Through its Venture Capital unit, Evonik Industries invests in startups and their disruptive innovations. It’s not only about making money, but also about partnerships and new markets.
A brilliant idea, a garage, and lots of enthusiasm—that’s the creation myth of legendary startups. But in fact there’s a lot more to it than that. And that’s exactly why most startups fail—because an idea alone is not yet a product, and a product alone is not yet a business model. That path is a long one and leads through the Valley of Death. That’s what people in the know call the phase in which high-tech startups have to build up production facilities and a workforce before they can generate income. In particular, startups that are not creating digital services but tangible products and technologies have to have deep pockets. The best way to survive in the Valley of Death is to have a healthy initial supply of capital and other people’s trust in you.
Evonik Industries knows this, and it specializes in supporting and financing exactly this kind of enterprise. Venture Capital is the unit that, since 2012, has been investing in promising startups that have left their laboratory phase behind them and are ready to bring their inventions to market. In the medium term, € 100 million will flow not only via specialized funds, but primarily in the form of direct investments. Finding promising candidates is the mission of the eight-person Evonik Venture Capital team, which includes management experts, physicists, chemists, and engineers. What all of them have in common is long experience in the chemical business, a critical view towards purported innovations, and good connections with the operating units of the Group. That’s because in spite of all the risks involved their investments must be very sound, and they must be compatible with Evonik’s strategy and markets.
Investment Director, Evonik Venture Capital
The experts scrutinize more than 500 young companies every year. Well over 80 percent of them are filtered out in the very first round. At the end of the vetting process, between three and five startups are left as candidates for investment because their innovations could change at least one of Evonik’s markets, or because they could open up new markets for Evonik technologies.
The range of direct investments Evonik has made so far illustrates just how diverse these disruptive technologies are. It ranges from nanolenses for digital gesture recognition to high performance lubricants made from renewable raw materials and customized shoe insoles produced with a 3D printer. So far there are eight companies in the portfolio, and the plan is to increase that number to as many as 20. Four of these companies were new in 2015.
The Canadian startup Wiivv Wearables produces customized shoe insoles with the help of 3D printers. The Finnish medical equipment company Synoste has developed an innovative implant that makes it possible to carry out orthopedically essential leg lengthening for patients in a much less invasive manner.
JeNaCell, a spinoff from the University of Jena, has developed a biotechnological process for producing nanocellulose that can for example, be used to treat burns more effectively. The Dutch company Airborne Oil & Gas has developed a unique composite technology for the production of flexible pipes for the offshore extraction of oil and gas. These pipes are lightweight, yet extremely robust.
Thanks to Evonik’s investment, these technologies too are moving a step closer to commercial success. For Evonik, the aim is not only to receive a return on its investment but also to form partnerships to which the Group contributes its infrastructure and the combined market and application expertise of its almost 33,000 employees. That’s an incalculable advantage for the young companies during this sensitive phase. In return, Evonik gains access to bright minds outside the Group and promotes fresh new ideas that could move markets—and perhaps our world—in a new direction.
In Marl and at its branches in the USA and China, Evonik Industries is operating its own “incubators” for disruptive technologies. At Creavis, Evonik’s strategic innovation unit, interdisciplinary teams consisting of researchers and developers from inside and outside the Group work together on innovations that have great potential but also require a lot of patience.