It’s hard to imagine Wal-Mart as anything but a clearing-house for goods made in China, India, and other developing countries. The retailer, however, has recently partnered with Aldus Equity Partners to build a small, but interesting venture capital fund. Since Wal-Mart is only investing a paltry $25 million in the fund, the real question is why Wal-Mart would even waste time and effort to move in this direction? Well, the fund is aimed at investing in small women and minority owned businesses, and Fortune believes the idea is to placate diversity advocates who have been a drag on the Wal-Mart image of late.
The whole thing doesn’t seem to make much sense to me. If the company wants to move in this direction, then why not work directly through its powerful procurement operation? Many vendors that make the trip to Bentonville to pitch their products already rely on Wal-Mart’s blessing of their business model to move forward. There are dozens of ‘idea pitchers’ that present to Wal-Mart every year. With nothing but a few samples, some assurances on a supply chain, and sweat equity, these small vendors rely on Wal-Mart buyers to accept their business plan. It seems like to me that the VC model only allows for a longer incubation period. Nonetheless, this is an interesting approach to expanding the Wal-Mart umbrella deeper into the procurement cycle.