Henkel Tech Ventures started with a few pilot programs, which gave it time to build strategic value and ensure that the effort and resources invested in innovation would generate success. 
Collaboration, Collaboration, Collaboration
May 14, 2024
Interviewed by Nicolas Sauvage on April 17th, 2022
Henkel Tech Ventures, the corporate venture capital arm of the German Henkel Adhesive Technologies, has maintained a strong focus on deep tech ventures and holds a successful investment portfolio with a deep tech focus. Head of Corporate Venturing Paolo Vavaj provided the Corporate Venturing Insider audience a deep-dive understanding of the CVC’s mechanisms.
Starting Small
Having already worked in corporate strategy at Henkel, Paolo presented an approach for new business development through various smaller projects. He received the go-ahead with the company planning to revisit the activity after a year. After hand-picking a team, he began developing opportunities that quickly delivered significant benefits to the operating business, such as technology involving welding two different plastic materials, which are still relevant to the automotive industry.
Soon, the team concluded that to increase its direct benefit to Henkel Adhesive Technologies, it should explore technologies outside Henkel. The first few investments in 2015 established traction for the startup within the operating business by instilling confidence within the CVC arm and highlighting that startups present invaluable untapped resources within the parent company’s strategic plan. Paolo described how upper management came to understand that startups may possess fascinating innovations that Henkel may not be able to create without a significant reallocation of resources.
The Ideal CVC Practitioner
Paolo said the ideal CVC practitioner would hold a Ph.D. in chemical and organic chemistry. He believes A strong technical and commercial background is essential. The technical background is usually acquired through education, but can occasionally be acquired in the work setting. Commercial experience, on the other hand, almost always is absorbed via job experience and rarely through education.
“You need to understand what the startups are doing,” He said.
Henkel Ventures is a deeptech CVC, so the need for technical expertise cannot be overstated. Commercial experience helps, but some form of technical background is a virtual prerequisite for a position on Paolo’s team
Team Diversity and Consensus
Paolo admitted to harboring inherent biases when evaluating startups. To eliminate them, he said it is essential to diversify the decision-making team, including gender, race, job experience, education, background, and more. His team consists of eight accomplished professionals, including chemists, engineers, and business experts. One exciting and unconventional essential addition to their team is a psychologist. That associate, Paolo said, would have a spot simply because of his fit and personality. Being a psychologist is merely an added perk.
Overall, Henkel Ventures just looks for the right characters and personalities who bring the entire team forward in addition to adding different perspectives in evaluating startups and their founders. From a maintenance perspective, it would be much easier if Paolo had named seven individuals who were clones of himself to the panel, but the outcome would be one dimensional. So diversity is essential and often not held with high priority when interviewing team members.
“The real difficulty is not hiring diverse people,” Paolo said. “It’s hiring diverse people who can work and act as a team.”
On Paolo’s team, one independent member performs all the startups’ technology assessments. From there, members owning strong business backgrounds evaluate the startups’ monetary benefit to Henkel Adhesive Technologies. Then, everyone leverages their backgrounds and strengths to finalize the due diligence and decision-making.
Henkel Ventures uses an investment board. However the initial decision to move forward is arrived at with a vote of the eight fung teammates. Although Paolo could drive investments to the investment board without team consensus, he feels that would be unwise, possibly creating dissension in the CVC.
The Five-Year Commitment
Paolo explained his fund’s five-year protection plan idea. When initially proposing the idea for Henkel to open a CVC arm Paolo expressed the need for a five-year mothership commitment to give his team a real chance to write its success story. If corporate couldn’t commit to financially insulating the fund for five years, there would be no point in launching it.
In Henkel’s case, the operating business protected them for longer than five years. It paid off, with the first new businesses based on startup technologies entering the marketplace.
Changing the Status Quo and Mindset
After achieving their first few successes, the operating business’s mindset changed. It now approaches the CVC arm frequently with requests to find particular technologies. Business units ask Paolo and his team to recruit startups who are using these innovations and can assist Henkel Adhesive in developing them. Paolo related a story in which a top Henke executive admitted that, at first, he felt the CVC arm was throwing money out of the window. After a couple of wins, however, he is convinced it is a strategic investment into the innovation activities of Henkel Adhesive Technologies.
In the corporate environment, failure is often not an option. Its potential as a learning opportunity is underappreciated. That’s not so in CVC, where the vast majority of investments fail to pay off. Failure may be even less welcome in large corporations like Henkel. So, it was essential to make sure people in the mothership understood that all portfolio companies would not pan out, but there would be something to learn from all of them.
He invited top managers to post-mortem discussions of their career setbacks. He wanted them to disclose the projects, the point in their careers when a plan went sideways, how they felt about it at the time, and what they do differently now as a result. The 10-minute “crash talks’’ reveal the managers’ private feelings and vulnerable sides. Just as important, they help people realize that a project failure is not a personal or project failure. Missteps are merely temporary and do not detract from professional worth or sidetrack advancement.
As Henkel Tech Ventures strives forward with a collaborative mindset, changing the status quo in the mothership, Paolo has primed all the parties involved for unlimited success by fostering a cooperative outlook.
