Delphi’s Oracle

8th March 2018  

by Andrea Colombo, Founding Partner at U-Start

Venture Capital is a quite complicated and risky business. Just a few funds are able to generate interesting returns. This kind of difficulty in creating attractive performances is perfectly summarised in the following quote by Dan Levitan, Maveron fund's Founder: “There are lots of ways to make money in Venture Capital, and there are even more ways to be mediocre. The industry has too much money and too many smart people chasing too few great entrepreneurs."

So, what is the secret recipe for those “mammasantissima” funds that have top class IRR and who largely reward the asset class's investment risk? I would say that is the perfect combination of insight, intelligence, fortune and, mostly, the capability of having a privileged access to future visions.

In ancient Greece, people who wanted to have a look in the future offered food plentiful libations and sacrifices to Pizia, Delphi temple’s priestess. Today, we should ask for an audience to oracles as Google, Facebook, Amazon, and Airbnb. In other words, to the ones that are shaping the Tech and Digital sector through monopolistic models.

Unfortunately, none of these things is possible in U-Start yet. So I decided to write this editorial to reflect deeply on possible trends and study sectors. Education and detailed comprehension are essential elements for every kind of evaluations and investment choices.

To guess the future, you need to look back at the past. Such an interesting oxymoron!

To observe our Club Members' portfolio company growth is certainly a useful exercise to understand their innovation capability at 360 degrees other than the real needs own by the markets in which they’re planning to operate innovation.

Talking about business sectors, I am especially interested in Media, Food biotechnology and Retail. They are facing, and sometimes suffering, incredible developments.

The Media sector is totally changing. Information demand, and more generally content demand, is not satisfied anymore by traditional printed products, neither by the televise ones and, sometimes, by the digital ones. Nowadays, traditional media operators are desperately trying to intercept this shift of demand, hoping on individuating digital innovative proposals that are able to offer a new and entertainment delivery service that could get into the deepest intimate and daily people life. To do something like this means to create modern and mobile-only interfaces and, moreover, to know how to set your presence on platforms such as Facebook, Instagram, Pinterest, Snapchat and Musically. This trend is at the same time super fascinated and complicated, as the shift is so fast that new media brands are questioning how they can maintain a deep relationship with users in the long run. We are confident to have found in Freeda, one of the last deal offered to our Club Members, the media company that most answer to this challenge.

The Food biotechnology sector is also boiling. Recent capital increases of companies like Memphis Meats, Impossible Foods, and Clara Foods make us part of a world that is changing for the better. Food sustainability is the main point for these companies offering laboratory made food without animal derivation components. They now can do it with meat, eggs, milk and, thanks to Finless Foods, fish.

Finally, let’s think about Retail (and retailers), such as American giants’ distribution placed in a corner by Amazon and others E-Commerce platforms. These are all brands that cannot meet the new generations' demands offering innovative shopping experiences. Then here we go with DNVB or E-Commerce with subscription business models. Stichfix, Casper and Warby Parker in the United States, Outfittery, Horizn Studios and Velasca in Europe (and in the U-Start Club Members’ portfolio).

All this is happening now.

What about the long run? Maybe in the next 20 years, Artificial Intelligence will make man's work no longer necessary. Maybe in 50 years, goods and services will be free because Artificial Intelligences will own production means or, better said, they will be the means and the production themselves.

But this is another investment story...