PALO ALTO, Calif. – There are two basic theories as to the future of corporate venture capital programs.
The first is that they will prove to be a shirt-lived fad succumbing to both public market instability and a cadre of investment professionals more interested in earning greater personal fees than helping prop up the parent company’s balance sheet. On the other hand, many believe that the corporate venturing world’s very lack of emphasis on capital gains will help it survive while many traditional returns-focused firms fall by the wayside.
Put Agilent Technologies Inc. in that latter category. Last month, the analysis equipment designer and manufacturer unveiled plans for a new venture arm charged with annually finding approximately $100 million worth of strategic investments.
“The whole process started in the third quarter of last year,” said Maximillian Schroeck, managing director. “Agilent is setting a pretty aggressive growth agenda and felt that venture capital investing should be part of that growth.”
It also may have felt a bit of pressure in that many, if not most, of its competitors already have established venture operations up and running.
“There is a grocery list of competitors to Agilent that have been very successful with their venture capital programs,” said Deane Dray, a research analyst with Goldman, Sachs & Co. “We still consider [Agilent] to be a pretty new public company so, rather than being late, this is just a part of its maturity.”
Indeed, the company, which was spun out of Hewlett-Packard Co., only went public on Nov. 18, 1999. Since then, it has experienced strong public market performance and is now in a position to throw a bit of capital around in search of potential synergies.
The company will focus on co-investment opportunities in the optical, wireless and life sciences spaces, with a soft investment ceiling of $10 million for each potential portfolio company. In general, Agilent Ventures will concentrate on series B rounds for U.S.-based companies, with a few early- and late-stage plays thrown in for diversity’s sake.
“Any deals we make will be based on strategic business rationales since money is really the least important thing we want to contribute,” Schroeck said. “Our intent is to be a hands-on supporter, especially since we have such a vast base of resources on the research and testing side.”