Every business has competition and for some, the competitive landscape is transparent and clear, and for others, the competitive environment requires a little more insight and explanation.
Venture capital funds are increasingly competing for deals and are finding themselves in a “selling” position vs. a “buying” position when it comes to making investments. The best companies now have the opportunity to do more due diligence on their investors and to negotiate terms from a position of strength.
The Pandemic Impact Fund is no different from other funds in needing to be a value add investor and building relationships with our portfolio companies that align everyone’s interest. There are a few things that make the fund unique, however, that help to mitigate competitive pressures.
As a Pandemic Tech fund, we are not squarely in any Limited Partner’s stated thesis. We may match their sector interests, stage focus, size of fund, etc. but no LPs really are out specifically seeking Pandemic Impact Funds. We’ve found a few examples, however, starting with Kleiner Perkins Pandemic Fund back in 2006. There’s also OurCrowd’s Pandemic Innovation Fund and a new Post Pandemic Fund and even a post pandemic startup studio. More managers are starting to see the opportunities coming out of the pandemic’s disruption and these funds are poised to succeed as those funds that came out the the 2008 financial crisis did.
Little Direct Competition
While you won’t find a lot of direct competitors, we effectively are competing with other early stage funds that overlap with our thesis.
We’ve found a few examples of direct competitors, starting with Kleiner Perkins Pandemic Fund back in 2006. There’s also OurCrowd’s Pandemic Innovation Fund and a new Post Pandemic Fund from Alumni Ventures, and even a post pandemic startup studio. More managers are starting to see the opportunities coming out of the pandemic’s disruption and these funds are poised to succeed as those funds that came out the the 2008 financial crisis did.
What Gives us Competitive Advantage
- We’re more than just a fund. The Pandemic Impact Fund drives its pipeline with traditional network development, but also holds regular conferences and accelerator programs with pandemic tech and life science companies. These programs serve three purposes: 1) They create awareness about the fund and bring companies into our sphere. 2) Working with companies through a one-week HyperAccelerator program gives us intense due diligence opportunities to dig in deep on strategy, risks and opportunities. Mentors test hypotheses and the process gives us a chance to see how the company’s leaders think and develop strategies. 3) The conferences and accelerators give us a chance to build trust with potential portfolio companies. 4) These programs have given us the opportunity to create partnerships with national groups with whom we co-present some of our events and accelerators. These relationships increase the quality and size of our pipeline, but also tend to result in introductions and relationships with potential portfolio companies in a “preferred” position.
- “Pandemic Tech” is not a vertical. The thesis behind the Pandemic Impact Fund is that we’re not just focusing on this pandemic, but all future pandemics and the social and economic impacts they bring as well as the health impacts. This puts the Fund squarely into the life sciences as a portion of its portfolio, but it also includes fintech, edtech, future of work, real estate tech, smart cities and other verticals that address the massive changes that this pandemic is causing in how we live, work and play. This puts us in competition with funds that focus on those areas, but also sets us apart.
- We are early stage. The Fund invests early, usually after a product is launched, or when preliminary FDA traction has been achieved. We are experts in identifying value and mitigating risk at early stages where questions about product market fit or regulatory pathways may not yet be clear. Our processes for evaluating and supporting portfolio companies have been effective in helping companies to grow. As early stage investors, we reserve 50-60% of our AUM to provide follow-on investments for our best portfolio companies. This helps to assure companies that we are there to support them in reaching the increasingly large capital gap between first Seed investments to Series A. Many of the larger growth stage funds are not playing at this stage, but we create relationships with them in order to facilitate later stage funding for our portfolio companies.
While the Pandemic Impact Fund is certainly in a competitive environment with other funds, we believe we have built a “Blue Ocean” in which we win nearly 100% of investments we pursue and have a significantly large pipeline that allows us to be highly selective in the companies that we choose to do business with.