Corporate Innovation/Innovation Case Studies/Analysis/ Inside ABB’s new moonshot plans The company is building its first startup and looking to take riskier investments. By Maija Palmer 25 May 2021 \Corporate Innovation HSBC’s new $1bn debt fund expands support for women entrepreneurs By Alejandro Tauber 17 May 2022 Corporate Innovation/Innovation Case Studies/Analysis/ Inside ABB’s new moonshot plans The company is building its first startup and looking to take riskier investments. By Maija Palmer 25 May 2021 For decades Swiss engineering group ABB has focused on either inhouse research or acquisitions as a way of bolstering its technology offering. But no longer. The company, which is a leader in the field of robotics and heavy electrical equipment, now wants to collaborate with young startups with big ideas. “We want to do more moonshots where we don’t see the immediate returns.” “We want to do more moonshots where we don’t see the immediate returns,” says Anton Kotov, chief strategy and chief digital officer at ABB’s Electrification business area. “We have so far been a little shy on those.” The move speaks to a bigger change across the corporate world, with more and more companies looking to borrow Silicon Valley-style startup ideas — and to build relationships with ecosystems of startups. ABB overall has also been on a big transformation journey over the past year following the arrival of new chief executive Bjorn Rosengren, who was brought in with a brief to turn around the company’s lagging financial performance. ABB created the first industrial robot in 1974 and is still a market leader in the field, but its financial performance has been lacklustre. The reorganisation has seen the company explore the sale of several business units, shrink its head office and hand more power back to its business units. As part of this, the company’s centralised $50m corporate investment fund has been broken up into smaller investment pots handled by different business area. The electrification business area, ABB’s largest unit by revenues, now handles its own $20m evergreen fund. Building its first startup Some commentators worried that ABB’s focus on financial performance would mean sacrificing research and growth. But for the electrification business area at least, the more decentralised structure has meant it can take a few more risks with innovation. Last October the electrification business area for the first time created its own startup, an electric fleet management venture — so far just known as ABB eMobility Digital Venture. “We wanted to do something with electric mobility, but we already had a big presence on the charging hardware side after the Chargedot acquisition in China. We thought that fleet management for electric vehicles would be important, but it was outside ABB’s core business,” Kotov explains. “It made sense to create it as a separate entity.” To capitalise on the city’s status as a mobility hub, ABB hired a team based in Berlin and led by Markus Kroeger, the former CEO of online car marketplace heycar. It’s now built the team up to around 20 people. The first minimum viable product is due to be launched by the third quarter of the year and the team is hoping to have its first customers before the end of 2021. Amazon Web Services is collaborating with the venture to build a cloud-based solution for real-time fleet management. The decision to create a startup was also about moving at speed, says Kotov. “We need to act fast here because the market is moving so rapidly.” It would not have been possible, he says, to build a minimum viable product in under a year inside ABB’s internal R&D unit. “We are likely to have at least one more internal incubator in 2021.” Building a startup has required ABB to dispense with some of the usual corporate bureaucracy, like using the HR grading system to classify jobs and the eMobility venture team have been free to use their own IT systems rather than ABBs. Furthermore, with eMobility being a separate legal entity from ABB despite being fully owned by the company at present, the door is open further down the line for other companies to come in as coinvestors. It is early days yet, but Kotov says that if things go well with the venture, it could serve as a blueprint for more ventures like this. “Other divisions are setting up similar things. We are likely to have at least one more internal incubator in 2021,” he tells Sifted. More startup challenges At the same time, ABB’s Synerleap innovation hub is collaborating with Microsoft to launch a second startup competition, following a successful first programme last year. The team are scouting startups with solutions in smart buildings, smart power and distribution and will select three companies for a $30k prize. Last year’s three winners — Mavenoid, a Swedish computer software company; Fsight, an Israeli grid optimisations company; and Viking Analytics which helps companies monitor industrial equipment — all went on to work with ABB on pilot projects. The latter went on to sign a framework agreement with ABB earlier this year. “The divisions are in the driving seat when it comes to choosing the companies to work with.” Malin Carlstrom, head of ventures at ABB Electrification, says the company has learned a lot about the best way to engage with external ventures through running the challenge. SynerLeap has been running for four years and has already done a lot of work with startups, bringing them in to pitch ideas around software and robotics. But the company is now trying to make sure startups are even more focused on real business problems. “With the new scheme we are bringing it closer to the business needs,” says Carlstrom. “We have formulated challenges arising from the divisions’ needs and the divisions are in the driving seat when it comes to choosing the companies to work with.” Independent investing ABB’s Electrification business area is also becoming bolder with its investments, now that it runs more independently in the new structure, says Carlstrom. ABB has so far been fairly lucky with its investments — it was an early backer of Northvolt, the Swedish battery gigafactory startup in 2017 — and now the company has a valuation of $2bn. Other ABB investments include CMR Surgical, the robotic surgery system; Hailo, an Israeli company delivering deep learning to edge devices; and Freewire Technologies, the California-based electric charging company. Echoing Kotov’s words about moonshots, Carlstrom says ABB is interested in more big bets and investments away from the core business. A good example of bolder investments, she tells Sifted, is Graphmatech — a Swedish startup developing new graphene-based materials. ABB invested in the company’s seed round in 2018 and the company was recently listed as one of Sweden’s hottest startups. But, she adds, it is a very binary business — the technology can either fail or become highly significant. “It is make or break,” she says. It isn’t the kind of thing ABB would develop in its own R&D labs, so making an investment in the company is the best way of being involved. ABB is also looking to invest further in the development of solid-state circuit breakers, following the company’s own breakthrough in this field in 2019 and an investment into US-based Atom Power last year. “Unicornwise Europe is as competent as any other market. Companies here just need to be more active in investing.” Underlying Carlstrom’s determination to move beyond the comfort zone is a belief that European corporations should be doing more to invest in European startups. European startups still struggle for investment. “Valuations in the US are twice as high for half the revenue,” she notes. “It is good to have an acquisitive home market. I would like to see European companies make more investments rather than do dividend buybacks and look more to their backyard. Unicornwise Europe is as competent as any other market. Companies here just need to be more active in investing.” It is harder to take risky bets as a strategic, corporate investor, Carlstrom admits. Moonshot investments take a long time to pay off. “All you are likely to see in the next few years is the valley of death for these companies. We expect to encounter some hardship with these and may have to handle the investments in a different way,” she says. Carlstrom tends to prepare the ground by getting management buy-in for the strategy and by making sure the rationale for these riskier investments is clearly understood. After all, $20m a year is still only a small fraction of the approximately $400m ABB Electrification business area spends on R&D each year, so there should be room for some experimentation. “The biggest risk is to do too little, and move too slowly,” she says. “It is not making faulty investments.” Maija Palmer is Sifted’s innovation editor. She covers deeptech and corporate innovation, and tweets from @maijapalmer Related Articles Europe’s leading corporate unicorn hunters By Maija Palmer Click here to read more Heriberto Diarte, head of SE Ventures: How to set up a CVC fund the right way By Maija Palmer Click here to read more How to build a startup culture in a big company By John Thornhill Click here to read more Most Read 1 \Healthtech Is Daniel Ek’s new body scanner worth the hype? 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