At Juxtapose, the New York-based venture studio he cofounded in 2015, Patrick Chun has sought to make bold, tech-driven bets in industries that don't typically garner much buzz, including life insurance and dentistry.
Now he's seeking to take on other tech-averse industries with an old-school approach: buying up individual businesses in those fields and integrating them under a shared brand.
The strategy resembles private equity more than the typical venture-capital model. But for Chun, that's exactly the point. He's hired Geoff Miller, previously a director at the PE firm Genstar Capital, to oversee his firm's new strategy, which it calls "platform builds."
Juxtapose, cofounded by Chun and Jed Cairo, has incubated companies such as the anti-aging-care startup Modern Age, the life-insurance company DayForward, and the dentistry chain Tend. Its new strategy, Chun and Miller told Insider, is a natural outgrowth of its goal to generate VC-like returns with lower, PE-like risks.
It's also timely in the market downturn, Chun added, as investors evaluate companies more rigorously, seeking solid business fundamentals, not just ambitious growth prospects.
"People are really skeptical of cash-burning companies," Chun said. "We're looking to tack on assets that are real companies."
The first industry Juxtapose is targeting with its new strategy is heating, ventilation, and air-conditioning, or HVAC, services. Tackling the HVAC industry hits the firm's sweet spot, said Miller, who is based in San Francisco: "It's a large market with a fundamentally broken consumer experience."
While several companies that have received VC backing — including Thumbtack, Househappy, and Angi, which is now public — address HVAC, they function as marketplaces and do not oversee the actual services. Private-equity firms have also taken an interest in HVAC companies: The home-services chain Wrench Group, for instance, is backed by the PE firm Leonard Green & Partners.
But consolidation in the HVAC space has a checkered history, including a string of failed buyout deals in the 1990s. Miller said he believes that even now, PE firms often focus narrowly on financial optimization rather than improving how those businesses serve customers.
"When you pay up for a big business in home services and you throw a lot of debt on it, it actually doesn't leave you a lot of capacity to innovate around the consumer experience," he said.
The HVAC company Juxtapose is building, codenamed Project Zephyr, aims to combine the best of both the VC and PE worlds. The firm will buy independent HVAC businesses, primarily in the US Midwest, and merge them into one company. Project Zephyr will build technology not just for ordering services but also for helping technicians to manage their workflow.
The acquisitions will require a significant investment of hundreds of millions of dollars over the company's lifetime, Miller said. For now, Juxtapose will make the acquisitions out of its current $300 million fund, which it raised in 2021. But Miller believes they will pay off as Juxtapose builds a tech platform around them, with the aim of creating a transformative experience for customers and workers alike.
That's what distinguishes Juxtapose's strategy from the typical private-equity approach, in Miller's view.
"You don't typically hear about CEOs being excited to go to private-equity firms to innovate," he said.
The firm is now seeking a founding CEO for the company. Then it will set about developing the company's tech platform and identifying HVAC businesses to acquire.
Rolling up a set of businesses isn't new to the VC industry. Over the past couple of years, for instance, startups that aggregate marketplaces on Amazon raked in billions in funding. But enthusiasm for Amazon aggregators has waned over the past few months, and several companies in the space, including Thrasio and Suma Brands, have had layoffs.
Juxtapose's approach is distinct from the erstwhile aggregator frenzy, according to Miller. Bringing together disparate businesses doesn't necessarily create additional value in itself, especially if they still functionally operate as independent shops, he said. The businesses that Project Zephyr acquires, on the other hand, will work together as a unified company.
"There has to be some reason for the businesses to come together," Miller said. "Scale for scale's sake is not very valuable."