Part One

You're listening to Peter Bodenheimer and Stefani Bardin of the unstuck innovation consultancy we're talking about the article Corporate Venture Investing Arms Wrestle with Sagging Values from the Wall Street Journal published on August 21st 2023 and the Food Business News piece Coca Cola launches sustainability focused Venture Capital fund published on July 18th 2023. You can find this audio nugget and links to the articles on our website unstuck innovation.com

Thanks for listening!

So one of the things that we do at unstuck is work with companies on what we would call corporate venture or corporate enture strategy and the importance of corporate venturing is that it's one way for companies to start to engage with a different element outside of their core business right so when you talk about corporate venturing it could be anything from launching an accelerator, becoming a limited partner or an investor in a venture capital or private Equity Fund. It could be launching their own direct Investments through a corporate Venture Capital arm or a couple of other things, but ultimately it's one way to drive innovation that is not necessarily part of their Core Business and - because of that my background in Venture I really love reading about what's going on and I think there's a lot of cycles that happen and we're in frankly one of those downturn cycles across Venture in general but especially in corporate venturing I was reading an article from The Wall Street Journal and they were talking about in 2021 about 21% of all venture investments came through corporate venture capital arms 10 years before that it was 11% So it doubled effectively. So the retrenchment that's happening around that is it because people got greedy or people just were very shortsighted in the way they plan this out? Well I think often and I I it sounds a little silly to say that there's no strategy involved certainly there is but there are times where venture performs exceptionally well because a rising tide lifts all boats right and then there are other times where kind of like the world we've been in the last two years or so maybe even a little longer of- oh boy these valuations were out of control especially in food and beverage um we were we were full-on bubble boys and bubble girls for the last couple of years um. these were situations where the the corporate leadership I mean there are a lot of different reasons that this happens one could be macroeconomics right so I think the reason that in 2011 it was so much lower is there was a huge runup before that in terms of corporate venture capital and then the 2008 financial crisis hit and once you know the performance of a company starts to go down then the leadership is like what why are we spending money here why are we spending money there. A great quote from the article about you know talking about how they do these things and then a few years down the road the CFO is like wait a second why are we doing this we've invested in these private assets I can't set a firm valuation on them I can't have a liquidity event you know frankly what the fuck are we doing right so that's one aspect of what can drive this the other is that when things are performing well it becomes very attractive because the returns look great and in some cases they are great but in some terms those are just markups.

Here's part two of that conversation

So this retrenchment that's happening around corporate venturing and the heyday of spending from the past couple of years seems to be pulling back however there's an article about Coca-Cola and a sustainability venture or they're partnering with a bunch of bottlers to try to reduce their carbon footprint do you see that kind of corporate venturing happening more often instead of buying up or investing in companies whose product either aligns with or competes with your own or their own product. Well I think there are different reasons that companies do this it's not completely out of the question for a company to have one fund focused say it's Coca-Cola on finding the next new beverage category or adjacent category that they want to be in versus a fund like this which is focused on sustainability in the broad stroke but really specifically around technologies for reducing uh their impact in distribution in manufacturing in supply chain in general. So sometimes it's about hey let's find our next billion dollar line of business and in other cases it's let's expose ourselves to some of these early technologies and see if they're a fit for us because at one point they're just not this is one of the challenges of corporate Venture is working with a startup that might have six employees and a proof of concept and a company like Coca-Cola that is behemoth how do you integrate those things right but this is one way to start to get exposure and at the point at which it's ready for some sort of scale or at least enough of a scale proof of concept that it makes sense for Coca-Cola they already have that relationship they have an understanding of how it might work within their infrastructure and so it makes a lot of sense. I think in this case they also partnered with Greylock who's a really respected Venture Capital firm to manage that fund I know they've also done funds for groups like Albertsons and others and so they're they're kind of outsourcing the best part of it to professionals.

Here's part three of that conversation:

It sounds also a lot like patagonia's Tin Shed right where they first started their incubator to help them solve a problem around the toxicity in the material for their jackets right and it was a very smart move for them to invest in companies who were a little bit more nimble in the way that they were uncovering the technology because they were you know more small scale but Patagonia has also started doing something really interesting which is moving into the food space and innovating in that space in the same way that it sort of seems like two sides of the same coin with Coca-Cola right Coca-Cola is now going more into sustainability and you're starting to see companies going into regenerative agriculture that don't necessarily have products that rely explicitly on farming right . I mean when you talk about food and beverage that's always the genesis point right like you have to grow something or produce something that gets turned into it but I I think with the the case with Patagonia they're living their ethos right when it comes to their food side Patagonian Provisions they are looking at sustainable fish so tinned fish is sort of a big part of what they're doing already and they're things that are very closely aligned in terms of values and brand with what they are known for I suppose the same could be said for Coca-Cola but who knows right like they could be investing in some company that's making sensors for trucks that are shipping to optimize the temperature that they're shipped at right so it should be awesome yeah it could be ultimately I think all of these things each individual investment is hard to measure the success of in the big corporate picture but overall it's are they moving the needle the way they they want and that's the same thing with like doing Innovation work with inside a company anyway is like some things are gonna work some things are gonna fail but are you moving the needle in the direction that you want to go and do you have a cohesive strategy that says here's where we want to be five years out ten years out 50 years out that might be a bit of a stretch but you know how far out can we get and are we heading in that direction and I think all of these are different ways of doing that right and one is not better than the other it's all company specific which I think people get a little confused about is that they see a strategy happening in a public space and they're like we should be doing that and it might not be the right match for them. I certainly saw a lot of that In my time in venture where we would have corporate partners that were genuinely interested how these startups were thinking and how they could potentially work with them. we also had a handful that were there because they wanted to put a line item in their annual report that said we made a visit to the food x incubator or accelerator to see what Innovations were happening look how Innovative we are and that's it so you know I would argue that the ones that were digging a little deeper were more valuable and were going to get more out of it certainly but they all work the way they work.