The eighth annual global corporate venturing London symposium began with opening remarks from Global Corporate Venturing’s chief operating officer, Tim Lafferty, who addressed a crowd of close to 400 attendees.
Investors present at the event manage a total of $100bn in venture assets, for parent companies with aggregate revenues of at least $4 trillion. Entitled The Shoulders of Giants, this year’s conference has largely focused on showing the benefits of increased collaboration between ecosystem players, with startups and entrepreneurs helped to new heights by their corporate backers while the latter enjoy increased exposure to emerging technologies.
Day 1: Morning session
Shortly after the opening address, Graham Stuart, minister for investment at the UK’s Department for International Trade (DIT), took to the stage for a keynote presentation in which he reminded the audience of the key role played by London – Europe’s “capital of VC” – in the worldwide venture ecosystem.
According to PitchBook Data, UK tech firms attracted a record £3bn ($4bn) in VC investment in 2017– almost twice that of the previous year (£1.63bn) – with London accounting for around 80% of that alone. The UK is also currently the leading destination for foreign investments in Europe, with around £1.2 trillion of capital invested.
“Too many people see finance and capitalism as a dirty word, but they are the fuel of an advanced economy,” Stuart said, adding: “What you do matters to our economy. We need people like you, who are willing to take risks to invest in the future. Our innovation depends on startups, and our startups depend on people in this room.
“In the same way that one cannot have capitalism without capital, we need capital to create the innovations of the future and fund the innovators of the future.”
Stuart said the government’s role was to understand how it could add value and contribute to attracting investment, both from UK investors to foreign companies and from international investors to UK-based businesses. That help, he added, could be divided into the high-growth company question – creating conditions where UK companies are an attractive investment – the venture capital question and the international question.
The DIT had formed a special unit dedicated to venture capital that had collaborated with more than 250 VCs to date and had committed to raising the UK’s research and development spending to 3% of GDP.
Stuart said: “What we want is to cement the UK’s position as the number-one VC club in Europe. Of course we do have weaknesses, but we want to work with you to fix those. That is why I am keen to hear from you and hear about the barriers you face.
“With your help, the UK will hopefully remain Europe’s natural hub for venture capital, creating more jobs and innovation, and changing people’s lives for the better – because that is why we do what we do.
“There is a saying – if it ain’t broke, don’t fix it. Whoever said that was not a venture capitalist. There is always room for improvement, and we should always be striving to improve. That is what VC is all about – seeing the opportunity that others have missed.”
Stuart’s speech was followed by a panel that brought together Tony Askew, founding partner of information and analytics services firm Reed Elsevier’s corporate venturing unit, REV, and a co-chairman of 2018’s symposium, and Raj Singh, managing director of JetBlue Technology Ventures, the investment arm of airline group JetBlue.
The pair agreed that although technology used to be a separate branch of corporate activities, it had now become an integral part of any company’s development. Askew said: “There is no longer a tech sector. All organisations now think of technology as part of the products they develop and take to market, and that is what has really changed.”
Askew added that larger bets were going into unproven technologies such as artificial intelligence, saying: “We are at the point where the human is not necessarily the centre of the workflow and the product, and that will continue to evolve over the next 20 years or so.”
Another key change was that corporate venture capital had now become a crucial part of the VC space, representing around 25% of the deals done globally, according to GCV analytics. In the face of those changes, corporates had progressively adapted, explained Singh.
“Most companies have recognised that innovation does not just come internally anymore, but that they also have to look outwards,” he said. “While internally, we are still pushing towards incremental innovation, we often reach outside for radical innovation. The pace of change is so quick that we have no choice but to do that.”
A persistent issue was that entrepreneurs remained largely unaware of what they should look for in an investor when raising funds.
Singh said: “There is recognition that [CVC] is not just about the money, and not just valuations either. Things have evolved in a very positive way, and one of the things that entrepreneurs most regularly ask us to do is help them understand the industry.”
Finally, Askew insisted on the importance of talent recruitment in the building a successful business, saying: “It is very easy to buy technology, but it is very hard to find and also keep talent. A business’s profitability is dependent on the ability to find that talent pool.”
Akira Kirton, managing director for Europe, the Middle East and Africa at BP Ventures, oil and gas producer BP’s corporate venturing arm, joined Marianne Wu, president of power and automation conglomerate General Electric’s GE Ventures subsidiary, for a discussion moderated by Ken Gatz, founder and CEO of online financial transaction platform ProSeeder.
The panel – Going beyond the core of an organisation: how corporate venture can open up new markets – examined how GE and BP locate and make the right investments.
Kirton said: “A lot of it is about trying to create a win-win situation. Venturing 2.01 was about starting to integrate our investments into the business, and trying to create value in our deployment. Venturing 3.01 is much more about playing a role at platform level, where you have to look at the overall portfolio and value chain.”
Detailing GE Ventures’ strategy, Wu added: “We are very fortunate in that we report to the company’s chief innovation officer, and are an integral part of the company. I often think of our role as extending the core of GE’s activity, whose activity focuses on three areas – empowering the world (energy), curing people (healthcare) and helping them move around (aviation).”
Kirton and Wu also discussed the growing importance of impact investing, with Kirton commenting: “Although we do not engage in impact investing for the sake of it, it has definitely become an emerging criterion in our assessments. As investors, if we cannot actually bother to create a business case and say this is the future, then that is a failure for our industry.”
The mid-morning break was preceded by a joint keynote session comparing the investment strategies of Johnson & Johnson Innovation–JJDC, the CVC vehicle of the pharmaceutical group, and M12, Microsoft’s recently rebranded corporate venturing fund.
M12 was represented by its global head, Nagraj Kashyap, while JJDC’s strategy was explained by president Tom Heyman. Their exchange was moderated by financial services firm Silicon Valley Bank’s managing director, Alex McCracken.
The two companies’ approaches diverged in many ways and Kashyap and Heyman agreed that whether the corporate provided strategic or financial support, a startup should never fully rely on that help. Kashyap said: “Ultimately, we cannot protect the startups from their own failure. We are not responsible for shielding them from their own mistakes. What our investment essentially means is: ‘We are giving you a first shot, but if you run slow, you will get crushed.’ So they still have to deliver and perform well.”
Heyman added: “We will do anything to make our portfolio companies successful and we definitely do not like pulling the plug, but on certain occasions – after repeated failures, for example – there is just nothing more you can do.”
Following the mid-morning break, James Mawson, founder and editor-in-chief of Global Corporate Venturing, invited a panel on stage for a discussion around the themes of risk, return and impact. The panel consisted of Laurel Buckner, managing director of telecoms firm ATN International’s CVC arm, ATN Ventures; Girish Nadkarni, president of petroleum supplier Total’s Total Energy Ventures fund; Ram Jambunathan, managing director of SAP.io, enterprise software producer SAP’s innovation unit; and Susana Quintana-Plaza, a partner at industrial technology producer Siemens’ Next47 subsidiary.
Nadkarni said: “When the impact issue was first thrown upon us my first reaction was to say: ‘I can only juggle with two balls, with three it is getting difficult.’ But actually there are many ways of getting involved in this.” He cited Total’s recent focus on offering access to energy in emerging countries in Africa and Asia.
Buckner said ATN was also attempting to help emerging markets, explaining how its technology can help areas recover more quickly from damage caused by disasters such as hurricanes in the US. “Given where climate change is going, the possibility of bringing faster infrastructure systems to those areas is very important,” she said.
Jambunathan said SAP was committed to driving impact in the 17 areas listed by the United Nations as part of the Goal 17 global sustainable development strategy.
Referencing recent privacy and data protection scandals surrounding social media platform Facebook, Mawson asked the panel how they tackled the unintended consequences of technology. Nadkarni recommended avoiding partnerships with companies whose affiliations were unknown or unclear, as this could involve a reputational risk for the investor.
Following a data insights presentation by Martin Haemmig, adjunct professor at the Centre for Technology and Innovation Management in Germany and the Netherlands, and a case study on corporate venturing unit Robert Bosch Venture Capital’s recently adopted lean startup strategy, a panel led by GE Ventures executive managing director Karen Kerr brought together representatives from Intel Capital, M12 and ABB Technology Ventures, part of power and automation group ABB.
The panel returned to a topic that was the leading thread at this year’s Global Corporate Venturing and Innovation Summit (GCVI) – diversity, which remained a prime source of debate among CVC leaders.
Wrapping up the first day’s morning session, Bryan Wolf, Intel Capital’s managing director of data centre and cloud infrastructure, spoke to Mike Wall, who was general manager of the group’s storage division before joining Intel Capital portfolio company Amplidata as chairman and CEO.
Wolf and Wall discussed the importance of delivering value from term sheet to exit for CVC units at a time where funding sources for startups have become more abundant and diverse.
“There is an ever-increasing amount of CVC money and deals, but there are also a lot of other sources of money,” Wolf said, identifying sovereign funds, mutual funds and pensions funds as examples. “So how can we make sure that we stay at the forefront? Beyond just the strategic imperative, we have to be able to offer a lot more value.”
As mentioned in the introduction to the 2018 GCV Powerlist, Intel Capital has been active on that front, having encouraged collaboration between CVC units in other companies through what is informally known as the Wendell doctrine, named after Intel Capital president Wendell Brooks, who had summed it up by saying: “We are better when we work together.”
Wolf said: “As we bring syndicates together, we can offer much more assistance to portfolio companies, helping them with go-to-market processes and facilitating exits. One plus one really does make five when CVCs work together to bring up the value of companies.”
Referencing Intel’s role in driving Amplidata’s development and its eventual successful exit, Wall said: “Once Intel had made the investment, that created a ton of market awareness, progressively transforming an otherwise unknown small Belgian business into a global company.
“It was something that validated the group’s technology, and therefore created many market opportunities. There were also strong synergies between the two product development and technology teams, from which both sides could benefit. This meant that we would always be on the leading edge of the sector.”
Reflecting more generally on the value brought by CVCs to their portfolio companies, Wall added: “I have always been a believer in the strategic value of corporate investors – they represent way more than just working capital.
“A corporate validates your technology, your company, and gives you the ability to meet other companies as potential partners or investors. The fact you share your technology also means you increase your competitiveness. A corporate is also likely to bring in people who can be great employees or board members. Cross-functionally, working with corporate venturers has brought way more value than working with purely financial VCs.”
See an in-depth discussion between Wolf and Wall on the value of corporate venturing in our comment section
Day 1: Afternoon session
Kotaro Yamagishi, CEO of Keio University’s venture capital arm, Keio Innovation Initiative (KII), co-founded digital media company Gree and is still a board member. In a fireside chat with GCV editor-in-chief James Mawson he spoke about how his work at Gree had given him the experience to to lead KII. Read more about the conversation in our special report on the GUV: Fusion event run in tandem with the symposium.
Another fireside chat featured Jacqueline LeSage Krause, managing director of corporate venturing unit Munich Re/HSB Ventures and co-chairwoman of the symposium, who spoke to Andrew Rear, CEO of sister unit Munich Re Digital Partners (MRDP), and Scott Walchek, founder and CEO of mobile insurance platform Trov.
This talk delved into the insurance world and how Munich Re, one of the world’s largest reinsurance firms, operates beyond its core business of insuring insurance providers and providing cover for innovative large-scale projects such as self-driving cars.
LeSage Krause moderated a discussion between Rear and Walchek, who spoke about their working relationship and what both Trov and MRDP are doing to innovate in the insurance sector.
Attendees heard how MRDP was originally set up to handle the wave of insurance technology being developed, focusing both on tech that was building an experience around the customer, and on services that dealt with the problems the sharing economy brought to the traditional insurance industry.
Trov offered insurance for single items that could be activated through an app with a single click. Rear told the audience how impressed he was with Trov’s ambition and scope, and said it was enough to move the needle at Munich Re, not always the easiest task at a business that large.
MRDP’s involvement had enabled Trov to enter new markets more quickly, and secured the balance sheet that allowed it to assume greater risk, while Trov had helped MRDP access areas they otherwise would not have entered, such as working with Waymo, internet technology group Alphabet’s autonomous vehicle division.
Mark Muth, director at professional services firm PwC, moderated a session on financial technology that included Jalak Jobanputra, founding partner of VC fund FuturePerfect Ventures, and Benoît Legrand, CEO of financial services firm ING’s corporate venturing unit, ING Ventures.
Muth laid out the groundwork based on PwC’s 2017 report on the finance sector – 77% of institutions were planning to adopt blockchain by 2020, and there had been a 40% increase in annual investment over the past four years in fintech more broadly, with total investment now standing at $40bn.
Jobanputra emphasised how decentralisation was at the heart of FuturePerfect, while Legrand looked for disruption at the same time as maintaining a top-down view on ING’s key sectors.
Jobanputra’s answer to the central question of the discussion was an emphatic yes – she believed incumbents had the opportunity to innovate and partner good fintech developers, aided by funds like her own at FuturePerfect.
However, Jobanputra pointed to the 2 billion unbanked people across the world and suggested that many banks remained slow to innovate, hindered by the post-2008 regulatory environment and an inability to manage mobile technology as well as they could.
Speaking specifically about blockchain, Jobanputra noted how Bitcoin was originally created to eliminate the need for banks, yet institutions were now using blockchain technology to increase the efficiency of their backend, while gaining new customers.
Legand took a more cautious position, noting that what made a good fintech company might in five years be different from what made one now. He wanted to innovate at the border of the bank, but noted that banks could still be moving faster.
ING Ventures invested in areas where ING could leverage its commercial edge, but also where technology was emerging fast and had the potential to be disruptive, for example backing a fintech company that was competing directly against ING Spain.
FuturePerfect’s lab was not an accelerator, Jobanpuntra said, but a place for specific projects with commercial partners. This was a key place where FuturePerfect could interact and innovate with strategic investors.
Last, the discussion turned to initial coin offerings and whether Legand or Jobanpuntra thought they were an appropriate means of investment. Both offered a clear no, identifying regulatory uncertainty as a key factor.
The last panel of the day focused on the influence exerted by new technologies on venture investing, examining how machine learning and AI were likely to affect venture deal-sourcing, governance and portfolio management.
Moderated by John Riggs, principal and partner at professional services firm PwC, the discussion brought together Jonathan Serfaty, data scientist at telecoms firm Telstra’s corporate venturing arm, Telstra Ventures; Jonathan Pulitzer, a managing director for GE Ventures, a subsidiary of General Electric, in Israel and Europe; and Stefano Gurciullo, investor and technology lead at venture firm Redstone VC.
Gurciullo said: “Data science will help a lot of capital investments. CVC is a people’s game that is a lot about having the right connections and identifying interesting targets. Data science is not just useful for inbound data, it can also help with finding targets on the investment side.”
Gurciullo suggested the data management software used by Redstone could, for instance, also help him and his team quickly get a thorough view of a potential portfolio company in a given niche or space, providing data that would otherwise take months to collect.
Telstra had begun using machine learning around seven months ago, applying it to deal-sourcing, due diligence and portfolio management, Serfaty said, adding: “There are a lot of companies out there and not so much information on them, so it is really about getting as much of that as possible, to give investors some sort of superpowers in their decision-making.”
Pulitzer added: “We are definitely witnessing a dramatic change. At GE, we have used data science to pull together multiple signals, such as which accelerators are coming out with the most interesting dealflow, or which technology is the most conclusive. Although we are definitely utilising technology to guide us, we are not yet at the point where we are jumping in head first to use it as a proper tool in our investment strategy.”
Pulitzer’s observation raised the question of the extent to which AI should be involved in investors’ decision-making, and whether having it serve as a “seat” on investment committees should be an acceptable practice.
Machine learning was a very useful tool, Gurciullo said, adding that investors could not simply rely on data based on past investments, as “the past cannot tell us everything”. He added: “Future successful investments will likely differ from past ones, as some form of innovation is also needed. So the question really comes down to evaluating whether human intuition can be automated.”
The panellists generally agreed this process would and should always have some form of limitation. Pulitzer said: “You can make computers as smart as you can, but CVC is an interpersonal business that will hopefully still require human interaction for many years to come. By using machine learning exclusively, you might miss out on things that have not been experienced yet, and there are still many undiscovered gems out there.”
Day 2: Morning session
The second day of the symposium started with a university venturing panel moderated by Global University Venturing editor Thierry Heles discussing how to build and develop a startup, from idea to scale-up.
The panel featured Paolo Bavaj, head of corporate venturing at adhesive product maker Henkel Adhesive Technologies; Mark Brooks, associate director of innovation and strategic partnerships at the Association of International Certified Professional Accountants; Ilonka Jankovich, venture partner at Randstad Innovation Fund, a subsidiary of recruitment firm Randstad; and Jim Wilkinson, chief financial officer of Oxford Sciences Innovation, the university venture fund of University of Oxford.
Read more about the conversation in our special report on the GUV: Fusion event run in tandem with the symposium.
The next panel, moderated by Oliver Keown, senior associate for healthcare investing at GE Ventures, brought together healthcare industry leaders around a discussion on how to generate access to intellectual property.
Roel Bulthuis, senior managing director at Merck Ventures, part of German pharmaceutical firm Merck, was joined by Neil Foster, partner specialising in M&A and private equity at law firm Baker Botts, Deborah Harland, partner at pharmaceutical group GlaxoSmithKline’s SR One unit, and Francesca Wuttke, managing director of the European branch of Merck Global Health Innovation Fund, a subsidiary of US pharmaceutical company Merck & Co.
Asked how an agenda for access to IP and innovation was driven within their respective organisations, Bulthuis stressed the importance of building relationships with other industry players to maintain a reputation and drive success.
“Having a relationship with others is important,” he said. “The reputation you create as an investor in that industry has a big impact on the ability of the parent company to access innovation. Our key impact is to create a network, and a profile that makes people want to work with us and see us as a valuable partner.”
The healthcare industry, Builthuis added, puts about 20% of its budget into research and development, which has led to a mature VC and business development culture. As an early-stage investor, Merck Ventures dedicated around half of its investments to seed rounds, with the rest going into larger syndicate deals.
“We have to make sure that commitment and resources are engaged there, bearing in mind that we need to take an active role in shaping companies that can help our parent company grow,” he added.
Foster then highlighted the “cultural clash” between the technology and pharmaceutical worlds, where best practices had not entirely been established and bad practice could still be common. “The biggest disruptors in biotechnology are in digital and devices, as opposed to pharmaceuticals,” Foster said, adding that intellectual property registration remained a more common practice in the US than in Europe.
The panellists concluded by covering the growing importance of data and data management in the healthcare world, especially in relation to the recently enacted General Data Protection Regulation in Europe.
Foster noted that data in the healthcare world, including, for instance, patient information, had been heavily regulated for many years already, particularly in the US and Europe.
Bulthuis explained that progress in data technology meant pharmaceutical companies now had the ability to invest not just in therapeutics, but also in a wider selection of life sciences technologies.
The impact that data could have on the sector as a whole also generated discussion on pricing, with people expected soon to be able to monitor their own health to a greater degree. “The access to data also means we can widen our scope, and not just sell new products but also think of how we can develop new drugs and new types of therapeutic solutions,” Bulthuis said.
Antoine Maurel, investment manager at Orange Digital Ventures, a subsidiary of telecoms firm Orange, moderated a session on corporate venturing in emerging markets, with industry leaders discussing the booming business opportunities currently emerging from Africa and India – each had a young and fast-growing population, and both were in the middle of a technological and digital boom.
Krishna Chokhani, managing partner at India-based accelerator Zone Startups India, told attendees the average age of a startup founder in India was 28, while, according to official figures, half of the country’s 1.3 billion population was below the age of 25 and 65% below 35.
United Nations figures indicated Africa’s population is set to grow by about 40% over the next 10 years, while about 19% of its population were aged 15 to 24. Something that had also characterised India and Africa in recent years was their technological transformation and progressive transition into the digital age.
Eric Osiakwan, managing partner at Chanzo Capital, a growth capital firm targeting the “Kings” countries – Kenya, Ivory Coast, Nigeria, Ghana and South Africa – said Africa was behind in terms of funding raised – roughly $560m in 2017 compared with $13.5bn in India – and its digital progression was still to come.
Another characteristic shared by both Africa and India was their booming technology and digital space. Osiakwan told attendees that in Sub-Saharan Africa the mobile industry currently accounted for 6% of GDP, and both regions were experiencing rapid growth of internet penetration.
Chokhani and Vishal Ramaswamy, growth strategist at the Bangalore-based office of US-headquartered investment data provider Tracxn, said India was still in the process of digitising many essential components of what formed a modern society
Despite that, 200 million bank accounts had been opened and 1.2 billion social security numbers generated in recent times, according to Ramaswamy, and India was slowly moving towards disruption.
Chokhani said: “The most famous companies in India are currently in e-commerce. They are filling the gaps in the ecosystem that need to be filled, with digitisation still the prime focus. Filling those gaps will take a bit of time, but it will also yield good profits for investors.”
At present, traditional VCs accounted for 40% to 45% of the funding ecosystem in India, with corporate venture capital accounting for roughly 20% and the rest represented by angel investors.
“As the Indian ecosystem matures, so will the CVC space,” Chokhani said. Although the largest part of businesses were currently involved in business-to-consumer activities, there should also be a shift towards business-to-business over the years.
As India’s startups transition from one side to the other, the country had dreams of becoming “the software-as-a-service (SaaS) hub of the world”, Ramaswamy said, adding that there were more than 900 SaaS companies in the country, including 700 operating in the deep-tech space.
Ramaswamy said: “The government is doing quite a bit to push the country’s digitisation. The foundations of technology are currently being laid, and soon all villages will be connected with broadband. Once that is done, we can progressively move towards innovation, machine learning, and building more ground-breaking services and products.”
Some engagement with early-stage businesses in India had already started creating the local landscape, according to Ramaswamy.
Africa was meanwhile poised for a “tech take-off”, as the telecoms, media and technology sector had consistently outperformed other sectors over the past 10 years, generating 19% of annualised returns over the period, Osiakwan said.
Finally, Africa and India had benefited from an increased foreign presence. Roughly 60% of India’s 500-plus active venture capital investors were based locally while the rest were of international origin, according to Ramaswamy. In terms of value that ratio was reversed, with foreign investors supplying 65% of the funding.
Referencing US-headquartered Walmart’s recent acquisition of a majority stake in India-based e-commerce company Flipkart at a valuation of almost $21bn, Ramaswamy said: “Everyone wants a piece of what is happening in India right now. This deal has totally shaken up the local ecosystem.”
Osiakwan responded by stating that in Africa “a lot of local investment is going into the lower end of the market, while foreign investors tend to operate in the larger space. Global money is totally changing the landscape”.
Recommending that investors in the room keep an eye on Africa in the near future, Osiakwan added: “Necessity is the mother of innovation, and Africa is the continent that has the most necessities. That is why you must look at it now.”
