MCJ Collective LP Report (Q2 2022)
In the spirit of transparency, we are publishing as much of the contents of our quarterly letter to our Limited Partners (the investors in our MCJ Collective venture funds) as allowable from a confidentiality standpoint. Here is our full public report from Q2 2022 and of course you may always view our publicly announced MCJ Collective investments on our portfolio page. We hope you enjoy the insights herein.
Dear MCJ Collective LPs,
Economic headwinds have been roiling the technology sector at large for the last few months, and it seems clear we're headed toward a sustained bear market if not full-blown recession. While the turbulence has hit the public markets and later-stage private companies the hardest to date, we’re clear-eyed in our expectation that this will trickle down to early-stage companies and result in a protracted period in which raising capital will be more challenging than we have experienced in years. Knowing climate tech is not immune to this broader market correction, we are, nevertheless, confident that it offers MCJ Collective an opportunity to continue building a portfolio of the very best companies to address the climate crisis.
There are several reasons that underlie our long-term optimism:
1. The urgency of the climate challenge creates investment durability.
The solutions we are backing are not just opportunistically great businesses, they are companies building solutions that are urgently needed. Large corporations, governments, and vast sums of financial capital have made very public commitments related to climate change, and the time-boundedness of the need for solutions is real. The transition to clean and renewable energy sources, the movement of industry into decarbonized solutions, the transition to electric mobility, the shift of agricultural practices to less carbon intensive methods – all of these are critical shifts that need to happen this decade. And in parallel, solutions to manage risk and resilience in the face of an already changing planet are becoming increasingly more critical to sustain both global business operations and some semblance of life as we know it.
2. Our diversified portfolio approach ensures we are backing a wide-range of high-potential companies with strong capital foundations.
The MCJ Collective portfolio spans early to late-stage companies — reflecting wide-ranging categories as low-GHG fertilizer to forestry carbon markets. In addition, we’re building a portfolio that is increasingly international and choosing founders with diverse backgrounds. Our conviction rests on the belief that the breadth of our investments — 68 companies as of this writing — constitutes a resilient portfolio that, in spite of a difficult economic environment and expected losses, has the potential to yield outsized returns.
3. The MCJ flywheel of community, capital, and content not only creates outsized access for us to invest in leading companies, but also allows us to “punch above our weight class” in providing support for our portfolio, earning us continued access into future rounds.
We see this flywheel in effect every single day. Portfolio companies source talent from the MCJ member community. Community members recommend companies that become guests on the pod and then become investments from the fund. Pod listeners contact us with market-making business development opportunities for startups on the show. This self-reinforcing flywheel accelerates faster as our content reach gains more and more influence and as our member community attracts more and more solutions-oriented leaders.
Finally, we should note that we see a clear opportunity ahead of us to back companies that will not only survive a down cycle, but thrive in a world of diminished competition, greater access to top talent, and a focus on the economic fundamentals of their business. In addition, an end to the bull market of the past 12 years, marked by easy access to money and sky-high speculative valuations, means that prospectively our funds should be able to invest at reasonable and favorable valuations. We could not be more confident that our unique positioning as collaborative capital — adding tangible value to an investor syndicate through our content, community, and other assets — is even more important to founders in this new landscape. To paraphrase John Doerr, who shared his reflections at a conference we attended in May, we fully believe that now is the time to “triple down” on climate tech.
We continue to be honored and motivated by your ongoing commitment to the funds, which time and again has come in many forms, and look forward to working with you to back the next generation of climate tech solutions.
Sincerely,
Jason, Cody, David, Yin, and Thai
