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M&ATech: Innovation advisors carve out niche in startup deals

  • Innovation advisors’ access to startups seen as added-value versus traditional advisory firms – Acciona exec
  • Innovation labs seen as first point of call for companies interested in startups – L Marks
  • High-growth tech companies look at buying traditional companies - Deloitte

Companies that want to engage with startups are increasingly turning to innovation advisors to help them identify investment, acquisition and collaboration opportunities, experts said.

Acciona [BME:ANA], a Spanish multinational that specialises in the development and management of sustainable infrastructure and renewable energy, sees tech M&A as an option to be activated in cases when there is a strong commercial validation and strategic fit, Telmo Perez, who is a director of its corporate innovation team, said.

In these cases, the company often works with innovation advisor Mind the Bridge (MtB) rather than traditional consulting firms, Perez said. “The process requires very curated scouting and deal-flow activities as well as specific expertise and skills in the startup world that only new players such as MtB can provide,” he said.

As well as working with MtB, Acciona itself also actively looks at startups at a global level in the fields of renewable energy, water, mobility and sustainable infrastructure, Perez said. It offers a platform, called I'MNOVATION, that allows startups to work on pilot projects with the company, he said.

Another company with a similar model is Italy-headquartered multinational energy firm Enel [MIL:ENEL], which scouts for startups through Enel Innovation Hubs, Luciano Tommasi, Head of M&A at Enel X, said. The company works with partners like MtB to help it initiate commercial relationships with startups, he said.

The Italian company will consider M&A once it finds a startup that is a strong strategic fit, Tommasi said. An example is eMotorWerks, a Silicon Valley startup in the electric vehicle charging market, he said. MtB introduced both sides in 2017 and Enel bought the startup after a few months of collaboration, he added.

MtB was founded in 2007 by Marco Marinucci, who is now its CEO. It was originally an accelerator, but moved into advisory work around 2012, Rodolfo Lissia, an advisor with MtB, said.

European companies, such as Acciona and Enel, often use the 30-strong advisory innovation firm to find out what is going on in Silicon Valley and other tech hubs, Lissia said. This trend is on the upturn, he said. MtB is based in San Francisco.

The diverse startup world means companies often feel they need support identifying targets, Lissia said. MtB's clients are split between mature players and less experienced buyers, he said, adding that in both cases they need to understand how their ecosystems are changing.

“We act as their antenna,” Lissia said. MtB uses its network and expertise to identify potentially game-changing innovations, he said.

The firm often works alongside traditional advisors after it has helped a bidder identify a target, the advisor said.

According to MtB's website, more than 500 startups have graduated from its accelerator. It works with 30 corporates a year and engages with more than 2,000 startups. The company has offices in London, Berlin and Silicon Valley and is moving into Paris and the Middle East, Lissia said.

Meanwhile, L Marks of London helps corporate clients set up innovation labs as the first step to engaging with startups, CEO Daniel Saunders said. It identifies needs, scans startups, invites them to pitch, then invites a handful to a 10-week programme, which concludes with a “commercial outcome” and often an investment, he said.

For example, L Marks and UK logistics firm Wincanton [LON: WIN] last year announced a joint investment in Australian startup Storekat following an innovation lab. Storekat provides data-driven software to optimize underutilised capacity in warehouses.

L Marks has the capability to scout up to 10,000 startups, Saunders said. More than 270 startups have joined 60 innovation programmes since 2014, as per its website.

Companies will increasingly seek collaborations with startups as a way of managing innovation, Saunders said. Investments will follow on from this, he added.

However, corporates buying startups is only part of the story, Enrique Gutierrez, managing partner of financial advisory at Deloitte, one of the big consultancies that is moving into the space, said. Rapidly scaling tech companies can also acquire older corporates, he said. This latter trend “opens a new world of unseen opportunities,” he added.

The model of hiring advisors to study companies’ innovation needs is a response to widespread disruption, Gutierrez said. Executives need the help of highly skilled professionals to make disruptive M&A work. “Disruption is no longer strictly limited to the adoption of new technologies, but the reaction towards a radically different way of thinking,” he said.

by Rupert Cocke

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