A Bird’s Eye View of the R/GA Ventures Sourcing Process: Connecting the Dots from Opportunity to Solution
So far, we’ve written about building a minimum viable brand and designing an effective user experience for startups as part of our “process” series. But before we help companies grow and scale, we first need to find them.
Using our Macquarie Capital Venture Studio as a case study, this piece highlights the sourcing process that guides our thinking as we connect the dots from opportunity to solution: in this case, as we identify the drone startups that can add value to Macquarie’s owned and operated assets.
Macquarie Capital Venture Studio
The Macquarie Capital Venture Studio kicked off in February 2018 with a mandate to promote innovations in infrastructure technology, or “InfraTech.” Macquarie Capital is one of the largest owners of infrastructure and energy assets in the world, with a portfolio across…
- Transportation (toll roads, bridges, shipping ports, airports)
- Power (solar farms, wind farms, hydropower facilities, commercial battery storage projects, utilities)
- Real estate (schools, hospitals, prisons, development sites)
These hard assets represent a wealth of opportunity for startups operating in the commercial and industrial space.
Quick Refresh: The Venture Studio
Last September, we wrote about the evolution of R/GA Ventures from running accelerator programs to operating Venture Studios. In a Venture Studio, we help our corporate partners solve business problems, identify and capitalize on disruptive technologies, and engage with emerging behaviors by tapping into the startup community.
To our corporate partners, the startup world represents an ecosystem of solutions. To startups, our partners are a network of opportunity. Yet connecting the dots between opportunities and solutions is easier said than done.
That’s why an integral component of our Venture Studio model is startup sourcing: helping our corporate partners find the new players and emerging technologies best suited to address their most pressing issues.
Step one: Develop the sourcing strategy
The Venture Studio model allows our corporate partners to identify, test, and invest in emerging technologies in an efficient, low-risk process. One way that we ensure efficiency is by helping our corporate partners identify the technologies that have biggest potential to impact their business. Using a team of analysts, technologists, and entrepreneurs-in-residence, R/GA Ventures develops a sourcing strategy specific to our partner. For Macquarie Capital, we need:
- Clear and direct strategic alignment with Macquarie assets. This is essential in supporting the innovation exchange — within Macquarie’s assets lie opportunities for emerging technologies to create new value or solve operating pain-points. After conducting an audit of Macquarie’s owned and operated assets, we identified broad themes that helped us to hone and organize our research efforts. One of these themes is Inspection, Detection, and Protection — technologies securing our most critical assets.
- Established product-market fit. This requirement helps us to narrow the range of technologies that we consider for the Venture Studio. While a technology like blockchain excites us and offers real potential in the energy and infrastructure space, most of the companies building blockchain products are simply too nascent for full deployment in the Macquarie Capital portfolio.
Sourcing is a fluid process. Blockchain’s immense promise captivated us at the beginning of our sourcing for the Macquarie Capital Venture Studio, and we focused a considerable amount of our early efforts on understanding the technology and identifying companies using it in an energy context. It was important for us to maintain flexibility and pivot our immediate focus away from blockchain as we discovered how far most companies were from achieving full scale implementations, although we still actively monitor these companies as they work towards larger deployments.
For Macquarie Capital, limiting our search to startups with established market traction will help us to ensure successful pilots. Within the realm of Inspection, Detection, and Protection, this led us to tech including IoT sensors, AI-enabled analytics platforms, and drones.
Step two: Find a North Star
To illustrate the iterative methodology behind our sourcing process, let’s focus on one technology: drones. With companies like Flock in our portfolio, R/GA Ventures is no stranger to this space. But looking at the technology through the lens of its application to Macquarie Capital — Inspection, Detection, and Protection — required us to approach the drone industry differently.
This lens allowed us to quickly eliminate applications of drones irrelevant to the Macquarie Capital Venture Studio, such as hobbyist flying and package delivery. This served as our first filter on drone technology, giving us a point of view as we conducted our initial research. Having a North Star — even one as broad as Inspection, Detection, and Protection — kept us focused and guided our conversations with players in this space.
In this stage of sourcing, we collect as much data as we can. This includes…
- Reaching out to relevant portfolio companies to learn their perspective on the category
- Connecting with institutional and strategic investors active in the space
- Reading white papers and industry reports
- Pulling companies from databases like Crunchbase
- Interviewing subject matter experts and industry leaders — including Michael Huerta, former Administrator of the FAA and Senior Adviser at Macquarie Capital
This research gives us a more nuanced view of the technology. While drone hardware has been around for years, it is critical for us to understand the new commercial opportunities and regulatory hurdles.
Step three: Identify our swim-lanes
Even with a North Star to guide us, the array of relevant drone companies is vast — everything from drones themselves to flight planning software to drone operator networks to components for precision navigation.
Keeping in-line with our primary sourcing requirement — clear and direct strategic alignment with Macquarie assets — it became clear that the companies that had the most potential were ones that bridge the gap from raw drone data to actionable information. Furthermore, a deeper audit of the category revealed that the hardware side of the drone industry is rapidly consolidating to a handful of major players (DJI alone, for example, owns 72% of the global market share).
These two findings — that actionable drone data was key for Macquarie and that the drone hardware market is already dominated by a small group of companies — drove the next major refinement of our sourcing criteria. We narrowed our search to software companies facilitating the capture, storage, and processing of drone data.
Step four: Conduct holistic diligence
Achieving this level of focus is key prior to conducting due diligence. Our diligence process hits the usual beats — team, revenue, defensibility, etc. — but is augmented to account for the unique criteria that matter to our corporate partners.
We also take advantage of R/GA’s expertise. Unlike VCs or other venture consulting firms, R/GA Ventures enjoys direct access to R/GA’s teams of technologists, brand strategists, designers, and more. We loop in members of these teams — the same types of people who developed the Nike+ experience for Apple Watch, built the Beats brand, and designed an entirely new mobile-only bank for Bradesco — to help us achieve holistic diligence.
We use systematic scoring tools that we’ve developed internally to guide us through this entire process. This is essential in keeping these different perspectives organized and aligned with our ultimate goal: finding the best startups that we can for our partners.
From sourcing to Services: The Venture Studio approach
This article focused on drones to illustrate how we develop a sourcing strategy, but we apply this same process to each technology and industry that holds untapped solutions for our clients.
Once we’ve identified our startups and signed the contracts, we’re ready to kick off the Services phase: the process by which we help companies scale through access to R/GA’s creative, strategic, and technological talent (See an example of the output of Services here). In parallel, we work with our corporate partners — like Macquarie Capital — to develop pilot projects and integrations.
This process represents some of the key characteristics that differentiate R/GA Ventures from other consultancies, accelerators, or corporate innovation programs: a focus on the innovation exchange between industry leaders and emerging players, an action-oriented approach to partnerships, and the “creative capital” offered by R/GA’s global network. It’s acceleration redefined.
The Macquarie Capital Venture Studio with R/GA is a platform designed to promote innovation in InfraTech, with a focus on energy from source to switch. The first three companies to participate in the Venture Studio will be announced in early May. Learn more here.
