The Covid-19 crisis is validating the establishment of VFS Innovation Ventures by Volvo Financial Services (VFS), the finance-focused division of Sweden-headquartered commercial vehicle producer Volvo Group, according to Jason Miles, managing director of the corporate venturing unit.
VFS Innovation Ventures is based in North Carolina and concentrates on financial and mobility technology in addition to services that can help Volvo increase efficiency internally and for its customers and dealer network.
The unit was only launched in November 2019 but disclosed its first deal shortly afterwards, investing an undisclosed amount in insurance technology developer Rein. Some are expecting corporates to put open innovation on the backburner in the face of Covid-19 but VFS is positioned differently.
“I think it is confirming the strategy,” Miles told Global Corporate Venturing. “It is very hard for multinational companies to move quickly, efficiently and nimbly in markets that are uncertain or volatile. Part of the reason we developed VFS Innovation Ventures was so we could get access to some of that speed on a scaled basis.
“What is happening right now is confirming the need for even greater speed and acceleration into some of these more emerging technologies that can help us keep business going as usual when there might be some market turmoil or disruption.”
Miles stated that although there are challenges involved in interacting with prospective portfolio companies remotely, smaller startups are generally well equipped to communicate through new methods. It is the optimal time to utilise new techniques and technologies intended to increase speed and efficiency.
“We have been leaning into innovation pretty heavily as a concept because a lot of folks talk about digital transformation, going paperless and making it easier to transact electronically,” Miles said.
“We have viewed digital transformation as much more of a business transformation. Volvo Financial Services sits in an interesting area where we are essentially the conduit between all the Volvo Group brands and the end market.
“We are the lender, the organisation that has the most contact with our end customers and dealers, so we have an interesting view on the market. We made a strategic decision probably about two years ago to really lean into innovation as a way to get access to smaller, more nimble startups and new technologies so we could drive greater services to the end markets we serve.”
Although some companies will have prepared for an economic downturn more than others, the prime issue may not be the initial shock of coronavirus lockdowns but the aftershocks as they struggle to bring their businesses back up to speed. Nevertheless, Miles expects startups focusing on business optimisation and cost management to come out of the crisis relatively well.
“The type of environment we are in right now really magnifies some of the opportunities we have been looking at around payments, insurance, data and transactions, and cost efficiencies inside the business,” he said.
VFS Innovation Ventures is primarily a strategic vehicle and its key function is to target technology that can enhance business practices within Volvo, from companies that may not have found the ideal market fit, though an equity position can mitigate the potential for losses to some extent.
The unit is a new entrant to corporate venturing and Miles suggested it was coming in at an exciting time, when technology is maturing as valuations settle down.
“Because they are mature there is a stronger foundation for us to really make strategic decisions around the companies we work with and the kinds of technologies they offer, and have greater confidence that the technologies are actually going to move the needle for us,” he said.
“I think it is an excellent time for us to be jumping in versus some of the other companies that may have been doing it for a while and seen a few cycles. They might be too mature, or the types of opportunities they are looking at are not as nimble or (will) have as strong an impact on the business as the kinds of technologies we are looking at.
“Again, we are getting in where technology is a little bit more efficient so we can get in and out at a much lower cost than if we had started 15 years ago.”
