Many large corporations have made multiple efforts to develop their corporate venturing strategies. New York-listed industrial conglomerate General Electric (GE) has spent more than 20 years working on its own initiatives in this area.
Its latest iteration, GE Ventures, has been highly regarded as an industry leader, viewed increasingly by with other groups as a model of best practice. Its five main units are: equity investing, which invests in and partners startups, GE Licensing, New Business Creation, Healthymagination and Catalyst, its new early market development discipline. Sue Siegel heads GE Ventures as chief executive, reporting to GE vice-chairman Beth Comstock, who runs GE Business Innovations, developing new businesses, markets and service models.
GE Ventures launched in 2013 with a commitment from the parent company to invest $150m a year. However, while GE Ventures may appear to be a relatively young undertaking, its parent’s interest in the corporate venturing sphere goes back to 1995 through its GE Capital, Equity division, which has made more than 1,000 investments at growth stage through debt underwriting – companies with at least $35m in annual revenues – and in more mature, mid-market companies, with a current portfolio of $1bn managed by 20 professionals, according to its website.
Under Thomas Gentile, former president and chief operating officer of GE Capital since mid-2014, the operation shifted to be what he called “a smaller, non-systemically important financial institution focused on GE verticals”, for example aviation, healthcare and energy, with a number of its senior team, including Michael Fisher, Ed Hrvatin, Mark Holroyd, Ethan Drake and Chris Fowler leaving to form RIN Capital in October as an investment vehicle for Manoj Bhargava, founder of 5-hour Energy.
Prior to the launch of GE Ventures, the conglomerate also made investments in promising energy technologies and disruptive business models through its Energy Ventures and $100m Ecomagination Innovation Challenge, GE’s first open innovation program announced in 2010, and GE joined forces in 2011 with New York-listed utility NRG Energy and oil major ConocoPhillips to form Energy Technology Ventures, which over the following four years funded 19 venture and growth-stage companies to accelerate emerging energy technology.
Under Siegel, GE Ventures has become the primary unit backing earlier-stage entrepreneurs. Siegel remarked at the Global Corporate Venturing and Innovation Summit in California in January: “We earn our stripes by being engaged in corporate strategy for our business units, educating on new business models, emerging technology trends, and working to always sense emerging trends. We have helped do this through the infusion of talent from the VC and entrepreneurial world. These are among a few things that we have done and yet there is much more to do both internally and externally.”
Nearly half her team – 19 of 40 listed on GE Ventures’ website after analysis by Global Corporate Venturing – were internal moves from GE. Siegel herself joined GE from venture capital firm Mohr Davidow Ventures along with partners Marianne Wu, Alex De Winter and Rowan Chapman, who was named one of Global Corporate Venturing’s Rising Stars in January, from energy and healthcare beats respectively. Leslie Bottorff was previously at Onset Ventures, while Risa Stack had been at Kleiner Perkins Caufield & Byers. Karen Kerr was previously at Arch Ventures and Intellectual Ventures.
Others in her team, which is nearly equally gender weighted, joined from corporate venturing peers, including Michael Dolbec from LG, Ricardo Angel from Chevron and Eric Bielke from Siemens, Ralph Taylor-Smith from Battelle Ventures, or from business backgrounds.
Siegel refers to the GE Ventures platform as a business toolkit – a multi-pronged approach aimed at accessing innovation. This toolkit consists of traditional corporate venture capital investing (CVC), new business creation, licensing and early market development practices. She said five new businesses had been created over the past 18 months through New Business Creation, a practice area led by Risa Stack. Add to this toolkit, Catalyst, an early market development practice that put in place “a discipline that helps identify and develop collaborations with leading scientist entrepreneurs creating breakthroughs that are market disruptors and could be the next big thing”, as Siegel said.
Among these new business creations has been Evidation Health, a digital healthcare company using predictive analytics to improve patient outcomes. Evidation is the result of a collaboration between GE Ventures and Stanford Health Care, the university hospital of Stanford University.
Other startups being created are Current, which aims to provide a sustainable energy ecosystem, and GE Fuel Cells, which has developed fuel cell technology that uses stainless steel instead of platinum and rare metals to reduce costs and increase efficiency.
Siegel also pointed to the Healthymagination platform, which works on catalysing solutions for major global health challenges. The HealthyCities initiative and brain health efforts are two examples. Siegel added that “as a CVC, we are being asked to expand our focus to move beyond the role of ‘tech scout’ and equity investor” in the quest for future growth. She affirmed that “GE Ventures has expanded GE’s access to the innovation ecosystem, its technologies, new business models and practices, and the incredible entrepreneurs that power them”.
And GE Ventures has set up its Edge programme under Lisa Coca, managing director of corporate venture investments and commercial development at GE Ventures, to provide what Siegel said was support for “our portfolio companies through what we can bring to their growth and development by providing access to our research and development (R&D) experts, our distribution channels, our worldwide footprint and our regulatory and policy expertise. We have really fuelled this effort by also offering leadership educational programmes at our Crotonville campus, with a curriculum ranging from leadership skills, hiring to marketing, and the art of storytelling, geared at enhancing entrepreneurs’ development”.
Corporate venture capital investments “aimed at transforming industries and generating meaningful returns, might require more capital or global access than what a financial VC might be interested in doing”. Siegel also emphasised the importance of collaboration among players in the field. “Corporates understand that innovation is broad and diverse, and that we cannot do it alone. Partnerships are key and GE welcomes partners in the growth journey.”
To date, GE Ventures has inked more than 100 equity deals, technology and commercial collaborations across its five focus areas – software and analytics, healthcare, energy, advanced manufacturing and corporate productivity and operational efficiencies.
In terms of investment trends, Siegel said: “Everything is going digital in every industry. Everything will be connected via the cloud. Data is the new currency. Business models that are established in the tech vertical will be widespread into other verticals such as healthcare, energy and in oil and gas, to name just a few.”
GCV Analytics, Global Corporate Venturing’s insights-as-a-service data platform, indicates that GE is currently the top seventh investor with 103 deals. The majority of its investments have been in the healthcare sector, where it committed capital to 31 deals.
Some of these deals, however, date from the days before GE Ventures, as the company has been active in the corporate venturing space since before the dot.com bubble. In fact, GE Ventures’ website indicates it has 25 healthcare portfolio companies and 27 energy companies – its most active sector.
GE Ventures has shares in 15 software and analytics startups, seven advanced manufacturing businesses and two corporate services companies.
It has invested most frequently alongside VC firms Andreessen Horowitz and Khosla Ventures, as well as energy corporation ConocoPhilips and oil company BP, which each co-invested in four deals. BP was part of three rounds in the energy sector and one in the consumer sector, while ConocoPhilips invested alongside GE in two energy deals, one software company and one cleantech company.
GE’s largest investment tracked by GCV Analytics so far dates from 2011, when it participated in a $200m series C round for US-based electric car company Better Place. That round increased the company’s total funding to $750m and also featured holding firms Ofer Group and Israel Corporation, banks UBS, HSBC and Morgan Stanley’s Investment Management unit, as well as VC firms VantagePoint Capital Partners and Maniv Investments, which contributed funds through its Maniv Energy Capital arm.
Better Place, however, failed to generate a return for its stakeholders, losing more than $800m and selling only 950 vehicles before filing for bankruptcy in 2013, with assets acquired for a fraction of the invested dollars.
Germany-based online gaming company Bigpoint, meanwhile, proved a much more lucrative decision. GE sold the majority of its shares to private equity firms Summit Partners and TA Associates as part of their commitment to invest $350m in the startup in 2011.
Siegel said: “On the financial side, SolarEdge had a successful IPO last year [raising $126m in its Nasdaq flotation in March]. On the strategic side, Rethink Robotics products are being used in a number of our businesses, while other investments are helping us optimise our manufacturing processes. We have also seen big wins in our licensing division, such as our PFS [potassium fluorosilicate] programme [using red phosphor in light-emitting diodes], which identified non-core intellectual property in one of our businesses to enable great growth through both licences and supply.”
US-based energy management company Opower was previously the biggest IPO exit from a GE portfolio company, raising $116m in proceeds in 2014. GE first invested in the company when it won the group’s Ecomagination Challenge in 2010, splitting a total of $55m with 11 other winners. GE held less than 5% in Opower.
GE Ventures, however, has not been directly responsible for all investments since inception. In 2013, the company invested $104m in Pivotal, a spinout of data services provider EMC/VMWare in return for a 10% stake. That deal was made by the GE software centre’s business development team and, according to an unnamed insider, “since it was such a large deal, it is not considered GE Ventures for the purpose of budget, but it went through the same channels”.
In 2013, GE Ventures signed an agreement with crowdfunding platform OurCrowd that gave the corporate venturing unit the right to co-invest in select early-stage companies operating in the healthcare, energy, software and advanced manufacturing.
At the time, OurCrowd had already helped 28 startups raise combined funding in excess of $22m, eight of which secured more than $1m each. Siegel said at the time: “OurCrowd has created a unique platform for dynamic early-stage origination and funding. They offer a quality investment environment and the partnership will give GE increased access to early innovation.”
That partnership did not remain the only agreement that GE Ventures has sought out. Together with Startup Health Academy, the venturing unit welcomed applications until November 4, 2015 from healthcare businesses working on payment and virtual health services. The partners expect to select a new batch of startups later this year around new themes.
GE Ventures also lists a partnership with healthcare fund Rock Health on its website, but it provides no details, and GE Ventures is not named as a partner on Rock Health’s website.
Evidation Health did not remain GE Ventures’ only collaboration with a university. The corporate venturing division gives special attention to HourlyNerd on its portfolio page, a spinout from Harvard Business School that operates an online consultancy marketplace for businesses to seek expert advice. GE Ventures participated in a $7.8m series B round in February 2015 alongside fellow corporate investor conglomerate Kraft Group and several VC firms and private individuals.
Another startup highlighted by GE Ventures is Mocana, a US-based device security technology developer. GE contributed funds to a round of undisclosed size in 2013, alongside security software producer Symantec, as well as Shasta Ventures, Southern Cross Ventures and Trident Capital.
A significant investment in the healthcare sector was Omada Health’s $48m series C round in September 2015, led by financial services firm Wells Fargo’s VC affiliate Norwest Venture Partners. Health insurance provider Humana and healthcare system Providence Health & Services also took part, alongside Rock Health, Andreessen Horowitz, US Venture Partners and DRx Capital. Omada’s software helps prevent chronic diseases related to obesity, such as diabetes and heart disease.
In 2014, GE Ventures invested in US-based Kwantera, which is working on a predictive analytics platform aimed at the energy market. A regulatory filing indicates the round was $4.4m and names CoView Capital and Allied Growth Strategies and Management as additional investors.
Finally, in the advanced manufacturing sector, GE Ventures features drone hardware, software and cloud services platform Airware. GE made a strategic investment in the US-based startup in 2014 as part of an agreement to help with technology development and provide access to GE’s industrial customers.