Nokia Growth Partners, the corporate venturing unit of Finland-based technology company Nokia, saw one of its portfolio companies, UCWeb, a mobile browser company with 500 million users, sell to China-based Alibaba for a multi-billion dollar sum this month. Yet according to one of the corporate venturing unit’s directors the deal might never have happened, as it was a deal in the area of mobile gateway, which its parent Nokia was looking to pursue itself.
The UCWeb deal was hatched in 2010 because Nokia Growth Partners believed UCWeb was a strong company, yet this required the unit to invest in a company potentially competitive to a goal of its sponsor and sole limited partner. Paul Asel, a managing partner at Nokia Growth Partners, said: “This was a case of investing in a grey space. This is one where we decided from a financial point of view this was a high potential business. We felt it was the most interesting mobile play in China at the time, and from a financial point of view we felt this was something we should back. It created some concern in Nokia, as this was an area they wanted to do themselves.”
Despite the concern within Nokia, over time UCWeb developed stronger ties with the Finnish company, becoming very strategic. So much so when then Nokia chief executive Stephen Elop launched the Lumia in China, UCWeb shared the stage with him alongside China Mobile.
The deal arguably provides a case study argument for the potential benefits of running an external fund, as this provides a greater degree of autonomy to make decisions. Asel said Nokia Growth Partners still sought champions within Nokia to champion the deal given its controversy, as Nokia is Nokia Growth Partners’ sole LP, yet he believed the deal would never have happened were the unit simply investing from Nokia’s balance sheet. “We were perceived by the right people within Nokia at the right time to be doing the right thing. I really believe if we were an internal fund the investment in UCWeb never would have happened. Yet because we were external we were able to do that investment.”
Asel added he believed the UCWeb deal was another illustration that having a third party structure with primary financial goals, yet at the same time attempting to secure strategic benefit for the corporate sponsor, was the most effective form of corporate venturing. “It is my personal belief that this model has more staying power. It is much harder to do this from either the purely inside model or the purely financial model. It takes a fair amount of nuance, discipline and experience. Yet if you get it right it is one that is very powerful”
At Global Corporate Venturing we will be analysing in-depth the strengths and weaknesses of the various models of corporate venturing, as we attempt to pull together a high level brief of the state of play in particular industries later in this year. Let us know what we should look at for poster children of various models, so we can profile them like we have the UCWeb deal.