Cemex is one of the largest building materials suppliers in the world, but in a changing regulatory, technological and business landscape they realized the potential for disruption to their business. Gonzalo Galindo, President of Cemex Ventures, walks through how Cemex has created a leading corporate venture arm to push the industry forward, and in the process expose a massive company to what's going on in the dynamic construction market.
Learn more about Cemex Ventures here: https://www.cemexventures.com/
Follow Gonzalo here: https://www.linkedin.com/in/gonzalo-galindo-gout-89b20b4/
Follow Mauricio Weiss here: https://www.linkedin.com/in/mauricioweiss/
Gonzalo Galindo
[00:00:00]Hugh Seaton: Welcome to Constructed Futures. I'm Hugh Seaton. Today I'm here with Gonzalo Galindo, president of Cemex Ventures. Gonzalo, welcome to the podcast.
[00:00:11]Gonzalo Galindo: Thank you very much Hugh and, and happy to be here today, and hopefully sharing interesting comments to our colleagues in the construction innovation world.
[00:00:20]Hugh Seaton: I understand you've been at Cemex for a number of years and had some operational roles before you were part of the team that launched Cemex Ventures. Let's start with what Cemex Ventures is, but I'd love to think about how it connects with the bigger Cemex family.
[00:00:35]Gonzalo Galindo: Well, Cemex Ventures came along about five years ago. At some point at Cemex, we felt that we were fairly vulnerable to a potential wave of disruption that the construction might experience, as any other industry in the world. As you know, every single industry in the world has experienced some sort of disruption, and we being part of the construction industry, which is a wide industry, a big part of the building materials industry, which in a sense, is a very tangential industry to the whole construction value chain.
We felt fairly vulnerable to the potential change is happening in the way people thought about construction, thought about going about projects and so on. So we thought that, having a group of people, which continuously analyzes the construction value chain, understands, what are the trends? What are the technologies people are thinking of, what are the opportunities. And with that analysis, we can help Cemex figure out better, what type of strategy they need to follow to continue being a relevant player in the construction value chain, by providing valuable building materials. That was kind of the foundations of what we ended up being, what today is Cemex Ventures?
And with that group of people continuously analyzing and understanding and setting up priorities of where we need to invest as a company in innovation to become relevant or to fend off that level of disruption, we thought that was the way to do some open innovation, more related to the strategic business than anything else.
[00:02:12]Hugh Seaton: I love that and I think it's worth also telling listeners, many of whom will know who Cemex is, but not everybody, because I think it speaks to how interesting that you chose to go as wide as you did. But let's talk a little bit about what Cemex’s main business is.
[00:02:28]Gonzalo Galindo: Okay. Cemex is a heavy building materials company. Our main businesses are cement, ready mix concrete, and aggregates. We do also have some other additional business, like some precast materials, some asphalt, some construction chemicals and additives and so on. And we also have a nascent business unit, which we call organization solutions, which also tries to provide some other products and services to the whole construction environment.
Cemex has been around for more than hundred years. We were founded in 1906, in the north of Mexico, so it's close to 115 years already in this world. And we have operations in over 50 countries in the world and, and commercial relationships with over a hundred countries today.
[00:03:21]Hugh Seaton: And I'm just looking...something like a $13 billion company, so it's a big operation that's around the world. And yet, because the reason I wanted to bring it up apart from just letting people know what you do is it's interesting that a relatively concentrated, although massive company you decided to look way broader than that. You didn't just look at building products or how they get specified or anything that limited you actually said. We want to look at the entire value chain. What drove that?
[00:03:51]Gonzalo Galindo: Look, at the end of the day in the construction world, many things happen in which we are not part of those decisions. By the time somebody calls us and request a ready mix concrete truck to be delivered to a job site, it's too late, too many decisions being taken in which we had no say.
So as I mentioned, we felt really vulnerable. So the reason we wanted to see across the value chain is because we see this corporate venture arm as a tool to actually help Cemex shape a little bit the strategy, and actually, hopefully not only fend off that disruption, but also look for business opportunities where we believe we can provide or add value to the construction value chain.
So I don't see Cemex being a contractor tomorrow. That's certainly not true but what I see Cemex getting into businesses, which can add value in a much more different construction world.
[00:04:46]Hugh Seaton: That's really interesting. And again, the size of the company means that you've got the breadth that almost no one else does, at least no one that's doing what you're doing, which makes it all the more interesting.
Let's shift gears real quick and actually talk about what's the breadth of what... we've just talked about, how it's broader than one might expect. What is that breadth? What, so what are the things that, that you guys are doing.
[00:05:08]Gonzalo Galindo: Look, based on that analysis and based on the strategic analysis that Cemex does, we set out a set of strategic priorities for Cemex and our job at Cemex Ventures as an open innovation arm is to actually go and first find and invest in those technologies, which help might help Cemex to achieve those strategic priorities. Among those one of the strategic priorities of Cemex has to do with sustainability.
Therefore some of our job in that, in that the strategic priority has to do with helping Cemex in increasing their credentials and business opportunities in the circular economy, in helping Cemex in decarbonize it's whole value chain, issues like a carbon capture, carbon usage, a carbon footprint reductions in general.
So the sustainability is very high on our agenda. Obviously another of Cemex's strategic priorities has to do with the business growth in general. And also in that sense, we actually try to help Cemex to figure out potential business opportunities. Not only the areas I just mentioned like sustainability and circular economy, but also taking a look into the future of materials, the future of construction processes, how the construction projects, will happen, is off-site really gonna take off, does Cemex have a chance to work something out in their offset construction arena.
For example, supply chain is also an area in which we also focus a lot at the end of the day, we end up sending tens of thousands of trucks every day to the streets with products and services. So we can actually, if we believe we can leverage that capability to create new building materials supply chain models, and also productivity, something which is also very important now, digitalization not only for our operations, but also for our clients and helping them be more digital, more productive and things like that.
And also in general terms, you can say that we are focusing three or four areas, which actually expanded to four or five. Which has to do with sustainability, CO2, the future of materials, the future of construction processes and methods, digitalization, supply chain.
[00:07:21]Hugh Seaton: That's a really interesting set of priorities.
I mean, sustainability makes, and of course they make sense given what you do. Sustainability, I can see that would be an area of vulnerability. How do you do that? So obviously there is a fund that is bind all of this, and it's a corporate venture fund, which we'll talk about a little more later, but a lot of people will be familiar with your, I believe it's annual Cemex competition. In fact a friend of mine was on your list of, I think, semifinalists at the Document Crunch, probably more than one of them. But what are the activities in market that you focus on?
[00:07:57]Gonzalo Galindo: Look, of course, when you go as a new venture or corporate venture arm, one of the important things for you is to actually be seen. When we started five years ago, certainly not many building materials company, we're doing corporate venturing and not necessarily none of them in the cement world. So really you need to go the extra mile and making you be seen and let the whole entrepreneurship world understand that you are somebody which you can do business with and where your ideas and your entrepreneurship efforts can have some resonance in whatever we are doing.
That's why at the beginning, Cemex Ventures, since the beginning, we didn't package Cemex Ventures into just what Cemex is or what Cemex was. No, we want it to be a little bit more open to make sure that we attract as many entrepreneurship as possible. One of the many ideas we come up with is certainly the construction tech startup competition of which it started at like a small effort to actually attract start ups in early stages, and slowly but steadily after five years of running it, this is probably the largest startup competition in the construction world today, which is not only sponsored by Cemex today. We're actually, it's sponsored by six or seven other people. In the US, like Haskell Dysruptek, GS group in Korea, Hilti in Europe and so on.
It became beyond the Cemex effort only, it started to become an industry effort to actually attract good entrepreneurs and good ideas, which can be accelerated with the interaction with these people.
[00:09:38]Hugh Seaton: Yeah. And the fact that you're such a global company has to help enormously. And do you find that, that you're just, there's really nobody else who's looking as globally for winners and not winners, but for great companies as you are, it seems like you're, you know, either in a class of your own or there aren't a lot of other people doing what you're doing.
[00:09:58]Gonzalo Galindo: I would say that we were the first ones and we have like the first movers advantage, things are changing. And now finally, and happily, we are seeing other players moving into the same direction in really trying to promote and, well search and promote entrepreneurship in the construction world.
Especially in the building materials front, we're starting to see more people getting concerned and interested in knowing what is happening and seeing how they can help in actually promote that entrepreneurship. many people will say well, but, but now you're not, not alone. I'm actually happy. The more the merrier.
I mean, this is an effort of many, it's going to be an endurance run. It's not just a hundred meters run.
[00:10:41]Hugh Seaton: Yeah, and it's a big world and it's nice to have other balance sheets involved in it. And one of the things that you don't hear about as much is that it is, it is hopefully often the case that manufacturers can, can sustain big, bigger margins than contractors.
That obviously depends on who you're talking to. So the $50,000 question, a lot of listeners would love to hear is what do you look for? What's interesting to you in startups.
[00:11:09]Gonzalo Galindo: Look, it is case by case, but in general terms as any potentially other investor, we pay a lot of attention into the team, the actual, the actual founders, I mean, who they are, how aggressive they are... do they have a clear vision? Do they have a clear way of actually... have a clear plan of how they are gonna expand, accelerate and start growing their company? Do they, and also we spend a lot of time whenever we do an investment in any startup, we spend a lot of time in due diligence, but not necessarily checking whether they have the papers, correct, the IP is correct, their accounting is correct? Yes, we do that as well, but we spent a lot of time talking to them on what is that world in which Cemex as an investor, Cemex Ventures as an investor will help you achieve something for your company and in the process create some sort of synergies between you and us or some sort, because of the nature of the investments we do sometimes that is not necessarily that evident. Many corporate Ventures are very focused in trying to bring in innovation for very specific questions of innovations the corporation has.
In our case, we do that, yes. But we also look into things that currently Cemex doesn't even think about. And we actually take bets on, we believe this is something Cemex should think about it. And hopefully Cemex either helps this concept grow in the construction value chain, or even makes business out of this potential concept as well.
So that discussion early discussion with entrepreneurs on how. Partnership of our investments will evolve. It takes a lot of time in our assessment of the different startups.
[00:12:59]Hugh Seaton: Yeah. I mean, I we're having this conversation because your team is very good at reaching out and talking to lots of people. And casting a really broad net. So that makes a lot of sense.
I want to talk a little bit about something you just hinted at, and that is how CVCs corporate venture capitalists can sometimes operate differently from you know, sort of a traditional VC in that, and there's a range, of course, some are, even though they're corporately run they're still very financially focused. That balance between strategic and financial and also relatedly kind of believing in something, even if the numbers aren't there yet, because you understand the industry, whereas maybe a traditional VC would say, I'm sorry, your growth isn't where it needs to be. Can you talk a little bit about how your position allows you to look at startups differently?
[00:13:47]Gonzalo Galindo: At the end of the day, there's a saying which says there's no better strategy than the one that makes money. At the end of the day, sooner or later, the judgment of, of the financial returns of what we do will be there.
And that happens to any venture capitalist either corporate or not, it will happen. Probably the main difference is that we need to do that by helping our usually single LP, which is our corporation, solve issues, problems or look for innovation or even open new businesses, which today that corporation is not involved in.
And that, and that's probably the tricky part. For example, I'm talking about sustainability. If you go and see many of the venture capital funds today related to the construction industry, not all of them, but few of them are really focused on the digital arena because that's what they really manage. They know how to grow those businesses. They know how those businesses grow. They've had many expertise in valuation, so, and nothing wrong about it. I mean, actually we are we're investors in one of them. And I believe we're going to get a great return, which is gonna make me very happy.
But if you transfer that to the sustainability front, we're talking about a completely different ballgame where startups grow differently, valuations are different. What you value in the strategy and the IP of the of that step is completely different to a startup in the digital world.
So for us in the corporate venture front, We need to get exposed to all those realities and try to make sense of, to all of them. So in a sense, we not necessarily make our lives more difficult, but we really need to bring into our corporations, things that actually help them solve problems. Or help them create opportunities, which not necessarily a traditional venture capital firm will be concerned of.
They're much more concerned about the return on the investment. You've put your trust in me, your business, your money I'm done that trust need to give you some returns back. Otherwise that trust will disappear.
[00:16:03]Hugh Seaton: And I'm assuming that your mandate is broader than a normal LP agreement would be anyway, right? I mean, obviously you have people to whom you report, but it's, it's not quite the same where you have a charter and, and guardrails you have to stay in, or is that part of it?
[00:16:21]Gonzalo Galindo: I think we tend to be more flexible in certain things. I mean, if you are an LP in a VC, I mean, the terms of reference are very well explained in the contract you're signing. Here there's not such a contract, right? There's, there's a set of priorities and a set of discussions that the corporations and, and a set of requirements that the corporation is asking from us.
And those can change because corporations' priorities change based on what is happening. You know, I mean, the pandemic is a good example. I mean, a year and a half ago, we were with one line of thinking today, we are already, twisting that original line of thinking and adding some, some other elements to it.
[00:17:03]Hugh Seaton: And I think, I mean, some of why you're in this position also is having spent, was it 15 years or so in senior positions across Cemex, your understanding of the company and ability to operate in it probably helps a little bit too.
[00:17:17]Gonzalo Galindo: I mean, it does. I mean, I had a vast, and very rich experience within Cemex.
I did all the way from business development, I bought companies for Cemex in a couple of places, I did the line management. I was in strategy, now here. I mean, it really helps to actually understand the business deeply, and really probably at the beginning for me was more how can I be less a Cemex executive or more an innovation executive than anything else really turning on that chip.
[00:17:53]Hugh Seaton: And I'm sure over time, it's still good to be a kind of a Cemex guy as well as the innovation guy.
[00:17:58]Gonzalo Galindo: Yes. At least for me. Yes, but especially for our corporate venture team, I want them to be as open as possible, really to understand the reality. So I had a very good connectivity to the company, but if you asked me whether they would prioritize looking inside to looking outside, I will push them to look outside as much as possible.
[00:18:19]Hugh Seaton: That's why you're there, right?
[00:18:21]Gonzalo Galindo: That's why we are here, exactly.
[00:18:23]Hugh Seaton: And I think there's a humility in your approach that isn't always true, which I think is really great. So you've been looking hard, it sounds like, even before the initiation of Cemex Ventures about four and a half years ago, even earlier than that, you've been looking out at what's going on in technology.
How have you seen that pool expand? How have you seen what's you're looking at change over that, let's call it a decade.
[00:18:47]Gonzalo Galindo: Okay, look it's, it's hard as you know, the construction industry is unique. It's very big. It's very polarized. It's too many actors. Something that potentially we've seen at least in the digital front, is that all those solutions to actually improve productivity at the job site, we are seeing a huge growth in that one in the last five to 10 years.
You can see, not only the Autodesk, Procores and Bentleys of this world becoming bigger and more proactive. You can see thousands of startups already addressing in different shapes and modes, different problems of productivity, that different jobsites have today. You can see that also happening on the digital front as well at the planning, engineering phase and all you can start to see, you're already a good way for startups already addressing issues in that front.
Where we haven't seen that many yet, it's potential in solving supply chain issues. And I think supply chain is a very important problem to be solved. Probably one which accounts for probably one third or 40% of the problems of this industry, in any case. It's something that we are looking also with good eyes, is not necessarily the leading, cutting edge tech, innovation, but innovation after all is in construction processes. This wave of off-site construction is finally kind of taking off, whether it will be the end to end solution time will tell.
But we see certainly a much more stable offsite construction environment moving forward. And that is calling already for changes in the way we plan projects, the way we think about projects and the way we actually supply projects, not only from the supply chain perspective, but also from the actual product perspective.
You can see already incipient emergence of new materials, people who are trying to change current materials like concrete or wood in much more different ways. Where we still think, the, the construction world is still a little bit bind its potential in a sustainability matters, not just talking, but to be honest, not yet a lot of movement.
For example, for us, we need to clean our act to provide green materials or, or low carbon footprint materials to the construction world that eventually... but we are working today for technologies, which might help us do that in 2030, probably, you know?
[00:21:27]Hugh Seaton: Yeah. It's pretty long lead time stuff. was Cemex at all involved in the recent was it cop 26?
I think it was in in, in Scotland?
[00:21:35]Gonzalo Galindo: Yes, we got involved. Actually we joined a couple of initiatives, like what they call the first movers coalition, which is a group of players from different industries, which we believe that together we can jointly accelerate the procurement and evolution of certain technology, which will help us reduce our emissions and have a better, sustainability credential.
[00:22:01]Hugh Seaton: And as a company who several of your main products are in the bulls-eye when it comes to discussions of sustainability, and of course, the size of your company, your sensitivity to government involvement in the, in the industry is probably higher than average.
How do you see that changing from, you know, the US to Europe, to other places you do business.
[00:22:23]Gonzalo Galindo: Look it certainly is different. For example, in the CO2 front, that's a discussion that we've been having in Europe for 20 years or more. The cap and trade system is there since early two thousands. Regulation has been more and more stringent in Europe about emissions, as we move along and they are certainly much more concerned about... if not concerned they're regulating much more aggressively, all that in Europe than anywhere else in the world.
The US, it depends. If you're in California, you feel the pressure. If you're in Alabama, you don't feel any pressure. So, and in general terms, the US is slightly behind in all those senses.
It will catch up eventually. I mean, there's no way we can afford to not do anything about it. If any of the key messages of COP26 is, this is the decade in which we need to start doing something. Otherwise we're not going to make it.
[00:23:20]Hugh Seaton: Yeah. Do you think that, as you think about companies that are in areas where you look for companies to bring into your portfolio one way or the other, either direct investment partnership, whatever it might be.
Does the presence or absence of, of government have any impact? You find that there are places where sometimes regulations might slow things down, but also like Finland is an example where their government's done a reasonably good job in, in AEC of wisely, investing in creating some interesting companies.
I'm not sure that's true everywhere, but are you seeing that sometimes the balance goes the other way, where the government investment makes up for what might be a heavier regulatory environment.
[00:24:00]Gonzalo Galindo: Yes look. I think that as anything else, there are countries which are proactively taking steps to actually help, these type of processes.
And not only with regulation, which in any case, usually when you go to those countries, that regulations tend to be easy to understand, straightforward. I mean, you can actually. understand it and work upon it. And you can see those governments, not only being very clear on what they want, they actually act upon it as well.
[00:24:37]Hugh Seaton: Right.
[00:24:37]Gonzalo Galindo: They become partners. In some other places is not the case. I mean, some of the places it can become very cumbersome and it can become even difficult. you have, you mentioned great examples Finland that is a good example. The Scandinavian countries in general are good examples. Israel is a great example.
You can see some states in the US as well, pretty active in helping and promoting and, and regulating properly. But there's some of the places in which we still need to actually come up with the right solutions.
[00:25:07]Hugh Seaton: Yep. And it'll be interesting to see how pressure gets applied in the U S because you know, the investment community comes and goes when it comes to their, their sense of, of kind of green funds and so on and whether they're really doing anything or if it just makes for good cocktail parties.
[00:25:22]Gonzalo Galindo: Indeed, I mean, in spite of the fact that the US has been kind of falling bind in all these issues especially in environmental regulation, but still, you can see a lot of funds being creative with billions of dollars, a lot of millionaires putting money into these issues, and a lot of innovation happening as well.
So it's, it's, we cannot discount them. I mean, they are proactive.
[00:25:49]Hugh Seaton: Yeah, I think some of the pressure on owners might also help, but that's a, that's another podcast.
[00:25:54]Gonzalo Galindo: That's something. For example, you can see in stock analyst calls for a company like us, the questions on environmental issues, on emissions, on what are we doing is becoming more frequent and more pungent.
[00:26:11]Hugh Seaton: I mean, they're hunting for risk, right? They're looking for...
[00:26:14]Gonzalo Galindo: They really want to solve this problem. I mean, you emit a lot of CO2, what are you doing? We want to know, we want to know if you're going to be here in 2035.
[00:26:25]Hugh Seaton: Yeah. I mean, assuming people buy your stock, not, not hoping it's gonna, you know, do a Tesla.
That's, it's a, it's a long, longer term play one would assume.
[00:26:33]Gonzalo Galindo: We're not going to be a Tesla, but we can guarantee you that we will provide you with zero CO2 net, zero CO2 products eventually.
[00:26:42]Hugh Seaton: That's great. And that's what you're here for. That's what, that's, what Cemex Ventures is here for, right?
[00:26:48]Gonzalo Galindo: And that's a good example. Our CO2 journey. We have reduced our emissions substantially and we will reducing substantially more in the next five to 10 years. We have clear targets. For example, if in 1990, a ton of cement produced on average one ton of CO2. Today, that number is like, I would say 600 by the end of this decade will be 450.
And that is only with a non technology. What I'm doing today from the corporate venture point of view is looking to the technologies that will take us from the 450 to the zero between 2030 and 2050, probably or 2040, or I dunno, whatever it takes. And we are already piloting some of those technologies in our industrial installations, we're already, negotiating with them, different there's different ways of, of, of how are we going to make them accelerate those which will work. And that is happening today. I mean, we are still nine years away from that day.
[00:27:47]Hugh Seaton: That's excellent. So let's, I'd love to, to end with where you see things going. We've talked about the future a fair bit, but as you look for things that are exciting and areas, you talked about supply chain, you talked about sustainability. What are some themes that you're seeing emerging that you you'd like to see and that you expect to see over the coming... let's call it five years.
[00:28:11]Gonzalo Galindo: In the next five years. At least for us, very important is certainly supply chain. We would love to see a much more meaningful solution to the supply chain of materials, to the different construction world. That's an effort which is going to be huge in nature, which is not going to be solved by one people are going to have to see a lot of partnerships.
We're going to have to see a lot of collaboration among many players to actually come up with the right solutions, which actually making sure that the right materials with the right quality at the right moment, they are use by the construction world. And by doing that we reduce substantially the amount of waste that has been created by the inefficiencies in the supply chain.
I think supply chain is the most overlooked issue in the construction industry. It is for us a top, top priority. Secondly, as mentioned as well is Our sustainability credentials. We have an obligation and not, it's not only a natural, it’s a moral obligation of our company to make sure that we reduce our emissions as much as possible and increase our level of circularity in our operations and the operations of environment, and recycling of materials, helping our customer to recycle things, recycle ourselves in our, in our operations. Are so one, which we are very good at already, but we still need to go the next level and actually help our customers become better in circularity.
And last but not least, certainly making sure that we lead this wave of changes by providing better materials by, by making sure that our materials are more in synchrony with the future of construction, the future of societies, and so on. if offsite construction is going to take place, I don't think I will be delivering big trucks anymore. I need to deliver something else.
What is that? That's something that we need to come up in the next few years. Yeah, and certainly everything will be supported by better digital capabilities. At the end of the day, digitalization will help all these changes happen.
[00:30:24]Hugh Seaton: Excellent. Great way to end. Gonzalo, Thank you so much for your time. I've learned an awful lot.
[00:30:30]Gonzalo Galindo: No, thank you very much for offering me this, this opportunity and I'm very happy. I was very happy over the last day, 35, 40 minutes.
[00:30:39]Hugh Seaton: Excellent. Thanks so much.
[00:30:41]Gonzalo Galindo: Thank you.