Pangaea Ventures is the world’s leading venture capital firm in advanced materials. With its niche focus on advanced materials, Pangaea Ventures is striving to make the world a better place one startup-investment at a time. The firm was founded in 2000, and the portfolio is currently made up of 10 investment and 8 exits. KITE Invest spoke with General Partner, Chris Erickson, to get a better perspective of this specialized venture capital firm.
KITE Invest: Briefly shed light on the development of Pangaea Ventures and the specialized sector in which has been investing in over the last 15 years.
Chris Erickson: In 2001, we closed Pangaea I with the mandate to invest in advanced materials and IT. Within two years after closing that Fund we decided to focus exclusively on advanced materials.
At the time most venture capital funds were generalist funds, and we felt that we needed to specialize, to establish a reputation, and to raise money. That was the strategy we made in about 2003 and it started to reap the rewards by 2006 when we began to get returns from advanced materials and raising our second fund. At this time we went out to market as an advanced material venture capital fund.
Most of the money in that second fund came from large strategic corporations that wanted in on innovation and technologies that could affect them and create opportunities for them in the future. We also built our team around this focus and have methodically added people to our team over the last 14 years with the expertise in this space. Now we are seen as the world’s leading advanced material venture capital fund.
KITE: Regarding Pangaea Ventures 16 major multinational Strategic Limited Partners, including Samsung and Mitsubishi Chemical Holdings, how do Pangaea’s relationships with significant brand ambassadors in advanced materials directly affect the startup companies that Pangaea invests in?
CE: It is a bit of a synergetic process. We learn from our strategic corporate investors, which are some of the largest chemical material and industrial companies in the world, what they see in the marketplace and their focus for the future growth. Therefore, we are able to have a market perspective of what some of the needs and problems are.
Over the last ten years there has been a wave within these large companies to do external innovation, as well as internal innovation –as an important way to stay on top of their market. We have the top deal flow in advanced materials, and these large companies want to see opportunities and they want to work with our portfolio companies. As a result, many of our portfolio companies in one way or another strike relationships with one or more of our strategic corporate investors, be it joint development agreements to improve the technology, be it manufacturing relationships to get product out to market or supply or customer relationships. Simply by bringing these large corporations to work with our portfolio companies adds value to the portfolio company in and of itself.
KITE: While Pangaea has offices in British Columbia and New Jersey, the Strategic Limited Partners come from around the globe. To this point what is the geographical focus of Pangaea’s investments and are there areas that Pangaea is hoping to enter in the future?
CE: Historically we have been focused on North America for investments. Only one of our investments to date has been outside North America, and that is Cnano Technologies, a company located in China. However, this geographical focus is going to change.
Eighteen per cent of our deal flow was in Europe last year, so we expect to make investments in that market grow quite soon and we hope to open an office in Europe within a year. The deal flow and the companies that we look at have been global. About 75% of our deal flow has a North American base, and our offices are here, but we will be expanding outwards over time.
KITE: The World Economic Forum’s list of the 10 emerging technologies revolve around safeguarding the planet and go in line with the focus areas of Pangaea. How does Pangaea view this recognition of the emerging technologies by the WEF affecting the investment landscape of advanced materials?
CE: The World Economic Forum’s Top 10 technologies aligns with our investment focus and thesis quiet well. Some of the most significant scientific breakthroughs are in advanced materials for energy, electronics, health, and sustainability.
Let me give you three examples. Additive manufacturing, sometimes called 3D printing, is a big growing market that is based on advanced materials. Also recycling of thermostat plastics, which will make a huge dent in landfills and waste. Genetic engineering for agriculture will help solve hunger issues, and make agriculture more sustainable is also largely based in advanced materials. Not all of the WEF’s emerging technologies are in advanced materials, but they largely align with what we are investing in.
KITE: Mentioning Pangaea’s market focus in energy, electronics, health and sustainability. What are the characteristics of the companies within these markets that Pangaea looks for? What makes an investment opportunity intriguing?
CE: Well, we are investing in smart entrepreneurs with breakthrough innovations that have a large value proposition in a large market; therefore, the team is important and critical, the product needs to be solving a significant problem, and the markets being entered into are emerging and growing fast. These are key things that we are looking for and companies that we want to invest in.
KITE: Lastly, what advice would you give to startups seeking funding? Where would you suggest emphasis is given –the team, product, awards etc.?
CE: My advice is to be bold, think big and solve a significant problem. It is also important to be clear in your message and presentation. We like to see quality management teams and those that are prepared to accept advice from people in the market and strategic advisors. We want to work with entrepreneurs that are willing to grow and learn, but are also being bold and thinking big.