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Why we launched Keyframe

We’re excited to announce the launch of our investment firm: Keyframe!

Over time on this blog, we’ll cover our investment focus, portfolio highlights, and sometimes just things we’ve learned that we thought others may enjoy learning as well. For now, a quick history.

A couple of years ago – Ethan, Ben, and I began to explore launching a business together around a shared thesis:

  • Large swaths of the economy, particularly in energy and transportation, were beginning to undergo dramatic and inter-related disruptions.  Painting with a broad brush, we categorize these markets within ‘physical infrastructure’.
  • Because of the highly technical nature of the traditionally siloed segments of physical infrastructure, that disruption would create the need for transformed market structures and new kinds of collaboration, both in industry and the capital markets.
  • Navigating the breakdown of these silos and the build up of new market structures would present both unprecedented challenges and unique opportunities.

We set up shop at Cyrus Capital – a firm where I have spent much of my career and continue to be actively engaged as a Partner – as Repower Group, and began trying to understand the various ways that physical infrastructure was to evolve, and subsequently, what unique opportunities would emerge to create value.  We didn’t have expectations about where we’d land – just a view that a deep strategic focus on spaces going through structural change, especially ones where we have personal interest and professional backgrounds, was the most likely path to achieving our “coup d’oeil” moment(s).

After two plus years spent dissecting tech & policy trends, countless business models (+ ultimately investing in a handful of great companies!) and studying the resulting capital markets dislocations, the following became clear:

  1. Our thesis is being confirmed in significantly broader ways than we’d expected.  Innovation in physical infrastructure is threatening existing the stability of infrastructure and driving further capital markets inefficiency.  The changes to the way that energy is produced+distributed and to how goods+people move are impacting varied and numerous industries… from food to retail to consumer goods and beyond.
  2. Despite market expectations of trillions in capital deployment, actionable structures and asset classes to deploy capital into many new business models are nascent at best.
  3. A re-enforcing positive cycle is driving faster change across industry, and increasing disparity between winners and losers.  For example, we are beginning to more commonly see things like advances in data science lowering the cost of emerging energy sources, or computer vision techniques developed for autonomous driving providing game changing efficiencies in municipal recycling or oil & gas pipeline projects.  Companies in position to benefit from this re-enforcing cycle have an ever increasing advantage.
  4. There is a high barrier to entry for generalist investors in physical infrastructure given the complexity of new technology, the often opaque market structure, and the patchwork of ever-changing regulatory and policy regimes.  Meanwhile, substantial portions of existing specialist investors in these spaces are mandate constrained (i.e. energy focused PE, credit funds), and lack the flexibility required to meet emerging capital needs.
  5. Many emerging opportunities in physical infrastructure require a business model that is operationally intensive and often capital intensive.  Growing companies of this type, even with strong unit economics, fail to fit neatly into existing venture capital firms’ expectations because of the complexity of their capital requirements.  At the same time, incumbents, who might otherwise be well positioned to benefit from disruption, are often penalized for investing too heavily in the future given the market’s short term cash flow focus.  As a result, many companies with operationally intensive business models are left without investors who can be good partners across the varied needs of their capital structure.
  6. At the same time, advances in fin-tech and legal-tech (processing, credit assessments, smart contracting, etc.) are unlocking opportunities to scale innovative products and services by lowering transaction costs for the long tail of underserved customers.  While companies are operationally more capable of scaling than ever, lack of innovative capital markets can be a barrier to growth.
  7. A fund with the flexibility to invest across asset classes and business models (#5/#6), with a generalist mandate – but dedicated focus on a few theses (#4),  in spaces undergoing market structure changes that will create large future winners and losers (#3), that will need large amounts of capital (#2), would be well positioned to address the market need in physical infrastructure and adjacent spaces (#1!).

And thus, Keyframe Capital was born.

Over the past two years of our work together, all paths consistently led us to leveraging the unique flexibility of our mandate to address a novel capital need for a company or market.  A few recent examples of those investments by our team include Wunder Capital and  May Mobility.  And a handful of others that you can expect to learn about on our blog about over time.

Ultimately, we spent the last two years validating one simple truth: As a fund with the right size, mandate, cross-asset flexibility, and industry focus, we could build a competitive advantage. By taking this approach to building Keyframe, we could be a unique and value add partner to the companies and co-investors in our focus markets.

So we spent the last several months getting that vision off of the ground!  For now, we plan to continue to have a strong focus on transportation, energy, fin-tech, and how disruption in these industries will impact the broader economy.

That’s all for now.  Thanks to all who supported us to get to this point.  Stay tuned for what’s next by subscribing to our blog!

– John

 

 

 

The views expressed here are those of the individual Keyframe Capital personnel quoted and are not the views of Keyframe Capital or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by Keyframe Capital. While taken from sources believed to be reliable, Keyframe has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation.

This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by Keyframe Capital. Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by Keyframe Capital, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results.

Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

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