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Investments to change the world

investments change world

Investors can play a significant role in solving the world’s most significant problems with allocations to inventive and innovative companies dedicated to addressing these critical issues.

Building businesses that could solve the world’s biggest problems is all in a day’s work for Mike Zimmerman.

As a partner at the Commonwealth Science and Industrial Research Organisation’s (CSIRO) innovation fund, Main Sequence, Zimmerman’s job is to find Australia’s best new inventions, work with their founders to bring them to market and nurture them into multi-million-dollar companies.

The fund’s lofty ambition – in addition to generating returns for investors – is to build science and technology-based companies that tackle global challenges in health, food, space, industrial productivity and climate change.

“I work with some incredibly inspiring founders who are leading the companies that we’ve backed. Those founders are totally committed to changing the world for the better while delivering great returns,” Zimmerman says.

An average day for Zimmerman begins around 5am with a run to clear his head. From 6:30am to 7am, he’s on the phone to New York and Los Angeles, where two of the founders he is working with are pursuing new business.

After that, days vary.

The bulk of his week is spent hands-on with the companies under his guidance. That means anything from advising on capital raising to examining a company’s latest products. Most of the companies in which Main Sequence invests produce physical products and the founders are keen to show them off.

“With our company, v2food, last time we met, the board got together and went to a restaurant to taste test some of the company’s latest plant-based meat products – versions of lamb, pork and beef prepared into dishes by gourmet chefs, not just a hamburger,” Zimmerman explains.

Not every meeting begins with a gourmet meal, but he does spend a large part of his time in board meetings. He also introduces the start-ups to other people who can help.

Through Main Sequence’s links with the CSIRO, he can connect founders with about 3500 scientific experts for technical advice. Through his business ties, he can help with recruitment.

“These are very early-stage businesses, so the way they grow is by hiring new people,” he says.

Investing in innovative start-ups is not without risk, but including 25 to 30 companies in the investment portfolios helps to manage risk through diversification, he says. More importantly, Main Sequence only invests in companies the partners believe have the potential to sell to global markets and achieve $100 million in revenue within the 10-year term of the investment funds.

“There is always an expectation these companies can be worth hundreds of millions, if not billions, of dollars if they are successful. In venture capital, that ‘home-run’ approach to selecting investments is key because there is typically a very high failure rate,” Zimmerman explains.

“If we only have a handful of our 25 or 30 companies succeed, but all of those are worth hundreds of millions of dollars, then we will return phenomenal returns to our investors. That’s the business of venture capital.”

One of the fund’s success stories is Emescent, which produces autonomous drones that capture high-quality data in challenging mining and industrial environments.

“The drones can go into really dark, dirty and dangerous caverns inside mines: places where people cannot go. They gather new types of data that help the mines not only protect workers but actually get new insights out of the data and improve productivity,” Zimmerman notes.

Founded in 2018, Emescent now has customers in over 40 countries and works with most of the world’s major mining companies. Its creators are scientists who previously worked for the CSIRO on drone autonomy and data capture and analytics in heavy industrial areas.

“They were so excited about what they had invented inside CSIRO that they wanted to have a go at turning that into a global business,” Zimmerman says.

He coached the scientists on how to form and run a company, and helped with negotiations to take their intellectual property out of the CSIRO. Main Sequence provided funding to establish the company.

“We are still on the board there and support them in a range of things from hiring people to strategic partnerships, pricing and additional capital raisings.”

To get to the handful of companies Main Sequence has in its portfolios, Zimmerman and his team have sifted through over 3000 business ideas.

“The companies have to be powered by great Australian research. We don’t invest in apps or marketplaces that can be easily replicated. We are looking to back companies that are commercialising unique and world-class science and research. That helps us get comfortable with the ultimate defensibility and size of the opportunity,” he says.

Each partner at Main Sequence specialises in one of the six challenge areas the fund targets. Zimmerman’s focus is on supercharging industrial productivity, feeding 10 billion people and decarbonising the planet. Other partners concentrate on space as our next frontier, harnessing new technologies and making quality healthcare available to everyone.

Part of his week is dedicated to expanding his own expertise in his target areas. “Last week I talked to two of the world’s experts in rare earth minerals processing that happen to live inside the CSIRO. They were helping me get up to speed on an investment opportunity,” he reveals.

He believes having a deep knowledge of scientific breakthroughs, in addition to his 20 years’ experience working with start-ups, helps him to make better investment decisions.

Others agree. Main Sequence has attracted major institutional investors, including Hostplus, Lockheed Martin and Singapore-based fund manager Temasek.

Hostplus chief executive David Elia says the companies and technologies backed by Main Sequence’s recently launched Fund II will play a critical role in addressing the complex problems facing the world. The superannuation provider has invested in both of Main Sequence’s funds and supports the manager’s goals of investing in projects and technologies that will benefit society, in addition to delivering sustainable, long-term returns.

For Zimmerman, working towards positive change in the world, with the potential for great commercial returns, is the most rewarding part of all.

“I come home each day and start my mornings really being inspired by the people we have invested in,” he concludes.

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