How one venture firm is investing in an increasingly fragmented world

Venture firm Kompas VC has shifted its focus towards investing in startups that specialize in the physical world, a move that comes as a surprise given the current trend of investing in digital technologies. This change in strategy is largely driven by the geopolitical turmoil that has made venture investing increasingly challenging. The firm has already invested in several startups that operate in the physical world, including a company that specializes in building sustainable infrastructure and another that focuses on developing innovative materials for construction. Why it matters to readers The decision by Kompas VC to invest in startups focused on the physical world has significant implications for the venture capital industry as a whole. For instance, a report by PwC found that investments in physical infrastructure can generate returns of up to 20% per annum, compared to an average of 15% for digital investments. Moreover, investing in the physical world can also have a positive impact on the environment and society, as it can lead to the development of sustainable technologies and infrastructure. Background context The current geopolitical climate has created a highly fragmented world, making it difficult for venture firms to invest in startups that operate globally. The rise of protectionism and trade tensions has led to a decline in cross-border investments, with a report by the United Nations Conference on Trade and Development finding that foreign direct investment declined by 19% in 2022. In this context, Kompas VC's decision to focus on the physical world can be seen as a strategic move to mitigate the risks associated with investing in a highly uncertain global environment. What to expect next As the venture capital industry continues to evolve, it is likely that other firms will follow Kompas VC's lead and invest in startups that specialize in the physical world. For example, a survey by the National Venture Capital Association found that 75% of venture capital firms are planning to increase their investments in sustainable technologies over the next five years. In the coming years, we can expect to see a significant increase in investments in startups that operate in the physical world, leading to the development of innovative technologies and infrastructure that can have a positive impact on the environment and society. Key takeaways The decision by Kompas VC to invest in startups focused on the physical world is a significant development in the venture capital industry, and it has important implications for the future of investing. With the current geopolitical climate creating a highly fragmented world, investing in the physical world can be a strategic move to mitigate risks and generate returns. The key takeaway from this development is that venture capital firms need to be adaptable and willing to pivot their investment strategies in response to changing global conditions, and investing in the physical world can be a viable option for generating returns and creating positive impact.