Financial investment giant Macquarie Capital has teamed up with digital advertising and brand agency R/GA to invest in a wide range of startups that have potential to disrupt both traditional and digital markets.
The companies have set up a unique partnership — the Macquarie Capital Venture Studio (MCVS) with R/GA — where the investment arm of R/GA (R/GA Ventures) finds startups and vets them with Macquarie Capital, a division of the sprawling Macquarie Group. Then the partners help nurture the startups and run pilot tests of their technology through partnerships with Macquarie’s larger portfolio companies.
Macquarie, with hundreds of billions of dollars in investment assets under management, has developed a big ownership position in infrastructure companies around the world. But it is aware that those traditional businesses can be disrupted by startups with clever technologies.
“Infrastructure is no different in that respect, and we want to be a part of that,” Michael Silverton, head of Macquarie Capital Americas, said in an exclusive interview with VentureBeat. “We partnered with R/GA, as we didn’t want to create our own incubator. We did want to create a platform to identify leaders in technology.”
Macquarie typically invests much higher amounts of money, around $20 million to $150 million, in growth companies.
“We recognize we have to move earlier than our traditional investment timing to capture the opportunities and help them develop efficiently,” said Silverton.
Gene Mauro, head of the R/GA investment team, said the investment amounts are deliberately on the small side.
“We don’t quantify the fund amount. That would put us in the institutional investment business, and we are deliberately not writing a big check to start,” Mauro said. “We come in with a six-figure check.”
Working with Macquarie helps R/GA get perspective and “make sure we are not boiling the ocean” with startups that don’t have a practical use for their ideas, Mauro said.
“This is a game changer, about accelerating your startup’s commercialization,” Mauro said.
While such small investments may not move the needle for Macquarie in terms of its overall rates of return on investment, they do help identify disruptive technologies and unearth ideas that will help its larger companies.
“This comes back to point that whole industries are being impacted by new technology,” Silverton said. “It’s incredibly exciting. To find the players that are going to be successful, you need to be in the early stage. We are helping to develop a new industry. Tech will become more and more important.”
He added, “We need to establish dialogue between entrepreneurs and asset owners to see what those opportunities look like. It’s thinking of the future. You have to see ahead of the curve. It adds value to assets we have.”
Silverton said there are three focus areas. One theme is called “inspect, detect, and protect,” which includes the sensors, maintenance, and safety technologies to protect infrastructure. That’s essentially the Internet of Things, or making everyday objects smart, connected, and sensored.
The partnership is also investing in the theme of distributed energy or renewable energy. And finally the partners are looking at productivity and automation through technologies such as augmented reality, virtual reality, mixed reality, artificial intelligence, and machine learning.
Mauro and Silverton said they have already invested in three companies.
Zero Mass Water
Zero Mass Water has developed Source, a “hydropanel” that magically turns sunlight and air into potable drinking water at scale. It fits within MCVS’ investment theme of distributed energy resources. Source is already deployed in 14 countries on five continents.
Potential applications of Source include anyone who wants to create their own pure water supplies. The potential customers include luxury hotels, schools, single-family homes, offices, military, government buildings, and more. Using mega-arrays of Source panels creates a more cost-effective and environmentally friendly water source for bottled water companies.
It also addresses social good. In addition to the business opportunities presented by on-site water generation, Zero Mass Water is committed to using the technology to improve the lives of people in water-scarce regions.
“There is both a philanthropic and commercial side, with a magical element to it,” Mauro said.
Macquarie Capital believes it can accelerate the startup’s international growth and help it find more funding. Zero Mass Water is currently seeking a $50 million funding round.
The investments include Hangar, which makes a platform that powers the capture, processing, and delivery of visual insights to create interactive digital histories of construction sites, infrastructure, and other valuable assets. Hangar fits in with the theme of “inspect, detect, and protect.” The idea is that Hangar will protect the assets under management in Macquarie’s infrastructure and construction portfolio.
Hangar’s AutoPilot allows drone operators to accurately capture aerial data. Hangar’s JobSight lets customers easily request and view this data, and Hangar’s Kinetic Edge supports autonomous operations across numerous industries. Over time, the Hangar technology could be applied directly to predictive maintenance.
Another MCVS investment is San Francisco-based Sunfolding, which is developing new approaches to solar tracking for commercial and utility systems with the first pneumatic tracker. The ideas is to deliver cost and performance breakthroughs to stakeholders across the solar industry.
Sunfolding fits with Macquarie’s ongoing commitment to solar generation. Sunfolding represents an opportunity to build solar infrastructure that is faster to deploy, more cost-effective, and easier to maintain. Sunfolding replaces dozens of high-wear components on solar panels with one robust wear-free part, the Sunfolding AirDrive. This cuts construction time and costs, reduces development overhead, and maximizes operating profits by minimizing maintenance costs.
Silverton said the team plans to bring Sunfolding’s product to Macquarie’s portfolio companies.
R/GA is an international digital ad and marketing agency with about 2,000 people worldwide. It gets heavily involved in product creation with its clients, and worked on things like the first wearables that Nike deployed. It helped Beats Audio design its products and get off the ground ahead of its sale to Apple. R/GA is part of Interpublic Group, a larger holding company, and it started doing venture investments more than five years ago.
Mauro joined last year to help the company elevate its venture consulting practice, which worked with Snapchat in scaling up more creative third-parties on Snap’s platform. R/GA invested in eight companies, and it also helped Verizon Ventures find startups to invest in. About 15 pilot projects surfaced that way, Mauro said.
Through that activity, R/GA has helped source a lot of potential startups for Macquarie to evaluate. It took a little while to come up with a strategy, messaging, and a focus to align the objectives for both Macquarie and R/GA. And now they are sifting through companies that need seed or second-round investments.
Silverton said that the team has looked at more than 502 startups, and it came up with its first round of three investments this year. A few more investments are pending.
“This is about access to customers who can accelerate commercialization,” Mauro said.
It’s a relatively small team of investors at both R/GA and Macquarie that are making the investments. Silverton said that Macquarie is “not keen on investing in companies that are just an idea.” Rather, it is looking at companies that have made progress on product development and need support with pilot projects.
So far the partnership is working out well.
“We have been pleasantly surprised with R/GA, which is a great partner to embark on this journey,” Silverton said. “They can bring their expertise on branding, marketplace, and product development. And Macquarie can bring its experience around infrastructure to pilot a lot of these new technologies to advance the growth of these startups.”