‘The pace of change will never be as slow as it is today,” said Sue Siegel, chief innovation officer at GE, CEO of GE Ventures, and the summit’s co-chairman, when she opened the conference. “Change is going so fast,” she added. “Today is as slow as it is going to get.
“In the future, you will see the current time as slow, which means things are only going to accelerate – which is a scary perspective. We already feel how tumultuous everything is, and how we struggle to keep up with all technologies. And yet things are only going to get faster. What this means from a corporate venture capital point of view, is that we cannot get complacent. We need to continue challenging ourselves.”
She said: “Last year, Brexit had happened, the US elections had happened, and the French presidential elections were under way, which meant there was a lot of political tension. There was so much going on at that time that no one quite knew what to expect.
“We all thought in 12 months, it will have all settled down. And as it appears, it has not. In fact, what you see at the moment are natural disasters, cultural movements – such as the ‘metoo’ movement – new technologies such artificial intelligence (AI), cryptocurrencies, blockchain and autonomy, which are all disrupting the industry.
“And alongside this, you have geopolitical uncertainty. So as much as we all thought that 2018 would bring more stability and clarity, I am not sure we can say this now, as there is still so much that is unsettled – politically, culturally, and technologically.
Siegel, however, was confident that CVCs were “pretty well-equipped” to deal with this instability as, in her words, “the venture capital personality and mindset is one that lives in ambiguity, one that looks to find solutions to problems, and one that sees how ambiguity causes opportunity”.
She said: “CVCs are very well-positioned in terms of being able to solve a problem through entrepreneurship and partnership, but also to help the strategies of corporations. It is very important that we keep on bringing freshness, novelty and the ability to question in order to challenge the accepted way.
“When you have corporations impacting industries, and industries impacting the world in turn, it becomes a pretty big deal.”
As a result, she said CVC was a “discipline” becoming more necessary as research and development budgets shrink and productivity looked for. GE was using ventures and innovation tools to find novel concepts, catalyse growth and scaling impact and changing mindsets.
Siegel described the community as “heroes of impact” and CVCs as “true drivers of innovation”, requiring people to stand up and take responsibility, share best practices and learn from one another as well as engage on diversity by men asking questions and women sharing understanding.
Intel Capital president Wendell Brooks gave an update on the firm’s activity in the two years since he took over and focused on where it was adding value to portfolio companies and changing the focus of activity with an emphasis on diversity.
With 42 new investments last year, Intel invested $690m compared with the $455m in the previous year’s 34 deals with a particular focus on automation and AI.
Ten of Intel’s portfolio companies were introduced to the public market in 2017 – a significant step up for the unit, which was helped by favourable market conditions, Brooks said, while another 26 exited through trade sales. Its latest investment initiatives have seen the number of women-led portfolio companies in new deals increase from 6% in 2015 to 15% in 2016 and 22% last year.
Brooks said: “When I was on this stage two years ago, I made the promise that Intel would commit to diversity. “Looking at the audience here, it seems we are doing better than in the financial VC community, but it still is not enough.”
Referencing its own new internship scheme, the president challenged all CVCs to look hire or intern at least one African American and one woman, saying this would “already be a big contribution to the community”.
He added that the group had tasked Lee Sessions and Bryan Wolf to find more ways to “work together” with other CVCs to support portfolio companies and make “one plus one equal five”. He said CVCs’ advantages over financial VCs included due diligence, industry expertise, refining technology with engineering, endorsing technology and driving standards, accelerating route to market and driving company theses.
And while warning for groups to be prepared for recession and to take advantage of opportunities created when capital is pulled back from VCs in a downturn, he added: “Intel Capital’s mission is to invest around what our business units are doing, but also to make sure that any new opportunities and technologies we invest in are helping us learn. We are getting paid to learn, and to invest in wherever we think innovation is going.”
A third highlight of the first morning session was the keynote presentation by Young Sohn, president and chief strategy officer at Samsung Electronics, a unit of the South Korea-based conglomerate, in which he delivered a key message: “Data will drive opportunities for everyone.”
Comparing the explosion of data economy to the oil boom that drove much of the 20th century, Sohn said: “Data is the new oil.” He said we were in the middle of “a big change”, with a lot of opportunities emerging in the data space. According to him, the top five data companies currently have a combined market value approaching $3 trillion compared with about $1 trillion for the top five oil majors. All the things we do nowadays are happening with connected devices. One of my jobs has been to change Samsung from old to new, and to figure out how to embrace this change.”
Anna Catalano, board member at Kraton Corporation and Willis Towers Watson, and former chief managing officer at BP Ventures, was interviewed by Clareo Partners managing partner Peter Bryant.
The pair’s discussion focused on evaluating how today’s board members view corporate venture and innovation. Highlighting once more the importance of diversity and open-mindedness, Catalano said: “Innovation happens when you are talking to someone who is unlikely to gravitate in your usual orbit. You have to be in touch with people who are not part of your world, and to remain curious about things that exist outside it.”
Catalano likened the role of CVCs to that of translators and interpreters for the innovative technology space, whose role would be to explain what the future world will look like. She advised delegates: “Do not let events like this summit be just two days out of the year. Try instead to go back and figure out how you can effect change for a better world and try to make the necessary switches within your organisations before coming back next year.
“You are the means by which corporations can be affected – do not underestimate the power you have.”
A recurring theme throughout the matinee and afternoon sessions, was the change in mindset and approach regarding the investor-entrepreneur relationship, with the need for CVCs to participate in the global community of entrepreneurs.
Several speakers were keen to highlight the need to encourage collaboration among CVCs. Jacqueline LeSage Krause, managing director at Munich Re/HSB Ventures, said: “As the industry is becoming more professionalised, there is increased interest in sharing knowledge on particular issues and establishing common practices.”
Reporting on the new GCV Leadership Society accounting and operations taskforce, she added: “What we realised is, whether you are a new CVC or have been in the industry for a long time, we are all coming across the same issues. Rather than tackling them on our own and as if it was the first time these were faced, we thought it made sense to get this small taskforce together and establish common approaches to address them.”
This was one of several groups or hubs formed under the GCV Leadership Society to help the industry tackle issues better, while there was a separate session for government venturing leaders, and University of California, the largest public research institution in the US, with 1.8 million living alumni, showcased five of its entrepreneurial stars.
GCV founder and editor-in-chief James Mawson discussed with Rob Salvagno, head of corporate development and Cisco Investments, the unit’s investment strategy and its progress since Salvagno stepped into his leadership role two years ago. US-based network equipment company Cisco has so far acquired around 200 companies, while its Cisco Investments corporate venturing unit invests an estimated $150m a year.
Salvagno said having the same team working on both investments and acquisitions had been key in driving the unit’s success. He added: “Although there is still a long way to go, we have the opportunity to be a top investor. We do a great job at tracking innovation, so what we really need to do now is build our core value proposition.”
This, Salvagno said, was crucial for a unit’s success. When setting up a unit, CVCs should first determine their investment approach. Was the goal to strengthen existing businesses, or to track innovation outside that? “These are two different philosophies, and you need to be clear about them both internally and externally,” he said. “There is a lot of money out there, so you really have to look at what makes you unique. It is about believing in your core value proposition, and how it may benefit your portfolio companies.”
The morning session was wrapped up with a data presentation by Martin Haemmig, adjunct professor at Cetim in Germany and the Netherlands, and Max von Zedtwitz, part of the Glorad Centre for Global R&D and Innovation.
According to von Zedtwitz, much of the world’s research and development efforts were still concentrated in the US, with around 24.1% of the world’s R&D centres based in the country, including 315 in California, where the concentration is highest. The US also accounted for 35.9% of the world’s transnational corporation R&D centres.
Reflecting on investors’ approach to the Chinese market, he said: “Chinese customers are much more difficult to figure out, and this is why you need to be on the spot to understand them. Corporates are, however, now trying out a new way to access innovation in China, which involves not going after the technology itself, but after local entrepreneurs instead.”
Von Zedtwitz, who described the phenomenon as “a big trend in open innovation”, insisted on the importance of having access to the entrepreneur ecosystem, as it is the best way for foreign multinationals to keep a hand on the evolution of technology in the region.
He also spoke of the difficulty encountered by foreign businesses in understanding the Silicon Valley system. Establishing a global R&D system could therefore be the next big challenge for the CVC community, he said.
Haemmig observed that the proportion of US corporations going international or global had increased over the past few years, although they still represented a minority, with 776 domestic investments as opposed to 320 overseas investments recorded in 2017. He also noted that between 2006 and 2017, 345 startups moved to Silicon Valley.
He said that in terms of deals, volume and internationalisation, CVC activity had hit an all-time high in 2017, with Asia consistently increasing its market share. But while CVC investments were more significant, the number of acquisitions of invested startups had decreased, indicating a rise in strategic collaborations.
Haemmig recommended that startups expand abroad from the very beginning of their activity, as opposed to waiting for the completion of one or more funding rounds. Data had shown that “startups expanding to foreign innovation hotbeds do best when they move immediately after their local market validation”.
The afternoon featured a conversation between Ilya Strebulaev, professor of finance at Stanford University’s graduate school of business, and Claudia Fan Munce, adviser to New Enterprise Associates and former head of IBM Ventures. Strebulaev gave advice on best practices in corporate venturing.
According to Strebulaev, a unit could be considered successful if it had survived at least two CEOs. He said: “This conference is about success, and those who made it. But I would like to talk about those who are not here, and understand how and why CVC units can fail, because learning from others’ mistakes is equally valuable.”
Based on his research, in part carried out through annual surveys in partnership with Global Corporate Venturing, Ilya Strebulaev made several recommendations. The first step in establishing a successful unit was to determine its goal – financial or strategic, or both at the same time. He said units with a purely financial goal were the least likely to succeed, while those with a more balanced proposal tended do better. It was, however, “very hard to be successful in both at the same time”, he added, hence the need to have clear goals from the outset.
Strebulaev added: “You need to make sure that your CEO gets the point and sees the research in action,” adding that the most successful units usually reported to CEOs, or to a chief strategy officer. The least successful tended to report to chief financial officers or chief technology officers.
He also highlighted the strategic importance of deal sourcing and deal structuring, identifying smart syndication as another key to success. A good practice for a new CVC, for instance, was to try to partner more established investors, including financial VCs.
He added: “Through my teaching, I have realised that contracts and valuation – which we spend a lot of time on in class – are areas that industry players are largely ill-informed on. My advice is to familiarise yourself with these, as they are just as important.”
Jaidev Shergill, head of Capital One Growth Ventures, took an in-depth look at investment strategy and his unit’s evolution. Launched around three years ago, Capital One now has 10 team members, including five investments professionals. “We started in a very scrappy manner,” said Shergill. “At the two-year mark, we had a good investment process, and so we started looking at the strategic traction our investments could bring.”
Capital One currently evaluates companies with three metrics – 40% is based on investor relationship value, 40% on vendor relationship impact; and 20% on learning and culture impact. These evaluations are repeated throughout the investment period, according to Shergill.
He added: “Using these metrics enables us to put the lens of strategic impact pre-investment and opens up the possibilities of seeing how portfolio companies evolve over time. It enables us to figure out the direction we want to go into from an investment perspective. It also helps us in our reporting to the investment committee, which in turn is more involved and able to see where we are in our journey, and can provide a more targeted help on specific issues.”
The first day of the conference ended with a series of “unpanels” focused on different themes, including blockchain, automobility, quantum computing and healthcare, among others.
The second day of the GCVI summit started with an interview of conference co-chairman Quinn Li, who heads Qualcomm Ventures, by Faisal Rashid, partner at law firm Fenwick & West. Li spoke of his “excitement” to be chairing the conference again this year.
He said: “It is exciting to see that this conference has grown so much since it started. I have come across many old friends, but I am also discovering many new faces, which tells me that there a lot of people out there who are just starting out. This makes it a very interesting time to be part of the industry. This summit makes a great opportunity for us to get together and learn from each other. For the new folks starting a new venture in particular, this is very valuable.”
Asked by Rashid what “keeps him up at night”, Li said most of his thoughts were of the next areas of investment that could be exciting for his team, and of how to keep up motivation and cohesion within that team. “In other words,” said Li, “it is about finding where the next unicorn [a business worth more than $1bn] will be, and how we can keep the right team infrastructure to do it.”
Li said some key areas Qualcomm was currently looking at included the internet of things, autonomous vehicles and data technology. He added: “Venture is a long-view business where you really need to think things through. Once you commit to it, you have to plan to stick to it. Having that long-term horizon, and getting the needed support from management, are the two most important aspects.”
A cybersecurity session featured Dave DeWalt, a member of Delta Air Lines’ board and a former CEO at McAfee and FireEye, and Andrew Thorpe, corporate partner at Orrick.
DeWalt, who has been active in the cybersecurity space for the past two decades, spoke of a “shocking” level of threat. “It is getting out of control,” he said. “We see massive conflicts of interest emerging, with obvious online criminal activity and espionage. Everyone is concerned about reducing risk.”
He referred to Russian interference in the 2016 US elections, and said he knew of 5,000 Chinese intrusions into US companies, adding that the challenge of maintaining security and reducing infiltration risks was bigger than before. He said having a cybersecurity expert on a company board had become “paramount”.
He added: “It is important not just to be ready from a technology perspective, but also with having trained people. Human trust and education are two very important elements in cybersecurity.”
Diversity was a focus during the morning. A panel moderated by GE Ventures president Marianne Wu – Diversity dreams: where we want to be heading in 2018 and beyond – featured Eileen Tanghal, general partner at In-Q-Tel, Janey Hoe, vice-president at Cisco Investments, and Lo Toney, general partner at Plexor Capital, a fund incubated by search engine provider Google targeting minorities.
Wu said women in the CVC industry accounted for only 6% of C-level executives, and around 25% of the entire industry. Meanwhile, people of black or latino ethnicity accounted for only 3% of C-level executives. Only 5% of startup founders were women, while people of black or latino ethnicity represent as little as 1%.
“We need to start looking at diversity as a business opportunity,” said Toney. “People from a different background might be able identity opportunities that others might not. Think about the composition of your team – you will rapidly realise that the more diverse it is, the more access to dealflow and investment opportunities you will have.”
Hoe said: “Talking about it is not enough. Diversity now has to be set as a business target, just as everything else in the company, and the diversity strategy should be aligned with the overall business strategy. At Cisco, every time we make a new hire, we make sure that not only the candidates are diverse, but also the panel interviewing them. You also have to ask your portfolio companies what the representation is like on their team.”
In-Q-Tel’s Tanghal added: “You guys have a lot of influence on the boards of your startups, and should also always try to convince financial VCs and CEOs to do more. Even if it is just a couple of hires – it all counts.”
A second diversity panel brought together Karen Kerr, executive managing director at GE Ventures, and Stacey Epstein, CEO at communications technology company Zinc, who discussed the force of female founders and CEOs.
Epstein cast a more positive light on the state of diversity within the industry, saying: “Now is a great time for women to realise their dreams and get their funding. People are seeking diversity. Companies making new hires might even occasionally roll out the red carpet for you, because they know more female VCs are needed in the industry.”
Epstein also encouraged business owners or recruiters to look through the ranks of already successful companies to find existing female talent – not just at C-level, but across all roles. But she lamented the lack of female role models. “When I was little, I did not think it would be possible for me to become a CEO, as nobody encouraged me to do it. But times are changing now, and the multiplication of these female executive role models is what will change things over time and resolve the pipeline issue we are currently facing.
“A lot of women take themselves out of the ring early in their careers for senior executive positions, because they think they will not be able to manage being a good mum while having that level of responsibility. They need to be reminded that you do not have to sacrifice things at home to be great at your job – men have done it for many years without ever asking themselves if they could.”
In the afternoon, Matt Jennings and James Piacentino, respectively global vice-president and digital adviser at SAP Leonardo, discussed the group’s digital transformation. Originally released by SAP in January last year, Leonardo was first branded as an internet-of-things platform giving customers a place to track sensor data from connected analytics. Relaunched in November, the platform is now a digital innovation system enabling users to take advantage of the possibilities offered by emerging technologies such as AI, machine learning, advanced analytics and blockchain.
SAP Leonardo, they said, aimed to offer faster innovation with less risk and to help streamline operations related to promoting and developing innovation. New technologies could help accelerate processes such as proof of concept, product incubation or early-stage productisation. The pair illustrated this with Vale, a Brazil-based logistics company for which SAP Leonardo recently created a custom solution to streamline purchase requisition. As a result, there had been an 86% reduction in purchase requisition rejections.
The pair, however, noted that a distinction should be drawn between optimisation and transformation. “Most people aspire to do something transformational, but it really is more often than not just an optimisation of an existing business process,” they said.
Mark Smith, executive director at Verizon Ventures, was interviewed by John Riggs, partner at PwC Innovation Strategy. According to Smith, the unit currently had three team members in Israel, and eight directors in total – four of which are female, “which we are very proud of,” he said. The group’s major investments areas are aligned with the parent company’s core activities in telecoms and telematics, including technologies such as the internet of things, advanced networks, digital media, internet services and smart transportation. To date, Verizon Ventures has invested in around 50 companies, of which it has acquired only one.
Other sessions largely focused on discussing investment in new technology areas such as blockchain, AI, and the internet of things. One panel brought together Jacqueline LeSage Krause, managing director at Munich Re/HSB Ventures, Kavita Gupta, managing director at ConenSys Ventures, Bart Stephens, partner at Blockchain Capital, and Louis Lehot, partner at DLA Piper, for a discussion on blockchain and initial coin offerings (ICOs) moderated by DLA Piper partner Mark Radcliffe.
Blockchain, the panel agreed, was still an area of investment people tend to approach with caution. Stephens said: “A lot of people like to focus on the transition itself, the ICO – which sounds a lot like IPO, a more familiar term – rather than on the idea of a ‘tokenised network’, which to me is far more important. A key aspect in managing to build a trend around something is also to have a network effect, but a lot of people and businesses fail to achieve that.”
A solution, he suggested, was to provide a financial incentive in the form of tokens to get people to join the network. “If you provide a financial incentive, all of a sudden the user becomes a stakeholder,” he said. “It is about encouraging people to take part in the wealth creation process, as opposed to networks like Facebook, which creates wealth only for a single individual.”
The panellists also highlighted that, as with any new area investment, there was a regulatory need to ensure that there was investor protection, and that the US market remained competitive, offering regulations that were no harsher than other activity hubs such as Singapore, Hong Kong or London.
Lehot said: “We are at the tip of an amazing change in how companies are run with blockchain. We are looking at wholesale reimagining, with an increasing number of people taking part in the movement.”
Radcliffe added:” We think that blockchain technology is fundamental and will disrupt many industries. We are seeing corporations studying how to tokenise their own product suite, and evaluate startups with strong tokenomics as potential acquisition targets. We expect that in 2018, many institutional venture funds will buy tokens, fund companies that issue tokens and help their portfolio companies to tokenise their product suite.
“Corporate venture investors need to be prepared for the new world of tokenised businesses, both in developing strategies for their corporations as well as assisting their portfolio companies in deciding whether and how to tokenise their products.”
The conference ended with a keynote presentation by Jedidiah Yueh, author of Disrupt or Die: What the World Needs to Learn from Silicon Valley to Survive the Digital Era. Yueh’s address – Failure of the innovation classics: what the world needs to learn from Silicon Valley to survive the digital era – was a reflection on innovation and startup creation, and on the entrepreneurial journey of those who “made it”.
Calling himself an “accidental entrepreneur”, Yueh has 20 years’ experience in the digital space, having first been founding CEO of Avamar, specialising in the data deduplication market, and later launching Delphix, a software group specialising in streamlining data.
Having spent the past 20 years decoding innovation and collecting “hidden frameworks”, as he calls them, Yueh strived to debunk certain myths surrounding Silicon Valley and successful entrepreneurs such as Mark Zuckerberg, Steve Jobs and Eric Schmidt. One myth, for instance, is the preconceived idea that one needs to have an “incredibly original” idea to start a business. “Those ideas are usually very commonplace,” said Yueh. “A simple grain is always the start.” Another misconception is the time developing this idea may take. “It took one developer one week to build Facebook,” he said.
Yueh said what followed after the founding concept was based on a simple equation – legacy industry plus digital era equals digitally refactored industry. In other words, the digital avalanche offered the possibility of taking a simple idea and transforming it into a multimillion-dollar “monster” that would change the world.
A key question that all entrepreneurs should however asked themselves, he added, was: “Will your top transformation program win the future of your industry?”
Yueh also insisted that innovation, contrary to belief, was traceable and repeatable – one idea may lead to many others that were just re-explorations or derivatives of an original concept. Examples of this included Uber and its many duplicates, or all the social networks that took Facebook as their starting point. “There is a clear repetition of mega-successes in Silicon Valley,” Yueh said.
Finally, the author reminded the audience of the importance of placing the idea before the individual, as it was the former that defined the latter. The idea itself was what was most important. Taking himself as an example, the author recalled how at the beginning of his journey in the entrepreneurial word, he was “nobody”. He recast is formula as “reading the right books plus implementing the right framework equals winning the future of your industry”.
The last slide of his presentation, which read “May the force of disruption be with you”, came up as the perfect ending to this year’s GCVI summit.
Discussion: Phase two of nanotechnology and beyond
Kaloyan Andonov, reporter
This main-stage session explored how today’s corporates are responding to new nano cell technologies. The session was moderated by Tom Vanhoutte, partner at Belgium-based nano-electronics research institute Imec.Xpand. Speakers were Tony Chao, managing director at Applied Ventures, the corporate venturing subsidiary of semiconductor equipment maker Applied Materials, Heejin Chung, head of venture investment at South Korea-headquartered semiconductor supplier SK Hynix, and Dong-Su Kim, head of Samsung Ventures America, the venturing unit of the South Korea-based electronics manufacturing company.
Chao said of the strange nature of nanotechnology: “Nanotech is everything and nothing at the same time. It is everywhere – in clothes, phones, manufacturing – and you do not even know it is there. It is everywhere and nowhere at the same time.”
Kim discussed the intersection of data and hardware, which went “hand in hand”. He said that with the exponential explosion of big data and the associated need for data storage technology, hardware necessitated staying a step ahead.
Speakers also discussed the challenges for hardware companies, a domain with a high failure rate and an absence of large exits. Chung attributed this to the technical complexity involved and the longer time required for a hardware company to mature. “It takes much more time to mature than a web business,” he said.
Other points included how corporate venturers could help hardware or advanced materials companies employing nanotechnologies overcome these challenges. Kim said corporates could provide money, guidance and customers, pointing out that Samsung often co-invested in such enterprises with semiconductor manufacturers such as Intel and Applied Materials. Chao added: “Deep tech startups require technical expertise to appreciate their potential, which CVCs do have. They have not only the money and appetite to invest but also see strategic value in their offering.”
Discussion: Automotive, mobility and travel
Kaloyan Andonov, reporter
Tom Whitehouse, contributing editor at Global Corporate Venturing, chaired this sector spotlight session. Tony Cannestra, director of corporate ventures at Denso, Meghan Sharp, managing director at BP Ventures–Americas, and Bonny Simi, president of JetBlue Technology Ventures, participated.
Simi, co-head of a venturing unit and a practising pilot, said Jet Blue Ventures had been “very bullish” in the aviation space, as breakthroughs in electric propulsion would bring about significant disruptions in short-haul transportation. She said her unit’s investment mandate extended beyond pure and deep tech into innovation related to travelling and the entirety of a customer’s journey.
Cannestra touched on developments in autonomous vehicles and noted that there was a “rush of entrepreneurship” in this space, citing as an example Israel – a country without a native automobile industry, where thousands of startups are currently working on autonomous vehicle technologies. He also said most of the technology for fully autonomous vehicles was likely to be developed in the next three to five years.
Sharp brought the perspective of an oil major to the possible electrification of transport. He said BP owned petrol stations around the globe and, with the advent of electric vehicles, the question would be whether motorists in the near future would be filling petrol tanks or charging electric batteries. Sharp said BP Ventures’ capital had been increased and currently received $200m a year, allowing it to invest more broadly in areas such as artificial intelligence (AI), mobility, digital and low carbon in addition to emerging enterprises developing technologies related to its core businesses.
Each of the speakers highlighted the trends they were watching. Simi said she was interested in how blockchain and AI technologies would impact JetBlue’s space. Cannestra said the key to the adoption of emerging autotech lay in personalisation of vehicles. Sharp claimed the hottest new area was electrification and fast charging.
Later, in a breakout session, BP, JetBlue and Denso introduced startups to which they have committed capital. The event was moderated by Jim Fischer, partner at law firm Drinker Biddle & Reath, which sponsored the session.
Sharp introduced Arcady Sosinov, CEO of FreeWire, which had announced a round backed by BP Ventures just a day before. FreeWire develops a mobile charging system for electric vehicles. The technology currently operated at 50kW but it was scalable to make a 10 to 15-minute fast charging of an electric vehicle possible.
Sharp also introduced the audience to Gary Tucker, CEO of Zubie, another BP Ventures portfolio business, which develops a connected car cloud-based platform for vehicle management monitoring. Previously backed by other corporates, such as retailer BestBuy, automotive parts producer Magna and communications technology producer Comporium, Zubie’s platform is used in small fleets, where trip data and vehicle diagnostics are collected and analysed.
Cannestra introduced Brian Wong, CEO of Trilumina, a Denso portfolio business, which develops lasers for solid state light detection and ranging (lidar) systems and 3D sensing. Wong described his company’s mission as “to democratise lidar and 3d sensing”. Founded in 2011, the company raised its first round in 2013 and has 41 patents granted and pending. It has also received backing from Caterpillar.
Cannestra also introduced Abhay Jain, CEO of Active Scaler, a Denso portfolio business, which he described as in-motion intelligence, providing a platform that offered car security and other services, automating vehicle management through contextual analytics, machine learning and artificial intelligence.
Raj Singh, managing director of JetBlue Technology Ventures, introduced Shimon Elkabetz, CEO of ClimaCell, which provides weather data. Elkabetz said conventional weather forecasts lacked accuracy and granularity that may be needed for autonomous vehicles and aircraft. To provide more reliable and accurate data, ClimaCell’s software analysed signal interference and collected data, sampling existing communications networks. Its data services were currently being used by major airlines in the US, with potential applications in autonomous vehicles and the insurance industry.
Lastly, Zunum Aero, a JetBlue Technology Ventures investee, was presented by Birger Steen, its commercial and corporate development adviser. Founded in 2013, Zunum Aero develops commercial hybrid-to-electric aircraft for regional transit by employing range-optimised powertrain and propulsion technologies. Steen said Zunum’s aircraft could not only reduce environmental impact but also drive operating costs down.
Are you ready for portfolio company rule changes?
James Mawson, editor-in-chief
Financial rule changes this year have led to corporate venturing groups forming a working group to ensure the community implements best practices and “gets ahead for next time”, according to Jacqueline LeSage Krause, head of Munich Re/HBS Ventures, the corporate venturing unit for the world’s largest reinsurer, and David Stevenson, managing director at Merck Global Health Innovation Fund.
The two are co-chairing the GCV Operations & Accounting Taskforce to tackle issues surrounding multinational CVC investors emerging initially from the Financial Accounting Standards update on recognition and measurement (ASU 2016-01) of portfolio companies historically held at cost.
ASU 2016-01 came into effect in mid-December for listed corporations – private corporations have to start by next December – and requires changed processes for monitoring and valuing portfolio companies. The first reporting deadline, therefore, is the end of the first quarter, but the taskforce is looking more broadly at how the industry can define its influence, control and risks better, and measure and reflect the valuations on their corporate balance sheets.
In a roundtable discussion just before the taskforce was launched at the summit, John Liang and Craig Cooke, deals managing director and deals director respectively at Pricewaterhouse, gave an overview of the new accounting standard.
They said: “For equity securities with readily determinable fair value but no available-for-sale classification, all fair value movements must be recorded in net income.”
Otherwise the default treatment would be fair value or at cost, minus impairment, adjusted for observable price changes, they said. While this alternative could be decided at the start, mark-to-market accounting was required if the status changed and so needed continued monitoring and price changes recorded in the same period as the information was received, which required “reasonable effort to identify any relevant transaction on or before the balance sheet date”.
This relevant transaction is “an observable price change in an orderly transaction by the same issuer in the same or similar security”, PwC said.
ASU 2016-01 also made other changes to disclosures, presentation, financial liabilities and deferred taxes. The overall impact of these changes would be increased earnings volatility, PwC said.
The GCV taskforce is drawing up a list of questions concerning the rule change that all CVCs should ask their auditor, and is also looking for four or five volunteers to join – contact jmawson@globalcorporateventuring for initial expressions of interest. A European roundtable discussion will be held in the spring with an update at the GCV Symposium in London on May 22-23 2018.
UC entrepreneurs pitch at GCVI Summit
Thierry Heles, editor, Global University Venturing
This year’s summit hosted a pitching contest featuring five startups founded by alumni of University of California – telemedicine and drug delivery company Pandia Health, peer-to-peer vehicle charging network EVMatch, medical device manufacturer Tergis Technologies, scientific research platform Hyperthesis and phone lens accessory producer Lume.
Introduced by Christine Gulbranson, the university’s senior vice-president for innovation and entrepreneurship, and sponsored by innovation platform Future Planet Capital, the pitch event gave the startups an opportunity to talk through their offering before a jury of industry experts and the more than 650 delegates who attended this year’s summit.
First to take the stage was Jude Calvillo, co-founder of Hyperthesis and alumnus of UC Los Angeles. Calvillo noted that it currently took researchers an average 35 hours to compile a literature review and 20 hours to identify a research gap. To address this, Hyperthesis has developed a platform that generates schematics of research papers based on metadata – extracted through natural language processing technology – enabling researchers to find relevant data through a visual interface and with a few clicks.
Calvillo claimed the platform was significantly faster than Google Scholar, a search engine that indexes scholarly literature such as peer-reviewed journals, conference papers and dissertations.
Hyperthesis, which is currently seeking $380,000 to $1m in equity funding, hopes initially to target universities and marketing consultancies. The startup also hopes to drive international synergy and discovery, allowing, for example, an English-speaking researcher to find papers in Chinese and significantly expanding the amount of accessible literature.
Heather Hochrein, co-founder of EVMatch and an alumna of UC Berkeley, soiught to have a fundamental impact on electric vehicle charging. Hochrein began by explaining “range anxiety” – drivers may not choose an electric vehicle for fear of running out of power without no nearby recharge facility. The solution, according to Hochrein, is a peer-to-peer charging network allowing drivers quickly to find the nearest charging point provided by a private user.
Drawing parallels with Airbnb, a platform that allows home owners to rent out rooms or properties, Hochrein noted that some providers on her platform had bought a charger specifically to generate passive income, despite not owning an electric vehicle.
The company was launched in California last year and has since grown to 100 hosts. There are zero infrastructure costs to EVMatch, which provides only the app and payment handling. The startup’s initial target markets are urban and suburban neighbourhoods.
EVMatch is aiming to reach profitability by the end of 2019, growing from a current 350 customers to 50,000. The company is seeking $750,000 in seed funding and looking for a lead investor to help scale the business to 3,000 customers and $100,000 in revenue this year.
Next on stage was Brian Soo, founder of Lume. Soo, an alumnus of UC San Diego who is currently his company’s sole member of staff, launched the business after graduating last year and has turned to crowdfunding platform Kickstarter to bring his first product to market. Lume has developed zoom and wide-angle lenses that can be attached to mobile phone camerass.
Targeting content creators, such as video producers on streaming platform YouTube, Lume has also developed a phone case that adds the ability for external storage and restores the ability to plug in a microphone – a functionality removed by both Apple and Google in their phones.
Michael Urner, co-founder of Tergis Technologies and UC Merced, is tackling ventilator-associated pneumonia in pre-mature babies. Urner said 10% of babies in the US are premature, and the figure is rising. Premature newborns stay in an intensive care unit for 13 days on average, during which time they are at risk of pneumonia when dry air in the incubator can affects the lungs, cauing pneumonia. Urner’s technology humidifies the air.
Tergis is seeking $400,000 from strategic partners in return for an 8% stake, money it will need to secure regulatory approval in the US, start clinical trials at Children’s Hospital Central Valley and market the device to hospitals.
Sophia Yen, co-founder of Pandia Health and an alumna of both UC San Francisco Medical School and UC Berkeley, is countering problems relating to the availability of birth control pills in the US, which can normally be supplied only to a fixed address, causing issues for women, such as students, who are mobile..
Pandia Health also offers a telemedicine service, where doctors can prescribe birth control pills without a physical appointment with a physician. In the longer term, Yen said the company hoped to offer other pharmaceuticals, such as sexual health products and medicines.
The company has already raised $650,000 from friends, family and angel investors, and is now seeking $1.5m to grow from 1,300 to 10,000 users – which would generate $300,000 in monthly revenue. Yen said the business should be profitable by 2021.
Douglas Hansen-Luke, executive chairman of Future Planet Capital, thanked the five startups and announced Pandia Health as the winning company. It will be invited to compete at the Future Planet Capital Awards at the GUV:Fusion conference in London in May.