One of the underappreciated benefits of corporate venturing is its role as a lightning rod attracting entrepreneurial attention to the parent that can lead to partnerships and deals even without an equity investment.
Germany-based industrial conglomerate Robert Bosch’s corporate venturing unit has over the past four years developed a successful investment team and helped introduce innovative ideas to its parent.
Markus Thill (pictured), managing director at Robert Bosch Venture Capital’s (RBVC) office in Frankfurt, Germany, said: “Our strategic mandate is often fulfilled by match-making entrepreneurs to Bosch.
“We introduce a significant amount of companies to the parent each year – more than 80 in 2011 alone – and aim to invest in five to seven companies [in this time period].
“However, these five to seven deals will not move the needle for Bosch’s financial results, given its sales [more than €50bn in 2011], unless we find something that is disruptive to a significant part of our parents business.”
Bosch provides automotive, industrial and building technology and consumer goods. Its corporate venturing unit effectively looks across more than 30% of financings worldwide, as recorded in Dow Jones VentureSource, for deals that might offer new technologies or services in the broader realm of its parent’s business units.
RBVC has completed 11 deals since launch in these areas, nine of which can be found on its website. But Thill said it had tried to do more deals but had to pass on quite a few, for example in semiconductors, because general market conditions had changed since 2007 and there were few other investors with which to form a syndicate.
He added: “One could get the impression that venture capital firms [VCs] seem to have become more risk averse and frightened about not getting a good enough IRR [internal rate of return, a measure of annual performance].
“Expensive deals, not by value but because they need €20m to €50m to get to cash breakeven, seem to be deemed too risky for many VCs.”
This should be a great opportunity, Thill added, but RBVC sought to take 10% to 20% stakes rather than majority control so that the entrepreneur avoided facing prejudice in an exit, among other reasons.
RBVC generally tries to lead or co-lead deals, for example investing an initial €1.5m to €4m. Ironically for a group focused not only on IRR like its VC peers, RBVC has had some early wins. Its first exit was earlier this year with the sale of Germany-based gesture control provider Ident Technology to US-based Microchip Technology for a reported €30m, according to news provider VentureCapital Magazine.
RBVC first invested in September, in a €7.1m round alongside VC peer MIG Funds and Danube Equity, the Austria-based corporate venturing unit formed by steel corporation Voestalpine and 3-Banken Group.
Despite the lower-than-expected investment pace, Thill said RBVC had no plans to change its strategy but was looking to expand its activities worldwide.
This is helped by RBVC’s ability to go to any of Bosch’s more than 300,000 employees worldwide, including more than 35,000 in research and development, and to call on specialists in any area as “innovation is ingrained in Bosch’s corporate DNA”.
Fact box:
Formed: 2007, operational from January 1, 2008
Assets under management: €50m per year (run rate of investments, including reserves)
Offices Germany, Israel, affiliate office in US
Key people
Managing directors: Claus Schmidt, Markus Thill
Other investment staff: Gitte Bedford, Bienna Chow, Hongquan Jiang, Dieter Kraft, Gad Toren, Heribert Uhl, Jan Westerhüs, Ke Zhang
Advisers to RBVC in affiliate office (Robert Bosch, US) Luis Llovera, Cyril Vancura, Jeff Yu
Deals
US:
Ogmento – augmented reality applications for mobile devices;
Aethon – mobile robot for the supply chain;
Cheetah Medical – non-invasive cardiac output measurement;
GreenPeak – fabless semiconductor company;
eIQ Energy – power management technology for solar energy;
SynapSense – wireless energy efficiency solutions
Europe:
Ident Technology* – real-time three-dimension touchless gesture control;
Light Blue Optics – holographic laser projection technology;
EpiGaN – innovative power electronics material supplier.
* Exited in 2012
Fund commitments:
HLM Venture Partners; Giza Venture Capital; NGEN Partners; Emerald Technology Ventures; Environmental Technologies Fund; DFJ Esprit; Sierra Ventures