Global Corporate Venturing surveyed the heads of corporate venturing units round the world as well as influentialservice providers and others in the ecosystem to askwhat was the most important event or trend in 2012. Next month we will reveal their answers on the outlook for 2013 – email your thoughts to jmawson@globalcorporateventuring.com
Responses last year were broadly split between the growth in corporate venturing and more macro concerns, such as the impact of technology plus stock market and economic volatility on sectors and deals.
This year’s concerns were about the range of issues groups have to grapple with, reflecting the challenges and complexity of corporate venturing as a profession and industry.
The main themes were about new group challenges on strategy, governance, metrics, acceptance, working with business units and fundraising.
There was also challenges about transitioning strategies after launch, refining goalsand methods, dealing with glo-bal network and international reporting, as well as scaling opportunities suitable to a large parent, building ecosystems with partners and models not just new technology.
Internally, challenges are about helping the portfolio, external partners and parent – with the hot sectors as big data and energy and hot regions as emerging markets and how to deal with them.
Externally, investment and exit conditions were either too hot (pricing and time to do deals) or too cold (venture capital collapse or arrogance limiting deals and follow-ons, other sources of capital) to find good entrepreneurs and make exits and returns.
Respondents also worried about innovation leading to parent demise (likely to be an increasing problem) or cost cutting.
What has been the biggest issue you have faced in 2012?
Claudia Fan Munce, managing director of IBM Venture Capital Group: Defining a new model to bring customer, IBM and start-ups into successful pilot projects that can be win-win-win. Customers gets a new solution to advance their offerings, start-ups get real cus-tomers, and IBM has served as the integrator of these new solutions to our large enterprise customers.
Jean-Marc Bally, managing partner of Aster Capital: Our fundraising has been much more time-consuming than expected.
Peter Cowley, investment director at Martlet: Coping with the volume of quality deals.
Darren Herman, president of KBS+ Ventures: Accelerating the portfolio has been our biggest priority this year. Not necessarily growing it, but rather making sure we are doing everything we can to move it forward.
Davorin Kuchan, director of corporate venturing and innovation at Texas Instruments: Adoption of a new corporate venturing model to have more active participation both externally and internally.
Fabienne Herlaut, founder and managing partner at Ecomobilité Ventures: Aligning shareholders interest to make investment decisions.
Martin Grieve, managing director at Unilever Corporate Ventures: Liquidity.
Dominic Emery, chief development office for BP Alternative Energy: Getting exit proceeds from initial public offerings (IPOs) or trade sales.
Rich Adcock, president of Sanford Frontiers: Defining our key focus.
Martin Kelly, IBM Venture Capital Partner: Expansion into emerging markets.
Graeme Martin, executive president of Takeda Ventures: Working out the wrinkles in pharma corporate-only investment deal structures.
Gwen Melincoff, senior vice-president at Shire Strategic Investment Group: Venture capital firms(VCs) not being able to participate in follow-on rounds of financing.
John Suh, director of Hyundai Ventures: Learning how to co-work between the corporate venturing busi-ness group at headquarters [in Korea] and my office[in California].
Brook Wessel, senior investment manager at T-Venture: More deals than time to execute them.
Johan Carlsson, president of Volvo Group Venture Capital: Lack of market dynamics – too few exits, too few investors, too little creativity in finding solutions for struggling companies.
Jonathan Tudor, partner at Castrol InnoVentures: Dealflow sourcing.
Reese Schroeder, managing director at Motorola Solutions Venture Capital: The length of time it has taken to ensure we have great co-investors on some of our deals. I am happy that patience has paid off.
A head of medical corporate venturing unit: Difficult, protracted follow-on rounds.
David Lawson, open innovation manager at Procter & Gamble: Scaling opportunities to meet the needs of a global CPG [consumer products group] company.
Alexander von Frankenberg, managing director of High-Tech Gründerfonds: The biggest issue in 2012 was getting exits done in a still positive economic environment. Despite large amounts of cash sitting idle in large corporations, they are still very careful spending it for young, in many cases cash-burning, high-tech start-ups.
Dan Cherian, general manager of Nike’s Sustainable Business and Innovation Lab: Building ecosystems is the biggest opportunity, which will not come just from one or two venture deals but catalysing many partners.
Richard Lewis Jones, investment principal at British Gas Venture Capital: The sale of Vivint to Blackstone for $2bn as the price indicates the value of the connected home sector.
Michael Lee, managing partner at Rogers Venture Partners: Softbank’s purchase of [US phone operator] Sprint will affect the market because it creates new incentives to invest and be innovative. It shows the outcome is not pre-ordained and just to cut costs.
Stephen Socolof, managing partner of New Venture Partners: The venture industry’s evolution to a different model as fundraising remains difficult for VCs – those that can raise get bigger while angels and crowdsourcing and corporates all increase their interest.
Pete Magowan, head of energy at Moonray Investors: A lot of interest around big data and energy efficienc.
Crispin Leick, managing director of Innogy Venture Capital: Banking project finance constraints to pull off innovative infrastructure projects that include technologies from our portfolio companies.
Marc Westermann, principal at SFR Développement: Justifying the allocation of funds to a non-core financeactivity while crisis and competition hit the core business.
Clennell Collingwood, partner at TTP Ventures: Corporate decision-making processes take time.
Paul Morris, consultant, ex-Dow Venture Capital: Reconciling potential conflicts– there is a necessity to invest in innovation to help drive long-term growth, but short-term pressure on costs is driven by quarterly reporting requirements for public companies.
Andrew Gaule, founder Corven Networks: Organisations recognising they need to show they can support the ventures they have invested in and make an exit that shows they can make a return – 2012 has been a difficult year to prove that case.
Patty Burke, partner at Bell Mason Group: We may find that corporate venturing was the innovation strategy du jour in 2012, with new units created and investments made without the strategy, governance, metrics and buy-in needed to make them successful.
Martin Haemmig, professor at Cetim: Many Western corporates with venturing programmes missed dealing with the BRIC [Brazil, Russia, India and China] nations. It is not always about technology, but access to local business models, markets, channels and talents for localised versions In addition, western corporates and their venturers have missed the emerging pre-revenue train in China during 2012, which is about to start in India in 2013 and simultaneously in Russia.
Subra Narayan, ex-Kodak: The parent’s demise has led to a strangling of funds and thus the inability to follow on or make new investments.
Simon Gall, founder of Integrity Capital: A lack of initiatives to reduce tax and improve finance for all tiers of economy.
Christine Phillpotts, global portfolio manager at Grassroots Business Fund: I am an investor in a fund focused on emerging and frontier markets, and do not currently work in a corporate venture group. However, based on what I see in the market, the biggest issue that faced corporate venturing in 2012 as it relates to emerging and frontier markets has been around portfolio companies figuring out a successful distribution strategy that is able to deliver the companies’ products and services, despite infrastructure challenges, particularly outside urban areas. This will be most relevant to consumer product companies that will often need to develop, or successfully leverage an existing, distribution channel cost-effectively to continue growing.
Emily Levy: For the life sciences space, the annual review may want to highlight their increased importance to the entrepreneurial ecosystem, especially as it continues to be challenging for VCs to raise funds, and given announcements like the one that Mohr Davidow – who had been a great participant in the life sciences and diagnostics sector – is de-emphasising healthcare.
Alain Hanover: Don’t inhibit the start-up in any way. Let it breathe as much as possible. Having been a corporate venturer for eight years, and on other boards with corporate venturers, the most important way the corporate venturer can help, and stay in harmony with the other investors, is to keep the company’s best interests in mind, and the strategic aims of the parent as secondary. Sometimes the CVC can add other sales and opportunities, but they should be aligned with the company’s strategy. Then you will get invited back to co-invest in other deals and add the most value. Creating great products, expanding markets and adding wide-ranging customers will make the business more valuable for everyone. Having an inside view of the business from its board gives the corporate venturer enough advantage to help with the parent.
Anonymous:
Lack of internal alignment with a venturing strategy – although this is dramatically improved with the development of a clear strategy, viable market partners, and fundable projects being pursued by funding partners.
Difficult insider bridges and financing.
Lack of liquidity in exit markets and overhyped valuations in internet companies.
Finding internal champions to support our investments.
Finding deep-pocket investor syndicates as fundraising is difficult for many independent VC managers.
Balancing corporate culture and dynamics at an innovative small firm.
We are considering a second fund with outside investors but it is not much of a fundraising environment.
Unrealistic price expectations – strong competition from VCs and corporate venturers.
Speed – getting the large corporate to move quickly enough.
Getting business units to understand their role, value-add and processes for investments. Identifying trends but, more importantly, taking quick action to partner, invest and acquire.
Not getting ripped off by Silicon Valley VCs asking for unfavourable deal terms and very high valuations, especially later-stage. Not to be dumb money. Excessive valuations relative to sales and profits