Bridging the gap between idea and industry – BASF Venture Capital

How does BASF invest in global start-ups? Here is our summary of the presentation about BASF Venture Capital given by Markus Solibieda (Managing Director) during CIEX 2020

About BASF Venture Capital

The vision at BASF venture capital is to catalyze changes for BASF and the whole chemical industry. The organisation is following a global capital venture approach and has been doing so since 2001. This makes BASF Venture Capital one of the oldest European corporate venture companies.

There were only seven such entities in Europe when BASF started two decades ago. Now there are over 100 corporate venture capital units in Germany alone. In addition, the company has a team of 14 in different parts of the world, with an accumulative fund size of $250 million, an evergreen fund structure.

Markus Solibieda mentioned that BASF venture capital funds in A and B rounds and also caters to gross capital. However, their primary focus stays on Series A and Series B.

Furthermore, the managing director mentioned that the company does minority shares, and ticket sizes range between $1 million and $5 million in the first round. They also continue to support in other rounds, especially with successful companies

Investment strategy at BASF

Here you will learn about where their investments go. Additionally, the business models that are on top of BASF’s priority list include the following.

  • New Business Models, Artificial Intelligence and Digitalization

Markus Solibieda revealed that BASF’s target market and business sectors include digital farming tieing into its $9 billion crop protection business.  Another example is 3D printing, and BASF Venture Capital is very interested and excited about this industry. Markus Solibieda added that the company also looks at how to enhance the existing business models with digital tools. Another important aspect for the company is understanding how their innovation activities may face disruption due to new technology.

  • Platform/Ecosystem-Based Digital Business Model

BASF Venture Capital also focuses on how the new platforms will change the way their industry works in terms of distribution channels. BASF expects that there is a traditional value change in the chemical industry. They believe this will continue to happen by players in the USA and China with specialized industry platforms coming up.

Markus Solibieda emphasized that the company would like to notice how the new players in the industry will influence the change in the industry. Furthermore, the BASF Venture Capital wishes to learn how the use of platforms and consumer behavior is going to lead this change.

  • Chemistry both New and Sustainable Materials

These areas of interest include new chemicals in the market, including innovative chemical processes. Sustainable chemistry is another aspect of the industry, including battery storage and energy storage. In this sector, BASF would like to explore how they can foster the development of the chemical industry towards a more sustainable solution and contribute.

Investment Portfolio

Here are the following areas that fall under BASF’s portfolio

  • Digital farming – interesting investments
  • Artificial Intelligence (platforms/software) –investments in Europe, North America, and China
  • 3-D Printing – investments in the USA, China, and Germany
  • Sustainability – Biodegradable plastics, high-performing large volume storage batteries, etc.
  • Advanced Material – an extension of our current business activities
  • Biotechnology
  • International Funds – the company invests in funds and prepares grounds in the regions that are not so familiar with India. A year ago, they started an office with fund investment in Ag Tech and Food Tech as local partners in India. Similarly, in Brazil, they are working with SP Ventures as local partners in the country and to look at interesting opportunities.

8 Strategies for Corporate Venture Units

Here are the strategies BASF Venture Capital believes other companies can use to work with their respective corporate venture units. These are not just for chemical industries but all companies in general. However, Markus Solibieda shared these strategies as not some scientific discovery but a result of years of experience and observation while working with various strategies.

      1.    The Defensive Passive Strategy

In this strategy, a company tries to look at other players out there in the market and try to understand what will happen in the future. However, an observing company will only be scouting and not play an active role. They may collaborate with other businesses but will not be too active to implement anything as of yet.

      2.    Defensive Active

Here a company would still try to understand what is happening in the industry, especially what the new threats are. Then, they would invest in the businesses with disruptive characteristics and who could be challenging competitors in the future.

      3.    Optimization of Internal Processes

This strategy includes a young company or vendor developing something that may help your company in becoming efficient in processes. That is simply looking at who is working a new way to do maintenance such as maintenance tools, HR software.

Markus Solibieda says that in this strategy, you reach out to these companies to seek assistance as a new client and ask them to show you how to do it. The requesting company must show eagerness to learn about how this unique piece of tech can help improve and optimize its processes.

      4.    Pre M&A

This is one of the most popular strategies in the corporate venture capital domain. Companies such as Cisco and Intel have really built a whole legacy of acquisitions based on the Pre M&A approach.

The idea is to take a minority first, look at the business, and understand better how the business and management are performing. Then an acquiring company may decide if they wish to take the majority in that business.

      5.    Exploratory/Visionary

A different strategy that helps a company understands about the game-changers in the industry. For example, you learn about what will change in the next 5 to 10 years, such as quantum computing, fuel cell technology, etc.

      6.    New Business building

According to Markus Solibieda, this is a more pragmatic approach where a company invests in a business they believe has the potential to become a corporate mother company. This is about supporting startups with the potential to grow beyond their current size

      7.    Existing Building Buildup

This strategy allows companies to invest in existing businesses and reach out to their existing consumer by using digital tools. This is more of a customer-centric approach to building a better relationship with them. So companies primarily work with startups that have tools that allow a smooth implementation of this strategy.

      8.    Business Extension

This involves working with or investing in business models who wish to extend their current business lines. For example, a chemical company that wishes to provide services like data storage, etc. Other goals may include PR goals, HR goals, financial asset management, etc.

You can find the recorded presentation on our CIEX blog. It also contains more than 100 case studies and images captured from past CIEX conferences. Your next chances to join a CIEX related event are during our Virtual – CIEX Data Summit (May 10, 2022) and live CIEX (Frankfurt, October 5 & 6), 2022.

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