What does it take for a startup to capture the attention of a venture capitalist firm? A unique product or service offering that clearly solves a problem is a must, along with a market sized for growth and the data to back up any projections definitely helps, but is it enough?
"As investors, we also look for entrepreneurs who truly believe in the problem they are solving," said Simin Zhou, managing director of UL Ventures. "It's tough to succeed in a new venture; passionate founders pull through the difficult days and come out on the other side."
UL Ventures invests primarily in digital companies that drive innovation in ecosystems, a term used to describe the various stakeholders and community members critical for transforming ideas into reality through access and financial investment.
Zhou and her team talk to nearly 1,000 startups each year, meeting them at conferences, through networking and a lot of research and outreach. While it's an exciting exercise to talk to each one, Zhou noted that UL Ventures only invests in about 1% of the startups they meet over a year.
"We are out there looking years ahead, focusing on new technology and new markets," she said. "We want to invest in companies that are relevant to sustainable healthcare, energy, supply chains and mobility—sustainability ties into broader, global themes."
Zhou, who joined UL ten years ago to help drive impact for the company, views her work as supporting UL's mission towards a safer, more sustainable and secure world.
"UL made a lot of impacts historically in electrical safety and fire safety," she said. "We're now making a meaningful contribution in today's world that is more about digital safety, sustainability and supply chain transparency."
'A good fit for our company'
Investing in startups is hardly a game for the faint of heart, though, and there's a lot of work that goes into vetting a company. In addition to Zhou, her investment team, made up of professionals with investment or commercial experience, thoroughly investigates each company's business model, management and operating history. Each team member is assigned to different focus areas based on their sector-specific knowledge and expertise. Regardless of the sector, Zhou noted, they look at the criteria the same, giving marks for the different aspects that are important to UL Ventures.
Once the due diligence is complete and the investment is extended and accepted, UL Ventures acts as a board observer. They will also look for opportunities to help the startup succeed through network introductions or collaborating with UL businesses to explore new markets, technologies and ideas as part of UL Ventures' sandbox initiative.
"We see our strategy as a good fit for our company mission and financially viable from our perspective," Zhou said. It's an excellent opportunity for us in so many ways."
The one percent
Investments in the group's portfolio include healthcare startup KenSci, SkySpecs, a renewable technology business, and Resilinc, a cognitive supply chain risk management technology company. All three companies rely heavily on artificial intelligence to help maximize operations.
KenSci is helping health systems run better with predictive analytics—transforming how hospitals and health plans manage their operations, deliver timely and relevant care while improving patient outcomes using artificial intelligence.
"What we liked about KenSci is that they are actively working to make health systems more efficient and patient-centric," Zhou said. "With so many of our dollars going into healthcare, it is critical that we have a system that runs smarter and in a sustainable way. Better decision making, smarter resource allocations and better outcomes are needed, and that's what KenSci helps with."
SkySpecs is also helping drive better outcomes but, instead of in a healthcare setting, the company is transforming wind energy management through its fully automated drone inspections, data analysis and maintenance solutions.
"SkySpecs is interesting," Zhou said. "They specialize in predictive maintenance capabilities to help make wind farms operate sustainably. They have an autonomous drone solution that allows them to perform inspections with the click of a button, and their continuous analytics platform helps identify turbine issues while proactively suggesting maintenance strategies."
Resilinc pairs public domain data with supplier provided intelligence—supplier maps, factory locations and shipping logistics—to help its customers optimize inventory, manage suppliers and respond faster to unexpected events. It uses the information to map out different supply chain scenarios proactively so that when an event happens, companies can react swiftly.
"We invested in Resilinc three years ago because we believe that they are tackling a significant issue," she said. "Having supply chain visibility and near real-time, deep insights to assess risk across the supply chain is a huge advantage to our client base."
Resilinc, SkySpecs and KenSci may be lucky to be part of the one percent, but it's UL who Zhou believes will benefit most in the future.
"All three companies have been great investments that fit into our sustainability charter," she said. "Each founder is passionate about solving the world's greatest problems, and that's why we wanted to partner with them."