Business

Case Studies: Corporate ventures/family businesses

by

Koch Equity Development/Koch Disruptive Technologies

Kansas-based Koch Industries is the third biggest privately controlled family business in the world in terms of revenues. So its corporate venturing efforts offer an interesting glimpse of how businesses like Koch innovate and stay dynamic.

The mainstay of these efforts is coordinated through Koch Equity Development (KED), which is probably best described as a hybrid private equity/investment office/corporate venturing business.

But unlike private equity groups, it doesn’t raise funds – all the money comes from Koch Industries – and that money runs into billions of dollars annually. This makes it one of the biggest corporate venturing/private equity businesses linked to any family business in the world.  

Perhaps KED is best interpreted through the investments it has made – and these are many and sizable. A good example is the group’s recent investment in Getty Images, one of the world’s biggest stock photo agency. KED made a $500 million investment in Getty last November and followed up with another $100 million investment in February.

When KED backed Getty, KED’s president Matt Flamini said: “This transaction, like American Greetings, Meredith, Guardian and others preceding it, is another great example of KED supporting a family-controlled business with a unique, non-controlling equity investment.”  

So KED’s strategy is to take minority and majority stakes in sometimes family-controlled businesses. These businesses, say KED, can be complementary to Koch Industries existing businesses, what KED calls “tuck-in” acquisitions, or “new platform” acquisitions, which are designed to extend the Koch franchise. And being a family business, Koch Industries uses KED as a way to invest in family capital with an eye on longer-term returns.

As the Getty deal and many other past acquisitions shows (they are detailed on company’s website), KED has considerable assets available to make acquisitions.

Part of its strategy is often to co-invests with others. And it has the wherewithal to work with some of the world’s biggest investors including MSD Captial, Michael Dell’s family office, the Penske Corporation, the transport group owned by Roger Penske, and BDT Capital Partners, the Chicago-based investment group owned by Byron Trott. It has also worked with Goldman Sachs and most recently co-invested with Golden Gate Capital to take a stake in the software group Infor.

Koch Industries also has Koch Disruptive Technologies to pursue its corporate venturing efforts. Set up in November 2017, KDT’s president is Chase Koch, the son Charles Koch, and some say the heir apparent at Koch Industries. That may or may not be the case, but Chase’s position at KDT is a great example of how family businesses like Koch Industries are engaging the next gen in their business world.

Tech, startups, venture are the zeitgeist of 21st-century businesses and most young and ambitious millennials would prefer to work in these sectors than old economy companies. That’s no different for the next gens of the family owners of multi-million/billion dollar businesses. So, family businesses have an added incentive to start corporate venturing groups – to spark the interest of the family’s next gen in the business world.

KDT is certainly keeping Chase busy. Already KDT has made some headline-grabbing investments, including Desktop Metals, a 3D print metal parts company based in Massachusetts. Set up in 2015, Desktop Metals has already attracted close to $500 million in funding from an array of investors including Ford, BMW and Saudi Aramco. KDT recently led a Series E round worth $160 million into Desktop Metals.

So, KDT in a very short space of time is mixing with the heavy hitters in the world of venture investing. The parent family business is no doubt happy with its progress and Chase is gaining invaluable experience for the big job at the parent company just in case he may want it one day.

Tengelmann Ventures Management/Emil Capital Partners

Based in Essen, Germany, Tengelmann Ventures Management is the corporate venturing arm of the Tengelmann Group, the multinational retail group 100% owned by the Haub family. Ten years old, Tengelmann Ventures is one of the most active corporate venturing arms of any family business, investing in more than 50 startups and venture-type businesses around the world.

Notable recent investments made by Tengelmann Ventures include a co-investment worth $34 million in Chronext, a Swiss luxury watch trading platform, an investment worth €30 million with three other investors in Scalable Capital, a fintech group, and most recently a $3 million investment in Quantitec, a positioning and wearable sensor-systems application.

Also promoting Tengelmann’s corporate venturing efforts is the US-based Emil Capital Partners, which, like its affiliate, Tengelemann Ventures, has been very active in the venture world. Set up in 2011 by Christian Haub, a fifth-generation member of the Haub family, Emil has concentrated on the consumer sector investments.

Again, like Koch, corporate venturing businesses connected to parent family businesses have proven to be a useful training ground for the next gen – in this case for Christian Haub.

Notable deals by Emil include funding Bright Farms, a low-impact food producer, which Emil has backed in numerous funding rounds, Chef’s Plate, a Canadian online food sourcing platform, and Kidfresh, which creates all-natural kids’ meals.

 

Pentland Ventures

Pentland Ventures is the London-based corporate venture arm of the Pentland Group, a global brand management company owned by the Rubin family and now under the management of Andrew Rubin as CEO, a member of the third generation of the family owners.

Pentland Venture’s corporate statement rather nicely describes the uniqueness of a venture/private equity group linked to a family business: “We aim to combine the network and deal-flow of a venture capital fund, the financial discipline of a private equity firm, the operational expertise of a strategic investor and the long-term outlook and values of a third-generation family business.”

Pentland Ventures has made some interesting investments. Most recently, it co-invested with a German corporate venture group, and a number of investment offices to back a London-based logistics group called ZenCargo. More details here. It has also backed an executive jet membership group called SurfAir, an online booking platform for home cleaners called Homekeep, and an American sports apparel brand called Tracksmith.

 

Wipro Ventures

Wipro Ventures is the corporate venturing group of Wipro, the Indian multinational business owned by the Premji family. Set up in 2015, Wipro Ventures is based in Silicon Valley. It has made 18 investments in the last four years and currently has a portfolio of 14 tech-centred businesses.

Like Koch Industries’ KDT, Wipro Ventures is led by a member of the family who owns the parent company. Rishad Premji is the son of Wipro’s chairman and second-generation owner Azim Premji. Rishad heads Wipro Ventures and is also chief strategy officer of Wipro.

Most notable investments include a co-investment into Tricentis, an Austrian software testing group, which received $165 million from Wipro Ventures and one other investor in 2017, and Vectra AI, a US network security group, and Altizon Systems, an Indian-based big data group.

Leave a Reply

Your email address will not be published. Required fields are marked *