Al Gore, 45th vice-president of the US, laid down the challenge for the corporate venturing industry – what type of leadership will it show?
Gore’s speech at our third annual symposium was off the record, but delegates afterwards said they wanted to meet his vision of creating a world their children would be proud of rather than one that left them questioning why it was handed on in worse shape.
Gore spoke for more than an hour and received a standing ovation before signing his latest book, The Future, and mingling with delegates for another two hours.
He fielded a series of questions and repartee from the listeners about how to improve US politics, the impact of shale gas, and carbon dioxide reaching 400 parts per million, as well as how to balance entrepreneurs’ desire to ask for forgiveness rather than permission for an action with the need to think about the ethics and long-term impact of their work.
Introduced by Sharon Vosmek, chief executive of women-led entrepreneurs organisation Astia, Gore captured and provoked the minds of the crowd – whether they agreed with all his views or otherwise – and won the heart of at least one – a 10-year old girl.
Mia, daughter of delegate Andrew Gaule, founder of Corven Network, had a year earlier written a school project on Gore’s previous book, An Inconvenient Truth. In a moving private 10-minute meeting before his speech, Gore signed her project and read and discussed the subject before hav- ing his photograph taken with Mia and her parents.
The ability to connect across all walks of life, with all types of people and on all subjects marks out the truly gifted and empathetic politicians – Vosmek called him “my president” in her introduction – and such skills are often shown by the power brokers in other walks of life.
The symposium’s tagline this year reflected the impor- tance of those with a high emotional quotient and leadership score with a “power brokers” label and followed a private dinner for the top 100 members of the Global Corporate Venturing Powerlist, held at the Royal Festival Hall’s Skylon restaurant on the banks of the Thames opposite the Palace of Westminster.
A sign of the importance of the corporate venturing power brokers came from the many tales of extreme effort made by entrepreneurs to attend the symposium. Bright Capital’s RTT flew in from Russia via Morocco on a one-day pass after failing to land a visa, while Applied Ventures’ BT Imag- ing made it from Australia to meet the customers, suppliers and investors that can transform a nascent business. For direct comments from those who attended, see the showreel made by Mark Gillett of production com- pany SuitCase Media: http://vimeo.com/66674761.
Some of the top power brokers received an award, including Intel Capital as Unit of the Year. For a full list of winners and the shortlist see the supplement published in May.
The symposium agenda was dominated by those talking about how they were acting as increasingly effective gatekeepers, introducing the right entrepre- neurs to all parts of their parent companies as well as helping the business units source ideas and products and improving the efficiency of the other parts of a corporation’s innovation toolkit, including mergers and acquisitions, research and development, incuba- tion and joint ventures and partnerships.
The chief executives of Fortune 500 companies that attended, including Sir Martin Sorrell from mar- keting services firm WPP and Warren East from chip designer ARM, as well as the entrepreneurs, chief innovation officers, universities – see our sister title at www.globaluniversityventuring.com for more on this area and see the report on the roundtable dis- cussion – and venture capitalists, went away from the two days with more thoughts and understanding of the industry and ways to work with them more effec- tively, even if some of the players in the local venture ecosystem came in for some criticism from keynote speaker Marcos Battisti, head of western Europe and Israel at Intel Capital, the corporate venturing unit of the US-listed chip maker (see box).
Sir Martin (see box) put it succinctly in his keynote speech when he said there were now probably no large markets to be opened up now that Myanmar had been welcomed back into the global economy. The integration of more than 2 billion people into a capitalist-orientated global economy has been prob- ably the primary factor behind the low-inflation, con- stantly expanding economy over the past 20 years. But this period of low-hanging fruit is ending, apart from a few regions where demographics create a tail- wind to investing, such as Africa.
This puts greater pressure on what Charles Searle, head of listed and social media at South Africa- based media group Naspers and this year’s winner of the Lifetime Achievement award, in another key- note speech at the symposium described as the next wave of investing – going from taking ideas to new or underdeveloped markets around the world to being better able to connect up the dots and share ideas across borders (see box).
Searle’s unique ability has been to find and work with technologists and entrepreneurs, such as Pony Ma and Yuri Milner from Tencent and Mail.ru respec- tively, from wildly different cultures and backgrounds and help them achieve their goals over years now stretching towards decades. Naspers also effectively acts as a nexus through its portfolio companies spawning their own successful corporate venturing units that in turn build links across borders and have the ability to turn also-rans into profitable champions – the measure of venture capital (VC) pre-eminence.
In the past month, Naspers’ Brazil-based portfolio company Grupo Abril has invested in the latest round for bespoke marketing company Rock Content, while Mail.ru, in which Naspers also holds a minority stake, has made a $1.5m corporate venturing investment in Israel-based Cortica, which looks at images and videos through its Image2Text technology.
In the longer term, Mail.ru has backed US-listed social network Facebook among other US internet stars, while Naspers-backed Tencent, a China-based media group now with a larger market capitalisation than Facebook, has created its own champions in other countries, including taking a stake in Mail.ru and South Korea-based Kakao – whose founder, Kim Bum-su, has made a series of angel investments. VC firm K Cube Ventures and also gone on to set up web portal provider NHN and its influential corporate venturing unit.
The trail of influence, therefore, can rapidly spin a successful business into a higher atmosphere and create opportunities to grow and expand far more rapidly than groups reliant on more traditional merg- ers and acquisitions or expansion in large economies can do so. This is perhaps the only really successful venture investing strategy is the one where firms use their initial luck in backing a fast-growing company and then maintain and build on the relationship to help drive the success of future portfolio companies.
However, while corporate venturing units on average outperform their independent VC peers, the rapid growth in the industry caused some concern among delegates. Global Corporate Venturing tracks more than 1,000 units and its annual survey identified an expectation of the established as well as more nas- cent teams striking more deals over the next few years.
Anne Glove, chief executive of VC firm Amadeus Capital Partners, led an expert panel on the fundrais- ing trends for the venture industry, while, in the two academic presentation slots, Martin Haemmig, asso- ciate professor at Cetim, laid out his analysis of where these deals were being done by geography and stage of development.
Haemmig said the US still dominated by level of investment and number of deals, but different approaches were being seen in higher-growth coun- tries – see his monthly column with Boris Battistini for more on this.
Ray Haarstick, chief executive at software company Relevant Equity Systems, took Haemmig’s insights on with his panel discussing how the corporateventuring practitioners were trying to develop innovations through looking across sectors and regions for ideas that could be applied either locally or globally for profitable rev- enue growth.
But perhaps the hardest skill in driving a corporate inno- vation strategy is to marry the insights from the entrepre- neurs trying to create disruptive technological change with the parent corporation’s own strategy and roadmap, and effect change in both the former and latter – the sign of true power brokers, many of whom were identified in the inaugural Global Corporate Venturing Powerlist 100 last year.
Barry O’Brien, managing director of Silicon Valley Bank’s venture capital group, moderated a panel of four of these Powerlist members to explain how they led their corporate venturing groups, while another from the list, Dominique Mégret, head of Swisscom Ventures, and his panel explored how corporations could open themselves to outside ideas and leverage their parents’ value-added services.
But if the venturing unit is becoming a critical intermedi- ary allowing communication and knowledge to pass to the right people, corporate venturing as a career choice and path to more senior positions becomes a more important topic to be discussed, such as how people are recruited and paid – the questions set by Dermot Hill, chief execu- tive of talent management firm Intramezzo, on his panel.
In the opening panel, Lalit Ahuja, former chairman of US-listed retailer Target, described how he was helping a dozen Fortune 30 corporations to open up their research and development process to ideas from India. His other panellists, Deborah Hopkins, Rob van Leen and Peter Nagler, the chief innovation officers from bank Citigroup, materials company DSM and chemicals company Evonik respectively, laid out how they fitted corporate venturing into the wider innovation toolkit they had, from internal research and development through to partnerships and acquisitions. They were focused particularly on how cor- porate venturing could help influence the internal culture towards one of acceptance to change as a requirement for
continued growth, if not survival due to the rapid pace of innovation in technologies and business models from disruptive ideas.
Insights at the symposium into the technology and new ideas being pushed by entrepreneurs came from the 40 entrepreneurial companies invited to present an elevator pitch and join a roundtable discussion with cor- porations from four sectors who shared their views on the technology they wanted to see and their roadmaps for the future (see box).
Ralf Schnell, chief executive of Germany-based industrial conglomerate Siemens’ venture capital group, which makes direct investments as well as VC fund commitments, gave an example of how it sees the energy generation and infrastructure sector develop- ing globally over the next 20 years. He said that while different regions fitted into specific “archetypes”, such as traditionallists with moderate electricity generation growth or green pioneers with a higher share of renew- able energy production, their key requirements involved flexibility, optimising their energy mix of power sources.
He said because of its strategic view that the world was entering its fourth industrial revolution involving cyber-physical systems, Siemens Venture Capital was building its portfolio beyond energy efficiency, with stakes in Tendril and Power Plus Communication, and infrastructure improvements, such as Wirescan and Zolo Technologies, and software, online security and communication entrepreneurial businesses, such as Flexis, Magellan Technology and Realtime Technology.
One way to effect change in the parent is for the corporate venturing unit to impact the wider innovation toolkit, including which joint ventures and mergers and acquisitions are undertaken.
In her keynote speech, Claudia Fan Munce, vice-president of US-listed technology company IBM’s corporate strategy unit and managing director of its venture capital group, which acts as a limited partner (investor) in third-party funds and supports entrepreneurs directly through its SmartCamp initiative, said: “As the nature of computing changes, IBM has continued to remix [its] portfolio toward higher-value services, software and solutions.”
IBM has invested nearly $39bn in 141 acquisitions since the beginning of 2000 – nearly a third of them since 2010. Forty of these acquisitions, including Access360, Guardium, AlphaBlox, BuildForge, Webify, Corio and Aptrix, have come from the portfolios of the VC funds that IBM has committed to or engaged with. IBM engages these VC-backed portfolio companies through its PartnerWorld programme, which now has more than 1,300 members compared with 21 in 2000.
Fan Munce said her VC group was about “seeding IBM’s future growth”. She had defined its mission to “create and manage relationships with [more than 1,000] venture capitalists [worldwide] and their portfolio compa- nies to source and leverage external innovation for IBM’s strategic advantage and revenue growth”.
Part of what IBM gives to entrepreneurs includes greater credibility and visibility, intellectual property and expertise, while at least in part it looks for expanded ecosystems, revenue growth and strategic insights, she added.
Julie Meyer, the final keynote speaker of the sympo- sium and chief executive of VC firm Ariadne Capital, built on Fan Munce’s insights with a presentation on how innovation is about economics rather than technology. With the changes in communication and acceptance of corporate venturing and the broader open innovation theory, Meyer said innovation would increasingly be built on “ecosystem economics – engaging natural allies with incentives”.
She added: “In 2013, network benefits accrue to those firms [that] understand their role in their ecosystem and organise the economics for it.”
In her book, Welcome to Entrepreneur Country, signed for delegates, Meyer gave the example of how search engine provider Google had built its business by aggre- gating people’s personal data. Meyer said Google’s “big- gest Achilles heel is if someone in the search space were to cut a different set of economics for the consumer”.
She added: “Ariadne Capital found that entrepreneur John Paleomylites, founder of BeatThatQuote, sold his business to Google in 2011 for a 122 ebitda [earnings before interest, tax, depreciation and amortisation] multi- ple for these reasons.”
It was a fitting example of entrepreneurial vision aligned to the realities of working in a world with larger incum- bents and the pragmatism required to make money for shareholders – the sort of leadership and focus on the right result that sums up the best power brokers and a suitable way to finish the two-day symposium.