Brookfield Asset Management's Venture Capital Expansion

Within the realm of investment firms, distinctions are readily apparent. Brookfield Asset Management, a Toronto-based organization with a 122-year history, stands out prominently. Currently possessing a market capitalization of $63 billion and managing $600 billion in assets, Brookfield operates on a substantial scale.

Diverse Portfolio and Strategic Focus

Brookfield's investment scope encompasses a wide array of asset classes. These include real estate, infrastructure, renewable energy, private equity, and credit. Essentially, if an asset class is well-defined, it is highly probable that Brookfield has incorporated it into its investment portfolio.

Entry into Venture Capital

Venture capital represents a more recent addition to Brookfield’s investment strategy. Brookfield Technology Partners initiated venture investments approximately four years ago. Subsequently, they recruited Josh Raffaelli to spearhead this new practice.

Raffaelli's Background and Initial Impressions

Josh Raffaelli, an MBA graduate from Stanford University, brought extensive experience from Draper Fisher Jurvetson and Silver Lake to Brookfield. He initially expressed surprise at Brookfield’s venture capital foray. “I had never heard about Brookfield before,” Raffaelli stated, noting its historical focus on more traditional business sectors.

A Unique Value Proposition

Brookfield’s venture arm distinguishes itself by seeking to enhance the utilization and profitability of the company’s extensive real estate holdings. This includes reimagining office towers, shopping centers, and other properties through innovative technologies and business models.

Investment Themes and Portfolio Companies

The firm’s investments reflect this strategic alignment. Notable portfolio companies include Armis, focused on IoT device security; Loanpal, a payment platform for solar and home efficiency; and Carbon Health, a provider of integrated healthcare services.

Investment Criteria and Deal Flow

Brookfield Technology Partners typically invests between $25 million and $50 million in companies generating $10 million in revenue. These companies must demonstrate year-over-year revenue growth exceeding 100%. The team generally pursues approximately one new investment per quarter.

Independent Fund with Strategic Oversight

The fund operates independently, with its own investment committee. However, this committee comprises senior managing partners from across Brookfield’s diverse business lines, ensuring strategic alignment and informed decision-making.

The Latch Case Study

A compelling example of Brookfield’s approach is its investment in Latch, a smart access software company. Brookfield, owning approximately 70,000 multifamily units, recognized a direct need for smart lock technology.

Strategic Partnership and Revenue Generation

After a thorough evaluation, Brookfield led Latch’s Series B funding round in 2018. Subsequently, Brookfield purchased 7,000 locks from Latch, generating $10 million to $15 million in revenue for the startup. This illustrates how Brookfield’s investments can directly benefit portfolio companies.

Mitigating Risk Through Due Diligence

While strategic alignment offers significant advantages, Brookfield acknowledges the inherent risks. Raffaelli emphasizes the importance of thorough due diligence and ensuring that potential investments represent genuine strategic partnerships.

Pandemic-Driven Acceleration

Interestingly, the COVID-19 pandemic has accelerated the adoption of technology within the real estate sector. This has created a more favorable environment for Brookfield’s venture investments.

Current Investments and Future Outlook

Current investments that Raffaelli highlights include VTS, a remote property leasing platform, and Deliverr, an e-commerce fulfillment service. He believes Brookfield’s extensive real estate footprint provides a significant competitive advantage.

Adapting to Changing Real Estate Dynamics

Brookfield is actively exploring innovative uses for its properties. This includes transforming retail locations into ghost kitchens, distribution centers, and healthcare facilities. The company is focused on adapting to evolving market demands.

A Powerful Position for Innovation

Raffaelli expresses optimism about the future, emphasizing the potential of leveraging physical real estate as a catalyst for technological innovation. He views Brookfield’s position as “a very powerful place to be” in the evolving landscape of technology and the built environment.