Go back far enough in time (about 250 million years) and the world’s land mass was apparently one unbroken continent – Pangaea.
Roll the clock forward to today and the promise of the application of advanced materials to innovation means all sectors can be affected by their use and so are, effectively, one large investment opportunity.
That promise appears to be enough for a host of corporations to commit to Pangaea Ventures, a Canada-based venture capital firm focused on early-stage companies in advanced materials, third fund.
The firm has made a $50m first close on its third fund, substantially more than the $32m raised in 2008 for Pangaea Ventures Fund II.
While Pangaea has yet to have any bvious exits according to its website, the quality of its dealflow has been enough to interest a wide range of new strategic investors, particularly from Asia and the Middle East, including Asahi Kasei Innovation Partners, JSR, Mitsubishi Chemical, Murata Manufacturing Company, Nitto Denko and Sabic Ventures, although others have yet to commit again – re-up in the venture capitalist’s jargon.
While the area is particularly promising – investment bank Goldman Sachs last week reportedly said it would channel from third parties and invest itself $40bn in clean-tech over the next decade – Pangaea seems to have understood how to offer insights of broader use to its fund’s investors (limited partners, LPs) through its advisory board.
This helps the LPs as well as portfolio companies. As Chris Erickson, general partner of Pangaea, said: “Our proprietary deal flow and sharp mandate have attracted some of the world’s most successful companies as our limited partners. As a result, our portfolios enjoy tremendous advantages with access to markets, suppliers, and expert assistance that would normally be available only to Fortune 500 companies.”
The challenge of managing a diverse set of strategic LPs is an area of increasing importance to many venture capital firms. Some, such as Index Ventures, try and resolve the challenge by limiting the strategics to half the fund’s size and to just two corporations; others (Ecomobilite Ventures, Aster Capital, Innogy Venture, Energy Technology Ventures) build a fund around a handful of firms, while North American groups especially seem able to host multiple groups (Kleiner Perkins’ s and iFund, CMEA Capital and Chrysalix spring to mind).
There are no right answers – ultimately it depends on luck and some judgement whether good deals are done (both financially and in interesting areas). The key requirement is a willingness to cooperate and look at the other parties’ perspectives as a longer-term approach to the potential benefits of indirect investing from a corporation’s standpoint either as a way of learning how to invest or to explore so-called white spaces ancillary to the core business.