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Let’s say you’re a researcher at a major multinational corporation, and you’ve developed a groundbreaking technology that will change the world. Then you get notice that your innovation has been shelved — because it’s not central to the company’s mission. This frustration is felt by many researchers at numerous multinational corporations around the world.
According to the EU Industrial R&D Investment Scoreboard, multinationals and large corporations now invest over $1 trillion every year. Even more staggering, McKinsey reported that large enterprises invested $2.3 trillion in R&D in 2019. The firm also states that many enterprises lack an R&D strategy capable of realizing their aspirations.
As a result, a lot of these technologies are failing to reach end customers, being shelved due to issues like timing, internal misalignment or lack of commercialization expertise. But corporations without the R&D strategy needed to successfully commercialize their innovations have a new way to bring them to market: by spinning them out into new companies.
The trend: Spinning out dormant tech
Colin Scott, senior vice president of New Company Development at Innventure, is seeing a fundamental shift in how corporations view unrealized R&D. The firm has evaluated over 150 opportunities and found that multinationals are sitting on breakthrough solutions that solve real-market problems but fall outside core operations.
Corporations are increasingly partnering with outside firms, incubators, or venture studios to unlock value. This is part of a larger shift toward open innovation and reducing R&D waste. Some companies are creating internal venture studios; others are licensing or selling intellectual property to third parties.
How spin-offs draw value from technology
Specialized venture builders like Innventure and some major conglomerates are carving out a niche in the rescue model for shelved technologies. One of the most widely publicized spins among conglomerates is GE, which split into three separate companies so that it could spin out its health care, aviation, and energy technologies — boosting market value and increasing flexibility in the process.
While the majority of GE’s major technologies in those three segments weren’t exactly shelved, spinning them out separately enabled the three companies to focus more on their areas of expertise, potentially developing even more innovations that could’ve been shelved while they were part of the massive GE conglomerate. The giant has been known to let projects in development fall dormant in the past, like its plans for an Amazon-like cloud several years ago.
Additionally, Siemens spun off its health care business in 2018 to create Siemens Healthineers and its energy business in 2020 to establish independent players that are more focused on the internally developed technologies.
Similarly, Innventure partners with multi-national corporations to spin out their shelved innovations. Using its DownSelect framework, the company demonstrates how structured evaluation reduces risk. Innventure Chief Growth Officer Roland Austrup said when spinning out dormant technologies at multi-nationals, they look for several indicators.
First, does the technology solve a significant unmet market need? Second, is there an economic value proposition that’s immediate, compelling, and quantifiable? Third, can this technology reach billion-dollar value?
How spinning out technologies unlocks value
Spinning out shelved technologies signals a shift in how corporations think about their innovation portfolios. It opens opportunities for investors, startups, and entrepreneurs to access high-value IP, and it could accelerate commercialization of sustainability tech, health care advances, and AI tools that might otherwise never reach the market.
Multinationals that spin out their dormant technologies can tap into those innovations for their own uses — without having to be in a business they don’t want to be in. For example, a major corporation developed sustainable packaging it could use for its products, but it didn’t want to be in the packaging industry. Spinning out that innovation created the ability for it to use that technology for its own products while reaping the financial benefits of such a transaction.
According to Austrup, value creation happens through focus and specialization. Inside a multinational, breakthrough innovations compete with billion-dollar core businesses for resources. Outside, they get dedicated teams, capital, and strategic attention.
The value unlocks three ways: First, multinationals monetize R&D that would otherwise sit unrealized — they get equity stakes, royalties, and solutions to their strategic problems. Second, specialized operators create companies worth multiples of the initial investment through focused execution.
Third, markets get transformative solutions to urgent problems. Having a good idea doesn’t mean you can run a business. Building the right team is crucial for unlocking that value.
In some ways, this model takes the best of private equity and pairs it with the replacement of inexperienced founders with experienced owner-operators. PE firms come alongside startups and provide funding and sometimes guidance, but they also may take a more hands-off approach. In fact, one could even call this practice “PE in disguise.”
