Guest Post: Value Capture vs. Value Creation
Early findings in data center cooling systems
This post is the first of four in a series, one from each of our summer scouts. The below was written by Elana Golub, a rising second year MBA student at MIT Sloan and current Managing Partner on Dorm Room Fund’s Boston team. Reach out to her at elana@alsocapital.com or follow/DM her on X at @ElanaGolub.
This summer, I’ve been exploring the data center cooling landscape, searching for market segments where budding startups could capture significant value. For example:
Using heat as an asset: Companies that seize and sell the heat emitted from cooling systems, securing dual revenue streams with one product (e.g., French startup Qarnot Computing)
Eliminating variable cooling costs: Technologies that remove incremental capital expenditure with scale, increasing customer dependence on services and products with growth (e.g., Nautilus Data Technologies)
You may be wondering, “Why value capture and not value creation?”
In discussing investment opportunities with Mike and the Also Capital Scouts, we often revert back to this exact question.
The debate primarily surfaces in conversations around new technologies that transform an existing product, process or service so that it becomes higher quality, faster, and/or cheaper. These are value creators, increasing the amount of profit available in a certain market.
Value capture, on the other hand, is the “so what” of value creation; i.e., how does this engineering innovation position the company to own a percentage of the new profit created? What vertical integration possibilities have they uncovered that are theirs for the taking?
Value capture matters because it not only dramatically increases a company’s moat, but also expands and diversifies the set of revenue opportunities available to the company on a per customer basis.
If you’ve got thoughts on what other segments of the data center cooling market are up for grabs, I’m all ears! Find me at elana@alsocapital.com or @elanagolub on X.
