“The Corporate Venture Capital (CVC) survival game: decarbonization as a catalyst for longevity and purpose” – Aster Fab’s Hélène Maxwell shares her views

Corporate venture capital (CVC) funds have gained popularity as a strategic avenue for corporations seeking to invest in startups and gain competitive advantages. However, despite their growing popularity, CVC funds face a perplexing conundrum: on average their lifespan is a mere four years. This phenomenon has prompted researchers and industry experts to delve into the underlying factors that contribute to the early demise of these funds, as their premature ends prevent them from living up to their full potential as an impactful funding mechanism.

Various interconnected challenges plague the lifespan of CVC funds. Strategic shifts, mismatched expectations, cultural differences, and internal obstacles collectively impede their ability to achieve their strategic objectives, ultimately leading to their premature demise. A prime example of this is General Electric (GE), which established GE Ventures in 2013 as a strategic initiative to invest in promising startups across diverse sectors. However, due to financial difficulties and the need for operational restructuring, GE was compelled to wind down GE Ventures. Similarly, the recent closure of TotalEnergies Ventures underscores the vulnerabilities faced by CVC funds in the pursuit of longevity.

Decarbonization as a catalyst for CVC fund longevity

Amidst the multitude of challenges faced by CVC funds, a glimmer of hope emerges through the concept of decarbonization. If used with the clear objective to support decarbonization, CVC funds can embrace a clear mission, drive substantial impact, and enhance efficiency through targeted investments and a more focused investment strategy. This alignment would allow them, not only to navigate the challenges that hinder their lifespan, but also contribute to broader environmental goals.

The transformative potential of CVC funds in addressing climate change is exemplified by their groundbreaking investments of over $10 billion in climate tech startups in 2022. Notable recent CVC investments, such as AccelorMittal XCarb's investment in Heliogen, BMW i Ventures' support for ChargePoint, and Maersk Growth's investment in Bound4Blue, demonstrate the instrumental role of CVC funds in advancing decarbonization efforts.

Science-based targets: quantifying the investments that are made

However, it is important to recognize that while these individual investments showcase positive steps, they do not necessarily signify alignment with a corporate decarbonization strategy, assuming one exists. Research reveals that half of the CVCs investing in climate tech lack connections to science-based decarbonization targets, resulting in a misalignment with corporate sustainability strategies.

French multinational electricity giant Schneider Electric serves as a leading example in this space. With approved short-term targets and net-zero targets validated by the Science Based Targets initiative under scopes 1, 2 and 3, its CVC makes investments aligned with its roadmap in areas such as energy management and electric mobility. Aster has long supported Schneider Electric in executing deals in the climate tech space by facilitating investments in startups like Avantium (renewable feedstock), Solaire Direct (solar PVs acquired by Engie in 2015), CPower (demand-side energy management), and more. Other corporates with validated SBTI targets include Saint-Gobain, with its CVC arm NOVA founded in 2006.

Breaking free from siloed thinking, Corporate Venture Capital (CVC) funds and sustainability departments can amplify their impact

To unlock the full potential of CVC funds in driving decarbonization, it is essential to break free from siloed thinking and embrace a collaborative approach. CVC funds and sustainability departments can amplify their impact by aligning investment strategies, integrating sustainability considerations, fostering communication, and promoting cross-departmental education.

At Aster Fab, we are committed to pursuing this mission. By bridging the gap between CVC funds and sustainability departments, we aim to ensure that they contribute significantly to corporate decarbonization strategies and drive positive environmental change.

The survival game for CVC funds is challenging given, for example, the market uncertainties related to scaling decarbonization tech, the long-term investment horizon, the extra due diligence required to ensure the startups are aligned with the EU taxonomy, and the policy and the sensitivity of a cleantech company’s success, to policy and regulation change. All the same, with a strong focus on decarbonization and a collaborative mindset, they can emerge as catalysts for longevity and purpose in the corporate venture capital landscape.

To drive the transition to a low-carbon economy and promote sustainable investments, several key actions can be taken:

1. Encourage corporates to establish science-based decarbonization targets: By setting clear targets, corporates can ensure that their investments in climate tech startups align with the EU's overall sustainability goals. This will contribute to a greener future and accelerate the transition to a low-carbon economy.

2. Foster public-private partnerships: Collaboration between corporates and public entities is crucial for the success of climate tech startups. By facilitating partnerships, joint investments can be made, leveraging the resources and expertise of both sectors. This collaboration will drive innovation and support the growth of sustainable technologies.

3. Provide funding and education support: Allocating resources for cross-departmental education programs is essential to bridge the knowledge gap within corporate venture capital (CVC) funds and innovation departments. This will enhance their understanding of sustainability challenges and opportunities. Additionally, financial support can be provided to encourage investments and initiatives that drive the development and deployment of climate tech solutions.

By implementing these measures, corporates can play a significant role in advancing sustainability goals and driving positive change in the climate tech sector.

About Aster

Aster Fab has emerged as a trailblazer in the French stock market index CAC 40, and a sought-after partner for top corporates in the challenging realms of energy, mobility, logistics, and beyond. Their mission? Empower innovation, sustainability, venture capital, and M&A teams to boldly partner with, invest in, and acquire climate tech startups. Born from the visionary footsteps of their parent firm, Aster—a pioneering climate tech VC fund established in 2000—Aster Fab exists to embolden action-driven executives, transforming mere decarbonization roadmaps into resounding, impactful reality.

About the Author

Hélène Maxwell is a Senior Consultant at Aster Fab. With an impressive track record, she advises industry powerhouses like, EDF, Bouygues Construction, Vinci, Orano, GTT, OMV, Saipem, Terna, and more. Her expertise spans from designing bold innovation strategies, setting up impactful innovation initiatives (CVC, accelerators, startup studios…), curating sustainable deal flow to executing transformative M&A and CVC deals.

Prior to Aster Fab, she served as Aster Capital’s Managing Partner’s right hand.

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