E717 | Jessica Persson, Scania on Why Most Corporate VCs Are Built for a World That No Longer Exists

0:00Andreas Munk Holm:Welcome back everyone to the European VC podcast. Today we're sitting down with Jessica Persson who leads Scania and Vest. Scania's venture are built to accelerate the shift to sustainable transport system. Jessica has built her career at the intersection of industrial transformation, M &A and venture and she brings a rare global perspective to it. Today we will start with her personal journey and how it has shaped her worldview. Then we'll go deep on how Scania thinks about the forces reshaping transport and how Scania and Vest is structured to act inside that environment. and of course, and this is very interesting to me, how their scenario-based strategy models the future.

0:33Andreas Munk Holm:We'll finish with how they balance strategic and financial returns and what building one of Europe's most ambitious CBC platforms has taught Jessica and the team.

0:46This show is not investment advice and the hosts of this episode may be invested in the funds and companies featured.

0:51Andreas Munk Holm:But Jessica, before we start talking Scania, I just want to touch on you personally. You've got quite the story. Tell everyone who you are. Yeah. Hi, everyone. And thanks for having me on the podcast. So Jessica, I'm a Swedish by native, but also lived abroad in many, many years. Stayed about 12 years abroad in six, seven countries, most of that part in Asia. And have a really curious interest in global systems and what is happening right now with geopolitics, but also the techs and everything else going really, really quickly. and how we can be part of that going forward to shaping the next era of technology and business for Europe, but also for the world.

1:34Andreas Munk Holm:Jessica, you blew me away in our last conversation. Tell me a bit about, I believe it's the Middle East and how the Middle East has shaped how you think. Yeah, I think there is currently specifically, but since many years, it's been a little bit of focus for the different regions. And we are moving away from the globalization part. on my side since I always see myself as a global citizen I was raised in Singapore for about three years I went to university in Singapore but also lived in multiple places in Europe and also spent a lot of time traveling the world in I don't know close to 70 or 80 countries or similar and I think there is so much innovation and curiosity and then things happening all over the world so I think we can't really say that this side is good and this side is bad but rather I think there is a really really good innovation and drive in all parts of the world.

2:24So Europe has done a lot, historically, specifically the U.S. as well. But I think there is more interested spaces now when it comes to the places where we are a little bit outside of Europe and also when it comes to Middle East. There are so many things happening both in Dubai, of course, but then also when it comes to Saudi, when it comes to Qatar, not only capital-wise, but also when it comes to new market, new business models and new ways of scaling things. And they have the benefit sometimes to be able to do it from scratch. While we in Europe have a legacy of old infrastructure, old way of workings and different kind of partnership styles.

2:57Where I think that when it comes to the Middle East or when it comes to Africa and when it comes to different parts of Asia, you can start from scratch and you can really take inspiration from those parts of the world. The same, of course, goes for Southeast Asia. The same goes for China. And I think specifically also in Vietnam. I think it's happening a lot of things on the innovation front. and really, really good for different startup ecosystems. And then, of course, in China, everything is going with China speed. So that's also a really, really good ecosystem to be part of.

3:26Andreas Munk Holm:Yeah, but now I want to shift into talking a bit about Scania. And I think that it's fitting that you just explained to everyone as the external party here, what do you see when you see Scania acting in the market? You're quite seasoned investor in mobility yourself. So talk a bit about that. My first couple of investments within supply chain were in freight marketplaces. One of the companies that I've become really fond of is a company called Sender, a unicorn out of Berlin. I had one of the founders, David Nordhager, in one of my initial newsletters coming out of the LinkedIn profile. And over the many years, I've gotten to know David quite well.

4:08What is very noticeable if you look at the cap table of Sender is that you find the Scania brand name in there. For me, it was super interesting to very, very early on see Scania in there. And then over the years, I've kind of hunted down Jessica and I managed to get on a panel with her at Go West this year. So for me, it shows a lot about, you know, what has the vision been from Scania over the years. but also you know when you see a great leader and a great speaker like jessica then you're kind of impressed and there's a lot of topics that we'll touch upon in this podcast that i'm really eager and and very you know has a high star in my view in the way we look at corporate venturing so for me it's it's one of those great days where there's an awesome guest on the show jessica well how did that field did that you ever do you justice thank you thank you a lot jeppe i was specifically nice and i really liked how you talk about sender and david i love working with david he's an amazing character and i i talked to him a lot also for having to how to do the next steps and help work with him he's an exceptional founder with a really really good ability to move with the different stages of the company which is not always the case and and he's extremely strategic minded So I really, really like collaborating with him and the whole team.

5:28Yeah, and you really see a founder there that is really embracing the supply chain ecosystem. You know, he has done, I think, about 30 angel investments himself. So you also get to know a lot just being around him. So congrats on that investment, Jessica. Very well done.

5:44Andreas Munk Holm:We've actually had David on the podcast in his capacity as an angel investor because he's quite prolific there as well. What a person. Anyone that hasn't yet met David and Sander should definitely make sure to listen to that episode, though it is by now two years old. Tell me a bit about the journey of Scania Invest, because you come from having, and I don't know if I put this completely correctly, but having outsourced quite a bit of your venture activity to now having taken a lot in-house. Can you talk about that transition and how you're moving? Absolutely. I think in the beginning here, I'm a little bit estimating because I was still based in Asia at this time.

6:26But around 2017, it was Henrik Henringstel and the team who was down heading Scania to decided also to be more making sure that Scania should always be in the forefront of all technology tipping points. And I think the kind of good first approach is always to go a little bit scouting, do a little bit outsource. was very much focused on a different era of venture capital, where it was much more SaaS and much more e-scooters and that kind of feeling. And I think at that point of time, it really made sense to have it outsourced. Then when I came back from first Asia, being a CFO of Asia-Pacific, but then also working a lot in DAF for multiple years, and also with strategy for a lot of years, we saw a shift coming into the venture capital space where it's much more moving into deep tech and it's much more moving away from generalist venture capital to specific strategic partnerships approach, where I think that it really, really makes sense to be global in all the different parts of the ecosystem around the world and much more closer to universities and much more close to the line with the different cap tables to make sure that you have an aligned end vision of where and how long that marathon, which it usually is for deep tech, is supposed to look and how much money is needed for that transition.

7:45And there's also so much more complexity with the deep tech companies when it comes to industrialization, when it comes to operational problems for licenses or supply chain, and apart from all the normal liquidation issues and customer scaling and so forth. And so in that phase, we said, let's complement the outsourced version that we have and really go more into Middle East, both towards Israel, towards Qatar and other places, but also towards UK, towards even more into Duff, but also then going into Singapore, towards China, towards the US and Canada, of course. We look at about 3 ,000 companies per year and then we invest in maybe six to eight, but we really, really want to be close to those companies, more partnership approach and really work close with the other parties also on the cap table to make sure how can we scale this, not short term, but long term, and make sure that everyone brings something to the table.

8:37Either it's big capital or you bring operational knowledge or market access. But I think it really comes to an area as well where every single person on that table has to know why they're on it and what they're bringing to the table. And I think also startups should ask for that.

8:52Andreas Munk Holm:I think it makes a super important point about corporate venture and how that when markets are changing, industrial technologies are changing, while you as a corporate might be engaged with venture, and it might make sense in one era, so to say, to be doing it in an outsource function to be a bit more hands-off or one step removed from the activities. Things can change in the market that then make it super pertinent that you get it closer in-house. Yeah, but maybe you can talk a bit about that because I think this is also a bit of the reason why we're seeing such a big increase in activity when it comes to corporate venture in Europe because a lot of our industrials are realizing exactly what you're describing here, Jessica, that VC is becoming about brick and mortars as well as bits.

9:41Andreas Munk Holm:And for that reason, we really have to now get into it as corporates. No, I think we see the shift, right? And I think, you know, over the past year, a lot has changed around us. I think there are two things that we have seen in corporate settings and is a fact, and that is that people and strategy changes over time. But with the recent developments within AI and deep tech, we see a significant move where corporates can now see how big a part they can play in this startup ecosystem because it's everything about value creation. As Jessica said before, why are you on the cap table? Why are the different investors on the cap table?

10:22And it's for sure that the corporates are there to spread the words around what can you do with their asset, brand, customer data, and expertise. So for me, it's very, very clear why they're there. And I think that that is the new universe that we will see. We will see the corporates being more engaged, specifically from a European angle, in venture capital, because we see that move when we talk to the different stakeholders in the ecosystem.

10:45Andreas Munk Holm:Jessica, before this podcast recording, I asked you, could you produce some slides that would really give us a framework to be thinking about what we're going to be talking about? One of the slides you shared with us, and we're pulling it up on the screen for those that are watching, one of them is showing your business environment. And it shows five different factors that act as global trends that are transformative forces that redefine your industry landscape. One of them is climate change, and I want to dive into each of them. So to those not watching it, one of them is climate change, one of them is political and economic shifts, one is social shifts, one is technology and business shifts, and the finalist legal and regulatory changes.

11:27Andreas Munk Holm:This goes to show, I think, how broadly you are engaged as a CVC. It's not just about investing in startups. It's actually about tapping into a very broad economic environment that's changing. Can you talk about each of these just so that people can hear from a CVC lens? How do they affect you? Why are they formative to how you're operating as a CVC. Absolutely. And I think just there, you're making a really important point for us. That's also really why we like to have it in-house is we report straight to the executive board. We work straight with our CEO and the key decision makers when it comes to R &D, when it comes to production and so on.

12:08And we are taking part of all the different roadshows and all the different roadmaps for where we're going within Scania. And I think that is super critical to be able to offer back to the ecosystem them out with startups also what what can we offer what cannot offer and what is relevant for them to to go into that is relevant for for the different customers around the world so when it comes to this slide that you're talking about so to say we do always the calibration at scania where we always we have a strategy and we have a vision of course like everyone else but we recalibrate that one towards the different scenarios on that like scenario note we have a few trends right now that is really really shaping first i have the climate change of course everyone knows about the co2 discussions and everything ongoing there.

12:49But then we also have a huge political and economic shift where we see both in a positive way that there is much more economic rise in many different parts of the world, which is changing the bio-behavior and so forth, which is really, really good. But then we also see us moving away maybe less good from the global world that we used to be into a much more regional world. And I think in that regionalization, we always have to be present in the different regions because innovation will still exist everywhere and we need to be able to serve our customers all over the world. Then we have the social shifts where you see a lot more people are getting access to education and all those good things and you need transportation to be able to secure that everyone is sustainable, can safe inside the vehicle but also outside of the vehicle and also when it comes to the more congestions and more tightness of the different cities around the world where everyone is moving more into cities, how can we kind of survive in there without having too much loud vehicles driving around and so forth.

13:46But then we also have the technology and business shifts, where we see that technology goes quicker and quicker and quicker. So before each S-curve was a few years, but now we see that the S-curves keep on moving quick. And even new technologies, if the S-curve are quite sharp, and then you need to be on the next one. And it's also quite expensive then to be able to develop everything of that in-house. So I think a lot of companies are either moving to conglomerates, being extremely big, but most are then also working more as partnerships where you need to collaborate with different customers, with society, with universities and startups, and also even your competitors.

14:25There we can see that you can, so to say, compete when it comes to customers and products, but you can still collaborate when it comes to system enablers and making sure that good technology, for example, scales in a very efficient and productive way. And then, of course, the legal and regulatory changes right now. We have the customs in the US, which everyone is, of course, aware about, but then also different kinds of even within EU, where it's been quite regulatory complex for a lot of companies coming in here and to invest here and also to collaborate within the EU. And I think there we have in EU specifically, we have super good technology.

14:58We're really, really good at industrialization, but then we are slowed down when it comes to legal and regulatory collaboration possibilities. A lot of that is being worked on right now. And we are, of course, following these different shifts, both from a venture capital perspective, both from an M &A partnership perspective, but then also, of course, from our customer perspective. And I think also here, it's really, really valuable to work with either of us, but otherwise one of our competitors or one of the other big companies up there. Because I think there are very few companies in the world that are more knowledgeable when it comes to dealing with relatories and shifts around the world.

15:36I mean, most of the big companies around the world, specifically in Europe, has been operational for over 100 years. And we're very well averse to deal with massive inflation or customs pressures and industrialization in very tricky environments. I think what's interesting here for me with my corporate lens on, right, is that we know intuitively from the venture capital ecosystem that there are significant movements that counts when you do investments as a corporate, right? But oftentimes, it's kind of like when you talk to VCs, they don't do the full deep dive to understand what is it that the corporates really bring.

16:15When I hear Jessica talk about these five points, right, they're all super valuable. They are super meaningful in everything what's going on in the world. But I also know they move, right? Because I think, Jessica, if we had spoken two years ago, right, we would have discussed a lot about climate change. I think when we discuss today, we will talk about basically all five elements you have up there, because it's a really changing world that we have right now. What I would like to just, you know, a part of the process and the way we operate as CVCs, right, you also have your investment proposals.

16:50Can I ask, are these directly in your investment proposals? Is this topics that you address when you want to do your investments? It depends on which angle. I think for all of our investments, we always, of course, see how will these startups be affected by these? How prepared are they to the climate change items? How prepared are they to handle political economic changes, like when it comes to supply change and when it comes to geopolitics and so forth? And where in the world are they located? And so it's more, I wouldn't say that it would, again, depends on which angle you are. But I think it's not everything is ruled out based on these.

17:25But I think it's always kind of integrated when we discuss with the startup companies, with the portfolio companies, how do you want to integrate? What can we promise them and what can we not promise them? And what do we think that they need for scaling? For example, if you want to go in China as part of your strategy, we have a lot of good access in China. We also have that in different parts of the world. We are in 130 plus countries locally with our own people. So I think it's more together with the different startups. How prepared are they? Where do we see a gap? and is that a gap that we can fulfill or should we invite someone else on the cap table to be able to fill that gap?

18:00So it's more of that kind of discussion. And I think in general, that is also something we look at when we invest in the different startups, like how easy is it to talk to them and when it comes to industrial empathy, to understand their challenges and how much you can do and where you need potentially to change, but also how quick is your learning curve when it comes to learning new stuff and pivoting and adapt. And also how much focus does a startup have on here and now, kind of closing the gap of the next fundraise, whereas they also need to have a lot of focus on the big ecosystem or system view for being able to survive for the next 5, 10, 15, 50 years.

18:39So I think that kind of maturity in the decision power of the founders and support, that is also something we look at when we go through these kind of... What you should take on, you know, oftentimes when you talk to corporates, We also end up in a discussion whether you are a strategic or financial investor. I think at this point of time, nobody is doubting that everybody is doing financial investments. It's just more how you talk about it. The different places where I've been more engaged with MERSC and other companies, when we have this discussion, we do a standard financial investment proposal.

19:14And then we actually have on the side an analysis on how this is going to influence the corporate. Do you do it the same way or what is your take on strategic versus financial investments? For us, they're actually 100 % the same. Because I think for us, it will really, really want, I mean, if I talk to my executive board, they definitely want strategic insights. They want that technology tipping point, what's happening in the markets, which different markets around the world for consumer behaviors is changing and why and so forth. But to get the best technology insights or the best strategic insights, you also need to be on the best cap table and work with the best companies.

19:50And to do that, you need to have huge financial incentives as well. So for us, we definitely want super high financial returns. And we want that because we want it for the financials, but definitely also because we don't see that we otherwise can fulfill the strategic returns. So for us, they are very much aligned, and we would never do an investment purely from a strategic return. In that case, since I work both with M &A, I work with more private equity-like investments. I also work with joint ventures and partnerships. And then I have my different venture capital arms. So in that case, we would rather have a partnership, but we do some other kind of supplier collaboration.

20:27We do some kind of other strategic commercial investments with that company as we can still choose that option, but then never within the VC. When it comes to the VC, we 100 % want to be aligned with everyone else on the cap table. We never want to go in and buy that company. We never want to mess up the cap table. But we want to be aligned with the gap table and make sure that everyone gets the target, so to say, getting the financial returns as well.

20:52Andreas Munk Holm:Jessica, I would love to ask you to go a bit into presenter mode here because we have a lot of corporates tuning in that are trying to figure out what should their operating model be to drive both financial and strategic returns. We've oftentimes on the podcast had these meta conversations back and forth on how you do it. but you actually have a full-fledged model that we're pulling up again on the screen here for those that are watching. But I'd love to hear if you could explain to everyone exactly what we're looking at and how you're thinking about and how it's affecting how you built the CVC.

21:27Please feel free also to share it, of course, afterwards on your links and so on for the podcast. If anyone wants to discuss it further. This one is a SSE. It does not, of course, work with science, but I think for us it's really, really important. And maybe before we go into that one, I think the overarching theme for us is to be authentic, that you really mean what you're saying and that you really have that kind of traction. I think that some people that I meet in CDCs or VCs, they've been operational maybe for one or two years, but they haven't really done the operational stuff themselves.

21:56So I think also being a startup or being someone who wants to collaborate with an investor in any way, really do that due diligence, make sure what have they done themselves, what have they not done, and how much operational have they been. Because I think you really need to be operational to be able to help other people being operational and really scale. But as we see it, we work then with different kind of feeders. We work with universities, both like ETH, with KTH. We work with NUS and Singapore. We work with a lot of other universities that we have specifically targeted around the world. We work with specific investors.

22:27Again, we have probably contacted some of 100, 200 investors. But then we work very curated with 15 or 20 of those on a weekly basis where we really want to discuss and where we really love to collaborate. We also work with a lot of corporates. We don't really care who we work with there as long as it's legally allowed, so to say. So we want to work with the best there. So where it's possible, we also then would like to work with our competitors specifically then for enabling the system, which is really needed then to enable the scaling to be. We always then compete on products and on customers, of course, but then to really make sure that the system scales, I think that it really makes sense to You collaborate with other ones in your industry as well.

23:08I work with accelerators like Sting, of course, and others around Europe and the world. We don't have so many collaborators around the world in that one yet, but specifically in Europe, of course. And then we always get feedback from our customers. But then also you don't sometimes get blind spots. Some customers are really well versed when it comes to the next stages and what they need there. But that's also different in different parts of the world. What we really want to offer, which is then a lot of this is normal that everyone says you need to have industry and technology expertise and you have your brand and so forth.

23:41But for us, we really think that we have a brand value. That is, we've been in operation for 130 years. We never made a loss in making a year. And we are ourselves in operation in all these countries. We really think that we can offer deep insight to what is needed and how you scale when you're going into Asia or Brazil or different parts of the world. But then also when it comes to industry and technology, myself, I've worked about 25 years in this industry. I have direct contact with about, I would say, somewhere maybe 50 to 100 experts in our field, which are PhD then when it comes to materials, when it comes to batteries, when it comes to cyber, when it comes to different other fields, apart from industrialization, how to ramp up, which is very different if you do it in-house, if you work with a partner for industrialization, and how do you choose that partner then, and how do you do procurement, and how do you make yourself OEM ready?

24:34because I think that if you're a startup that has managed to work with either a company like OEM like Saab or some of the military like US military and so on or you work for a industrial company and OEM which is also world class around the world I think that you're basically then prepared to to do whatever kind of partnership after that because it's it's safety critical and it's really important items that we work with when you go into autonomous and electrification and so on. So if you manage that to be an OEM supplier, then I think you're ready for a lot of other partnerships as well. But then you really have to stress test and see that the people you're talking to, do they have the knowledge for what you need?