
"I think you'll start to see companies really try to build a national brand," he said. "What Lime is doing with their store in Santa Monica, with more coming, is really focused on showing the local cities that they're there to stay and are there for the community."
But not all cities are thrilled to have scooters show up, especially when there's no warning. Palm Spring, California on Friday said it had informed Bird to cease and desist all operations "until the city has a chance to weigh in," on its presence. It's not the first time Bird has barged in without permission, either, previously angering municipal authorities in Beverly Hills and others across the country.
Regulations, in that regard, can only help.
"This is a long-term game with city-by-city regulations," Lui said. "We can see this entire sector be a massive business and still not be available everywhere in the U.S. We will see a lot of key regulations in major cities will be written this year. A lot of regulation is actually good for the industry because what major cities do will slowly get adopted into the smaller cities."
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