Field Notes: Corporate Ventures in Social Impact

Field Notes

More companies are delving into social responsibility via venture investment and innovative products.

 


“Companies as diverse as Google, BMW, and General Mills are complementing traditional R&D by joining with other investors to put money into promising start-ups,” according to an October Harvard Business Review guide on how to successfully deploy corporate venturing. As more companies begin examining and improving their social impact, a new report from Impact Economy offers strategies for marrying these two practices: using corporate venturing to grow social impact alongside other business goals. William Burckart at Next Billion writes:

On the supply side (i.e., the supply of investment opportunities and financial products), few impact enterprises and nonprofits working to resolve social ills have balance sheets strong enough to support direct investment of the type and size that would interest impact investors. And seemingly insurmountable transaction costs contribute to the failure to attract systematic interest from commercial and philanthropic investors. […However,] a promising strategy is coming into view for building viable pipelines of investible deals—what [Impact Economy founder Maximilian] Martin has dubbed “Corporate Impact Venturing” (CIV). Corporate venturing in the traditional sense helps companies harness external factors, trends, or ideas for sustainable business growth by investing in new models for value creation, which can then be tested and cloned, or later transferred into the core business once they are perfected.[…]

 

In our experience, a CIV strategy can help the financial services industry build a pipeline of investible impact opportunities. Doing so enables financial institutions to move past the bolt-on approaches to impact-related investing, CSR and philanthropy that have come to characterize the efforts of many firms—approaches which are often costly and have proven to generate only narrow advantages. Creating new ventures and investing in existing ones, all through an impact lens, can boost innovation, equip firms for fierce (and growing) competition, and help achieve ambitious impact targets.

Profile Products CEO John Schoch took a different approach by investing internally rather than buying an innovative startup. Believing that his company’s water and soil management expertise might have something to offer the developing world, he started for-profit subsidiary ProCleanse, which recently released a life-saving and profitable innovation to provide affordable clean water to families in developing countries, according to Forbes:

After four years and millions of dollars invested in intensive research and development, ProCleanse has released a product that generates two gallons of clean water an hour and lasts for 10 years without chemical additions, components replacements, or frequent maintenance… The company estimates that the device will last more than 10 years, a quality that outshines many other filtration devices, and will cost less than $0.001 per liter over that lifetime…

As to profits, Schoch says he is putting faith in the strength of the technology and the growth of its current partnerships: “We believe that there is a payoff, or we wouldn’t keep doing it.”

Click here for more quick reads featuring interesting articles on philanthropy and impact investing.

0

Discussion

There are no comments yet

Leave Comment