As evidenced by over 20 years of continuous venture capital (VC) investing, and given the very nature of venture capital investing, Dow Venture Capital takes a long-term view to our portfolio. We actively manage each of our investments to create strategic value for Dow and while also realising financial returns. We continue to work closely with our business units to target new investment opportunities consistent with those objectives.
Dow VC has consistently invested in startups since 1993 as one of the earlier corporate VCs. Initially, its role was to deliver purely financial returns to the company. Its role has since shifted to a highly focused, strategic investment arm in support of the growth objectives of Dow’s market aligned businesses. The financial returns on our investments continue to be important, but are not the sole driver of an investment decision. We will only make an investment when the potential financial return is attractive and it explicitly supports or enables a strategic objective aligned to business strategy endorsed by the relevant Dow business leader.
As we have shifted to our current strategic focus, our investment approach has also evolved. Dow VC is much more active now in leading deals, taking board seats where appropriate, and being more prepared to evaluate early stage opportunities where we can add value. I would add that our strategic focus increases the scope of the types of deal structure we are potentially interested in. We pursue VC investment, but will work to create the best deal structure to create the most value aligned to all parties’ objectives such as a license, joint development deal, contract research deal etc. even if equity is not always involved.
There are many possible variants along a continuum from strategic to financial focused investing approaches and Dow VC has developed over time an approach to suit Dow’s strategy and growth objectives. There are several models for corporate VC, each with unique aspects. What differentiates Dow is 1) our continuous history of investment in the space 2) our past as a pure financial investor that grounds and informs our strategic investments 3) our close collaboration with our corporate Business Development and Technology licensing groups and 4) our willingness to lead deals and take an active role on boards where we believe it can add value.
Interest in open innovation models of product and technology development is creating an interest in VC models for growth in corporates. Corporations are increasingly initiating technology scouting initiatives to seek out these early stage opportunities for strategic collaboration and to provide vetted leads for corporate venture capital or merger and acquisitions investment. The increasing presence of corporate investors has the advantage of creating a new source of highly informed capital. However, it must be recognised that access to this capital will come with different sorts of obligations. I would emphasise that the new players will take time to develop experience and internal decision-making processes.
The areas of interest to Dow align to our market participation strategy, which is focused on markets such as water, electronics, packaging and agriculture to name a few. Also adjacent application of technologies originally developed in very active VC areas such as life sciences, IT or alternative energy.