The best of two worlds — A traditional VC initiated by a family-owned business
Before you stop reading and think this is about corporate venture capital (CVC), let me tell you… IT IS NOT! Let me instead tell you how Venture Capital can create enormous value (on top of an outstanding financial performance) for your company’s innovation and how you can combine strategic added value with a financially focus VC setup.
Vito Ventures, the fund I work for, was initiated by the Viessmann Group, a family-owned, international big player in the heating industry. The company just celebrates its 100th birthday, so I guess we can say, they somehow know how to do things right and innovation is part of their DNA. In 2014, the Company decided to start their full-fledged, 360 degree, digital transformation, to prepare for the next century and tackle the challenges that come along with new, digital-driven businesses in their core markets, but also to seek for new business opportunities outside the “box”. One of the initiatives to boost this transformation is Venture Capital. While thinking about the best possible setup and the pros and cons of CVC vs. traditional VC we combined the best parts of both and ended up with a superb solution. The rest of this article should give you a good idea why we decided to do things the way we do:
One of Viessmann great assets always was the perfection and technical excellence of their products. You only produce and ship something, when it is perfect and failures are something that you try to avoid…! This straightforward mantra helped the company to grow over the last decades. But it is not necessarily the way innovation happens tomorrow and how you speed up the development of new products and ideas. How do you manage to keep up the quality but embrace a new culture, where “making mistakes” and learning from them is a good thing? How do you get the best scope on what’s going on around you? How do healthy companies look like in the future that attract top talents? Last but not least, how do you strengthen your core business, what business models lay beyond the core business and what does it take to participate in them or even better, how do you create them?
Vito Ventures is a traditional VC when it comes to its setup and main purpose… find and back extraordinary teams and technologies all over Europe to perform financial returns within a defined fund cycle. Our scope is therefore not to invest in services and products that strategically fit to Viessmann only, but start-ups that drive the digital transformation of infrastructure and companies from a holistic perspective. We search for new ventures in the fields of IoT, industry SaaS solutions, B2B marketplaces and energy tech, that enable established and new companies to tackle their day to day business in the future as well as start-ups that will change the status quo of industries for good.
For the Viessmann group the value add comes through a direct and for now exclusive connection to the European start-up ecosystem. We share our investment hypothesis, provide feedback to new technology trends and function as a sparring partner within the business development. It is not a secret anymore that Viessmann somehow drafted the blueprint for the digital transformation of a family-owned company. This does not only strengthen their own businesses but also showcases the “German Mittelstand” how to turn threats coming along with the enormous impact of digital business models, into an competitive advantage. On the other side, through the tight bound to our initiator and LP, we provide our portfolio companies with direct access to Germany’s economic backbone. Here, startups find the perfect playground for pilots, sales partnerships, customers, basic feedback or eventually the right partner for an exit.
We are thrilled to be part of this journey and contribute our share to the digital transformation of Viessmann. Speaking for myself, I believe that many traditional companies have everything to succeed in the future… if they are willed to radically question their own standing and change if necessary. It is not a problem, not to know, how to handle future challenges but it is fatal not to ask for advice. Venture capital will be the booster of some great new companies that will disrupt existing markets, but it can also help to get an idea, how those companies will look like and how you can learn and participate from their success.