Cathie Wood has long made a name for herself and her investment firm, Ark Invest, which bets on cutting-edge technology companies.
She also made a large bet on St. Petersburg when she moved herself and her firm in 2021 from New York City.
“I had no doubt once we walked into this community we would be here,” she said to a filled room at a Monday night keynote with the Tampa Bay Innovation Center. “The last two years were not very kind to Ark Invest, and yet every day I walk out of my condominium, I just feel joy — no matter what’s happening, there’s something about this community.”
Shortly after Wood’s move, she partnered with the Tampa Bay Innovation Center to create a 45,000-square-foot building, dubbed the ARK Innovation Building, slated for an Oct. 1 grand opening.
Wood keynoted the Innovation Center’s event on Monday night, which showcased a dozen companies in the organization’s newest climate technology cohort.
“You in this room focusing on climate tech are focused on three of the major spaces,” Wood said. “We’re in a brave new exciting world, and we’re really happy to be here and to work ... on the Innovation Center, which we have very high hopes will deliver some of the most astonishing opportunities we’ll see in our lifetimes.”
She broke down the “scoring card”’ she and her team use to evaluate companies from both a top-down and bottom-up approach:
- Evaluating management. Beyond the people and culture that make up a company, she says she looks for a “strong visionary leader” who can stand up to “short-term-oriented” shareholders when the company goes public. She cited Amazon’s Jeff Bezos and Tesla’s Elon Musk as prime examples of “strong visionary leaders.”
- Barriers to entry. She said she focuses on companies that can get a “winner take most” of the market they’re entering. She stated autonomous vehicle companies will come out on top in the artificial intelligence field and specifically pointed to Musk once again, believing Tesla will be the “winner take most” in that space in the U.S.
- Market share. And not in the typical way to measure market share — by unit. Wood pointed out that Apple, while the company has a smaller amount of market share per unit, has a majority of the smartphone industry’s profit share.
- Execution. While Wood said traditional asset management firms tend to emphasize a company hitting its profit margins, Ark focuses on the percentage of revenue spent on research and development efforts. “If you’re not spending in the areas we believe are the right areas, that’s a demerit,” Wood said.
- Valuation. “People think we don’t spend any attention thinking about valuation; we think about valuation; we almost don’t care what it is right now,” Wood said, adding she focuses more on the valuation in five years’ time. “If we think it’s strategically positioned with the right management and right barriers to entry, we almost don’t care what they’re spending. We care what they’re investing in, in order to get the lion’s share of the market.” The firm typically wants to see if the company meets a minimum hurdle rate of return of 15% at a compound annual rate over the next five years.
- Thesis risk. Wood said risk can come from many directions, including government, and is “going to get in the way.” She again cited autonomous vehicles as an industry breaking through that barrier.
Her team also intensely focuses on management, specifically shifts in management and the reasoning behind them.
“The one that gets my antennae up is if there is management departure; we’re looking like hawks at management,” Wood said. “Is it because it’s moving from a startup into a scaling opportunity, and you need a completely different management team? Or is it because the management doesn’t know how to keep good talent, incentivize them with really exciting and important opportunities?”
