The industrial company is facing a period of pronounced change as the pace of innovation has enabled start-ups to better enter areas which had long been the domain of large corporations. In response many large corporates have begun to enter corporate venturing or expand their programmes.
Our most influential table of those in the sector can be downloaded here.
Those stepping up their efforts include General Electric, the US-based industrial conglomerate, which has committed to deploying $150m a year through its GE Ventures unit, making it our most influential unit in the sector (see table). New industrial entrants are also common, and for this reason we have profiled ABB Technology Ventures, a unit set up in 2009 by Switzerland-based industrial company ABB (see page 12) as it is new entrant that has quickly adapted to changes in the sector.
In order to enter the sector effectively, ABB Technology Ventures has looked to adapt to the trends of the venture industry, according to Girish Nadkarni, the unit’s head. Nadkarni said: “We are constantly examining what we do. When we started, clean tech was hot. Now it is not. In some ways VC [venture capital] is a fashion industry. We are careful not to get carried away by fashion. We are sometimes contrarian and sometimes change where and in which sectors we invest.
“At the beginning, we were purely opportunistic. Now we have become more proactive – identifying, evaluating and analysing segments
from the bottom up. Currently we are evaluating big data, the internet of things and 3D printing, as they apply to the industrial or utility world.”
Kai Engelhardt, a business development manager at Mahle, a new entrant to the sector, said: “We see high potential in new technologies from many highly motivated entrepreneurs, with fresh and innovative out-of-the-box ideas. In the past we were often confronted with start-up
companies. However, many contacts with interesting companies occurred rather by coincidence – through banks, intermediates and
so on – instead of through a well-structured VC process, including a solid dealflow database.”
He added: “We do have highly skilled R&D [research and development] engineers. However, we would like to take the opportunity if there is an alternative access to cheaper, faster and better developed technologies and products. Furthermore the VC input helps our R&D to profit from new product ideas and solutions. VC can close gaps in our existing portfolio.
One of Mahle’s success factors is and has been innovation. Wherever we see a chance to increase the performance of our products or where we can complement our existing portfolio with smart and innovative products – under consideration of economic circumstances – we take the chance. VC
is one vehicle to do so.”
Those industrial corporate venturing venturing units looking to prosper would do well to court internal allies. Ralf Schnell, chief executive of Siemens Venture Capital, which passed €1bn ($1.3bn) in assets under management last year, said in an interview for our December profile of the corporate
venturing unit: “The true measure of our strategic worth is internal customer satisfaction – if the business units continue to give us money then we are doing our jobs properly. We spend as much time networking internally as we do externally – there are 28,000 employees in research and development
alone.”
Some frontier markets now have corporate venturing units as key finance providers for startups, such as that in Thailand. Jay Jootar, chairman of Thailand-based Venture Catalyst Group, which is backed by corporates including Taiwan-based manufacturing group Foxconn, said: “Corporate VC is the way to go in a country like Thailand. You do not have traditional VC and most Thai tech start-ups gain their funding through corporate VC.”
Jootar was talking with Global Corporate Venturing, after he wrote an opinion piece in local newspaper, The Nation, on how corporate venturing would be a driver for Thai start-ups.
Funds
In January it emerged US-listed industrial conglomerate General Electric (GE) reportedly planned to invest $150m a year in its corporate venturing unit, according to news provider VentureWire. Run by Beth Comstock, GE Ventures said it had 60 portfolio companies under development. This followed GE setting up a software venturing unit and hiring Mike Dolbec to manage the fund, joining from South Korea-based conglomerate LG’s venturing unit. In May last year, Pangaea Ventures, a Canada-based venture capital firm focusing on early-stage companies in advanced materials, made a $50m first close on its third fund with various corporations as investors.
As part of the fundraising effort, Keith Gillard joined Pangaea as a general partner after previously managing chemicals company BASF’s corporate venturing operations out of Silicon Valley, California.
Limited partners (investors) in Pangaea Ventures Fund III, which is targeting $100m, included Asahi Glass Company, Asahi Kasei
Innovation Partners, Bekaert, 9th Street Investments – a CoorsTek affiliate – JSR, Mitsubishi Chemical, Murata Manufacturing, Nitto Denko and Sabic Ventures.
In January, three European corporations committed an undisclosed amount to Emerald Technology Ventures’ Cleantech Fund III, which invests in early and expansion-stage companies in the energy, water and materials sectors with particular focus on Europe and North America.
Emerald said the corporate venturing units of Evonik Industries, Mahle and Cofisa (Sibelco) joined as part of a second closing as it targeted €100m ($130m) in its third fund. In January last year Evonik hired Bernhard Mohr from BASF to head its inaugural €100m ($130m) corporate venturing fund.
In May last year, the China Aerospace Science and Technology Corporation reportedly set up a RMB1bn ($158m) fund. The company set up the Aerospace Hi-tech Venture Capital Fund, according to news provider Asia Private Equity Review.
People
In January, Alex de Winter, who previously spent three and a half years as partner of Mohr Davidow Ventures, and Risa Stack from Kleiner Perkins Caufield & Byers’s (life sciences group investing in precision medicine, therapeutics and platform technologies, joined GE Healthymagination, a GE programme with $6bn to invest in healthcare.
This followed Sue Siegel, formerly of Mohr Davidow Ventures, being appointed as Healthymagination’s chief executive.
Last year Pieter Wolters took on the leadership of DSM Venturing after a career as an entrepreneur, replacing Marcel Lubben.
Markus Thill, co-founder of Robert Bosch Venture Capital, the corporate venturing unit of Germany-based industrial group Bosch, has also become chairman of the European Private Equity and Venture Capital Association’s new corporate venture roundtable.
Mark Felix has effectively taken over Dow Venture Capital in Europe after Paul Morris move on to advise UK government body UK Trade & Investment.