by Giovanni Rodriguez
Originally published in Forbes. Reprinted with permission from the author.
On a bright weekday morning last Spring, I found myself stranded outside a small, non-descript building on Howard Street in San Francisco, desperately trying to figure out how to get in. I got the address right, according to Google Maps. But there was no sign on the building, and no obvious way to enter. Three thoughts/feelings occurred to me. One, an easier portal into the space would have been welcome. Second, the experience felt like a test. Third — and perhaps the most persistent sentiment, because I feel it to this day — it was actually an appropriate experience because of the people inside that building.
Perhaps it was a test. The people inside that building were Stewart Alsop and Gilman Louie, founders of the fast emerging VC firm Alsop Louie Partners (one of their first big scores: Twitch, which sold for almost $1 billion in 2014; more about that at the end of the article). It’s a special firm. I knew Stewart from a startup he invested in more than 10 years ago, and recently met up with him to check out one of his most recent investments, a startup called Hover which enables contractors to use a smartphone to create an accurate 3D model of a home and which they can later use to spec, price, and do work on the home. After the meeting, Stewart and I chatted briefly. I was impressed, I said. I had been following, from near and from afar, some of the more interesting developments in 3D and AR, and this seemed like a potential B2B market disruption.
“You should come meet Gilman,” said Stewart. “He’s beginning to see the whole world in terms of 3D, where everything might be interconnected online and offline.” When I finally caught up with Gilman, I began to understand the different kinds of border crossings — from one world to another — that one would have to navigate to make a new world in 3D a reality. One border crossing: from the ‘inside’ to the ‘outside’, which I was reminded of on Howard Street before I finally figured out how to get inside the building.
Military Meets Games
Based on what little I knew about Gilman, I thought there might be some other test: whether I was smart enough to break into the building.
Many know of Gilman from his tour of duty as the founder and former CEO of In-Q-Tel, a strategic venture fund serving the CIA and other intelligence agencies. The gig created an air of mystery about the man which may have obscured his own reality. Before he entered the boardroom to meet me at Alsop-Louie — I sat alone waiting for about 10 minutes, wondering if I was being watched — Stewart hurried in with an iPad to show me what was keeping his partner occupied in another room. On the screen was a photo of Gilman holding what looked like a large plastic gnome; Gilman was grinning ear to ear. “It’s a 3D print of a game character captured in live play. Jordanian company we’re investing in.” Gilman is a game developer — one of the world’s most accomplished — and has been most of his working life. And it’s a world in which he is as comfortable as the military, the government, and, yes, the intelligence community.
A fourth-generation Chinese-American, Gilman grew up in San Francisco in a military family. His dad worked on B-29s (the propeller-driven WW II bombers), and his older brother worked in the Navy on aircraft carriers. Gilman grew up embracing the concept “service to your country.” But on the geekier side — where he was wont to go — he was fascinated by airplanes and computers. It was an interesting time to be enamored with these two very different kinds of hardware. It was the early age of the PC, and developers were experimenting with providing airborne-inspired experiences.
“When I saw the very first simulator for the Apple II, I fell in love with 3D,” said Gilman, who had marveled how much was possible back then on 8-bit machines. But he had another thought. “This is the closest experience I will ever have to flying a military jet. At least I thought so.” He got his opportunity to fly the real thing later.
He began hacking young — through college — and was soon hanging out at computer shows showing off what he and his frat brothers could do. At a Bay Area computer fair in the early 80s — where the Apple II was introduced — Gilman and friends set up a 6×6 booth and caught the attention of a talent reconnaissance team from Microsoft. “They thought we were Japanese. We didn’t dissuade them.”
The chance meeting led to the first in a string of opportunities to develop simulators on an ever-evolving succession of more and more powerful PCs, including the Apple Mac. Among many projects on a long run that ultimately led to the founding of In-Q-Tel, he helped lead the development of Falcon F-16 flight simulator, licensed Tetris — the world’s then most popular computer game — from developers in the Soviet Union, and founded and sold a public company that was later acquired by Hasbro Corporation. By that point, Gilman was pretty big in the gaming world, experimenting with a number of different kinds of game modalities, but his early roots with 3D simulators help set his professional and moral compass.
“If you want to simulate life, you have to do it in 3D,” he said, noting that the difficulty if not just the gravity of some of the potential applications for 3D demanded a certain sobriety to one’s approach. He shared with me how he was contacted by military professionals soon after his first successes to see what they can learn from 3D games. Over the years the military community and the gaming community have learned from one another, a kind of virtuous circle, the way Gilman sees it. And at the heart of the circle is 3D.
“After all, the world began in 3D, and it is in 3D.” To navigate between the “real world” and “virtual world” with any depth requires that you do it along three dimensions.
‘Real’ Meets ‘Virtual’
At my first meeting with Gilman, he took a moment to sketch Alsop-Louie’s investment strategy on the back of the napkin. I lost the napkin, so I asked him to recreate it here. It’s an illustration of how different kinds of companies create value over time. “Most companies will chase and compete on the red line,” said Gilman, referring to the place of the chart denoting where an early return is likely to come. “While it seems the least risky, in many cases, it’s actually the riskiest since competition will be fierce and the spoils have to be divided among multiple companies. On the other hand, said Gilman,“the green line is driven by a unique insight into an opportunity or business model that no one sees and by the time the market sees it, the visionary has such a big lead that it is hard to displace, Facebook is a good example of this.” My favorite part of the graph: the green shaded delta between the green line and the red line. “That’s where all the money is,” said Gilman.
I thought about the green delta when reviewing of some of the opportunities that Gilman and Stewart are now pursuing in the world of 3D. In scouting those opportunities, the two make an interesting team. Gilman is the “geek,” technologically advanced enough to know if the IP has potential to land in the green delta. Stewart is the “gadfly,” loaded with a lot of EQ as well as an excellent BS detector to know if the team is up to snuff. In practice, there’s a little bit of geek and gadfly in each of them, and they actually take turns prodding and grooming executives in the companies they serve.
There are several ways they engage. As investors, the job is to help the team develop for the long term. Founders that hew to the red line have a hard time keeping Alsop-Louie’s attention. It took several tries over several months for the Jordanian 3D firm I mentioned at the top of this article — dubbed Mixed Dimensions — before Gilman would commit. “He kept asking for more.” (They persisted, and the persistence began way early before there was even a ghost of a chance. After the first meeting, they forgot to ask Gilman for an email address but figured out the alias.) Alsop-Louie and the team are exploring ways to position Mixed Dimensions in the evolving value chains that are emerging between the “real” and “virtual.”
Another Alsop-Louie company, Hover — also mentioned earlier — is looking at the ecosystem of contractors, homeowners, and insurance claims adjusters who can leverage the technology in different ways (for claims adjusters: “reduce human error, create more accurate estimates, and desk adjust more claims with up-to-date photos and detailed property measurements.”) The ecosystem approach reminded me of Houzz, a successful company in a similar market — home furnishings and improvement — which was built on a “trifecta” of values popularized by Mary Meeker in her 2014 Internet Trends report: content, commerce, and community. But what creates the Hover opportunity is 3D.
Another way they engage: by joining the board in a non-investor role. Gilman does this from time to time, where the venture may require a complex of players that ordinarily do not come together (another kind of cross-border opportunity). Gilman serves as chairman of the board at Vricon, a joint venture by Saab and DigitalGlobe whose mission is to “create a digital model of the Globe in 3D by producing photo-realistic 3D products and digital elevation models globally for enterprise and government geospatial markets with unmatched coverage and delivery timelines.”
If that sounds confusing, it’s because they might be trying to convey too many of the big problems they are trying to solve. In simple — perhaps simplistic — terms, Vricon is attempting to provide business and government with new capabilities for real/virtual modeling that GPS cannot solve. If you are imagining the construction of a building in relation to other structures, for example, it’s not just about its location but elevation as well, and mistakes can be costly (if not just catastrophic). Gilman: “Accuracy in 3D mapping really matters,” another example of the difficulty and gravity of 3D applications.
‘Inside’ Meets ‘Outside’
Which brings me back to the beginning of this article, when I contemplated breaking into the Alsop Louie building. One of Gilman’s most notable investments caused a sensation in the summer of 2016 when it got an unimaginable number of people out of their houses and into the streets with what turned out to be the first breakout hit in augmented reality. I’m talking about Niantic, creators of Pokemon Go, which I wrote about that summer after watching a family member who is on the autistic spectrum walk out the front door and explore our neighborhood for the very first time.
Gilman’s place in this story goes back to his days at In-Q-Tel where he invested in a stealthy little company called Keyhole, which was later acquired by Google and branded Google Earth. The founder, John Hanke, remained at Google where he developed Niantic, and when Google spun out Niantic, he contacted Gilman seeking advice. Alsop-Louie ponied up with an investment, along with Google, Nintendo, the Pokemon Company, and a number of other VCs and angels.
I caught up with Hanke this summer, trying to get a sense of where he was coming from and where he was going (while on the way to amassing a lot of cash; in its first six months, Niantic earned close to $1 billion in revenue). As for where he was coming from, earlier Niantic AR games taught the team how the technology “can augment your perception of the world.” The big learning for Niantic after Pokemon Go: “AR can be a catalyst for real-world social action.” A big focus for Pokemon Go — as well as its upcoming Harry Potter AR game, I’m guessing — will be themed events to get people out of the house, into the world, and engaging one another.
Hanke and I wrapped up the conversation remembering all the books from a generation or two ago bemoaning the loss of community events, the town square, and the so-called third place (the place that is neither work, nor home, but where everybody knows your name). It’s a testament to his vision and that of his long-time investor that technology might play a role in reversing the trend. It’s way too early to tell, and it runs counter to how Alsop-Louie has won in the past; Twitch, an Alsop Louie company that sold to Amazon for nearly $1 billion, began to take off when it made the decision to pivot its video platform from offline sports to online games. Fact is, Alsop Louie is betting on both sides of the divide in the 3D world. In the meantime, the Niantic opportunity may be the biggest green delta of all, by positioning itself to address one of the greatest challenges of our time. Inside/outside — it’s all coming together.