Importance of the pick and shovel play
What is “pick and shovel” play in the world of business and why should anyone take interest? Nicole Junkermann highlights the significance.
The very best investors look beyond the obvious to identify trends in the market that might not have been immediately clear to others; they see past media hype and market noise and instead focus on data and detail to find the investments that will pay off the best in the long run.
This is a specialism clear to anyone who might look at the portfolio of companies invested in by international investor and entrepreneur Nicole Junkermann. Junkermann founded her venture capital firm NJF Capital in 2012, and has since invested in more than 45 companies (including a heady number of unicorns: some 30 per cent of the portfolio companies are worth more than $1 billion). However, she showed an aptitude for picking out a winner long before this. Junkermann is an expert in what investors refer to as the “pick and shovel play”, or investing long-term in the structural elements of a technology rather than the products built using them.
The term is one without a known attribution, but it harks back to a saying about the Gold Rush in 1840s and 1850s America: When there’s a gold rush, be the one to sell the shovels. Few people make a fortune as spade vendors these days, but the principle remains: investing in the underpinning technology or tools (the picks and shovels) behind an industry are the key to making money from it in the long term. There’s no guarantee that you will find gold yourself during the rush, but you know for a fact that many others will need the equipment to look for it.
Which points to Nicole Junkermann’s portfolio. If the current “gold rush” is the race to build Web3, then Junkermann has invested wisely in companies that will shape its future, such as Blockchain.com and Consensys, a software company that offers Web3 building tools itself and which also owns the popular cryptocurrency wallet Metamask. The message is clear: the value of a specific cryptocurrency might fluctuate wildly, but the wallet that cryptocurrency is stored in will always have value to its owner. This is where you should put your money in the long term.
