From partnering with Elon Musk to describing how Brookfield became a technology investor, Josh Raffaelli, Managing Director at Brookfield Asset Management and former Managing Director at Silver Lake takes us through his different experiences in technology investments. We talk about a special unit called Brookfield Technology Partners —a branch of Brookfield that invests in technologies that digitize the built world.
• 5 min. read •
Brookfield Investments' Ecosystem:
Josh Raffaelli: "With regards to technology investments at Brookfield, the most important thing to figure out whether we’re good or not starts with access. Can you access the most exciting technology companies in the world? Are they excited about partnering with you?
Because if we understand the recurrence in late stage growth, and just the Venture industry in general, it is concentrated in a very few number of players. So that question of who you partner with and who you are spending time with is about that journey within the community and the ecosystem in which we compete. So are we any good at this?
What we do is we say we leverage the Brookfields ecosystem - which is the $500 billion assets that we own, the 150 thousands operating professionals that we employ, and that knowledge base of the 37 countries we operate in to understand and to channel that ecosystem towards the creation of enterprise value with businesses that we partner with. (...)"
Technology Investment Process at Brookfield:
JR: "We have industry councils managing our assets every single day. We categorise the ownership of Brookfield assets and operating businesses into different segments. (...) So it is our job to leverage those people to identify their needs first. Second is bringing them along in our diligence process. This is really how you differentiate yourself. Having Josh Raffaelli show up is fine to go meet with the company, but if I can bring the guy who runs all of our home building businesses into a conversation about what the future of Smart Homes looks like -- it is a totally different conversation. And what happens is: the entrepreneur very quickly gravitates towards that strategic bent. So when you leave that red room, your impression is much different from any investor that has come before you because you show up and say: “I’m here because we identified the pain point, I can tell you exactly what that means and quantify it within Brookfield and more importantly help you navigate the Brookfield organization and then this industry as a whole. Because we speak the language of our peers, in a very conservative ecosystem of real asset owners. And it is our job to help you on that journey with validation capital."
About SpaceX and Brookfield’s Innovation Investment Strategy
JR: "How do you take industries that are very complicated with entrenched interests trying to kill you every single day and try to find your own path? The example that I love to give of embracing complexity was Space X. I remember this conversation in 2009/2010 and at the time we had a great business model. We had a cost position that was 1/10th the cost. (...) And Elon just turns and says: “Our competition is not ULA (United Launch Alliance), our competition is China, and our price point in order to beat that is not 10% reduction - it has to be 100%”. (...) And it's the learning you get there - that long term vision exercise: understanding what the real prize is. The prize is not building a luxury car that only a few people can afford. The prize is the electrification of the broader market. The vision and dream is to have an enduring moat that can persist. The managers that I work with are the ones that follow that discipline and are always asking what is the prize that we are really trying to solve for and ignore the inner complexity and the challenge you can have by having an oversimplified business model. This is exactly the business model that Brookfield will get behind. It is about the upgrade transition from existing coal buyer and natural gas power generation to a renewables future and the ground game is in the residential business (...)."
How Technologies Will Help Real Estate and Retail
JR: "This is the perfect time to be investing in Real Estate. We have a question: “is technology an opportunity or a threat?”. There has not been a situation in recent memory where the owners of Real Estate are looking so closely at what technology solutions are going to make them better at their jobs than now. Because we have to do more with less. The technologies that are going to be bringing people back to the office and making them comfortable and excited about being in a collaborative, close group again are going to be based on some technology solutions that we see today. If you think of the future of our retail business: malls are changing. This is about location and offering a differentiated solution for our customers and our tenants. It is about opportunities to think in more creative ways about business models, about how to leverage the amount of rents that you can extract from any property that you own. And so I think the future has not been as bright. " (...)
Other subjects in the discussion: which stage of companies' lifecycle is most interesting to Brookfield, case studies and latest investment examples by Brookfield,
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