Deploy the Projects You Have Approved but Cannot Fund
External finance for projects in your capital allocation queue
Your best operational projects are already approved; they are just not funded. Among firms applying a hurdle-rate buffer, the average hurdle rate is about 14.7%, against an average cost of capital of about 8.15%. Cost-reduction equipment faces a stricter test still: a payback of two to three years, demanding a simple annual return of 33% to 50%.
Faster, and far less capital, than the market
Leading customer-supplier partnerships have taken 32 to 42 months to start working and committed up to 2.5% of revenue up front, some every year. Your Corporate Venture delivers value from month 5, your quarterly value is modeled to exceed your fees from the third quarter, and up-front fees are about 0.06% of revenue for a $10 - $25B company, 0.04% for $25 - $100B and 0.01% for $100B+.
The backlog is measured, not assumed
Across more than 20,000 US government-funded assessments of small and medium-sized plants, about 7.4 savings opportunities were found per site and only 47% were implemented. On that pattern, a company with forty significant sites would carry roughly 160 approved, unfunded opportunities, and add about 39 a year.
How your Corporate Venture clears it
- Financed externally. The Venture finances, insures and deploys equipment you have approved but not funded. The capital sits outside your capital budget, structured to minimize balance sheet impact, subject to accounting advice.
- Paid from measured benefit. You pay 26% a year on the capital deployed, for ten years, out of a measured benefit of about 40% a year. That costs more than funding a project yourself, about $11M more over ten years on a $10M project, and buys capital now and insured performance.
- Performance insured. Each project’s performance is insured, so the technology risk is not yours.
- Vendors on your side. Your equipment vendors become linked partners, paying to have their stalled orders unblocked and Sales Support Teams to carry their products further.
- Weeks 1 to 4, Scoping. Your Scoping Proposal sets the baseline of approved, unfunded projects and how the benefit of each is measured.
- By month 4, commitment. You pay the setup fee, INNOVO begins building your Corporate Venture and your equipment vendors are invited as linked partners.
- From month 8, once the Venture is formed, deployment. The Venture finances, insures and installs the first projects: about $55M in Year 1 for a $10 - $25B company, growing about 32% a year.
- Every quarter. The benefit is measured and verified before fees are paid.
What you gain
Approved projects delivered without your capital, with their performance insured and their savings measured. Every year a project waits, its savings are lost; your Corporate Venture starts recovering them within months.
What you pay
Scoping fees and initial set-up fees are about 5% of the Venture’s costs for the first 3 years and about 1.3% of the value it expects to add in Year 3. Apart from technology search retainers and your half of the independent assurance fee, which you share with your partner, every later fee is paid from measured value created. Figures are modeled outcomes for a $10 - $25B Corporate Partner, not results achieved.
Choose the first sites and approved projects to finance, and book a 30-minute meeting with INNOVO: