German firms pursue new R&D models

14 March 2012

BERLIN: Major German brand owners like BMW, BASF and Siemens are utilising venture capital units to enhance their innovation programmes.

BMW, the automaker, rolled out pioneering vehicles like the i3 and i8 eco-friendly cars in 2011, when it also launched a venture capital arm, with a $100m budget, to back small players in related fields.

"We want to attract young entrepreneurs and start-up companies to come to us with their ideas and innovations and ask us for support," Ulrich Kranz, head of BMW's Project i, told the Financial Times.

BASF, the chemicals group, created a similar division of its own in 2001, which during the last few years has supplied resources to numerous fledgling enterprises around the world.

"It's about accelerating the development of innovation within the company and that can happen faster via co-operation with start-ups," Dirk Nachtigal, head of BASF Venture Capital, said.

Bosch, the conglomerate, is active in a range of sectors, meaning its venture capital arm has a broad remit. This includes serving as a "matchmaker" between start-ups and its diverse business units.

"Sometimes [start-ups] are looking for a strong brand name among their investors and sometimes they are looking to gain operational excellence," Claus Schmidt, joint managing director of Robert Bosch Venture Capital, said.

"Many of these start-ups suffer from inability to transfer good ideas in prototypes into manufacturable products. So they come and talk to us."

Siemens Venture Capital has invested over €800m in more than 150 firms and 40 funds to date, and believes a patient approach is vital.

Ralf Schnell, head of Siemens Venture Capital, said: "If you got into this business, you have to understand it's a long-term investment. You can't go in and get out next year.

"Teaming up with a start-up is something that complements our industrial research and development. It's an innovation tool out of a spectrum that includes R&D, acquisitions, joint ventures, licensing and university co-operations."

In January 2012, Evonik Industries, the chemicals group, announced its intention to provide €100m to start-ups and venture capital funds going forward.

Previously, Boehringer Ingelheim, the pharma giant, unveiled a €100m fund in 2010. RWE, the energy company, has also pursued a wide variety of investments through its Innogy Venture Capital wing, established in the same year.

Data sourced from Financial Times; additional content by Warc staff