By Emily Russell

Josh Wolfe has been in the venture capital business since 2000, when he co-founded Lux Capital.

He has since devised a hierarchy within the industry: the minnows, the megas, and the middle. Minnows will likely die out, megas will go public, and those in the middle will have breathing room to flourish, Wolfe says.

"They can write a small check and it can meaningfully return the fund, or they can write a large check and be pretty concentrated in their high-conviction winners," Wolfe explained to Barron's editor at large Andy Serwer in an interview for the At Barron's video series.

Wolfe sees Lux as one of 10 or so firms in the middle tier.

The firm, he explained, invests in high-tech companies focused on healthcare technology, aerospace defense, and what he calls "core technology." That includes advanced technologies like semiconductors, edge inference chips, and noninvasive brain machine interfaces -- things that Wolfe says "seem like they are closing the gap between sci-fi and sci-fact."

It also engages in what Wolfe coined "sci-tech diplomacy": finding global partners to scale breakthrough research. One example is Lux's work with eGenesis, a company that successfully genetically engineered pigs with organs that are human-compatible.

"We said, 'Well, is there a partner globally who might want to bring this there?'" Wolfe said.

Lux found one in the Emirates, where Johns Hopkins, New York University, and the Cleveland Clinic have transplant surgeons but lack an organ donor base. "That is an opportunity not only for in-country, but for regional scaling to the world," Wolfe said.

With Serwer, Wolfe also discussed the state of the broader VC industry, his view on the AI race, and how VC can support scientists who face an uncertain future. Below are excerpts of that conversation, which have been edited and condensed for clarity.

Barron's : I want to ask about what Lux excludes from its business. For a while, social media and mobile apps were all the rage for VC. Why didn't you go down that path?

Josh Wolfe: Part of it was competitive advantage. We needed to be distinguished. When we were starting, we had no shot to compete. So we had to carve out a niche that other people weren't. It was really out of necessity.

You are a New York firm. That is another differentiator.

Well, natively New York. We started here, but now half the team is in Menlo in Silicon Valley. Interestingly, we studied all these VC firms when we were starting: Why do they fail over time? It isn't just because they didn't have good returns. It is sometimes because they had geographic silos and had a Biggie versus Tupac, East Coast versus West Coast kind of thing.

So even though I live in New York and half the team is in New York, I am on more West Coast boards than I am East Coast boards. And then my West Coast partners are on more East Coast boards. That is by design.

How is the venture business going right now?

If you are in AI, aerospace, and defense, they are going amazingly well. And if you are in [software as a service] or some enterprise software, you are probably seeing margin compression.

Broadly, venture is one of the most cyclical industries. Every 10-15 years, there is a secular wave in some area of technology. So today there are close to 3,000 small venture firms that I call the minnows -- the small fish. I was talking to one of my limited partners, and I said, 'I think 50% of these firms might disappear in the next few years.' Why? Because they are under-reserved, meaning they don't have adequate funds to keep funding their portfolio companies. And the environment has changed: The cost of capital is higher and there are fewer growth investors to continue piling on money.

The LP said, 'Fifty percent? That is ridiculous. It is going to be 90%.'

What about the AI competition? Is that something you are keen on?

It is the biggest race today, like if there was a space race in the sort of post-Cold War. This is a defining era.

I had a front-row seat to it in 2015. We had invested in a company at Stanford that was doing self-driving cars called Zoox. We put about $25 million into it. They were in a secretive area of the Stanford linear accelerator on campus, and it was based out of a firehouse. There were six people, and we thought they were geniuses. We later sold Zoox to Amazon for a little over a billion dollars. I asked their team what kind of chips they used. They said Nvidia. I said, 'From the gaming company?' Nvidia at the time was a $15 billion market cap company. I remember that fall at a charity event I basically said, 'This is the pair trade of the century: long Nvidia, short Intel.'

We also funded a Japanese company called Sakana AI, which is their leading sovereign. And then, of course, you have these giant models that are being developed more cheaply -- whether they're borrowed or stolen or copied or developed -- in China.

Should we be paranoid about China?

If you take a jingoistic American stance and say we have got to beat China, I think restricting them from getting access to our semiconductors is only going to mean that they will find clever ways around our restrictions -- necessity being the mother of invention.

But if you say we are fighting for global influence in the world, then I agree that it is a contest worth winning. The virtue of open source models, like the virtue of science, is this very Karl Popper-like philosophy: You have an idea and you put it to the market. It gets battle-tested and gets criticized and you evolve and you correct. It is one of the great mechanisms of how we get progress and knowledge and truth and democracy.

Talk about Lux's science helpline, which is providing money to scientists whose funding has been cut off. Why is that so important right now?

Science is critical. It creates national advantages, economic progress, job opportunity, and democratization for people in different social statuses to be able to access capabilities that they never had. You have had, in the U.S., declining science funding for political reasons across multiple administrations, Democrat and Republican. You have people that are suffering because they are losing their funding to do their scientific research. In some cases, it is for very silly reasons.

We said at Lux, let's double our normal 10% stake to 20% and take on earlier-stage science with a scientist who maybe isn't fully mature, and their funding just got cut. Maybe we can step in and either license their work to an existing company, or we can come in and start a company around them and take some of the more risk than we might normally take. We can be a helpline. We are a source of funding out of capital interest, not philanthropy -- but we think it is doubly virtuous.

You grew up in Coney Island -- and not with a silver spoon in your mouth. What drove you?

I was exposed to people that had money when I had none. I don't think I left the country until I was 21; I never had sushi until I was 22. It was hot dogs and french fries. And I wanted money. I was driven by that. I think I always had a chip on my shoulder. That is one of the great virtues of entrepreneurs that I look for. I always like to say that chips on shoulders put chips in pockets.

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September 06, 2025 01:00 ET (05:00 GMT)

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