Quartet strike right partnership venturing note.
One theory behind the latest wave of corporations that commit jointly to an independently managed venture fund is that they have to be similarly sized in order to avoid the investment decisions being skewed towards the larger, more powerful company.
If so, the creation of Ecomobilité Ventures by four of France’s largest companies has been well designed.
The €30m ($40m) corporate venturing fund will invest in sustainable transport start-ups after commitments by state-owned rail company SNCF, oil major Total, mobile phone operator Orange and car maker Peugeot Citroën.
Manoelle Lepoutre, executive vice-president of sustainable development and the environment at Total, said: "This is the first time four major market leaders have pooled their expertise to support innovative young enterprises. It is a novel way of driving innovation in the area of sustainable mobility and enabling the development of new, more efficient solutions for our customers."
The venture will take minority stakes in European startups offering technologies, services and products around transport.
It will be headed by SNCF’s Fabienne Herlaut. She said Ecomobilité Partenaires, which was founded in October 2008 with €15m in six companies, had left SNCF and created a management company independent of shareholders – Ecomobilité Ventures.
SNCF retains its interest in the six deals – car sharing (VULog), carpooling (Greencove), electric cars (Lumeneo), photovoltaic (Coruscant), guidance for the visually impaired (Phitech) and last kilometre urban logistics (Urban-Cab) – but new deals will be by the Ecomobilité Ventures fund.
The investment committee for the new fund will be consulted on rather than deciding deals – debating the type of projects it wants to see, Herlaut said.
Investment decisions are made by a conseil d’administration or strategy committee, which has two representatives with three votes for SNCF, two representatives and one vote for Orange, Total and PSA Peugeot Citroën, and three independents with one vote each. SNCF is putting in half the fund, or €15m, with €5m from each of the others.
Herlaut said: "There has to be a unanimous decision to invest as each investor is too big to force an investment.
"We have been working on the project for 12 months so it has been a long birth with ample opportunity to fail. But each time an obstacle has arisen the partners have not given up but instead have found a solution.
"We had our first investment committee at the end of November and discussed nine projects, which each LP had received a week in advance. They gave an enthusiastic welcome to the types of project Ecomobilité Ventures was bringing and then had a three-hour committee meeting with no taboos to then select three projects for potential investment.
"All are aware that not every project will be of dramatic interest to them but as a portfolio each should have two or three of special interest to them. I hope we will not have to compromise finances to fit into a strategic box for them as they are even more demanding on finances. "
Patrice-Henry Duchene, head of sustainable development at PSA Peugeot Citroën, said the fund would help the company move beyond making automobiles.
The quartet of strategic limited partners is the largest grouping of peers behind a venture fund since the credit crisis started. Peers, such as Energy Technology Ventures (ETV), often have had three or fewer equal partners. (ETV’s backers are industrial conglomerate General Electric, oil major ConocoPhillips and utility NRG Energy.)
And Herlaut said it might take in more strategic partners and then leverage the fund with financial investors so it can do more deals.
She said: "We might have others join to bring more money as we are the experts in mobility with complementary expertise.
"SNCF is a public transport company and when we started the first fund it was very clear to me that the global environment of mobility was changing and rapidly so."
In an interview by Harvard Business School case, Investing in Cities of the 21st Century: Urbanization, Infrastructure, and Resources, Herlaut said Paris’s heavily used mass transit system was old-fashioned and congested.
There is tremendous need to revamp the entire structure to improve quality of service. Demand increased by 16% from 1995 to 2008. Customers want better service and more: faster cheaper, and delivering a better customer experience.
Supply side challenges include a rise in carpooling. Car manufacturers are offering a new type of subscription service providing various modes of transportation."
Traditional providers of cars and public transport, therefore, were being challenged by new entrants, either very large groups or start-ups and as the barriers were being shaken so the actors became different, for example EDF in electric vehicles; Lafarge in smart cities; Orange in providing itineraries on mobile phones, Herlaut said.
Vivek Badrinath, executive vice-president of enterprise communication services at Orange, said: "Information and communication technologies are a vital lever for optimizing travel and energy resource management. Orange has been focusing on these issues for several years through a program dedicated entirely to smart cities."
Bernard Emsellem, executive manager for Ecomobility at SNCF, said: "The creation of Ecomobilité Ventures is fully aligned with SNCF’s strategy, which is to link different modes of transportation in order to offer our clients end-to-end solutions."
It is also designed to achieve what Herlaut in the Harvard case study said was needed: partnerships. "Today’s world of mobility requires partnerships. Competitors have to work together in innovative ways. The winning partnerships will be those that create the most giant and innovative transport systems."
