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A Different Kind of Due Diligence Process

A Different Kind of Due Diligence Process
By Vin Narayanan
Date October 11, 2022

In order to survive and thrive, human civilization needs water, food and energy. Everything else flows from these three things. That’s why as a startup investor, I keep a close eye on anything that’s changing or potentially disrupting one of these spaces. Investing early in game-changing innovations in one of these sectors can yield outsized returns. But finding good investments is a challenging process.

The technology takes a long time to develop. The sales cycles for many of the new innovations are incredibly long. Convincing society, consumers or governments to use these new products or innovations isn’t assured. And these spaces are filled with incredibly rich and powerful incumbents working to make sure startups fail.

That doesn’t mean finding good investments can’t be done. It’s definitely possible. It just requires a different type of due diligence process. And that’s what I was doing this morning.

I got up early today to attend the Axios “A Global Look at Energy Reliability, Independence & the Environment” event. In it, they interviewed Deputy Energy Secretary David M. Turk, Resources for the Future President and CEO Richard G. Newell, former Federal Energy Regulatory Commission Chair Neil Chatterjee and EQT President and CEO Toby Rice. And only a minimal amount of time was spent discussing oil.

Instead, the discussion focused on energy as a national/global security issue, future supplies of energy and future transmission/distribution of energy. I hadn’t thought about dividing energy startups, but it makes sense.

For example, understanding how a short-term (five to 10 years) focus on increasing the liquefied natural gas (LNG) supply can both bring carbon emissions down and deepen economic ties between the U.S. and the rest of the world provides added context to potential LNG plays.

Similarly, understanding how minerals like nickel or zinc are important parts of making batteries or parts for renewable energy sources opens up an entirely new universe of energy investments.

And most importantly, creating ways to plug renewables into the grid and transmit renewable energy is one of the biggest pieces of infrastructure that needs to be built — which makes it one of the most appealing investment opportunities.

When you’re investing in spaces like energy, food and water, it’s critical to expand where you go looking for information. Each talk you attend, each video you watch and each paper that you read will expand your knowledge base. And it will provide the edge you need to find the right investment opportunity

I’m now more focused than ever on energy storage and transmission. And if I spot a good startup in that space, I’ll let you know.

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