OPPORTUNITY & OBJECTIVE
OPPORTUNITY & OBJECTIVE
Venture Capital as a Service (VCaaS) is a transformative way for government organizations, corporations, industry groups. institutional investors, and family offices to engage with the vibrant innovation ecosystem for financial and strategic returns.
Artesian's VCaaS model empowers clients to invest in innovative, high-growth startups without the need for a traditional in-house venture team. We collaborate with our clients to establish a bespoke mandate, and then handle all the complexities of venture capital - from sourcing and screening startups to conducting rigorous due diligence and providing ongoing portfolio management.
With VCaaS, we offer our clients a customizable investment approach that aligns with their specific goals, industry focus, stage of investment and appetite for innovation.
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To invest in venture capital, investors have traditionally:
1. Managed their own money:
This requires larger amounts of capital, access to qualified deal flow and expensive & sophisticated back office resources; or
2. Invested in funds:
This means minimal mandate control, limited co-investment opportunity, closed-end fund structure and no investment committee participation
But now there is another alternative:
3. Venture Capital as a Service (VCaaS):
This can be a fully outsourced service, or it can be a a platform providing organisations with the opportunity to complement existing, or build new, in-house VC capabilities.
VCaaS delivers financial & strategic (distributed R&D) return, as well as scale, context and focus, providing the client with a pre-screened & de-risked pipeline of qualified late stage startups for direct investment
Read: "Embracing VCaaS: A Strategic Solution for Corporate Innovation and Cultural Change"
"You can systematise innovation even if you can't completely predict it"
Eric Schmidt - Technical Advisor & Board Member Alphabet Inc.
VCaaS Overview
Collaborate
To access the financial and strategic returns of the innovation ecosystem a collaborative, scalable & systematised approach to early-stage investment is required
Scout
There are hundreds of startups working on every vertical-related innovation. Scouting for the optimal opportunities requires global resources & well-established networks
Scale
Due to the volume of startups to be assessed, scouting processes must be highly scalable to
filter the best opportunities from the firehose of possibilities.
Invest
We build & operate bespoke funds for clients, investing in startups delivering strong financial and strategic returns, and qualified growth-stage co-investment opportunities
Co-Invest
We will also work with clients to select, invest in and manage co-investment opportunities arising from the deal pipeline generated via other VC/PE funds in which they are an LP.
VCaaS Process
VCaaS
Issues, Challenges & Solutions
Democratization of Startups & Innovation
With lower cost of starting up technology innovation can occur anywhere
There are tens of thousands of startups working on any particular vertical’s related innovation globally
Global scouting requires global resources and networks
Challenge
Difficulty in identifying & accessing startups relevant to specific mandate requirements
Solution
An institutional deal sourcing & filtering process leveraging extensive global startup & innovation networks
Early Stage VC Provides Critical Distributed R&D
The driver for investment in most asset classes, including late stage VC, is a strong risk-adjusted return
Uniquely, a diversified portfolio of early stage startups delivers both a strong risk-adjusted return and a strategic return - distributed R&D
Challenge
How does an organization understand competitive risks & opportunities of the opaque startup sector
Solution
Gaining access to the global innovation network which can deliver strategic insights & analysis regarding emerging technology & industry trends
Asymmetrical Skew of VC Investment Risk
90% of returns are generated by the top 10% of startups
Early stage VC investing requires a scalable strategy that avoids uninvestable startups and invests broadly in the best 10%
Employ an option strategy - time is the best due diligence for early stage startups
Challenge
Different techniques and strategies are required for early, versus late stage, vc investment
Solution
A scalable, process driven early stage VC strategy employing an option approach to mitigate early stage VC investment risks
Prohibitive Resource Requirement
Early stage VC requires small amounts of investment capital but large amounts of resources
Global reach and regional specialization and contacts are critical in gaining full visibility of emerging technology trends and themes
Challenge
How does an organization tackle scaling issues required to understand global startup activity
Solution
An outsourced platform delivering aggregated cost benefits and a pre-screened & de-risked pipeline for later stage direct investment
Late Stage Co-investment and M&A Pipeline
Organizations are generally more willing to invest in a startup once it has demonstrable performance
A qualified early stage pipeline provides access to deals as well as comparative data to make better informed later stage investment decisions
Challenge
How does an organization make better informed, later stage, investment and M&A decisions
Solution
Via a diversified portfolio of early stage startups organizations can mitigate internal & external obstacles to direct investment and M&A activity
Headline, Moral Hazard & Signalling Risk Mitigation
Incumbent organizations face a number of acute reputational risks when dealing with startups. It is not uncommon for startups to:
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blame incumbents for failures/not reinvesting
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act in aggressive or unethical ways which may reflect badly on the incumbent
Challenge
How does an organization mitigate the risks associated with minority stakes in a range of early stage ventures
Solution
Employ an arms-length, outsourced investment vehicle that operates with relative autonomy, and perhaps a separate brand, to the organization
Bespoke Services
Artesian delivers bespoke services dependent upon the
scope and requirements of the VCaaS client
Existing VCaaS Mandates
Artesian has a range of existing VCaaS mandates
across different regions and verticals
