New Venture Capital Fund Targets Potential Disruptors

Adding a new dimension to its investment strategy, Siemens launches a venture capital fund to invest in early stage technology start-ups.

Ralf Schnell, CEO of the Venture Capital Unit of Siemens
Ralf Schnell, CEO of the Venture Capital Unit of Siemens

With $100 million in initial funding, Siemens has added a new venture capital fund to its Industry Sector and Venture Capital Unit. The fund, known as the Industry of the Future fund, was established to help back start-up technology companies early in their lifecycle. This type of targeting differentiates the Industry of the Future fund from Siemens’ other venture capital funds that focus on what Siemens refers to as “more mature start-ups.”

To learn more about this new VC fund and its goals, I spoke with Ralf Schnell, CEO of the Venture Capital Unit of Siemens.

“Smart tools and new software for structuring industrial processes have significant potential to disrupt key industrial markets,” says Schnell. “It is therefore vital that Siemens keeps its fingers on the pulse of technological innovation to maintain its competitive edge and technological leadership position. The new Industry of the Future fund will play an important role in helping to achieve this.”

Explaining the early stage start-up focus, Schnell notes that the new fund “targets start-ups at an earlier phase of their business development than is usual for Siemens sector-focused VC funds. The aim is to promote partnerships with those companies that have the potential to revolutionize industrial markets or to tap entirely new markets with innovative technologies. To do this, we need to be involved at the earliest possible stage to maximize the technology’s competitive advantage. This, and the fact that developments are moving so quickly, is why the Industry of the Future fund was established with an earlier investment-focus than other Siemens VC funds.”

In terms of what Siemens expects to get from these investments, Schnell says, “All Siemens VC activities are designed to meet the needs of the sectors [focused on by Siemens’ business units] – Energy, Healthcare, Infrastructure & Cities and Industry – so a fundamental investment-criterion is a strong link to Siemens' business activities and customers. Another crucial factor is the true potential of the technology in each of the start-up companies we invest in. Our VC activities are designed to help ensure that we are positioned at the forefront of cutting-edge technological developments and remain relevant to established, developing and new markets. In terms of exit strategies, there is no uniform approach and such decisions are made on a case-by-case basis. Ultimately, the aim is to strengthen Siemens’ competitive edge and to develop the expertise and capabilities to further extend our technological innovation and leadership position. In this respect, some of the Siemens VC portfolio companies—about 10 percent—have been acquired by Siemens, but we mainly look for partnerships in order to leverage powerful technologies for the benefit of our customers.”

Prior to its official launch, the Industry of the Future Fund had already made investments in two firms: Lagoa, which is focused on 3D visualization, and CounterTack, which is focused on cybersecurity. Given these two initial investments, I asked Schnell if there were other, specific types of technologies Siemens is now looking to invest in to complement these two investments. “In strategic and technological terms, the Industry Sector is particularly interested in innovative software companies that fit the wider Industry 4.0 strategy,” he says.

For Siemens, its Industry 4.0 strategy revolves around a potential fourth industrial revolution being driven by innovation in industrial design and manufacturing processes.

“The importance of digitalization and software to manufacturers competing in the global marketplace cannot be overstated and the Industry of the Future fund will ensure we are keeping up with this fast-growing trend. Even though design and production landscapes are being increasingly segmented geographically, software can enable entire production chains to be more tightly linked by sharing data and streamlining processes. Software will therefore play a vital role in protecting companies from supply-chain disruption as emerging technologies become embedded in manufacturing systems.”

As for next steps for the fund, Schnell says, “We currently have a very active pipeline of interesting opportunities. In general we are interested in all new, primarily software-related opportunities that can change the way our industrial customers do business. Some areas of interest are cloud-based applications, Internet of Things, big data analytics, next-generation human-machine interfaces and cybersecurity to name only a few.”

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