Gaule: Give a brief description of the purpose of 3M New Ventures.
Andrae: Our organisation was set up six years ago with the idea of looking into external ideas generated by start ups worldwide, and those ideas should have proximity to 3M’s undertakings in terms of new technology or relevant technology enhancements that 3M corporation would be interested in. For example, this would include new drug delivery technologies, new display technologies, energy storage systems and new fields of business in which we are not currently playing but for which we may have the underlying technology components to be able to play a significant role in conjunction with the technology of the company in which we are investing.
Gaule: What venturing processes do you use?
Andrae: For the most part it is taking minority shares in the business, roughly 20% at an average investment of $4m.
Gaule: The integration of venturing with other innovation and core business initiatives is so important in delivering benefits. How do you manage the connections and benefits across the business?
Andrae: We initially ask the five main business groups across 3M what kind of technologies they care about and which fields they deem most important to develop their own business. We are also looking to fill gaps in our current portfolio. Once we have invested in the company we spend a lot of time connecting the company with the relevant people across our business units in order to turn it into a really successful operation so we can benefit from the thinking of the start up and vice versa.
Gaule: Does a business unit approve an investment before you make it, or do you make those decisions yourself?
Andrae: Roughly two-thirds would need business group approval because those investments have a proximity to 3M’s businesses so we would need a champion’s approval from 3M’s side. The remaining third are so far out – 10 years plus – hence we need l only imited business group buy‐ in. In both cases, we seek approval from the chief financial officer, chief technology officer, CEO and our head of strategy around the general viability of the investment.
Gaule: Give a brief overview of the people in the team and the partners you work with.
Andrae: We are operating out of five offices globally – Boston, São Paolo, Munich, Shanghai and Singapore. We hired only external – no one from within 3M – because we wanted an external perspective on what would make sense for our company, an outside in approach. Approximately 20 people were recruited worldwide since we started operations six years ago. For the most part they have a background in technology, but also in business to allow them to have a broad perspective – from the deal side and from an angle that allows them to judge the technology in a broader sense, supported by a very large number of highly-skilled tech resources from 3M’s global operations.
Gaule: How are you developing the capabilities of your team and of the wider organisation to drive innovation?
Andrae: We have them spend a lot of time with their peers in the business groups of 3M. We have divided our team so that we have two technology focus areas per person. They build close relationships with the key technical and business resources of those units so they are able ask for an opinion regarding technology and business model innovation. It is important to understand the value proposition and intellectual property position of the company in detail and whether this would fit to 3M and how it would resonate going forward.
Gaule: Give examples of some of the partners where you do not have the capability internally.
Andrae: In terms of syndicated investments, we are working with lots of our corporate venturing peers at, for example, ABB, Applied Materials, Bosch, BASF or Intel. That is an important part of our network and deal-sourcing capability. We also work with venture capital firms such as Kleiner Perkins Caufield & Byers or companies like Google Ventures, which is a very important partner for us. We also work with specific providers of expertise or insight into particular expertise fields. So there is a very broad network.
Gaule: Give us some insights into how you are demonstrating and communicating the strategic and financial benefits of 3M venturing.
Andrae: The strategic part is the most important in demonstrating that external innovation is both important and relevant to 3M. In an ever‐faster‐changing world we need to have a meaningful and professional vehicle to attach to those external ideas, which is our main purpose. Financial returns are also very important. We have shaped a very well balanced portfolio across many technology fields and investment stages. We tend to build “islands” – investments of related nature to allow us to shape portfolio focus, related to, for example, the internet of things or grid-scale energy storage. As we are always looking into leveraging our technology, expertise and skills with the ideas and scope of our portfolio companies, a lot of effort resides with 3M New Ventures to help grow those synergies.
Gaule: What technology and business model changes are you looking to venture in?
Andrae: We are a technology company – we can enable technology in many different ways originating from the technology platforms we started shaping in 1902. For example, when we work with partners like ABB or Siemens, we clearly focus on our core strengths and capabilities – which may be advanced adhesives or sealing technologies – while our partners focus on supporting the venture with better market access in specific areas of the world. By knowing our capabilities and the best and most meaningful ways to recombine them with existing capabilities of our partners and of the start ups we are financing, we act as an accelerator on the tech side in order to bring ideas to the market better and faster.
Gaule: Give us insights into an interesting recent deal.