Popular convenience store chain 7 Eleven has made a surprise entry into venture capital business with plans to invest in startups within the retail and food spaces. The Dallas based company best known for brands such as the Slurpee drink, and Big Gulp has set up a venture capital unit named 7 Ventures and has already made two investments in startup companies. While it is common for companies focused on technology and innovation to have a dedicated venture capital business unit, it is somewhat puzzling that a convenience store chain would actively scout for investment opportunities in startups.
Investments Focused On Strategic Benefits
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According to Raja Doddala who heads 7 Eleven’s venture capital business, making money on venture capital investments is not the company’s primary goal. He adds that the company makes investments in ventures that offer strategic benefit for 7 Eleven.
The convenience store chain, which offers a wide variety of coffee made its first venture capital investment in an undisclosed coffee company. It recently made its second investment in Belly, a Chicago based customer loyalty and marketing platform. On its part, Belly is working with about 50 national chains representing 700 locations including 7 Eleven. Doddala explains that the company’s investment in Belly is aimed at learning about new retail models that help improve retail traffic and engagement.
VC Unit Not Limited To Tech, Pharma
Mark McCaffrey, technology consultant at PricewaterhouseCoopers says that while it is common for companies in the technology and biopharma industries to set up venture capital units to gain access to innovation, companies from brick and mortar industries can also employ the same model to get a similar edge.
Kellogg School of Management professor Yael Hochberg who has advised several startup companies points out that companies that once had in-house R&D units are moving towards outsourced R&D in which the startups that are funded assume the risk of creating new tools and technologies. Hochberg cites the example of GM Ventures, the venture capital unit of General Motors that invested in the startup The Nanosteel Company which develops steel technology used in auto manufacturing.
Likewise, beverage giant Coca Cola Company has a venture capital unit that provides capital to little known promising beverages.
Confidence In The US Growing
A recent survey by Deloitte and the National Venture Capital Association of about 400 venture capital, private equity, and growth equity investors around the world found that investor confidence about opportunities in the US has grown over the past year. The survey also found that VC confidence about investing in Europe remains low, while confidence is fading in emerging economies Brazil, China, and India. The findings also revealed that globally mobile is the most preferred sector among venture capitalists while cloud computing and software as a service (SaaS) is the first choice of most VC fund managers in the US.
