When one leading consumer products company developed a sustainable plastic recycling technology, it had no desire to be in the recycling business — and yet, it was responding to a significant unmet need in the market. The question was how to commercialize this technology, and this is where Innventure (INV) comes in.
Innventure enables multinational companies to commercialize technologies that have strategic value to them. The company works with multinationals on technologies they don't want to commercialize on their own. For example, the technology might not fit in with their core mandate. Thus, to develop these non-core technologies, Innventure creates new companies from scratch, acquiring or licensing the technologies from those multinationals.
"We form the company, so we’re not backing entrepreneurs," Innventure CEO Bill Haskell said. "We’re not reading business plans. We're evaluating technologies that already are known to meet a predetermined unmet need in the marketplace. So multinationals help us in many ways, but the first is that they uncover needs in the marketplace that are unmet, and they often develop technologies to meet those needs."
Unmet Needs
When the Innventure team starts a new company, they already know there's a need in the market, and there’s technology designed to meet that need. They use the multinational partner as a channel to the market to help drive adoption of these disruptive technologies.
"So big picture: these multinationals, even the top 100, spend over $650 billion a year on R&D, and only a single-digit percentage of that turns into commercial products for one reason or another," Haskell explained. "So there’s a vast store of intellectual property and solutions that, again, have been designed to meet needs in the marketplace. And so we’re the sort of connective tissue that takes those ideas and that market opportunity."
Innventure starts the company, funds it, staffs it with its own talent, and then builds it. The goal is to operate Innventure as a conglomerate, where Innventure has controlled subsidiaries it has started and that are operating companies underneath the Innventure umbrella.
Haskell says they're not an investment company or venture capital firm, but rather, owner-operators that run the new company after launch.
Identifying viable, disruptive technologies
When identifying technologies they want to commercialize, the Innventure team targets technology solutions they believe can achieve at least a billion-dollar enterprise value over a certain period of time upon commercial success. They also look at the market opportunity, whether it can make money, and if it has good margins and sustainable differentiation. Innventure seeks value creation engines.
To uncover these technology solutions, they communicate with multinational companies, both at the C-suite level and with the technology and licensing groups. Innventure tells them what types of technologies meet their criteria, and they periodically send opportunities they think will work.
"We reject most of them, honestly, because we’re pretty fussy about what we pick. Ours is not a portfolio model where we make a bunch of bets and hope a few win," Haskell explained. "We’re making very few bets and trying to make all of them win. And even on the ones that we reject, we often give feedback to the multinational about why we rejected it… Over time, they get better and better at feeding us higher and higher quality opportunities."
Innventure spends a lot of time cultivating these multinational relationships, and it works with companies around the globe to uncover disruptive technologies.
How Innventure's DownSelect® Process Works
The company targets a high success rate with the new companies it forms, preferably, 100%. Innventure does this through its DownSelect® analysis, not by winnowing down a portfolio of investments to a few it thinks it can win, but rather, by starting with a known need in the marketplace. According to Haskell, 42% of all startups fail because there's no market demand for what they build.
However, they already know going in that there could be a market for the technologies they develop because the multinationals they come from typically have plenty of market data and thousands of sales and marketing people traveling the world each day, listening to what customers want.
After starting with a known need, Innventure looks for technology solutions that multinationals have already spent significant resources, often tens of millions of dollars on development over many years. Haskell says that strategy helps them avoid absorbing a great deal of market and financial risks associated with the new technologies.
Pre-Installed Sales Funnel
The third step in Innventure's DownSelect® analysis is that the multinational can become a channel to the market, meaning their sales and market teams know where the customers are because they've already surveilled the market.
"By example, the first company we launched under Innventure pre-sold the first 20 years of the production of its first commercial plant before breaking ground… And that was done with the help of a Fortune 500 company in the consumer products business. They are a customer for it, but they introduced us to lots of other customers for it. It’s a recycling technology that takes polypropylene and converts it into the equivalent of new virgin resin. It takes dirty, old, used-up polypropylene, recycles it, and makes little beads that can be made into other plastics without the need to use a petroleum-based source again."
The consumer products leader wanted the technology commercialized because it needed sustainable packaging for its products, but it didn't want to be in the recycling business. However, no one else in the world had developed a technology to recycle polypropylene, so the company invented it.
Innventure then started a company around it via a licensing agreement to acquire the technology from the consumer products giant.
Funding and Operating the Companies
The fourth step in Innventure's DownSelect® analysis is to fund the companies.
Finally, Innventure deploys its own executive team to operate each new company from the start, providing seasoned leadership rather than banking on first-time entrepreneurs.
"I’ve been involved in… 18 and 19 startups from scratch to commercial success, and we have many, many people on our team that have been through handfuls of startups," Haskell explained. "And so everybody that we put into these companies as CEO and C-suite in the early days of these companies’ formation have done this many, many times."
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