Ferguson-based industrial giant Emerson Electric (NYSE: EMR) has plans to boost its corporate venture capital investment, saying it expects to provide $100 million to early stage companies over the next five years.
It will make the investment through Emerson Ventures, its corporate venture capital arm, seeking to provide funding to startups developing innovative technologies that align with its industrial offerings and bring new innovation to its customers.
“We see this as more than investment – it’s about partnership and enhancing the industries we serve,” said Emerson President and CEO Lal Karsanbhai. “We are committed to supporting and mentoring companies as we work together to gain strategic insights on emerging technologies, adjacent markets and industry disruptors. It’s a win-win for all.”
Emerson, which operates with two major divisions, reported fiscal 2021 sales of $18.2 billion. Its automation solutions division develops technology used by manufacturers to improve production efficiency while its commercial and residential solutions focuses on products that promote energy efficiency and sustainability in household appliances, heating, air conditioning and refrigeration technology.
With the $100 million venture capital pledge, Emerson said it plans to invest in four to six startups per year over the next five years. Thurston Cromwell, Emerson’s vice president of development and innovation, said the financial commitment comes as the Ferguson firm is instituting more of a corporate approach to its venture investment. He said Emerson’s startup investment was largely conducted at a business unit level in the past.
“What we’re trying to do is streamline the process, make it as agile as it needs to be to comport with the expectations of the venture capital world,” Cromwell said. “Whereas we have always looked for and done minority and venture capital investments in support of access to technology, markets and great companies, we’ve done so within the business unit construct. But now we have the flexibility, the agility and a streamlined approach to do it."
Emerson Ventures plans to pursue startups and technologies in three major areas:
- Discrete automation solutions
- Environmentally sustainable technologies
- Industrial software
Cromwell said Emerson ideally would like to begin backing companies at an earlier stage of development, such as those seeking Series A funding rounds. “We want to be in early where we think we can have the most impact and see the company maybe at its most exciting, innovative stage when the idea is really coming to market," he said.
As it adds to its investment portfolio, Emerson Ventures plans to source deals through relationships with venture capital firms and other corporate venture arms.
“We think we have a very good value proposition that is somewhat unique to industrial technologies and the validation that has to occur with early stage technologies before they get adopted by industry and the role we can play in that,” Cromwell said. “We think if we can execute and deliver on that promise, that we will build a very strong reputation in the space and we will be sought out as a value-add partner by the financial venture capital firms that are leading the early stage investing rounds we’d be interested in."
Emerson said it wants to provide its portfolio companies with longterm support. The company believes its global footprint, industrial expertise and access to customers makes it an attractive investor for startups.
As an example of its approach, Cromwell pointed to Emerson’s investment in Hanover, Maryland-based cybersecurity firm Dragos. Emerson first invested in the startup with its $37 million Series B round in 2018 and backed it in its recent $200 million Series D round that boosted Dragos' valuation to $1.7 billion. Cromwell said Emerson has integrated Dragos’ technology into its own products, generating revenue for the startup.
“It was a mutually beneficial arrangement and their success and growth to a small part is supported by Emerson’s commitment to add value, not just be an investor sitting there passively,” he said.
