Gaining a strategic edge

‘Highly coherent but loosely coupled’

Hicks’s understandable concern when REV became a shareholder in his company highlights the critical balance in REV’s relationship with RELX – between alignment and autonomy. Brown and Askew argue that the “highly coherent but loosely coupled” nature of the relationship is the foundation of its success and the reason it has lasted so long.

The need to achieve this balance determines key features of the relationship, notably its legal structure as a series of traditional limited partner/general partner closed end funds, with RELX as the sole limited partner. This is unlike the great majority of corporate venturing outfits, which invest directly from the parent group’s balance sheet and are staffed by company insiders rather than professional investors. REV is formally linked to RELX through its investment committee, comprising Brown and Askew alongside RELX CFO Nick Luff and the group’s chief legal officer, Hank Udow.

The route REV and RELX have chosen offers some big advantages. It enables REV to operate independently and pursue its own goals, which helps address concerns among the companies it backs – and its fellow investors – that REV’s job is to put RELX’s interests first. The limited partner/general partner structure also enables RELX to offer the same financial incentives that seasoned VCs would receive at a conventional firm.

A patient approach

But running a “captive fund” with one limited partner has another important benefit – it frees REV from the pressure conventional VC firms face to deploy capital fast, prioritise breakneck growth and raise ever-larger fund generations. As a result, instead of spending time raising money and reporting to investors, Brown and Askew can spend it with RELX’s divisional leaders, passing on their market intelligence.

Perhaps most importantly, this unusual set-up also shapes the way they invest. “We have a measured, patient limited partner, which allows us to be a measured, patient general partner and that allows us to really think through the market segments we’re going into,” says Askew.  

In the case of Agworld, an Australian data analysis company for farmers that REV backed from 2014, the ability to take a long-term approach in what proved a challenging market was decisive. The “agtech” market – using data analytics to improve farm productivity – emerged around 15 years ago and attracted huge investments from high-profile VC firms and a few exits at hefty valuations. Naturally, this increased the pressure to follow suit from some of Agworld’s investors, which included the corporate venture arm of a large chemicals group and a conventional VC firm.

“I wanted to hold our course,” says Doug Fitch, Agworld’s former CEO. “I said, ‘This is what I said we were going to achieve, and this is what we will achieve but we all have to be patient’. REV was good with that. They got it more than a couple of the other investors.”

Misalignment like that can be devastating, says Askew. But keeping the investor group together long enough to achieve a satisfactory exit required REV to put more time and effort into Agworld than most others would have done, especially once it became clear that the company would not yield a blockbuster return. Conventional VCs tend to concentrate on their few big winners and spend little time on less successful deals. REV has the scope to operate differently.

That approach paid off at Agworld – in August 2021, it was sold to Semios of Canada, forming one of the largest agtech companies in the world. REV rolled its investment from Agworld into Semios, which remains in the portfolio.

Measuring the value REV delivers

Thanks to its “measured” approach, REV holds its stakes for an average of nine years. This is unusually long by conventional VC standards, even allowing for the fact that companies generally are staying private longer nowadays as investors seek to capture more of their upside. So, having invested with REV for 25 years, how does RELX measure the upside that it delivers to the group? 

REV has had enough big winners to achieve one of its key goals. “We’ve made a lot of money,” says Brown, “and most corporate VCs don’t actually make money.” But for a group the size of RELX, those financial returns are beneficial but not transformative. The biggest impact comes from Brown and Askew’s strategic counsel, though this is harder to quantify.

Two of the most recent transactions Brown and Askew have made with RELX’s money, Harvey and EvenUp, are later stage than their usual deals and larger, at $30m and $20m respectively. But perhaps the most telling feature of these is how REV came to be involved. Harvey was in early discussions with LexisNexis Legal & Professional, which included a potential to invest and LexisNexis introduced REV into the equation, while EvenUp asked for an introduction to REV after learning about the deal with Harvey.

The fact that RELX is now highlighting opportunities to REV shows how thoroughly the group has transformed its reputation as a leader in its key information and analytics markets. And its success in doing that is due, at least in part, to the contribution that REV has made over the past 25 years.