Direct Investor: AIMCo sees a real opportunity to leverage its experience doing direct private equity and direct infrastructure to do direct venture. We think we have a competitive advantage over private sector players...time-horizon, scale, diverse set of portfolio companies... that will help us generate solid returns. Sourcing Deals: As a long-term investor with an ability to write big checks, the venture community really comes knocking on our door. This minimizes the deal sourcing requirements, but it puts a premium on being able to spot the deals that fit into our portfolio.I have to admit, thats a very innovative way to look at venture capital; you look for those venture assets that can play an important role within your broader portfolio of assets. This is actually something Ive come across a quite a few times in the family office setting; they look at venture assets as potentially offering the family business some value-add down the road. Its a holistic approach to the asset class that seeks to extend the benefits of a single investment to the entire portfolio. And, at the same time, the institutional investor with a broad portfolio of assets can help the venture stage companies break their shackles through intra-portfolio cooperation. Win-win. Fascinating. Now, thats all well and good, but this strategy comes with a serious health warning. Doing direct investments in venture stage companies within a public fund requires serious levels of buy-in and understanding by the Board. Why? Because some of the investments will, inevitably, go to zero. And thats OK. Its the nature of the asset class. But Boards really need to understand this and be prepared for it. The hope is that you have more winners than losers and, it seems, that the net impact on the broader portfolio is positive.
Criteria: We look for venture deals where we can develop good relationships with management. Our objective here is really to build industries (not just companies). Also, when we think about whether to invest in an asset, we consider our broad portfolio and assess whether the venture-stage company could be matched up with some of our other portfolio companies or assets in a synergistic way. We only want to invest in venture assets where we can add value, be it through our knowledge, our capital, or our portfolio of assets.
Anyway, all this is to say one thing: Its time to start thinking about venture capital again.