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Getting Proactive: Digging Deep for Dealflow Diamonds

Getting Proactive: Digging Deep for Dealflow Diamonds

People often ask us, "Where does Pangaea find all its deals?" The answer is quite proprietary: We've developed channels to over 120 universities and research centers; we are reading patents daily; we follow the work of individual researchers sometimes for years before engaging with an eye to invest. The key is that we generate the majority of our dealflow proactively, and with good reason.

Sure, some deals are reactive. Of course Pangaea has people approaching us with business plans. We have found some exceptional opportunities that way! Companies like NewLeaf Symbiotics, where valued coinvestors from another portfolio company asked us to join their syndicate.

Deals like that, though very valuable, are not the subject of this article. Waiting for somebody to approach you with a deal is, honestly, something anybody can do. Whether or not you have the value-add that brings deals to you is another question!

No, the subject of this blog is proactive dealflow, a more difficult method where every investor has a different approach. For some, their approach is not to be proactive, and that's fine. But for Pangaea, proactive dealflow is something we are generating every day.

A few years ago, Pangaea saw trends in mobile electronics and electric vehicles as requiring breakthroughs in energy storage. We had diligenced a few dozen battery opportunities but were not convinced by any of them. So, we made the decision to proactively assess the entire battery landscape.

We looked for any start-up company developing new battery materials. Cathodes, anodes, separators, electrolytes. We compared their technologies to published data from the established industrial leaders. We dug into all of the academic research on these materials.

We compiled a matrix comparing various key metrics, such as gravimetric and volumetric energy and power density, cost, chemistry, manufacturing process, IP, etc. etc. We assembled some 80 technologies to compare across multiple dimensions, which helped us identify which parameters really mattered, and where we were likely to find winning investments.

Out of that effort, Pangaea made investments in Envia Systems and Cnano Technology, both of which have differentiated advanced materials technologies solving major problems in both consumer electronics and automotive markets.. Envia engineered a proprietary layer-layer cathode material formulation that led to record breaking energy density at over 400Wh/kg. Combined with competitive costs, this has enabled Envia to achieve significant progress in the automotive sector.

Cnano, meanwhile, has grown from a Tsinghua University spin-out to become the world's largest producer of multi-walled carbon nanotubes. In addition to the battery materials application, Cnano's nanotubes are also in demand for composite polymer materials. The demand for Cnano's products have been so great that the company has recently expanded operations to an additional plant.

So, the proactive dealflow approach can and does work very well! But that's only part of the story. In addition to getting Pangaea in to some very exciting investments, the proactive dealflow approach has also kept us out of others. The key that the choice to stay out was ours, and it was an informed decision.

In 2011, we were tracking trends in electric vehicles and other sectors, and saw the potential for a spike in the demand for supercapacitors. Given Pangaea's experience in energy storage materials, it seemed a natural fit for us, so we began the same proactive, multi-dimensional comparison we had done with batteries. We assembled a database of thirty-odd ultracapacitor companies and technologies and began to compare and analyze.

Although some superior technologies emerged from our due diligence, Pangaea chose not to make any investments specifically in the supercapacitor space. Several companies had compelling technologies but one issue or another put them at a disadvantage relative to other investments we were considering. We did end up investing in Boulder Ionics, whose ionic liquid technologies are ideal for making electrolytes for both capacitors and batteries, but it was really a very different (and much better!) play than any of the ultracapacitor-specific opportunities we investigated.

For any opportunity Pangaea considers, we have multiple comparables with related technologies addressing the same or similar markets. This kind of competitive analysis helps winners shine out like a glowing neon needle in a monochrome haystack. Without this proactive approach, it would be very difficult to make informed decisions about which companies or technologies are likely to win. Fortunately, we have developed an approach that is working very well!

General Partner, Pangaea Ventures Ltd. Keith has been making cleantech and advanced material venture investments since 2001, having managed Mitsubishi Corporation's Canadian VC activities and BASF Venture Capital America out of Silicon Valley.View Keith Gillard's profile on LinkedIn

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