The Prisoner's Dilemma is a classic thought experiment that explores how people can work together for mutual benefit, or how one can undermine the other for less reward.
Can you guess what the outcome will look like for venture capital? A group of Boston investors wishes things were different.
This week, a group of five venture capitalists and the president of a real estate consultancy launched Venx (or ven^x), a collaborative group focused on deep tech investing. The five investors – Anzu Partners, Hitachi Ventures, Myriad Venture Partners and SkyRiver Ventures – come from four different companies and still make individual decisions about when to write checks. But it could be the start of something bigger.
“The need for partnerships and the need to work together for deep tech investments seemed obvious,” Hyuk-Jeen Suh told TechCrunch.
Suh, SkyRiver's general partner, drew inspiration from startup accelerators like Greentown Labs in the Boston area. This lab started with a few climate tech founders and has grown into one of the world's largest deep tech incubators. Initially, Greentown's founders were looking for lab space, but they quickly realized that the benefits of shared space went far beyond reducing rent payments.
“If you look at the startup ecosystem, they understand that it's better to collaborate. There are economies of scale,” Su said. Additionally, such incubators and other shared spaces act as one-stop shops for investors looking for startups.
Until now, venture capital has lacked something similar. While Silicon Valley does have Sand Hill Road, Hsu felt the thoroughfare was more like a collection of car dealerships along a “car mile” than a cooperative group. “They're all competing. We felt there had to be another way.”
One of the factors that made the Venx merger possible was the fact that the four companies represent a wide range of interests in deep technology, including climate technology, AI, and biotech, with responsibility for all investment stages from pre-seed to late-stage. Yes, Suh said. .
The fact that this partnership has surfaced among deep tech investors is not surprising. The types of problems faced by deep tech startups favor collaboration over cut-throat competition. They tend to require large amounts of capital, expensive laboratory equipment, and other expensive infrastructure. The problems they are trying to tackle often send them into uncharted territory. And the solutions they arrive at tend to benefit from diversity of thought.
Hsu doesn't think secrecy or jealousy will give anyone an advantage, as deep technology has clear skies for investors. “Why do VCs feel the need to compete? Is there not enough carbon to remove? Recycle or remove plastic? Can breast cancer be cured? Isn’t AI challenged enough? ” Knowledge sharing and trading access should also benefit LPs, Suh says.
If this sounds like a syndicate, it is a kind of syndicate.
Similar to a syndicate, the group shares the lead, with each investor bringing their unique perspective and expertise to the pitch meeting. But unlike syndicates, which tend to be informal and ad hoc during the venture stage, Venx is a more formal arrangement with the kind of intimacy that only a shared space can provide.
For now, Venx consists of an office space where partners sit, rub elbows, and talk about shopping over lunch. There is a conference room where the founders can hear their thoughts together, and then come together to share their thoughts. The group can accept new members as long as the majority of investments are made directly into startups (rather than in other funds).
It's easy to imagine Venks transforming into something more. More partners, more funding, perhaps a shared fund where the group can write checks, similar to an angel syndicate. Regardless of the final outcome, Venx's collaborative approach is an interesting experiment worth watching.