Chilean Pulp Giant CMPC Eyes Venture Capital Deals With New Unit

(Bloomberg) -- Chilean pulp giant Empresas CMPC SA is in talks to invest in three startups through its newly created venture capital division as part of plans to finance innovative firms and boost demand for its products.

The unit already led a $240,000 seed capital round in May for Santiago-based Strong-by-Form, a company that is designing wood-based composite materials for lightweight constructions and for vehicle chassis and body parts. CMPC plans to invest in Strong-by-Form's next funding rounds once it reaches specific targets, Bernardita Araya, head of CMPC Ventures, said in an interview.

CMPC Ventures is actively searching for investment opportunities in five main areas: cellulose-based textile fibers, new uses for pulp and paper byproducts, sustainable packaging to replace single-use plastics, lignin and nano-structure cellulose-based materials along with other digital-based technologies, Araya, 42, said.

Having a corporate venture capital division gives more options for CMPC other than licensing or buying new technology options. “There's this enormous space of technologies being developed around all the world and in which CMPC didn't have a presence. And the way to relate to those technologies is through a venture capital fund,” Araya, who has a PhD in biophysics from the University of Cambridge, said. “We want to partner with startups and help them grow, and we can learn in the process.”

With the financial backing of CMPC, which has annual revenue of about $5.3 billion, CMPC Ventures will have the freedom to invest in seed-capital stages or later A, B or C funding rounds where financial commitments may be much higher. Although those deals may require approval from CMPC's upper management, Araya said.

Venture capital activity in Latin America has accelerated during the pandemic. Last year, investors rang up a record number of deals while pouring more than $4 billion into startups for a second-consecutive year, according to the Association for Private Capital Investment in the region. Venture capital deals in the first quarter of 2021 reached an estimated $2 billion, according to LAVCA, as the association is called.

Some of CMPC's peers have already veered into venture capital. In December, Celulosa Arauco SA, a unit of Empresas Copec SA, bought a majority stake in Santiago-based Odd Industries, an artificial intelligence startup that provides climate change monitoring services. Brazil's Suzano SA announced earlier this year a partnership with Finnish startup Spinnova to produce fibers from pulp nano-particles, while Finnish packaging group Stora Enso Oyj is investing in plastic-free straws.

CMPC, which recently turned 100-years old, is looking for opportunities in start-ups that can fit with its operating divisions, “and help us envision our next 100 years,” Araya said.