Trends Watch: Investing in Sustainability, Diversity, Philanthropy, Health Care, and Blue Tech

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.   

This week, Elana talks with Dylan White, Founder & CEO, Alleviate Ventures. 

What is your outlook for venture capital investing in sustainability, diversity, philanthropy, health care and blue technology?    

I’d first like to address venture capital and private equity in general. If you look at the mega caps (Bain Capital, etc.) they are not hiring a ton and slow to invest. According to Reuters, “The last 18 months have been a challenging time for private equity and venture capital funds and their portfolio companies across the globe, impacting the availability and cost of capital, deal valuations, and exit opportunities. High inflation, rapidly increasing interest rates, volatility in the public equity markets, the collapse of certain banks that support the PE and VC ecosystems, and significant reductions in valuations of portfolio companies’ post-pandemic have led to massive economic challenges.”  

In other words, with inflation high and minimizing the value of a dollar, venture capital and private equity firms are not entering investments because their exits are far from optimal. If you hold onto a dollar during inflation, the value will increase when inflation goes back down. If you spend a lot during inflation, you are probably entering at a high valuation or cost-of-dollar invested overall. 

If you look at sustainability focused venture capital firms, like Fifth Wall led by Brendan Wallace, they don’t seem to have slowed down. But cash on hand is what matters here. According to Korn Ferry, the S&P 500 has $2.6 trillion cash on hand. It’s not as if these firms are cash poor. But high interest rates and global uncertainties make the market shaky. Interest rates were held in place recently but are supposed to be reduced in the next interest rate report from the government. 

With venture capital, private equity, and similar firms holding onto their cash along with market uncertainties, I believe these above sectors of sustainability, diversity, philanthropy, health care, and blue tech are suffering from a lack of overall investments. However, it is important to point out that while many industries struggled during COVID, health care skyrocketed, minting nine new billionaires. However, with vaccine adoption going down as COVID abates, companies like Pfizer and Novavax have struggled.  

Novavax, for example, was struggling mightily until a large cash injection from Sanofi took place to the tune of $500 million. These vaccine-heavy companies were relying on vaccine cash and several reorgs/restructures took place internally. The investment is going to a rescue operation as opposed to a net new startup. We do see bright spots, such as Regeneron Pharmaceuticals launching a $500 million venture capital fund called Regeneron Ventures.  

It is also important to address the electric vehicle market from a sustainability perspective. The United States is currently trying to move away from Chinese electric vehicle supply dependency and, as a result, there is currently a seismic shift as exemplified by Volkswagen’s investment in Rivian. It appeared as a few EV companies struggled, such as Fisker, because it is expensive to build electric vehicles here in the U.S. As tariffs rise on China, hopefully we will see continued investment in U.S.-based electric vehicle production. 

As diversity, equity, and inclusion (“DEI”) receive increased scrutiny in the U.S., it becomes a question of what the long-term return on this sizable industry will be worth as colleges such as Harvard and the University of Florida do away with DEI programs.  

Where do you see the greatest opportunities and why?       

The electric vehicle market. As previously mentioned, tariffs on China are making it increasingly expensive to important parts and cars from overseas. I see it is a great opportunity for the U.S. to invest in itself and create production hubs stateside as opposed to overseas reliance. It is causing a significant shift to dependency on Mexico, but I would take NAFTA over APAC any day. It will be interesting to see what happens to Fisker and if someone like an Elon Musk will bail them out. However, the old adage of “let a company go through bankruptcy and buy it for the absolute lowest dollar” may win out. It would be an interesting change in perspective if private equity firms had a sustainability, rescue-first stance toward struggling companies as opposed to the value of dollar invested overall.  

What are the greatest challenges you face and why?    

With the current VC and PE markets, the biggest struggle we have is raising significant cash here and abroad. Advisory firms are advising a hold position with investments, and from a trickle-down perspective it is preventing significant investments in these technology areas. With a lofty goal of $50-$100 million for our first fund, we have a ways to go. However, we are confident that the markets will turn around and we will be able to reach our goal.       

What keeps you up at night?  

Primarily clients, global issues, and philanthropy. I strive for excellence and optimal service delivery with all endeavors in life, and if my clients aren’t happy I’m not happy. One of the biggest issues I am tackling right now is energy consumption in datacenters as it pertains to AI utilization. I am also big into politics and philanthropy. In college, globalization was a large emphasis, and with the world the way it is I strive to make an impact and help people see through a clearer lens when it comes to media, politics, and interpretations of events. I think it is a common millennial belief that one day we will achieve global peace and all things will be right in the world.  

The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.