In our guide to successful corporate-startup collaborations we look at how companies can expand into future markets through investments and acquisitions.
A window into the world of innovation. Many corporates are looking for it. Increasingly, collaboration with startups is becoming the preferred choice to access innovation, and new markets.
In Winning Together, our guide to successful corporate-startup collaborations we present four key benefits that working with startups can bring to your company. Expanding into future markets through investments and acquisitions is one of them.
Globally, CVC investments grew by 87% in value to a total of 48.5 billion dollars. That includes just under half of Europe’s largest 100 companies that have some venturing activity by now, including corporates like Bosch, BMW and Telefónica. When we talked to them, we realised that even corporates in sectors such as automotives and industrial technology are increasingly looking to startups for digital solutions.
BMW founded its venturing arm BMW iVentures in 2010, a major vehicle to ensure that the BMW group remains flexibly engaged with the emerging field of mobility services. As Tony Douglas, Innovation Manager at BMW, explained to us 'our startup engagement is like an insurance policy. If things do change rapidly or disruptively, we have something in the back pocket’.
And the automotive sector is changing, rapidly and disruptively. McKinsey estimates a dramatic increase in vehicle connectivity leading to an increase in the value of the global market for connectivity components and services to €170 billion by 2020 from just €30 billion today.
Whereas corporate venturing is growing across Europe, Germany is the continent’s venturing powerhouse. Germany is also an interesting example of what governments can do to facilitate corporate-startup collaborations.
Since 2005, the High-Tech Gruenderfonds (HTGF) has become the most active seed stage investor for high-tech startups in Germany, though the volume of 576 million Euros invested so far were funded largely by the German government, the KFW bank – and to 14% by corporate partners. 'The participation of private investors in both HTGF funds was instrumental in not only setting up a high–performance organisation but also in acquiring strong dealflow and private investors for follow–on rounds in our portfolio', as Alex von Frankenberg, Co–CEO of the HTGF, told us.
We also see that corporates are increasingly experimenting with the partnerships that allow them to invest in startups and new technologies. Just look at Enel, one of Europe’s major energy companies. The company’s CEO Francesco Starace has made startup investments a top priority. A new Innovation committee, chaired by Starace and the chief financial officer, the chief innovation officer, the heads of business lines and country managers, make decision about future investments.
Enel invests money alongside financial investors, but does not take equity. Instead, the company sees itself as the ‘industry’ partner that focuses on helping the startup to develop or enhance products, to test them and eventually to launch commercial pilots. Each partnership is supported by an internal champion who advises startups and facilitates their relationship with the relevant business units and key stakeholders inside Enel.
'Startups allow us to tap into new businesses and to cover technology gaps' , says Luciano Tommasi, Head of New Ventures Initiatives. Enel invested in Smart–I, an Italian startup that develops solutions for automatic analysis of images underneath the public lighting poles and thereby provides smart cities services.
The startup solution is now part of Enel’s service portfolio and allowed the energy company to enrich its offer of smart city services and energy efficiency.
BMW's top tip for other corporates:
You can’t treat startups as another business line of your company. Don’t try to force them to do something that doesn’t really fit with their genes.
Enel’s top tip for other corporates:
Your company needs the appropriate organizational structure internally to have the right commitment and workflow with startups. Otherwise you don’t get anywhere.
Bosch's top tip for other corporates:
To successfully integrate innovations, you need to establish an internal culture of opening up, connecting and partnering.