With Research and Development (R&D) spend representing 25 percent of sales and with 4000 engineers working on advanced military R&D programmes, there should be no lack of brainpower at Saab. Yet, for Saab Ventures and its Head, Fredrik Nordh, it’s the brains outside he wants: the entrepreneurs and their disruptive technologies of the future.
Part of Saab Ventures mission is to acquire equity positions in innovative, fast growing companies, furnishing them with growth capital and expertise. “Venture’s vision is to be an innovative growth engine at Saab, and part of our mission is ‘spinning in’ high-tech companies,” explains Fredrik.
Spinning in Vs organic innovation
Saab commits heavily to R&D – more than competitors – but no company has a monopoly on good ideas. “Strategically, a company can cover a gap in its offer or technology organically, or through spinning in. Saab already has the managerial part and spinning in gives the technology,” says Fredrik.
“We get offers to invest in many exciting SMEs (Small Medium Enterprises), but they have to fit Saab’s overall strategic plan and give us a product, technology, know-how or marketing and sales channels our core business wants, that an end customer needs,” says Fredrik. A good example is Protarius AB, whose soft armour and ballistic protection operations were acquired in 2013, and which help protect soldiers in the field.
“We look for fast, flexible companies with interesting technology and where we see revenue potential. We also look for strongly motivated, creative entrepreneurs wishing to over-perform and deliver,” says Fredrik.
The Saab offer
“What we offer first and foremost is capital, we are talking about SMEs with disruptive technologies in need of growth capital, but which struggle to secure it as a start-up or on often limited track records. With capital comes the Saab brand, technical expertise, access to market and customers. When we stand behind an SME in the market we help them compete, including in public tenders they would not otherwise qualify for,” notes Fredrik.
Entrepreneurship: a series of corrected mistakes
At Ventures speed is a critical factor in success. SMEs face different, often more acute challenges than large companies: “your investment can be the difference between a company paying next month’s salaries or keeping the servers running. We have to take very fast decisions, with 20% of them corrected afterwards. You can argue that entrepreneurship is a series of corrected mistakes,” says Fredrik.
“When Ventures invests the golden rule is ‘never smother’: we don’t ask SMEs to adopt our processes, and we initially avoid taking a controlling stake in the company. We provide capital, take a board seat, share expertise and just help them grow, that’s it,” says Fredrik. “Eventually they can become part of Saab or are ‘spun-out’ back out to the market, stronger than they started,” he concludes.
In the next installment of this two-part article series, Fredrik discusses ‘spinning out’ disruptive technologies to non-core markets.