For BASF Group, corporate venturing and open innovation play a critical role in the company’s research and development activities. The German chemical producer’s business units and research department are intimately involved in vetting potential investments.
“Their role is to describe why, from a strategic point of view, we should work with this company and how,” said Dirk Nachtigal, managing director of BASF Venture Capital, which manages a €175m ($193.3m) venture fund.
BASF does not look just look for start-ups developing new chemical products, but also those that are a step farther along in the value chain. BASF aims to play a strategic rolein providing R&D resources and helping bring new products that use chemical-based materials to market.
Nachtigal has been with BASF Venture Capital since it was founded in 2001.“It was completely new for everybody in BASF group, in particular for the business unit and research departments and we had to show that them that there is something interesting for them,” he said. “They had to learn how to deal with young startup companies and there was a learning curve. Now they have recognised that it makes real sense.”
BASF has collaborated with more than 350 start-ups to date, invested in more than 30 of them. It usually invests between €1m and €5m.
In addition to investing in start-ups, BASF strategically backs other venture funds to get access to deal flow and networking. The company has invested in VCs in the US, China and Japan, as well as funds focused on specific industries, such as fuel cells.
“They used to see us as a threat, but now they see us as a partner,” he said. “Of course the challenge was to build up a reputation in this venture capital market in order to get the good, interesting deals.”
Last year, the company made two investments, and collaborated with 65 startups. In October, BASF led a $3m Series A financing round with a $1.5m investment in the US-based SLIPS Technologies, and in August it invested €1m (out of a €3m deal) in the UK-based technology company SmartKem, an R&D leader in high performance organic semiconductor inks for OLED displays.
SLIPS is one example of a company where BASF had a strategic advantage as an investor. The start-up created a technology that makes surfaces completely slippery, letting everything from construction equipment to automotive parts and consumer product packaging repel sticky substances.
One of the important applications is for polyurethane deep water cables – which are made with a material produced by BASF.