What’s the role of a corporate venture building unit? Bridging the corporate venture fund to the mothership and its business lines. That’s the conclusion of a long and insightful chat I had a few weeks ago with Nacho Giménez, Managing Partner of BP Ventures, on Mind the Chat.
But let’s step back. BP Ventures is the CVC arm of BP, the UK oil and gas multinational that is currently pivoting to become an “integrated energy company”. The “evergreen” fund — launched in 2008 and boosted in 2017 as BP started its transition towards net zero — has invested over $700m since inception and is deploying $120-150m per year. (This is the investment run rate for a “state of the art” CVC — corporates can’t play the CVC game with only $10-20m.) As of today, BP Ventures has a portfolio of about 45 companies with an average investment ticket of $5-10m and has had 15 exits.
Our portfolio companies are too small to make a change inside BP
I asked Giménez how many of the portfolio companies BP had acquired. He answered: “Actually two, but not directly by BP, through Launchpad”.
The most interesting part was the second part of his answer. “Our portfolio companies are too small to make a change inside BP. They are not yet ready to be integrated inside BP. They need an intermediate step.”
Launchpad is that intermediate step. The venture builder, launched by BP less than two years ago, has the ambitious goal of “building five billion dollars of enterprise value by 2025”.
Launchpad defines itself as a “scaleup factory”. It works with mature startups rather than early-stage projects and helps them grow by injecting capital. Launchpad invests almost three-digit millions each year. It also provides resources from a team of 50 super-skilled people from very varied backgrounds and brokers connections to the mothership’s business units.
Most of the time Launchpad fast-tracks the early stage through acquisitions — the amounts are not disclosed, but realistic ballpark figures are in the $10-30m range. Examples include Fotech and Finite Carbon — these are the two BP Ventures portfolio company acquisitions that Giménez referred to — as well as Open Energi and ONYX InSight, which are not part of the CVC’s portfolio.
Startups are generally not a good fit for large companies, they need scaleups
Launchpad's ultimate goal is to bring startups to a size that is compatible with a large corporate. Startups are generally not a good fit for large companies — they need scaleups with industrial and commercial-grade products.
To wrap up: the goal of a CVC is to spot and intercept startups with the potential to disrupt the mothership’s business. The goal of a venture builder is to help some of them reach the scale of operations required to make an impact. At least, this is the formula adopted by BP.
As discussed in a prior article, models are evolving as we speak and companies are experimenting with different approaches, including Wayra Builder by Telefonica, Airbus Scale, Enegas, Iberdrola Perseo Builder or SAP Venture Studio.
[Footnote: In this article, we are talking about corporates who aim to launch innovative businesses in adjacent or disruptive markets (so-called Horizon 2 and Horizon 3 innovation). If the goal is to onboard innovation closer to the core (Horizon 1), the venture-client model (corporates partnering with mature startups and scaleups) is a very widespread and effective solution.]
Alberto Onetti is chair of Mind the Bridge.