Germany-based specialty chemicals producer Evonik will follow up its investments in three early-stage companies this year by seeking out additional businesses that fit the strategic megatrends in which it is interested, Bernard Mohr, managing director of Evonik Venture Capital, told Global Corporate Venturing.
Evonik formed its €100m ($135m) venture capital fund in early 2012, hiring Mohr from chemical company BASF. Its latest portfolio company is biodegradable lubricant producer Biosynthetic Technologies, in which it invested in last month alongside petroleum company BP.
Evonik Venture Capital targets early-stage businesses, investing up to €5m ($6.7m) in each one. Mohr stated that the company’s investments are tied to megatrends related to its long term strategy, namely health, nutrition, resource efficiency, and globalisation.
The unit does not however invest with the end goal of acquiring a portfolio company for its parent company, and instead will chiefly pursue a financially successful exit such as a flotation or an acquisition.
“Although we are a strategic investor, Evonik Venture Capital also expects to deliver risk-adjusted venture capital returns,” Mohr said. “An exit could be an IPO or a trade sale, and if Evonik is interested in an acquisition, there could be a trade sale to Evonik as well. We do not invest with the sole objective to finally acquire the company.”
Evonik’s corporate venturing activities are not limited to directly funding early stage companies. It also invests in funds as a limited partner, and has committed money to energy, water and materials-focused venture firm Emerald Technology Ventures, North American cleantech fund Pangaea Ventures and German state-backed fund High-Tech Gruenderfonds.
According to Mohr, Evonik will invest in a fund if it can identify startups with disruptive technologies in the new material, energy technology, resource efficiency and sustainability sectors.
“These investments enable rapid access to totally new technologies outside of the existing portfolio, as well as covering the most important geographical regions and technology trends,” he explained.
Concerning the structure of its direct investments, Evonik seeks to invest as part of a venture capital syndicate and will limit its involvement to a minority stake.
In addition to Biosynthetic, it has funded two other companies, wastewater treatment technology developer Algal Scientific and plastics manufacturer FRX Polymers, so far in 2014, and Mohr confirmed the unit has plenty of funds still available to invest further in the long term.
“[The three companies] have interesting technology, great growth potential and they all have a strategic fit with Evonik, meaning we can work closely with them and help them to be successful,” Mohr said.
“We as an organisation plan to keep on with this for quite a while. We have a highly professional investment team, the support of the board and top management, and we are able to really tie it into the business and develop good relationships with both the portfolio companies and companies we see through the deal flow but [in which] we do not invest.”