The prisoner’s dilemma is a classic thought experiment that explores how people can collaborate for mutual gain – or how one might screw the other over for a lesser reward.
Can you guess which outcome venture capital might resemble? A group of Boston investors wishes it were different.
This week, a group of five venture capitalists and the head of a real estate consultancy launched Venx (or venx), a collaborative group that focuses on deep tech investments. The five investors hail from four different firms – Anzu Partners, Hitachi Ventures, Myriad Venture Partners, and SkyRiver Ventures – and they still make individual decisions on when to write a check. But it could be the start of something bigger.
The need for partnerships for deep tech investments, and the need to work together, it seemed obvious.
Hyuk-Jeen Suh, general partner at SkyRiver, was inspired by startup accelerators like Greentown Labs in the Boston area, which began with a handful of climate tech founders and has grown into one of the largest deep tech incubators in the world. Initially, Greentown’s founders were looking for lab space, but they quickly realized the benefits of the shared space went far beyond lower rent payments.
“If you look at the startup ecosystem, they’ve figured out that working together is better. There are economies of scale,” Suh said. Plus, such incubators and other shared spaces can serve as a one-stop shop for investors looking for startups.
Until now, venture capital has been lacking something similar. Yes, there’s Sand Hill Road in Silicon Valley, but Suh felt that thoroughfare was more like a collection of car dealerships along an “automobile mile” than anything resembling a collaborative group. “They’re all competing. I felt like there has to be a different way.”
Part of what allowed Venx to coalesce, Suh said, was the fact that the four firms run the gamut of investment stages, from pre-seed to later stages, and represent a range of interests within deep tech, including climate tech, AI, and biotech.
The fact that the collaborative emerged among deep tech investors isn’t surprising. The sort of problems deep tech startups face favors cooperation over cutthroat competition. They tend to require deep pools of capital, expensive lab equipment and other pricey infrastructure. The problems they’re trying to tackle often send them into uncharted territory. And the solutions they arrive at tend to benefit from a diversity of thinking.
For investors, there’s so much blue sky in deep tech that Suh doesn’t think secrecy and jealousy gives anyone an edge. “Why do VCs feel like they need to compete? Do we not have enough carbon to remove? Plastics to recycle or remove? Breast cancer to cure? Not enough challenges in AI?” The shared knowledge and access to deals should benefit LPs, too, Suh said.
If this sounds like a syndicate, it is – sort of.
Like syndicates, the group shares leads, and each investor brings their own perspective and expertise to a pitch meeting. But unlike syndicates, which at the venture stage tend to be informal and ad hoc, Venx is a more formalized arrangement with the sort of intimacy only shared space can provide.
For now, Venx consists of an office space where the partners sit, rub elbows and talk shop over lunch. There’s a meeting room where they can collectively hear pitches from founders, after which they gather to share their thoughts. The group is open to new members as long as the majority of their investments are directly in startups (not other funds).
It’s easy to imagine Venx morphing into something more. More partners, more funds, perhaps a shared fund from which the group can write checks, similar to an angel syndicate. Whatever it ends up becoming, Venx’s collaborative approach is an intriguing experiment that’s worth watching.
