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IKEA invests big in cleantech, looks to bring products, including solar panels, to stores over next few years

The kitsch Swedish furniture retail chain IKEA has announced big plans to go green.  The chain is looking to make a new name for itself, investing €50M on "cleantech" startups over the next five years.

The new unit, IKEA GreenTech, is channeling its efforts in five directions:  solar panels, alternative light sources, product materials, energy efficiency, and water saving and purification.  The unit will only invest in startups the can guarantee delivery of a product within a four to five year window, as IKEA's ultimate intention is not purely altruism, but rather primarily to sell greentech.

Johan Stenebo, managing director of IKEA GreenTech states, "We're already talking to companies."

He hopes to have his unit placing its first investments by the end of the year.  He states, "That's certainly our aim to make happen."

Mr. Stenebo says the products will have to meet IKEA's high standards.  He explains, "Really low prices, and they should be of very good quality. That's the only thing we look at, we would never look at anything else, we would discard anything else that doesn't fall into those boundaries, whether it's home furnishings or it's greentech products."

IKEA hopes to form partnerships with five to ten companies, with 5 or 6 of the partnerships being formed over the next 2 years.  It believes that it will have its first products on the market within 3 to 4 years.  IKEA wants to keep its portfolio small so it can guarantee quality and that products make deadlines.

Mr. Stenebo adds, "We will be very active on the boards of these companies.  I think we can contribute somewhat in terms of commercializing the product they are developing, and then, obviously, distributing the product as well."

Distribution power is definitely something IKEA brings to the table.  It has 270 stores in 35 countries, and half a billion customers per year.  The company not only creates its own furniture, it also invented flat packing of furniture to reduce costs.  It works with 1,300 suppliers in more than 50 countries.  Since its 1943 birth in Sweden, IKEA has blossomed to have more than 118,000 employees. 

The GreenTech unit is various small in comparison with the company as a whole, but has big responsibilities.  Formed eight months ago and headquartered in Lund, in southern Sweden, the unit currently only has four employees.  Mr. Stenebo adds in, "Within one or two years I think we'll be between eight and 10."

One potential opportunity for green sales from IKEA outside the store is in its housing business.  IKEA manufactures entire homes, starting in Sweden in the 1990s. IKEA now sells homes in the U.K. -- pre-fab homes with plots of land -- to low income buyers.  The homes are already ecologically friendly, with renewable materials in the construction, and solar and geothermal for power and heat.  However production from the startups could yield lower costs or more advanced designs.

The first priority for IKEA is getting the products to market though.  Mr. Stenebo has already considered that some products might be better suited for different markets.  He explains, "It's quite natural that, for instance, solar panels are more interesting to Spaniards and Californians and so forth than they would be to Swedes."

He concludes by outlining where the investments will be made and the outline for the future of the project, stating, "Initially, we will be looking more in Europe than anywhere else, but we do not have any geographical restrictions for our investments.  Once a company is up and running in five or seven years or something like that, and if we exit from that company, the money that we've earned in that investment will stay within the IKEA GreenTech fund."





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