What’s Different About the SX2 Venture Model?
Our model is deliberately different from most venture capital firms. There are two main differentiators: First, we are happy to build a company from scratch ourselves if the opportunity is there and we have the tools we need. We aren’t just backing other people’s companies and business ideas – we will back our own. Our most successful project to date was a company we founded and scaled up ourselves, bringing in third-party capital as we needed to accelerate the growth. Part of the attraction of the ‘build it’ model is that it means we can put in place the culture and values we want from the start. This can be particularly important in emerging markets, where corporate governance is a critical driver of sustainable success.
A second point of differentiation is our time horizon for the investment cycle. We took the view that we wish to do a fewer number of things really well rather than many things quite well. We deploy capital only when we are truly ready to take on a project, not because we have committed in advance to deploying a certain amount of capital over a set investment period – which is what happens with a typical venture fund. And once we’ve invested, we are more interested in long-term value creation than would be the norm for a typical venture fund, holding an investment for yield and capital appreciation rather than exiting against a set time frame. We don’t even use the concept of IRR (internal rate of return) to assess investments, as it tends to favour shorter-term thinking for value creation. All of this has led us to eschew the traditional fund structure and, aside from our own capital at the core of all of our projects, we only raise project-specific capital from third parties.