Foxconn, three local corporations form $100 million venture capital fund

Published Tuesday, August 28, 2018
by BizTimes

Foxconn Technology Group, Advocate Aurora Health Inc., Johnson Controls International plc and Northwestern Mutual Life Insurance Co. announced today they have formed a $100 million corporate venture capital fund to invest in startup companies worldwide.

The announcement confirms a previous BizTimes Milwaukee report that Foxconn was working to raise a venture capital fund as large as $100 million, and had been interviewing potential co-investors. The corporate partnerships bring in additional stakeholders, with each of the four organizations contributing an equal $25 million.

The Taiwanese LCD screen manufacturer, which is building a massive campus in Mount Pleasant, already had established working relationships with these corporations, so the fund partnership developed naturally, said Alan Yeung, director of U.S. strategic initiatives at Foxconn. He said the fund will demonstrate the corporations’ collaborative leadership in Wisconsin to drive innovation and move forward investment in technology and talent.

“We are absolutely delighted about this unique opportunity to partner with three world-class organizations, leaders in their industries, on this fund,” Yeung said. “I think an opportunity to have four companies working together and partner…is a lot better than one company.”

Each of the companies already invests in startups: Foxconn via its HCM Capital private equity arm, which currently has nine portfolio companies in China, California, Massachusetts and New York; Milwaukee- and Downers Grove, Illinois-based Advocate Aurora via its $5 million Milwaukee-focused InvestMKE fund, which has not yet made any investments since it was announced in October; Milwaukee-based Northwestern Mutual through its $5 million Milwaukee-focused Cream City Venture Capital Fund, which has made four investments in recent weeks, and its $50 million fintech-focused Future Ventures Fund; and Johnson Controls, which is based in Ireland for tax purposes but operates from a headquarters in Glendale, through its JCI Ventures platform, formerly known as Tyco Ventures.

The new fund, called Wisconn Valley Venture Fund, will be headquartered in Milwaukee and will invest globally, with no guarantee of investments in Wisconsin companies. It will be focused on “transformative and interdisciplinary” innovations in the organizations’ sectors: health care, technology, manufacturing and financial services.

“There is no specific target in terms of the percentage or portion of the fund that would be invested in Wisconsin,” said Jeb Bentley, vice president of investment strategy at Northwestern Mutual. “We’re very open to engaging with them, but what we want to do…is find the best companies.”

While it may not seem like the interests of the four companies would intersect so closely, executives from the companies said technology’s rapid advance – and their need to remain competitive – connects them all.

“The world is changing in ways it hasn’t since the industrial revolution with artificial intelligence and robotics and 3D printing…” and no one company can master all the technologies, said Robert Locke, senior vice president of corporate strategy at Johnson Controls. “It really makes sense in that environment for companies like ours to come together, to put together a fund like this, and use that fund and our combined energy as a magnet to attract the attention of the best and brightest in the world.”

Four prominent corporations working together will have the advantage of attracting the attention of strong companies and talent, wherever they may be, Locke said. The hope is that some early-stage companies may consider Milwaukee an appealing market in which to locate, as well.

“This is one of several things that we’re doing to drive innovation,” Bentley said. “We see a lot of value in collaborating with other firms and learning from each other. We’re seeing technologies today that are really redefining where industry boundaries are drawn and will have impact across different markets.”

The companies are currently seeking out a fund manager for the Wisconn Valley Venture Fund, on an accelerated timeline. The fund is expected to make investments of between $250,000 and $5 million in companies at various stages of growth.

“We’re very interested … at looking across the spectrum and not everything we look at has to apply to each of the four companies,” said Rick Klein, chief business development officer at Advocate Aurora Health.

Yeung said the innovations the fund invests in may not even have an obvious fit in any of the companies’ industry sectors, but may be a strategic fit down the road.

The executives said the Wisconn fund is not expected to compete with their companies’ existing venture capital funds.

Corporate venture capital activity has been gaining steam in Wisconsin of late, as detailed in a recent BizTimes Milwaukee cover story.

And several independent venture capital funds have also formed over the past couple of years, including George Arida’s 30Ventures and five funds formed under the Badger Fund of Funds program.

At $100 million, the Wisconn fund will be one of the largest VC funds headquartered in Wisconsin. Madison-based Venture Investors is also currently raising a $100 million fund. The executives said it was too soon to tell whether there would be syndication opportunity with existing VC funds in Wisconsin.

The companies do not plan to create any incubators or accelerators affiliated with the fund, and don’t expect the development would impact overall deal size for startups in the state.

“We do not expect it to have a big impact on the broader funding environment for startups in Wisconsin,” Bentley said.

The hope is the corporations can gain insights into areas where there are opportunities or threats on the horizon, and use the new technologies the fund discovers to their advantage.

“While we expect excellent returns by venture standards, the primary reason for doing this is not for the financial returns,” Locke said. “The objective is to accelerate the growth of our respective companies.”

At an event Tuesday announcing the venture capital fund to a limited audience of venture investors and corporate and startup leaders at Discovery World in Milwaukee, Foxconn chairman and founder Terry Gou, Johnson Controls CEO George Oliver, Northwestern Mutual chairman and CEO John Schlifske, and Advocate Aurora Health co-president and CEO Nick Turkal discussed their participation in the fund. Gov. Scott Walker and Metropolitan Milwaukee Association of Commerce president Tim Sheehy also weighed in.

Gou said Wisconn Valley would one day rival Silicon Valley, a hub of startup activity globally.

“We know we have to transform health care. Technology is going to be a critical part of that in the future,” Turkal said. “We can invest in transformation. We do it much more effectively if we do it with partners and we do it with friends.”

Schlifske said Northwestern Mutual would be at a disadvantage without the Wisconn fund.

“It is a great day for Milwaukee, great day for Wisconsin,” Schlifske said. “The whole business model that we’re in is changing and the need to have technology, technology talent and an environment that surrounds a company that’s focused on this is imperative and a necessary condition for Northwestern Mutual to continue to grow, to thrive, to attract talent, to employ more people.”

“Our investment in the Wisconn Valley Venture Fund reinforces (Johnson Controls’) commitment to innovation around the globe. It’s important to note that as these organizations came together, we shared a vision to not only have an impact locally, but on a global level,” Oliver said.

Sheehy helped spur the formation of the partnership when he brought them all together after Foxconn’s initial project announcement, Walker said.

Walker said Foxconn’s investments in Wisconsin will serve as a talent attraction and retention tool.

“To me that’s the ultimate bonus, is how many more young people we will keep in the state and how many other young people like them we will attract to the state from around the world,” he said.

https://www.biztimes.com/2018/industries/banking-finance/foxconn-three-local-corporations-form-100-million-venture-capital-fund/

 

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