Heellloo my hard working corporate venturing possums! Are you tired of feeling the "corporate pain" resulting from the near impossible task of finding the perfect start-up company, and after all that having to convince your company to invest? Are you frustrated with a batting average worse than any venture capital investor? Is your day filled with non-value-adding corporate investing activities that amount to much more than a full-time job? Then read on, and I hope you feel much, much better from these insights from one of your peers. Where to start? There is so much pain to choose from!
Let me start with something close to my heart, my very first investment. A while back as an inexperienced strategic corporate venturer I happened to stumble on a very special technology. It was part of a lovely, early-stage company that had recently spun out of a premier university in the Nordic region.
My operational business partners were completely enamoured with the long history of development and were delighted with the fact that this technology seemed way ahead of anything else we were able to find in the world.
After agreeing on terms with the start-up, I led our normal (read onerous) investment process, which included getting business team alignment, general manager approval, as well as engaging the safety, environmental and health group, the legal group for due diligence and then heading all the way to the top for approval. Finally, after an exhausting five months, I secureed a minority equity investment along with an option for an "exclusive right for an exclusive joint development agreement".
Oh possums, I can’t even describe the excitement that was building about this investment! The technology community in my company was quite frenzied thinking about the future business potential. But just as I was lifting my glass of wine to toast the completion of the deal (I don’t have to tell you that strategic corporate venturing and wine can be great companions), I heard rumblings that a management organisational change was imminent.
A new leader was placed in the business that had just sponsored the investment and, as luck would have it, he hailed from the same country as the start-up. I thought things could not get any better. Surely he would be supportive.
Much to my surprise, within a few months of making the investment the business decision had been made that my wonderful little investment and strategic development agreement were no longer of interest. Shocked and a bit hurt I tried to unwind from our strategic promise but decided to hang on to the investment until we could find the right way out. So what do we do with a strategic investment that is no longer strategic?
I will get to that question in a minute. However, my story is not over. About a year later a new business leader came in and wanted to re-examine the start-up’s technology. We still owned our shares and we went through the technology assessment process all over again and finally, several months later, the business came to the same decision – still not interested.
As we know, it is clear there are plenty of good times to be had as a corporate venturer and some of us like it enough that we want to do nothing else. However, maintaining credibility can be very challenging in a fast-changing environment. So, in an effort to alleviate this inevitable corporate pain, possums, let me share some of the things I have learned that may help you.
1 Life and people are unpredictable, and what can get you through difficulties together is building a strong relationship with the start-up early on that is founded on mutual trust. If this is more difficult that it should be, then ask yourself if this is the right start-up to invest in.
2 Setting upfront expectations is an important element of our work, and being clear that things can change over time is a critical communication. Discussing this directly together at some point can be helpful and even illuminating to both parties.
3 Try to move the investment to another caretaker as quickly as possible, especially if your company does not value your time being spent on non-strategic investments. There are good people out there (secondary or otherwise) that know how to handle such situations diplomatically.
Now that you know one of my stories, I want to hear from all you corporate investing possums out there. I bet you have been in some incredible situations that we all would love to hear about. With all of that experience this column has the potential to write itself!
Editor’s note: to maintain the confidentiality of our secret columnist, writing under a pseudonym, send your corporate pain tales to me, jmawson@globalcorporateventuring.com, and I will forward them to ChiChi with names removed.