Ecosystem investing: The art of the invisible handshake

Ecosystem investing is the grown-up version of playing with Legos — except instead of colorful blocks, you’ve got founders, buzzwords, and burn rates. The idea is simple: instead of investing in a random pile of startups that never make eye contact, you build an ecosystem — a connected network of companies that share data, customers, or capabilities to create value greater than any one piece alone. It’s the difference between a group of strangers at a silent yoga retreat and a band of Avengers (if the Avengers had to hit quarterly revenue targets).

In theory, ecosystem investing is a brilliant strategy. In practice, it’s also the world’s most expensive group project. You, the venture capitalist, become the over-caffeinated group leader trying to get everyone to share resources and “leverage synergies” instead of ghosting each other until demo day. But when it works, it’s beautiful — like seeing founders voluntarily respond to each other’s Slack messages or a B2B SaaS company that buys from another startup instead of promising to “circle back” next quarter.

Why ecosystems beat random portfolio

Most venture portfolios are like a bowl of trail mix: a few nuts (the good kind), some raisins (steady but boring), and the occasional chocolate-covered unicorn everyone’s praying for. Ecosystem investing, though, is more like a balanced meal — each ingredient complements the others, and sometimes they even share APIs.

When companies in the same portfolio work together, they can sell to each other, pilot each other’s products, align go-to-market strategies, and even help each other avoid catastrophic marketing campaigns involving NFTs. The VC gets a stronger, more resilient portfolio; founders get customers and allies; and everyone gets to post on LinkedIn about “the power of community” without irony.

Take the healthcare cold-storage shipping company that needs smart track-and-trace labeling. Why not send them to your IoT logistics startup? Boom — one contract signed, two valuations inflated, and your LP update suddenly looks inspired. Multiply that by dozens of collaborations and you’ve got what investors call “flywheel effects” — and what founders call “finally someone who returns my emails.”

Founders talking: The new frontier

Let’s be honest: getting founders to talk to each other is harder than getting toddlers to share toys. Founders are busy running 27-hour days fueled by caffeine and existential dread. Yet when they do talk, magic happens. They realize they’re not alone in trying to price enterprise contracts or survive “friendly” down rounds.

These conversations are where the real alpha lives. A climate-tech founder shares a data trick an AI startup can reuse; a logistics CEO explains how they dodged a supply-chain meltdown; a digital-health team finds a new data partner. Knowledge flows faster than a VC sprinting toward the buffet at TechCrunch Disrupt.

Before you know it, they’re co-hosting events, building integrations, and occasionally co-selling. At that point, it’s no longer a portfolio. It’s a small, chatty, surprisingly competent civilisation.

The VC as matchmaker (and therapist)

In this model, the VC becomes less a financier and more a cross between a matchmaker and a group therapist. Instead of simply cutting checks, you’re introducing founders with: “You two should talk — you both use the word ‘disrupt’ unironically.”

You set up Slack channels, retreats, and “casual networking dinners” that are anything but casual. You mediate disputes (“Your API isn’t better — it’s just different”), encourage cross-promotion (“Maybe tag them in your LinkedIn post?”), and occasionally intervene when two startups realise they’re accidentally competing.

Sometimes, you witness a miracle. A founder announces: “We partnered with another one of your portfolio companies.” That’s the VC equivalent of hearing, “I cleaned my room without being asked.”

The perks: Beyond the buzzwords

Beyond the obvious benefits — more sales, shared knowledge, friendlier board meetings — ecosystem investing delivers subtler advantages:

• Shared credibility: Each startup inherits a touch of the others’ reputational glow.
• Faster problem-solving: Why reinvent the wheel when you can borrow someone else’s slightly dented but functional one?
• Happier founders: Building alongside peers makes the journey survivable.
• More resilience: When one startup struggles, others can support it — or at least send sympathetic GIFs.

A connected ecosystem weathers downturns better. When budgets tighten, internal customers keep the flywheel spinning. It’s like having a bunker stocked with ramen — you may not thrive, but you’ll survive.

The dangers of ecosystem investing

Of course, no ecosystem is perfect. If one company implodes, others can get caught in the PR blast radius. Partnerships can sour; Slack channels can devolve into emoji warfare. The real danger is forced-synergy syndrome — when a VC insists two startups should work together even though one builds solar panels and the other sells yoga mats.

And then there are egos. Founders are visionaries — investor code for “stubborn.” Convincing them to collaborate can feel like herding cats who’ve read The Lean Startup and now believe they’re tigers.

From portfolios to planets

As venture capital evolves, ecosystems will become less like portfolios and more like mini-planets — interconnected, self-sustaining, and occasionally orbiting a charismatic GP. The next great fund won’t just back 50 startups; it’ll build a living network where founders, investors, customers, and alumni all feed value back into the system.

Imagine a world where your cybersecurity startup protects your fintech, your data startup fuels your climate model, and your AI company writes everyone’s press releases. The portfolio becomes one big, humming, self-referential economy — a meta-startup of startups.

Ecosystem investing isn’t just a strategy; it’s a lifestyle — built on intros, shared docs, and an endless chain of “Hey, can you connect me to…?” emails. It’s the difference between a founder staring into the abyss alone and a founder staring into the abyss with friends.

By doing it right, your founders will stop asking: “Who else is in the portfolio?” and start saying, “Wait — we’re doing a deal with them too?” That’s when you’ll know you’ve built something special: an ecosystem so interconnected it introduces itself.

I’d love to hear your thoughts. If my opinion resonates with you or raises questions, let’s continue the conversation. Feel free to share your comments, feedback, or experiences with me on LinkedIn where I will also be posting on CVC Compass.

Bill Taranto is president of MSD Global Health Innovation Fund and vice president of MSD Global Health Innovation Group. MSD GHIF has $600M under management and provides growth capital to companies that improve healthcare delivery and services.

For more than a decade, GHIF has invested in artificial intelligence and now backs 15 AI-enabled companies across drug discovery, clinical trials, supply chain, and patient access, using AI as a core capability to accelerate how the industry discovers, develops, and delivers new medicines.