Lutz Meschke and Philipp Schröder met for the first time in May 2023. The Deputy Chairman of the Executive Board of Porsche AG and Member of the Board for Finance and IT welcomed the co-founder and CEO of the cleantech start-up 1KOMMA5° to his office in Stuttgart-Zuffenhausen. Both men arrived with high expectations and were pleasantly surprised within an hour, becoming acquainted with each other on a first-name basis.
“Philip is young, dynamic, confident and impressive. He is great at structuring complex problems and knows how to explain things in an easy-to-understand way,” Meschke praises. “Lutz's office is much smaller and more modest than I expected,” Schröder adds. “I really enjoyed our meeting. It was a lot easier than I thought it would be.”
The two men seemed to hit it off. Both are entrepreneurs at heart and have shown their foresight on many occasions. Meschke is considered the father of venture capital activities at Porsche and showed courage and pioneering spirit when he pursued and launched his first steps into the world of venture capital in 2016. “As I always say, these activities should not be measured by the value of individual companies,” he says, looking back to seven years ago when it all began. “It is also clear that not all investments in start-ups are ultimately successful. What matters most is the strategic added value for Porsche. We have learned a lot and brought so many products, technologies and agile ways of working into the Group very quickly.”
Standing on the terrace of the Porsche Design Tower in Stuttgart, Meschke looks out over the city's rooftops, pleased with the progress made so far. “Our venture capital activities are paying off both strategically and economically. They generate important ideas for innovation and are already contributing to increasing the value of the companies.” Porsche has invested around 300 million euros in 50 start-ups, with a book value of just under 400 million euros.
One example from the startup portfolio is Schröder's 1KOMMA5°, which Porsche became involved in at the end of 2021. Two years later, the Hamburg company is one of several venture capital success stories that Lutz Meschke can cite.
Venture capital activity refers to the acquisition of minority stakes in recently established start-ups or new companies, and is distinct from traditional venture capital (VC) and what is called corporate venture capital (CVC).
In VC, an external, independent investment team raises money to invest in new companies. The goal of such a VC fund is to sell its investment at a profit after the company's value has increased.
In the case of CVC, traditional industry companies act as investors. This corporate investment team must meet the financial expectations associated with the investment and strategically add value. Through this investment, the investor company is primarily interested in gaining access to new technologies and business models, as well as gaining a new understanding of entrepreneurship.
These are exactly the goals pursued by Porsche Ventures, the CVC division of Porsche AG, which has defined four strategic investment areas: Car & Mobility, Intelligent Enterprise, Sustainability and Beyond. Porsche Ventures will now be able to operate largely independently from 2023 onwards. “This will enable us to make our deal processes more efficient,” said Ulrich Thiem, Managing Director of Porsche Ventures. “Investing in startups also gives us earlier access to business ideas and technology concepts. Porsche Ventures acts as a sensor for Porsche in new and developing markets and will also fulfill the company's strategic mandate in the future.” The involvement of the CVC division also benefits the startups, who not only receive new capital but also gain access to industrialization expertise, marketing know-how and first orders from the industry.
When Porsche took on the venture capital world in 2016, Meschke's approach was modern and global, with the company initially investing in international venture capital funds. Now Porsche Ventures is involved in several funds focused on the US, Europe (e.ventures) and Israel (Magma and Globe). Porsche has also invested in the CVC arm of Chinese carmaker NIO Capital. “Through fund investments, we wanted to learn how the venture capital world fundamentally works,” Thiem explains.
Meschke calls the period from 2016 to 2022 “the first generation of our venture capital activity.” During this phase, Porsche has directly invested in 39 start-ups and funded the creation of 13 companies by Forward31, the Porsche Digital incubator. Five of these investments have already been sold.
Through Porsche Ventures, we are laying the foundation for convincing external investors about our innovation plans and future investment strategy.
Lutz Meschke, Vice Chairman of the Board of Management and Director for Finance and IT
The most notable investment at the time was Rimac Automobili, now the Rimac Group. In 2018, Porsche got involved with the Croatian hypercar maker, helping it become a strategic investor with unicorn status – a company valued at $1 billion or more. After multiple rounds of funding, Porsche now holds a 20% stake in Rimac Group, Porsche's partner in the Bugatti Rimac joint venture. Rimac Technology is also well on its way to becoming a tier 1 supplier to Porsche.
Meschke envisions a similar collaboration with Hamburg start-up 1KOMMA5°, which offers heat pumps, solar modules, battery storage and charging stations for electric vehicles, ideally as part of a package, all intelligently connected.
Meschke and Schröder met regularly through the “Porsche Executive Champions” program, in which each member of the Porsche board of directors engages one-on-one with a startup founder once a quarter, encouraging them to share contacts, tips and good ideas, preferably in both directions.
“Through our investment in 1KOMMA5°, we have secured a partner that can make a significant contribution to the transformation of electric mobility,” explains Meschke, who is quick to emphasize that he and Schröder have concrete ideas for collaboration, but they won't talk publicly about them until they're ready to bring them to market.
Porsche also recently invested in Group14 Inc. and HIF Global LLC, two more established companies that already have high strategic relevance for the luxury brand. “Thanks to our investment in Group14, we now have access to a strong supplier of battery cell chemicals for Cellforce Group. This would not have been possible without our VC experience,” Meschke says. The same can be said about Porsche's nascent partnership with HIF Global LLC, one of the most promising players in renewable synthetic fuels, known as eFuels.
Priority Areas
Porsche Ventures defines four strategic investment areas
Leaning over the railing of the terrace of the Porsche Design Tower, Meschke reflects on seven years of success. “We are not going to rest on our laurels and will continue on this path,” he emphasizes. Porsche Ventures’ operational headquarters will move to Luxembourg in early 2023. “In this way, we are underscoring the independence of our VC activities,” he continues, “and building a foundation that may one day also be able to attract external investors with our innovation agenda and investment strategy.”
He cast his gaze towards the vineyards of Stuttgart, as if he had spotted another unicorn there. “Porsche Ventures has a lot of plans for the future,” he said again. Over the next few years, Porsche plans to invest up to 250 million euros in venture capital, part of which will come from profits from the first generation of the Porsche Ventures portfolio.
Money seems to be well invested and the next unicorn is likely just around the corner.
