Case Examples - Cargill

Cargill eVentures

On the surface, there is nothing that would seem "new economy" about Cargill, Incorporated. The company, headquartered in Minneapolis, was founded in 1865 and initially made its reputation as a grain merchandiser. Over the years, Cargill has expanded into a vast array of agricultural-related businesses, including grains, soybeans, cotton, cocoa, and sugar. Cargill also has a sizable financial trading group. Today it has operations in fifty-seven countries and revenues in excess of $49 billion. And it is the largest privately held company in the United States.

Cargill is also among the most innovative companies when it comes to e-business and corporate venturing, which is all the more surprising given its lengthy, traditional brick-and-mortar history.

The seeds were sown in the mid-1990s, when Cargill's CIO made sure discretionary funds were available at the SBU level for experimentation. Cargill began to add extranet applications to its platform. By 1998-99, there was enough momentum inside the company, as it reorganized to deliver customer-driven solutions, and outside, as the Internet revolution continued to gather steam, to convene an e-commerce task force. The task force was charged with defining new ways to drive innovation at Cargill through the use of new technologies. One of its key responses to this mandate: corporate venturing.

Cargill eVentures was chartered in 1999 to further enhance the company's core businesses and strategic directions via new venture investing. Its vision: nothing less than the transformation of global supply chains, using technologies that create innovation and lower costs, ultimately benefiting Cargill, its partners, and its customers.

Today, Cargill eVentures has a substantial fund under management and a global perspective, with seventeen people spread across offices in the Silicon Valley, Minneapolis, and London. To date, it has invested in and nurtured more than a dozen new businesses. The Silicon Valley office focuses on networking with entrepreneurs, venture capitalists, and other technology companies, while the Minneapolis office maintains links with the company and networks with midwestern VCs and entrepreneurs. The team composition also reflects this combined external and internal focus. Several members have come from Cargill operational positions, and their domain expertise and internal network of contacts have proved extremely valuable in validating concepts. In addition, a few external people were hired to add technological depth to the team.

Jim Sayre, the CEO of Cargill eVentures, had the clear intention of merging Cargill's unique strengths with the best practices of venture capital and the corporate/industrial world. Through investments in start-up companies and internal incubations, Cargill eVentures has supported businesses that are applying new technologies to transform traditional business processes and create new business opportunities.

Incubations have focused on using technology to create online marketplaces and communications platforms to establish industrywide standards for electronic commerce. With a robust market share in a number of vertical industries, and a recognition of the power of electronic business to lower the cost of transactions and improve customer relationships, Cargill wanted to be involved in developing these solutions. The company launched businesses where the opportunity was not being addressed and where it could leverage its industry expertise and industry relationships. One such example is LevelSeas, conceived by Cargill and cofounded with BP and Shell, which pioneered collaborative chartering and management of oceangoing vessels for global shipping.

Cargill eVentures' investments in start-ups focus on early-stage investments in technologies that broadly benefit, or are consumed by, global Fortune 500 enterprises. Cargill looks for opportunities where it can act as a test bed for the product, helping to lend its industry or process knowledge to product development. In some cases, doing so involves the transfer of Cargill IP. Cargill eVentures maintains its active involvement through a board seat or observer status on each of its ventures' boards and also organizes "chief officer"-level roundtables across its portfolios so that executives can share ideas and best practices.

Cargill eVentures is equally innovative in the way it has structured itself within the Cargill family of businesses. Even though eVentures is wholly owned by Cargill and treated as a business unit, it has its own governance and compensation structure (including carried interest in the portfolio) that is distinct within the parent company. Its investment decision processes are equally optimized and speedy. The eVentures team is guided by its own rigorous investment standards and stage-gate systems, and a small "board" of four (comprising handpicked corporate officers and e-business leaders, with Cargill's CEO ex officio) to provide oversight. Performance is measured by a rate of financial return typical to any venture capital firm, but in the case of Cargill eVentures, these financial returns are the "table stakes." The ultimate goals for the firm-indeed, how its long-term impact will be most felt-is in its delivery of strategic value to the corporation, driving innovation internally and introducing new styles of doing business, both entrepreneurial and collaborative. "This is the true basis of our success as a unique change agent within the company."

Many corporate venturing groups find the roles they are chartered to play within their parent companies even more challenging than building a position in the outside venture community. With the blessing of the Cargill leadership, the eVentures group has addressed these challenges very creatively, by constructing multiple sources for return of value. For example, it offers the following:

	An entrepreneur-in-residence (EIR) program, a structure borrowed from the VC world. Cargill eVentures maintains this program for providing business planning and strategy assistance to those whose proposals it approves. Many business unit employees join eVentures during the early-stage period for fixed periods of time, returning to their business unit to help evangelize for the new product or service.
	Expert advice and counsel to SBUs on market intelligence, prospects, and portfolio companies
	Direct aid to each SBU in developing e-business strategy and partnering models
	Centralized review and vetting of all new technology-focused business plans and proposals within Cargill, which creates standards, maintains quality, and insinuates a venture point of view and entrepreneurial culture
	Pilots as a competitive edge, introducing new technologies and applications by actively bringing portfolio companies and SBUs together to do early testing and pilots. It continues to monitor results with the SBU and other partner pilots.

Creating new business is an ongoing process at Cargill. When the eVentures group executive team meets every Friday to review venture proposals, it always asks key questions to ensure that the new business fits within the larger strategic interests of the parent company: Could Cargill be a customer for this service or product? How could Cargill add value to the start-up company? How can Cargill's customers or partners benefit? How easily could this new business be sold within our business units? Cargill has learned how critical it is to keep ventures closely attuned to the needs and interests of each business unit. The result has been successful ventures that are highly complementary to the company's core businesses. Much of that success has come from relying on expertise already inside the company. "We figure that if Cargill is a logical user of one of our eVentures, it is likely others in the industry will have the same needs," says Sayre. "That allows us to spearhead industry leadership in new technology."

Cargill e-Ventures URL:
http://www.cargilleventures.com