Start-ups force finance chiefs to rethink attitude to risk

Experiments with innovation are a nightmare for risk-averse CFOs, as investing in disrupters so often results in a loss

Source | | Maija Palmer

When Heriberto Diarte started the corporate venture fund at Schneider Electric in 2017, he banned any member of the French utility company’s senior management from being part of the investment committee. Especially the chief financial officer. 

“I said: ‘No. Absolutely not. Everything that makes you an amazing CFO makes you a lousy investor’,” says Mr Diarte.

A free rein to invest the company’s $500m corporate venture fund was one of Mr Diarte’s conditions when he came to the company. He was brought in to help Schneider Electric make investments in the companies that would be transforming the energy business a decade later.

To do this successfully meant not only keeping senior managers at arm’s length but also educating the finance chief in particular on how to approach investing in start-ups. Mr Diarte warned that he would probably lose most of the $500m within the first five years. Then, if he was lucky, in the following five he would gain it back, probably on one of the most unpromising investments. 

Almost every large corporation these days is experimenting with different forms of innovation, whether through an in-house lab, running a start-up accelerator programme or setting up a corporate innovation fund. They are looking for ways to capture new ideas from younger companies and to make sure they stay abreast of disruptive change before an upstart puts them out of business.

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