Building business relationships for the long-term
Neil Cameron, Investment Director, Emerald Technology Ventures
Could you describe your job as Investment Director.
My job is to source deal flow, to speak with entrepreneurs who have start-ups, understand their technology, and get answers to some basic questions:
- Does the technology work?
- How much does it cost?
- What is the technical value proposition?
- What is the economic value proposition?
- Is the market big enough for the product?
If the answer to these questions is “yes,” then my role is to describe the opportunity to our team. And if the team agrees that this is an interesting opportunity, then we invest more resources and actually do a detailed due diligence process.
Working with Nabtesco Technology Ventures, what type of start-up are you hoping to discover?
Typically, Emerald Technology Ventures is looking for very large solutions to very large problems that come with a very large reward. And we are interested in relationships that are extremely profitable and short.We’re looking to buy a piece of a company when it’s relatively inexpensive, help that company solve a very big problem, and then sell that company and recover the investment, ideally multiplying it several times over.
“The strategic component is a really important part of what Nabtesco Ventures does.”
How does that change what you’re looking for?
Emerald has only one reason to invest: we will only invest where we think we can deliver a good return to our investors. Nabtesco Ventures will invest when it thinks it can get a good immediate financial return, but also when it gets a strategic return. The strategic component is a really important part of what Nabtesco Ventures does. Does the start-up have a positive impact on Nabtesco’s revenue now or in the future? If yes, does it increase Nabtesco’s profitability? Does it help put Nabtesco in a stronger position against its competitors?
Can you give us an overview of the decision-making process?
It all comes back to those same simple questions. First, do you have a technology which actually works? Very often people have technology they think works. They think, “Wow, that’s a great technology, I’m going write a patent.” But if you haven’t proven that it’s going to work, then it’s too early for us to get involved.
Another question we ask is “how much does it cost?” People are always interested in products that work better that the products they have today, but they’re very rarely interested in paying two times more for it. So you have to have something that not only works, but comes in at a cost point that makes sense. And so already we can filter the candidates down to quite a short list.
We look at 1200 business plans in a year. Of those 1200, we might only spend a lot of time on 200, and then we spend an enormous amount of time on maybe 50, and we might actually invest in two. That’s the filter process we’re talking about.
“We source technologies which deliver high performance at reasonable cost.”
What do you think is the most promising technology that you could deliver to Nabtesco?
One of the most interesting areas to Nabtesco is additive manufacturing, or 3D printing. This is a technology for mass customization of manufacturing, which allows Nabtesco to produce very specialized high-value parts very quickly, at low volume, in a cost-effective way. The reason for my enthusiasm is that the tools and materials to make those parts have only recently become commercially available. So this is a technology which is poised to have a strong impact on Nabtesco soon.
Another area that’s very attractive to Nabtesco is composites. Given all the mechanical parts that Nabtesco manufactures, this gives them an opportunity to work with novel mechanical properties at a lighter weight. If you can have lightweight and strong, that can open up new market opportunities.
And the third area is friction interfaces. Creating a slip interface takes away friction losses, delivers increased efficiency, decreases wear, increases quality, decreases down time, and increases customer appreciation of your product. And so for a company like Nabtesco, lubricious interfaces are quite important. There are lots of very expensive and complicated ways of delivering a lubricious interface, but we actively source technologies which deliver high performance at reasonable cost.
Will you accept proposals from anywhere in the world?
Yes. To date this year we have received nearly 600 business plans from Europe and about 600 from North America, and fewer than 100 from everywhere else. But we have very strong relationships with corporate partners in Asia, and over time I expect our deal-flow distribution to grow.