The Best of Both Worlds?
Corporate VCs and traditional investors offer different advantages to startups. While venture capitalists excel at helping companies secure their next funding round or hire key personnel, corporate venture capital (CVC) firms can leverage their parent company’s resources to serve as early product testers or customers. Suffolk Technologies, the Boston-based construction giant Suffolk Construction’s new VC arm, seeks to provide its portfolio companies with the benefits of both and reap the rewards for itself.
The Genesis of Suffolk Technologies
Jit Kee Chin, co-founder and managing partner of Suffolk Technologies, explained that the fund’s parent company began investing in startups a few years ago after recognizing two key trends: construction innovation was emerging from startup companies, and venture capitalists were eager to support these firms. "We saw the potential, we saw the strategic value for us going in, and decided to start investing in early 2019," Chin told TechCrunch+. The company initially invested off its balance sheet but eventually departed from this approach and started raising external capital.
A $110 Million Fund with a Unique Approach
Suffolk Technologies recently launched its debut $110 million fund, which focuses on supporting construction technology startups across various stages. While the fund shares some resources with its parent company, such as marketing support, it primarily raised capital from external investors and operates independently. Chin emphasized that taking on outside investors was the right decision for the firm.
Why External Capital Makes Sense
There are several reasons why Suffolk Technologies chose to raise external capital:
- Expanded Investment Scale: By adding LPs (limited partners), the fund can invest more actively while still bringing financial rewards back to its parent company.
- Industry Expertise and Support: Many of the firm’s LPs have a background in construction or related industries, providing valuable expertise and support to portfolio companies.
- Increased Potential Upside: Raising external capital allows Suffolk Technologies to access more funding opportunities and potentially achieve higher returns.
A New Model for CVC Firms?
Suffolk Technologies’ approach may inspire other CVC firms to reconsider their investment strategies. Many of these firms operate relatively small funds compared to their parent companies, which can limit their ability to invest in promising startups. By raising external capital, Suffolk Technologies has avoided these size constraints and can now offer more substantial support to its portfolio companies.
Conclusion
Suffolk Technologies’ innovative approach to venture capital combines the benefits of traditional VC firms with the resources and expertise offered by CVC firms. As the startup ecosystem continues to evolve, it will be interesting to see whether other CVC firms follow Suffolk’s lead and adopt a more collaborative investment strategy.
Related Topics
- Construction Technology: The growing sector that Suffolk Technologies is focused on supporting.
- Corporate Venture Capital (CVC): Firms like Suffolk Technologies that invest in startups as part of their parent company’s business strategy.
- Venture Capital: The broader industry that provides funding and support to innovative startup companies.