Why a Chemist Left $7B to Bet on Physical AI Before Everyone Else | Bilal Zuberi, Red Glass Ventures

Turner Novak (0:03)

Bilal, welcome to the show.

Bilal Zuberi (0:04)

Thank you. Thank you, Turner. So good to see you, man.

Turner Novak (0:07)

It's awesome to see you too. I'm really excited because we haven't really got a chance to sit down and have like a two-hour conversation. I don't think like ever before, so this will be fun.

I think probably the most interesting place to start is, you have been investing in what we now call physical AI for 18 years. You were at a pretty large fund, Lux Capital, I think they have, I think, Claude told me 5 billion in-

Bilal Zuberi (0:35)

Seven billion.

Turner Novak (0:36)

Oh, seven? Seven billion in the UM. You left to start your own fund. It wasn't necessarily the hottest thing in the world, but suddenly people will not stop talking about it.

So as somebody who's been doing this for a really, really long time, what do most people typically get wrong when they first start to invest in something that's not just software?

Bilal Zuberi (1:01)

So number one, many thanks to Jensen Huang, who I think in January 2025 put up this chart that now people have seen many times, where he says AI, then agentic AI, and then physical AI, and I was like, oh my God, the future is physical AI.

Eighteen months ago when I was starting my conversations with LPs that maybe I should do a fund, there were many LPs who said, we've never done investment in this area, this is capital intensive, and I tried to tell them, no, it's not, at least not the way I'm approaching it or the kinds of investments I want to do. But it was an uphill battle because, oh, this is probably only large funds can do this, where you can write big checks and hold on to your positions. That has completely changed in 18 months and everybody wants to invest in it. The way Jensen describes physical AI, it feels like a little bit more narrow around robotics and autonomy and so on. The thesis of my fund is AI and the physical world. I think there's tremendous innovations happening in AI. I think we all realize that at this point in a hundred different ways. I think we want to fund some of those fundamental innovations, but we also believe that AI is going to have a massive impact in real-world physical industries. Things that we consume, this table, this glass, the food, the energy we consume, the industrially produced products that we have, and so on, defense and all that stuff.

What are the mistakes that people make? Look, number one, there's a lot of very smart people investing in this space, and they're coming from different vantage points. Some people have been doing it for a long time, so clearly they bring that expertise. They also bring a scar tissue to it. Sometimes their problem would be that they've seen too much, and they know a hundred ways to fail, and that's all they think about, so they sometimes miss the big idea because they had seen something like it before, and they wouldn't do it. But for newer people, go to market in these industries is tough. Decision-making in your customers is much more complex. The incentive systems at your customers are not exactly aligned with you.

They want better products, but they just want to protect their market share more than anything else. They've never seen rapid growth and oligopolies or monopolies. That doesn't really happen to them.

They would love to push all the risk to you, and you as a young entity might assume all that risk thinking that's what it takes, not realizing that there's not enough at-stake for your customer to be there for the long term. So you end up sometimes investing in companies that feel like a big idea, but the practicality is missing. One of the things I talked to LPs about as I was doing fundraising was that of course, we want to fund big important ideas, change the world ideas, and companies that can become very, very big, and hopefully, the entire investor ecosystem will want to be a part of that at various stages. So, it's not some niche fund. But I also said that we want to back founders who understand what it takes to turn a startup into a business.

Turner Novak (4:15)

So, why is that such a big deal?

Bilal Zuberi (4:16)

Look, startup, you and I can create a startup during this podcast, probably cost less than $25 to register, and we can call it, we're going to go mine on the dark side of the moon, and likely get admitted into some accelerator and even get funded. Yeah, I mean- Especially with you and my background.