The ending of one calendar year and beginning of another is often a good opportunity to test again why you do what you do and how it is organised.
Behind the successful corporate venturing programmes that have survived the years and changes in senior management is often (r)evolution – from more financial to more strategic goals (or vice versa), from a balance sheet to a fund to an evergreen to independence, or from few people and deals and geographies covered to plenty of each.
Corporate venturing’s strength is also its weakness – the flexibility of structure and aims to fit the specific culture and requirements of the people and parent it springs from offers choice.
Each group, therefore, can make and re-make and add to a unit – as typified by the legendary Johnson & Johnson Development Corporation whose head, Roy Davis, retired last month (see report). This can be frustrating to other syndicate members and entrepreneurs struggling to understand their partner and follow changes. But it makes the entire ecosystem more resilient.
By contrast, venture capital has ossified round a 10-year life, blind pool limited liability partnerships raised from institutional investors wanting strong relative and absolute financial performance. This has meant it has become vulnerable to changes in the entrepreneurial ecosystem – start-ups exiting too early or too late – and traditional limited partners turning away from the asset class in favour of other areas of asset management.
What has remained unchanged is the desire by people to create something and the need for resources to achieve this, in turn offering those providing the help a way to achieve their goals.
This was the hypothesis underpinning the launch of Global Corporate Venturing (GCV) and its sister title, Global University Venturing, this month – for three months the new title’s website will be open to all, following which GCV subscribers will be offered a discounted rate.
The past 100 years can broadly be characterised as one of financial intermediaries increasing the amount of debt leveraging economies’ equity, aided by the 1913 Federal Reserve Act’s privatisation of the US central bank so the government has to pay interest on the bills it runs up, derivatives breaking the link between leveraging an asset and its ownership and tax breaks on debt interest.
The challenge coming out of the credit crisis concerns the use of innovation to grow revenues through new products and routes to larger markets or finding ways to cut costs to boost margins and profits.
Two of the most important – if not the most important – sources of innovation come from universities and corporations, but both have been historically poor on average at investing in entrepreneurs.
While there is concern that some countries’ "low-hanging fruit" of access to resources or innovation is ending – typified by George Mason University academic Tyler Cowen’s
The Great Stagnation – the overall quality and quantity of innovative breakthroughs is only increasing. Last year’s potential discoveries of faster-than-light travel and identification of the Higgs-Bosun particle, combined with the alchemists’ wonder of modern chemistry and advances in biotechnology and life scientists sequencing the human genome or creating new organisms and biofuels, make this an unbelievable age of innovation and discovery, both incremental and radical, affecting the big areas steering human evolution – new forms of communication, energy sources, lifespan and quality of life.
For investors, looking at how the different sectors and industries will be reformed out of such research and the application of technology, such as the mobile internet, will be remarkably difficult.
With innovation coming from different geographies and sectors and, as the right hand of a company’s chief innovation officer, successful corporate venturing staff should be venerated by senior managers at their parent groups. If corporate venturing entered its golden age after the credit crunch, 2012 is the year when its value and performance is recognised by the wider world.