ABB is a global leader in power and automation technologies that enable utility and industry customers to improve their performance while lowering environmental impact.
The ABB Group of companies operates in around 100 countries and employs about 145,000 people. The company’s portfolio ranges from light switches to robots, and from huge electrical transformers to control systems managing entire power networks and factories.
ABB Technology Ventures (ATV) is one of the more recent chapters in ABB’s long history of technology innovation. ABB and its forerunners, Asea and BBC (Brown Boveri Corp.), not only invented or pioneered many power and automation technologies (liquid crystal displays, the microwave oven, artificial diamonds and FACTS all owe their development to ABB), but retained technology and market leadership in many of these areas.
ABB’s research and development investments in 2012 totaled more than $1.4 billion or 3.7 percent of the company’s $39 billion total revenues. R&D spending has risen by 68 percent since 2007. The company has seven corporate research centers, 8,000 researchers and developers, and 70 university collaborations across the world.
Key components of the company’s innovation strategy are investment strategies around inorganic growth (ie, merger/acquisition) and venture capital investment. Handled wholly separately from ATV’s investments, ABB has used its strong balance sheet to execute more than $10 billion of strategic acquisitions since 2010, including Ventyx ($250 million revenue), Baldor ($1.7 billion revenue) and Thomas & Betts ($2.3 billion revenue).
ATV was established specifically to execute upon the investment opportunities which traditional corporate M&A could not capture, namely early- and growth-stage investments in novel companies introducing new technologies and improvements on existing technologies that increase performance, reduce cost or open up new business models or commercial opportunities. Like other corporate venture capital undertakings, ABB uses balance sheet assets as opposed to traditional limited partner capital, to stimulate business growth by selectively accessing innovation and research in the marketplace. This is both complementary and additive to the activities of ABB’s existing research and development programs.
While every investment that ATV enters into passes typical venture capital thresholds for financial returns, the group must additionally meet the strategic objectives of the ABB Group and help accelerate – today or in the future – a business line or area of business interest for ABB. Put another way, any investment must meet traditional VC financial return requirements yet have credible strategic value to ABB. Linkages with ABB business units and R&D/technical resources then ensure additional value from the investment. A thorough understanding of the strategic interests of ABB’s business units allows ATV to work closely with them so that all of its venture investments are carefully coordinated with one or more business units early in the evaluation process. One business unit is typically designated as a lead business unit, and that BU assists ATV with market and technical evaluation as well as post-investment governance, product pull-through and overall integration.