Give us a brief introduction to yourself.
I am a mechanical engineer and have qualified as an MBA. I have spent my entire 16-year career at Caterpillar – 14 years in engineering design and development roles in operator stations and engine systems. In that time, I was able to work with many of the different business units of Caterpillar and the various product lines. In 2014, I joined the corporate strategy team, and then, in early 2015, was able to be part of the initial formation of Caterpillar Ventures.
Give us a brief introduction to your fund, the relationship with parent organisation and the innovation area you work in.
Caterpillar Venture Capital was launched in March 2015 with the intent of leveraging external development to support our business units’ technology strategies. Caterpillar is well known as a great company for research and development, but with the diversity of our businesses, and the rapid pace of technology development, we realise that we simply cannot develop everything internally.
The primary focus is on developing technologies that are going to help our customers become more efficient, safer and more productive. The intent is that all of these can lead to improved business results for our customers, which in turn leads to positive impacts on our businesses.
Is your fund one with a budget from the parent organisation or is it a separate entity? Why did you select that structure?
Caterpillar Venture Capital is a separate legal entity within Caterpillar. We do not have a formally created fund. Rather, we have an established target of total funding to be deployed every year, and we fund each investment from Caterpillar’s balance sheet. We evaluated the different models that could be used, and this structure simply fit the best with our organisation and goals.
How do you invest from your fund?
We are targeting a mix of both direct investments and investments into funds. We aim to invest directly in companies where possible to provide our business units the strongest relationship with a given company and promote strategic alignment. We have also invested directly in funds to provide both diversity in our deal flow and access to companies that we may want to engage with on commercial arrangements, but the strategic value may not be sufficient to warrant direct investment.
What key technology and new business models do you see as an opportunity or threat to your business?
We have four primary areas of opportunity where we are focusing our investments:
Digital – Caterpillar has more than 400,000 connected machines in the field, the largest field population of anyone in our industry. Many of these assets are being highly utilised, with some even running nearly 24 hours a day, seven days a week. All of these assets are generating data, and that data can be used to create valuable insights that benefit customers. Minimising unplanned downtime, for example, is key for many of our customers’ profitability, so being able to do predictive maintenance using that data, instead of reactive repairs, can add a lot to a customer’s bottom line.
Robotics – Caterpillar machines are used in a wide variety of applications and often a single machine is used for multiple, different functions. The ability to have these machines perform these functions with high efficiency, while being easily controlled by the operators, is a key part of the value Caterpillar brings. Also, many people may not know this, but Caterpillar is a leader in the autonomous vehicle space. Automotive companies get a lot of press for autonomy development, but we have fully autonomous mining trucks running in production in mines right now. Caterpillar is continuing to develop in this space to create semi and fully-autonomous machine systems that will lead to greater efficiency and improved safety for our customers and their operators.
Additive manufacturing (3D printing) – The strides being made in additive manufacturing can play a big role in providing Caterpillar and our customers with optimised design solutions for parts and systems. Our machines and engines are very complex, requiring a lot of parts. Part of the value to our customers is the Cat Brand Promise that says that we will get them replacement parts anywhere in the world for any of our machines or engines. 3D printing can potentially play a role in allowing more localised manufacturing of those parts to allow quicker response times and minimise down time for our customers or even our own factories.
Energy – Another aspect of Caterpillar that many might not know about is that energy and transportation systems are a major part of our business. We supply engines and power systems into oil and gas, electric power, marine and rail. Several of our initial investments have been in the energy space. They are supporting our customers in meeting flare reduction targets for oil production, improving efficiency of drilling operations and supporting an initiative to supply electric power via micro-grids to developing countries in Africa and Asia.
Introduce the members of the team? How have you tried to engage the core business people from the business?
Our core team includes our director, Michael Young, who was one of the key drivers in starting the VC initiative within Caterpillar. He has been with Caterpillar for 10 years in M&A and strategy roles, and, before coming to Caterpillar, was previously involved in VC for Dell Computers. We also have two investment managers, me and Arianne Orr. Arianne is an accountant and MBA who has been with Caterpillar for 17 years in various marketing, strategy, and M&A roles. Prior to Caterpillar, she was a consultant at Coopers & Lybrand. Our team has a lot of experience within Caterpillar in different organisations and roles around the world, and we bring a mix of technical and financial backgrounds to the team.
Outside our core team, we have internal partners we work with in legal and finance. We also do a lot of work with our business units on defining technology strategies and evaluating the startup companies to find the right fit within those strategies.
You participated in the GCV Academy in 2015. What was a key insight from that program that you have put into practice?
The 5P model – purpose, process, partners, performance and people – was a useful model to help think through the important factors of corporate venturing. This was especially useful as we were early in creating our CVC initiative.
What has been the biggest challenge or lesson since you started venturing?
My instinct at the beginning was that I wanted to do everything I could to make the strategic relationship successful between the portfolio company and our business units. Today I practice a balance between providing guidance to a company and ensuring they maintain independence and ultimately do what is best for their company.
How do you measure your financial and strategic performance?
The primary measure we look at is strategic performance, as this is the main goal of our investments. Strategic performance is measured primarily by our business units based on the commercial relationship they intended with the startup company. The goals of the relationship — co-development, marketing and distribution, or creating customer solutions – are tracked for their success in meeting the defined goals.
Financial performance is simply cash-on-cash return. We evaluate our portfolio companies on a quarterly basis to ensure they are on track in meeting financial objectives.
Illustrate what you have described with a couple of examples of recent investments or partnerships.
Our first investment, and thus our longest relationship, is in a company called Gtuit. The company developed associated gas capture and conditioning solutions for oil production. The partnership with our oil and gas team has had multiple facets from marketing of current Gtuit products through our Caterpillar dealer network to joint development of new products.
When you are not venturing, what do you do to relax?
I am a pretty active person, so “relax” is not exactly how I would put it. The two main goals for non-work time are spending time with family and getting outdoors. Luckily, I can combine those two areas quite a bit. My family enjoys rock climbing, orienteering, camping – generally outdoors and nature. When I am able to sneak in a bit of time for myself, I am usually either on my mountain bike or road bike.