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Coca-Cola

Coke taps into start-up mojo

Marco della Cava
USA TODAY
Wonolo founders Yong Kim, left, and AJ Brustein at their San Francisco office.

SAN FRANCISCO — When you think of Coca-Cola, your mind doesn't go to tech start-ups and venture funding. Coke wants entrepreneurs to think again.

The Atlanta-based soft-drink behemoth is in the business of seeding small companies whose tech-based ideas could help improve its bottom line.

Eleven start-ups in 10 countries have made the cut, including this city's Wonolo, which stands for "Work now locally." Think of the program as an Uber for labor, providing just-in-time bodies to — in Coke's case — restock empty shelves at a moment's notice. In fact, Uber is one of Wonolo's many customers. The labor start-up exists thanks largely to Coke.

Wonolo is the brainchild of former Coke employees AJ Brustein and Yong Kim, who found that Wonolo couldn't scale properly while being a part of Coke. Last fall, the company told the duo to break away.

"Things got in the way of us operating like a true start-up, things like offering employees equity, which is key if you're going after the best engineering talent in the Bay Area," Brustein says. "Now we're far more agile."

Coke was Wonolo's first major investor, and the drink peddler has less than a quarter equity stake in the start-up, which has raised $2.2 million in venture funding.

"This is the next wave of innovation for non-tech companies like us," says David Butler, Coke's vice president of innovation and entrepreneurship, who recently visited the Bay Area to meet with Wonolo.

"It's now about co-creation, about providing seed funding and being their first customer," he says. "We know about soft drinks. But others can help us find tech-based solutions to problems in our business that we couldn't tackle."

David Butler is Coca-Cola's vice president of innovation, in charge of the company's push to get start-ups working on its beverage-world challenges.

Butler, formerly Coke's global chief of design and author of Design to Grow, says the 3-year-old Coca-Cola Founders program works best when liaising with innovators outside the company.

"First we tried to incentivize people inside Coke to create innovative solutions to some of our issues, but that didn't work, basically because people already had a day job," Butler says with a laugh. "Then we tried an entrepreneur-in-residence program in eight countries, but that didn't work either, mainly because many got used to the corporate lifestyle."

Among Coke's lean-and-mean start-up teams are Winnin, a Brazilian start-up that draws teens in video-posting battles that often are sponsored by the soft-drink company, and Vending Analytics, a Sydney-based company that helps Coke better understand the sales patterns in its 10 million vending machines.

The results of such investments often are immediately tangible. Butler says thanks to Vending Analytics' predictive software, Coke has been able to see a 20% revenue jump per vending machine as a result of knowing which machines should be stocked with what products.

Besides its suite of Coke products, the company owns brands such as Vitamin Water and has a large stake in Monster energy drink. The global soft-drink and bottled water market is a $256 billion business, dominated by Coke (about 40%) and Pepsi (30%). The clout of such corporations can be enticing to start-ups looking for early-stage investment and business relationships.

"We're looking for proven founders with energy," Butler says. "When we find them, we share our billion-dollar challenges with them and open up our assets, which amounts to relationships, resources and reach. You want to connect with the CEO of Walmart or Bono? Well, we know them."

Butler is convinced Coke is playing with a new model that other large multinationals will soon adopt, largely because radical innovation seems to rarely sprout from inside large, established companies.

"Those who work at Fortune 500 companies are very different from the people who choose to work at a start-up, and frankly those start-up type ventures are usually crushed in-house," says Scott Kirsner, editor of Innovation Leader, a site aimed at corporate innovation execs.

"What Coke is doing is a way to get that start-up mojo without actually bringing those people into your company," he says,. "It's also a way of getting young, smart people to think specifically about Coke's business challenges."

Vending Analytics founders Jason Hosking, left, and Franki Chamaki use their software tech to help Coke maximize vending machine sales.

The one risk of not finding solutions to business problems in-house is that "eventually you might find you have to pay more for the answer in the long run, much like when Avis bought (ride-sharing company) Zipcar for $500 million once it noticed that some people just wanted to rent cars by the hour."

That's a risk Butler is willing to take. He says that once identified, Coca-Cola Founders typically are given $250,000 to $500,000 to launch their projects. If the start-ups subsequently raise external funding, Coke translates that initial investment into equity that rarely exceeds 20% of the company's value.

"This did and still does represent a cultural shift inside our company," Butler says. "But it's where we need to go."

Follow me on Twitter: @marcodellacava

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