Multinational Corporations (MNCs) invest heavily in research and development to innovate next generation products and deliver new value to their customers. New product introductions typically use existing manufacturing infrastructure and current supply chains. Usually, an MNC looks to its vendors or its own production capacity to make new finished products and the raw materials used in manufacturing. Sometimes though, a new product might rely on a novel raw material or an ingredient for which no manufacturing infrastructure currently exists.
In those cases, the MNC must decide whether to develop a new manufacturing process and either build capacity in-house or work with a vendor to design and add contract manufacturing capability to service the MNCs needs. This is often expensive, time-consuming, and hard to justify when only one new product line or the raw material is being produced for a single MNC. In other words, production often needs to achieve an economy of scale that is beyond the scope of any one MNC as a sole customer for the product, or volume economics may require that the new product or ingredient is sold to many players - even many competitors in the market. A new entrant—a new company—that commercializes the new product or raw material and serves all potential customers in the market can be a better solution.
Innventure is in the business of founding, funding, operating, and rapidly scaling companies in strategic collaboration with Multinational Corporations. Consider a case where an MNC enhances a product line by designing in a key ingredient based on renewable rather than fossil feedstocks. The MNC goal may be to meet sustainability targets, such as reducing greenhouse gas emissions; to decouple from fossil fuel supply chains; or to enhance product performance with a bio-derived functional ingredient. For some MNCs, such as food and beverage suppliers or consumer packaged goods companies, vertical integration that includes raw material manufacturing may not fit their operating strategy. In such a case, Innventure might partner with the MNC, acquire the technology to manufacture the new ingredient, build a new company to commercialize the technology, then fund, operate, and grow the new company to serve customers across many sectors.
We believe this model allows us to spin out impactful technologies, particularly those related to sustainability and advanced manufacturing that inherently transcend company, industry, and market boundaries. The MNC can win as an early customer of Innventure’s new company. It gains access to the renewable ingredient throughout the development cycle and often at favorable prices. The MNC can also win as a partner. As Innventure grows the new company to support many customers across different segments, Innventure shares value, via royalties and/or equity ownership in the new company, with the MNC. Ultimately, this model allows Innventure and the MNC partner to co-create more value together than either might do alone.
How does Innventure manage the introduction of companies built around disruptive tech into the market? Most investment models assume conditions won’t be affected by the introduction of a new solution.