The world’s big companies, of whom Procter & Gamble is clearly one, have buckets of cash but nothing to spend it on. Or nothing they’re willing to spend it on anyway.
P&G CEO Bob McDonald has been under the cosh recently for flat earnings (although its latest quarterly figures were better) and lagging Unilever (usually it’s the other way round).
One of the problems it’s identified is a relative lack of new and exciting products that can command the premium prices on which P&G has built its business. This is hardly surprising in the world of personal care products where just about every consumer need (and many non-needs) are perfectly adequately catered for.
So the giant from Cincinnati is trying to enlist some help from Silicon Valley in California; installing a three-person team in San Francisco to keep an eye on developments and striking a deal with new food and personal care product venture finance company CircleUp.
“On the P&G side, it’s really about looking for access, not only to those companies and what they’re working on, it’s really access to their founders,” says Andrew Backs, manager of new business creation at P&G.
“With each passing year, the internal venture groups at the P&Gs and General Mills’ of the world are getting larger and more important,” says Ryan Caldbeck, chief executive of CircleUp. “They have mandates to go out and identify innovation.”
Another big US food company General Mills is also partnering with CircleUp. CircleUp provides early stage finance for companies with annual revenues of about $10m, too big for angel investors but too small for private equity funds. CircleUp pools small investments of about $1,000 each from individuals into one large investment of about $50,000. It claims it can raise an investment in just two months against the industry norm of about a year.