VC Strategy: Opportunistic or Synergistic?

The cleantech venture industry is in a learning stage and most funds are starting to build their portfolio of cleantech companies. How do you build this portfolio of companies? Do you make opportunistic investments? Or do you make focused synergistic investments? Which of these strategies will provide the cleantech winners? Or does it even matter to be thinking about this question?

Cleantech can be classfied into several sectors (in case cleantech is new to you the sectors would be solar, wind, water, waste-to-energy, storage, carbon management, building materials, biofuels...) In my opinion, building a portfolio with one company in every sector is an opportunistic strategy for a VC fund. On the other hand, focusing on a couple of sectors and attempting to capture the entire chain in this sector is a synergistic strategy. Each portfolio company would then look like a business division of a vertically integrated company. For example, in the waste-to-energy industry I have seen plenty of start-ups with different gasifier technologies. However, they lack alliances for waste sourcing, technologies for waste sorting, and a marketable energy product (i.e. electricity, methane, etc).

Most waste-to-energy companies generate syngas (as their product) with impurities that needs capital intensive cleanup and processes (i.e Fisher-Tropsch, water gas shift, combined cycle) to generate marketable energy products. A VC fund with an investment each in waste sourcing, waste sorting and efficient marketable energy product processes, would have a significant edge compared to its competitors. However, the downside to such a strategy is that good start-ups in a particular space are not always available. This can lead to a sub-standard investment in the space and passing over good opportunistic investments elsewhere. Does a fund risk being synergistic in search of an edge or be content with opportunistic activity? Any thoughts out there?

This upcoming week is my last at Flagship and I have thoroughly enjoyed my experience. My biggest summer takeaway is my tremendously improved ability to work with ambiguity. I am now looking forward to a 2 week vacation in Iceland and Eastern Europe before heading back to school. Details on the trip to follow...

Comments

[braculus]

hi Varun!!!!!!!!!1 hope the vacation helped you getting rid of the stress.