The prisoner’s dilemma is a classic thought experiment that explores how people can collaborate for mutual benefits, or how one could ruin the other for a lesser reward.
Can you guess what venture capital outcome would look like? A group of Boston investors wish it were different.
This week, a group of five venture capitalists and the director of a real estate consultancy launched Venx (or ven^x), a collaborative group focusing on deep tech investments. The five investors come from four different companies (Anzu Partners, Hitachi Ventures, Myriad Venture Partners and SkyRiver Ventures) and are still making individual decisions about 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 seemed obvious,” Hyuk-Jeen Suh told TechCrunch.
Suh, a general partner at SkyRiver, was inspired by startup accelerators like Greentown Labs in the Boston area, which started 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 quickly realized that the benefits of shared space went far beyond lower rent payments.
“If you look at the startup ecosystem, they have realized that working together is better. There are economies of scale,” Suh said. Additionally, these incubators and other shared spaces can serve as a one-stop shop for investors looking for startups.
Until now, venture capital was missing something similar. Yes, there is Sand Hill Road in Silicon Valley, but Suh felt that road was more like a collection of car dealerships along a “car mile” than anything resembling a collaborative group. “Everyone is competing. I felt like there had to be a different way.”
Part of what allowed Venx to merge, Suh said, was the fact that the four companies span the entire gamut of investment stages, from pre-seed to late stages, and represent a variety of interests within the technology. deep, including climate technology, artificial intelligence and biotechnology. .
The fact that collaboration emerged between deep tech investors is not surprising. The type of problems deep tech startups face favor cooperation over cutthroat competition. They typically require large capital reserves, expensive laboratory equipment, and other expensive infrastructure. The problems they try to address often take them into uncharted territories. And the solutions they arrive at tend to benefit from a diversity of thought.
For investors, there is so much blue sky in deep tech that Suh doesn’t believe secrecy and jealousy will give anyone an advantage. “Why do venture capitalists feel they need to compete? Don’t we have enough carbon to remove? Plastics to recycle or eliminate? Breast cancer to cure? Are there not enough challenges in AI? Shared knowledge and access to deals should also benefit LPs, Suh said.
If this sounds like a union, it is…sort of.
Like syndicates, the group shares potential clients and each investor brings their own perspective and experience to a pitch meeting. But unlike unions, which in the risk stage tend to be informal and ad hoc, Venx is a more formalized arrangement with the kind of intimacy that only shared space can provide.
For now, Venx consists of an office space where partners sit, rub shoulders and chat over lunch. There is a meeting room where they can collectively listen to the founders’ proposals, after which they come together 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 transforming 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 worth watching.