Thematic investing in venture capital

During the past five years, venture capital has seen a rise in investment funds focussing on specific themes. Justin Caldbeck, the co-founder of Binary Capital, explains on why this is beneficial for start-ups and funds.

First, thematic funds can provide a much greater level of operational support to start-ups than generalists. Leveraging knowledge and experience from previous investments is much easier when venture capitalists can rely on investments in similar companies at the same stage. Thereby, the success chances of start-ups can be improved by focussing investments on specific themes such as software as a service, hardware or consumer companies.

But thematic investing is also beneficial for VC funds. Founders screen their investors and tend to prefer investments from specialised funds over other funds. Thereby, venture capitalists can improve their deal flow and attract the most promising start-ups.

While Caldbeck expects specialisation to increase in the venture capital industry, generalist VC funds will also survive and thrive as the focus of funds can lead to blind spots that are covered by their holistic approach.