The May 2022 initial public offering of air mobility startup Eve marked the end of a cycle for EmbraerX, the disruptive innovation subsidiary and incubator of Brazilian planemaker Embraer. Launched in 2016, EmbraerX is now looking for startups in new target areas — particularly AI, agribusiness, and logistics — and for other large companies to join its new multi-purpose corporate venture capital (multi-CVC) fund.
Innovation has always been an important part of Embraer. The company has hundreds of employees dedicated to R&D. But five years ago, during a trip to Silicon Valley, a group of executives realized that a market-driven, disruptive approach was needed.
“We already had our first venture capital in partnership with government agencies, called FIP Aeroespacial, but we could no longer compare ourselves with other companies in the same industry as we were doing. We realized that a new competitor could emerge from an unexpected field or region at any moment. That’s when we decided to create EmbraerX,” Daniel Moczydlower, head of innovation at Embraer and CEO of EmbraerX, tells The Brazilian Report.
Following Eve’s public listing last May, EmbraerX took three different steps that symbolize its new phase. First, it acquired, for an undisclosed amount, a minority stake in the largest drone manufacturer in Latin America, Xmobots, with an eye on the future market of medium and large autonomous drones and the joint exploration of new service niches for them.
Secondly, it integrated Beacon, one of its incubated startups, into the portfolio of Embraer’s services and support department. Beacon is a platform designed to provide aircraft maintenance solutions by connecting and synchronizing the aftermarket supply chain and aviation service professionals in real-time.
Still, it could become much more, such as a one-stop-shop platform for the entire aviation and logistics industry. More than 100 airports are already using it, and in February this year, it was adopted by a major Brazilian helicopter operator, Ocean Explorer.
In the same vein as Beacon, Mr. Moczydlower says EmbraerX is incubating other ideas related to renewable energy and the low-carbon economy — about which he declined to give more details.
EmbraerX announced in January this year that it was putting BRL 20 million (around USD 4 million) into a new corporate venture capital fund called MSW MultiCorp 2, its third fund to date. Managed by MSW Capital, it also has battery manufacturer Moura and the insurance arm of the state-owned bank Banco do Brasil, BB Seguros, as partners.
The new CVC fund comes at a time when Embraer’s first fund is already in the divestment phase and its second fund, the U.S.-based multi-CVC fund Catapult Ventures, launched in 2018, is still active but has little room for new investments.
“MSW MultiCorp 2 is a starting point for this new cycle, as we are looking for other big companies with a similar investment thesis to join our partners and us to reach up to BRL 150 million [USD 30 million] in resources. In addition, Embraer’s contributions may also grow,” says Mr. Moczydlower, adding that this is precisely the company’s primary purpose in participating in Web Summit Rio.
The three main targets of the new fund are the aerospace industry, agribusiness, and cargo transportation and logistics. “The Embraer Ipanema is already the leading single-engine sprayer plane in Brazilian agribusiness. Connecting it to new autonomous and AI-powered systems is just one of the possibilities in our sights.”
MSW MultiCorp 2 will always invest on a minority basis in seed and Series A-stage startups with checks between BRL 3 million and BRL 15 million (USD 600,000-USD 3 million).
“This means we are looking for startups with proven products and services that already have their first customers and are generating revenue. In the U.S., this may change slightly, and we may look at pre-seed startups targeting Series A,” says the Embraer head of innovation.
EmbraerX will also be looking for opportunities in Europe; in July last year, it opened an office at the Aerospace Innovation Hub@TUD, on the TU Delft Campus in the Netherlands.
At a difficult moment for the Brazilian and Latin American ecosystem, receiving an investment from a multi-CVC fund can bring an extra dose of stability.
“Since our thesis is one of strategic fit, values, and culture, when we enter into an agreement with a startup, our work commitment is longer term than that of a private equity or venture capital fund. We are not just an investor, we are a business partner,” emphasizes Mr. Moczydlower.
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