SAN FRANCISCO – Oil company Chevron Corp. at press time was in the midst of creating a venture capital unit that will have both strategic and financial goals.
Chevron Technology Ventures L.L.C. will receive about $50 million from its parent company to invest in venture capital partnerships, co-invest and make direct deals over the next three or four years, said Donald Paul, vice president of technology and environmental affairs.
The group already has backed two firms, ARCH Venture Partners and Ampersand Ventures, and Dr. Paul expected Chevron to invest in two more partnerships, probably one in biotechnology and one in information technology.
“It brings us face to face, puts us in a deal-flow stream that would take us a very long time to do by ourselves,” Dr. Paul said of the fund investments.
Chevron can offer its expertise in due diligence and valuation assistance to both its new venture unit and to VC firms with which the group invests, Dr. Paul noted.
Chevron intends to back companies whose products can be adapted for use by the energy industry, for example those businesses working on perfecting chemical analyses on microchips. Such technology currently is focused on medical applications, but Dr. Paul also sees some benefits to oil companies.
Chevron will consider companies from the seed-stage on up. Precise deal sizes and the amount of capital that will be devoted to partnerships, direct deals and co-investments have not yet been determined.
Corporate venture investing has seen a resurgence in recent years. The idea of creating a Chevron venture united was conceived last year when the company began thinking about ways to provide new opportunities in growth segments on the edge of the energy business. Two of the corporation’s research and development managers, Cliff Detz and Don Riley, will be “venture executives” at Chevron Technology Ventures. Neither Drs. Detz or Riley has worked in venture capital, although one worked on a study to determine whether Chevron should establish a venture unit.
The corporation expects returns to beat the 15% or more returns that are typical of other capital investments, Dr. Paul said. Part of Chevron Technology Ventures’ mission will be to look for companies that could be added to Chevron’s fold through a merger or acquisition.