How a former Tesla and Lyft executive is trying to reinvent venture capital
From selling six of his own companies to serving as president of Tesla and COO of Lyft, Jon McNeill, now CEO of DVx Ventures, shares his journey as an entrepreneur and reveals the secrets to his success.
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00:00Came from a family without much means, and so that meant that we had to buy our own clothes and shoes
00:06even early on. And so in first grade, second grade, I was hustling, trying to earn money so I could
00:12buy clothes and shoes for school. And so I started a little lawn mowing business that grew into
00:18a big landscaping business by the time I was in high school that paid for my first car.
00:22And I had employees that I had to pay, and marketing I had to do, and billing I had to do,
00:27and I actually, I fell in love with business as a kid because it gave me independence.
00:31I kept that up when I was in college. I worked at the trading exchanges in Chicago,
00:36started a few businesses in college. I fell deeper in love with business. I went to school in Chicago
00:42and was one of the first kids hired out of the Big Ten to join Bain & Company as a consultant,
00:47and spent two years there. And then they were starting Bain Capital. They started just a few
00:52years before I got there, but they were really starting to ramp it up. So I spent a bunch of
00:56time with what is today Bain Ventures, and then was encouraged that I was an entrepreneur,
01:02actually. And so I found a company to start and jumped out and started my first company.
01:07And we started it literally from our kitchen table. And it was a software business. We grew
01:13it to $40 million in ARR in 18 months. It was a crazy ride, and we sold it to a public company.
01:18And then I did that five more times in a row. I guess I qualify as a serial entrepreneur.
01:23And then through a crazy series of events, met Elon Musk and decided to join the best
01:30practitioner of my craft on the planet. As an entrepreneur, he's kind of unmatched.
01:36And so helped grow Tesla from $20 billion in revenue, and then helped take Lyft public as COO,
01:45and then jumped out to do something I'd been planning for for years,
01:50and that is starting a platform to create companies.
01:59My granddad had a auto repair shop attached to his farming land in Iowa. And I spent summers there,
02:09and I learned to fix cars. And I loved it, actually. And I loved how tangible it was.
02:16And so then as I started to build skills in business, I started to see all the opportunities,
02:20especially for software in the automotive industry. And so a number of my companies
02:25have that theme running through it. And I think it comes back to my grandpa's auto shop.
02:34So Elon had been talking with a dear friend of mine, Cheryl Sandberg, about becoming
02:39a president of Tesla. And she called me one day and said,
02:45I'm not the right person for this, but I think you might be. So she introduced me to Elon.
02:51Elon and I immediately dove into a couple of challenges he was facing in manufacturing,
02:56and then sales. And as we started to get to know each other, both of us really enjoyed
03:00being around each other. I was certainly energized by him. And so I joined Tesla,
03:05and it was about $1.8 billion in sales. And the biggest challenge was a demand challenge,
03:08actually. They were learning how to produce cars at higher volume, but didn't have nearly the demand
03:14that they needed to have. And so I dove in and went to stores so I could try to figure out what
03:20might be happening. I went to eight different stores, took eight different test drives,
03:23and nobody called me back. And so I called the head of sales ops. I said, can you tell me why
03:29I'm not being called back? I've used eight different email addresses, and somehow they
03:33caught up with me. And he said, no, I can't see in the system why you wouldn't be called back.
03:38I said, well, can you just run a report for me real fast that tells me how many people we've
03:42done a test drive for that haven't been called back? And he said, sure. Called me back in two
03:47hours, and he said, I can't believe this. We've done 10,000 test drives in the last month and a
03:52half, and 10,000 people haven't been called back. And I said, how many cars do you need to sell
03:57this quarter? And he said, 12,000. And I said, I have a feeling why you think you have a demand
04:02problem. So let's shut off any new leads that people get until they call back all their test
04:08drives. And we did that within a few hours, and sales went up. And this was before I even
04:14worked at Tesla. So I had to call Elon and say, hey, look, I may have overstepped my boundaries
04:19here. I don't even work for you yet, but here's what I found, and here's what I did. And there
04:23was this long silence on the end of the phone, the long silence that Elon's kind of famous for.
04:28And I didn't know how to interpret it, because I didn't know him very well yet.
04:31And after the long silence, he broke in and said, I think you're going to fit in here just fine.
04:43I didn't have any examples to draw on where you're taking a company from roughly $2 billion
04:48in revenue to $20 billion in revenue in 36 months. There wasn't any case studies for that,
04:53and so we all had to be super creative and scrappy, which is what we did together as a team.
04:59But it was crazy times, too, especially as we got closer and closer to Model 3 production.
05:06The balance sheet was super stressed. We were running out of cash, and we had to get Model 3
05:10out to replenish the balance sheet. And we were operating the company on less than a quarter's
05:15worth of cash. It was a balance of absolute euphoria as you're growing a company, but
05:20absolute stress, too, as things are highly pressurized. We would sit in the back of cars
05:27together a lot, because he had an approach that was kind of a Vulcan mind meld. He wanted,
05:33in his words, if we had the same inputs, he wanted the same decision to come out of both of us.
05:38We would riff on business ideas. And so I started to get a little jealous, because he was able to
05:44go do things like Neuralink and The Boring Company, and said to him, hey, I'd like to
05:49scratch the sitch, too. And he said, well, what do you have in mind? And I said, well, there's a lot
05:52of things we could do to change the car business from an episodic sale we sell to a customer once
05:57every four, five, six years. We could turn that into a recurring revenue business, so an ARR
06:04business. And he said, how would you do that? And I said, well, I'd sell insurance embedded in the
06:08car. I'd sell infotainment subscriptions, autonomy subscriptions, et cetera. So he gave me the chance
06:15to be an entrepreneur inside of Tesla. We grew a pretty significant insurance business, a pretty
06:19significant subscription business in infotainment and autonomy as well.
06:29I learned a few things. One is setting really high bars and high goals. And Elon is famous for his
06:35super ambitious goals for people, and then really holding folks accountable to those on a weekly
06:39basis, but also giving them the tools to be successful. So it wasn't just throwing people
06:43to the wolves. It was really supporting them. I think what I also learned was all the stuff
06:47I had learned about putting scaffolding in companies that was helpful to growth worked
06:52at scale. And so that gave me the confidence then to go help other companies at scale after Tesla.
07:00I joined Lyft largely to help to be a part of the team that would build the muscle to get them
07:04public. And it was an exciting process to go through for sure. What all companies have to do
07:09is really internally start to build the kinds of processes and scaffolding that help them
07:15with certainty make their quarters. Once you're public, it's very different from being private.
07:21There's no gimmies, no mulligans. If you miss, your stock value is going to be decimated. So
07:26you have to be prepared not to miss. And that's most of the work in terms of getting a company
07:31ready to be public. And that can get down as simple as kind of the weekly sessions you're
07:35having on demand and supply balance to make sure that you're hitting your forecasts. And then
07:40financial planning to make sure that you're getting a forecast that is hittable. So all
07:45those things go together to be able to prove to a company internally that it can win and it's ready
07:50to be public. I think autonomy is going to play out really in two ways. One is in RoboTaxi. But
07:58there has been this view that there's this panacea if you replace the driver with a computer,
08:06the costs change. And they change for the better. And therefore, profitability for people like Uber
08:12and Lyft will go up or companies like Uber and Lyft will increase. And the fact of the matter
08:17is that the driver today brings the car so the network doesn't pay for the car. The driver
08:22cleans the car. The driver maintains the car. The driver fuels the car. That's all going to be the
08:27responsibility of somebody. And so even though there's this panacea of, hey, the driver's cost
08:33drops out of the P&L and therefore the profitability soars, I think it's a panacea
08:38that gets replaced with fleet costs that somebody has to bear. And so I think there's a path
08:44in RoboTaxi, but it may be not as attractive as it seemed at the beginning. In parallel to that,
08:51we're kind of at a moment where cars of today may be compared to like flip phones. And so I think
08:58personal autonomous vehicles are every bit as interesting as the RoboTaxi story. But we've got
09:06to get to autonomous vehicles first. And that's proved to be a climb with a lot of false summits.
09:12In the U.S., we have roughly 50,000 traffic fatalities a year. And 95% of those are caused
09:18by human error. So the whole goal of autonomy is eliminating those fatalities. It's 50,000
09:25families that don't go through a tragedy. But it turns out our roads are some of the safest in the
09:30world. So if you expand out the traffic fatality count globally, it's 1.5 million people die annually
09:37in traffic accidents that are largely human cost. And so the reason to do autonomy is just that,
09:45is to eliminate fatalities, number one. Number two, it's to give mobility to people that don't
09:50have mobility options today. I have a friend who's blind. And when we introduced autonomy
09:56at Tesla, he called me immediately and said, when am I going to be able to take my first
10:01drive by myself? When am I going to be able to drive a car? And that stuck with me. And so he's
10:08been a motivation for my involvement in autonomy, because there will be people that today don't have
10:15the mobility option to drive a car by themselves. He'll be able to hop in a car and go where he wants.
10:20For the first time in his life.
10:28Safety's got to come first. And so what Cruise has done is really expand a safety-first culture.
10:35There were a lot of voices within Cruise that were demanding safety be the primary consideration
10:42for expansion and growth. And we totally agree with that at GM. So we've taken the best of GM
10:48resources to help Cruise pivot that culture to be safety-first. Because when you're doing
10:55breakthrough technology like this, it's important to make advancements, but you've absolutely got
10:59to do that with a framework that says we're going to keep people safe as we do this. The safety team
11:04has a seat at the senior management table, and they've got a veto right on what gets released
11:09and what doesn't get released. And so that safety capability and talent has been elevated to the
11:16highest level at Cruise. There's this concept in manufacturing that's now common. It was taught
11:21to us by the Japanese. And that is that any individual worker, if they see something going
11:26wrong, can stop the production line, which is a big deal. When you stop the production line
11:31at a car factory, you're talking about millions of dollars an hour result from that stoppage.
11:37So it's a big deal to hand that capability or that agency to a worker. And so that's at the heart of
11:44the cultural change at Cruise, is enabling people to pull the cord and essentially
11:50stop the line. I've got a lot of confidence in the Cruise team. They're returning to the mission.
11:54They're returning to the roads with autonomous driving because they've got more data and really
12:00more experience than anyone else in the autonomy space. Now with the safety-first mentality
12:07and framework, and I think it's going to be the best of both worlds in terms of a very bright
12:11future for the Cruise team. DVX Ventures is a little bit different. We're a company creation
12:21platform. And we were formed because I had this vision of being able to systematically create
12:26companies from scratch, like I'd done six times in a row before I joined Tesla. So during that
12:32journey of starting and scaling and then getting liquidity on six companies, I started to write
12:36down like how you take a company from zero to a million in sales, a million to 10 million, etc.
12:42And develop these playbooks. And so DVX really was birthed out of those playbooks to say,
12:49could we start companies from scratch, scale them, and really have impact on the economy?
12:54The technology is we start with three things that have to be true. The first is you've got to have a big
12:58market that's provable. The second is you have to have significant profit pools that makes it worth
13:03your while. And the third is we've got to have a moat or an angle that we think is super unique to
13:08us so that we can win. And if we've got those three, we're essentially an idea generation factor.
13:15And when those ideas pop, then we start to put product out in the market and start to experiment
13:20with a feedback loop from the market really quickly. And those that gain traction, then we
13:25eventually turn into companies, and then hire teams and scale them. We describe ourselves as
13:30Venture Capital 2.0 in the sense that we are not investors. We are hands-on operators. And so
13:36when we launch a company, one of the partners is the first CEO. And so the companies I launch,
13:42I'm the first CEO of these companies. We're that hands-on. And then we build the team around us
13:46and eventually step out as CEO. And so we're able to spot what good product looks like, what good
13:51markets look like, what good people look like, what good tech looks like. We know that because
13:55we've been operators. And we can help build that into the company from the very start.
13:59So what we try to do is really de-risk an idea and get a company started and then can hand the
14:05baton to a really experienced entrepreneur or even an entrepreneur with potential that can grow that
14:11company into something really special. So there are two ways that VCs make money. One is the fees
14:17that they charge for the amount of dollars they have under management. And the second is
14:22the upside in the companies. And what's evolved over the past five or 10 years is VC motivation
14:28has become more and more fee-oriented in the sense that they want to raise more and more capital
14:33to generate fees. The problem is that that's a kind of a risk-free model. And at the core of
14:40venture, we want to take risk. We want to take the appropriate risk. And so we feel at DVX like
14:46there's an evolving trend towards putting our money where our mouth is. And we call this VC
14:532.0. And so we don't charge our investors fees. We take, like them, a share of the upside. And so
15:00we are completely aligned with them in that the only way we make money is if they make money.
15:06And I think we're going to see more and more of that in the VC market as investors get wise to
15:12the need to have an investing partner who takes appropriate risk and is compensated by succeeding
15:21rather than merely collecting fees. I think, well, there are more than 1,000 unicorns that are
15:27waiting to get public. But there are, at today's pace, 30 to 50 companies that get public. And so
15:32that means that a year. So that means that out of those 1,000 plus unicorns, a lot of those aren't
15:39going to get public or get bought. And so the incentives have to be aligned in the future so
15:46that venture investors are taking the same risk, really, as their investors and are getting paid
15:55for successful outcomes versus getting paid for valuation. We've got a cybersecurity company that
16:00has really innovative technology, unique technology, where we can see inside the stack
16:04of a company's software. And that allows us to spot vulnerabilities for them. We score those
16:11vulnerabilities and hand them back a daily health scorecard about how they're doing with their
16:14cyber risk. And that company is our fastest growing company. It's hit the ground running
16:19and it's taken off. We've got a cleantech company where we asked ourselves the question,
16:24could we save 40% of the energy costs of buildings in the U.S. and developed a really super simple
16:30firmware solution that stays on top of thermostats that really provides technology that
16:36helps that building save 40% of its energy cost. A company called Kirby that brings software to
16:41dealers so dealers can do mobile service. So any dealer can look like Tesla in the sense that
16:47they can come fix your car at your home, at your office, like magic elves, and then disappear
16:53after your car is fixed. So you didn't have to take your car anywhere to get it fixed.
16:58The biggest impact on my experience in my career in leadership has been to have mentors. It is an
17:03unfair advantage. And I didn't realize this when it was happening at the time, but I had a mentor
17:09in my first job in high school. I had a mentor in my first job out of college. I had a mentor
17:16in my first company. All of those mentors made me better. And then I learned like to grab mentors
17:24both vertically and horizontally. Vertically, people that have seen the movie before,
17:29they're ahead of you on the journey maybe by 5, 10, 15 years. And then horizontal mentors,
17:36fellow CEOs, fellow leaders in your kind of market and maybe same age range and experience
17:45where you can bounce things off of each other. You may not be able to bounce off of your colleagues,
17:49your peers, your boss. And for me, the biggest leadership hack is having mentors.
17:56The worst piece of advice I've gotten is to build a company for an outcome. In other words,
18:03build a company for a big valuation. What you need to do instead is build a great product that
18:09people love and the company will follow. And you'll have a great big company at the end of
18:15the day. But if you end up pursuing the wrong goal first, which is just get big,
18:19you tend to cut corners on the product and the company doesn't tend to last.
18:23And so I think the worst piece of advice I've got is just build big. I'd rather build great.