The final quarter of the year marks a high point in the recognition of the importance corporations play in venture capital with an unprecedented number of events planned.
Industry bodies and conference organisers in continental Europe, the UK and the US gathered corporates together in an attempt to understand how companies are investing in venture capital. Trade bodies in Asia, notably in Shanghai, China, Korea and Japan, have also been active all year promoting the activity of corporates in the asset class, with the India Private Equity and Venture Capital Association to host its inaugural event on corporate venturing later this month.
Trade body support comes as many foresee corporates as an important force within venture capital more broadly. Mark Heesen, president of the National Venture Capital Association (NVCA) in the US, said: "What we have seen in the last year is a resurgence in corporate venture capital. Corporates have realised they cannot just look at the next quarter, but are thinking in five to 10 years where their company should be going.
"Many corporates are not doing research and development in-house, but looking at venture-backed companies to stay apace with technology. They are not just buying these companies, they have realised they have to be in game before they are mature enough to be bought. Being there at the outset of a new product is incredibly important from their perspective."
Mark Florman, chief executive of UK trade body the British Private Equity and Venture Capital Association (BVCA), which hosted its inaugural corporate venturing seminar last month, said: "Corporate venturing is very important right now. These funds with stable corporate backing are evolving to become an increasingly important part of the venture capital eco-system and are being welcomed by members of the venture capital industry."
The corporate-sponsored groups are said to be at an advantage because companies are cash-rich – many do not need to turn to the difficult fundraising markets for venture capital.
Georges Noël, executive adviser to the European Private Equity and Venture Capital Association (EVCA), the Brussels-based trade body for the industry, said: "Corporate venture capital groups are upbeat. They are using their parents’ evergreen money and very few are raising third-party money. They are concentrated on investments and exits and are not disturbed by fundraising activities.
"They are scouting a lot of potential transactions through their dealflow and developing deep knowledge through segments and markets, which is then used by the top management of the corporation."
Jacqueline LeSage Krause, vice-president of innovation and corporate venture capital at US-based insurer Hartford and an NVCA advisory board member who leads its event on the Nike campus in Oregon this month, said: "The mood is quite positive in corporate venturing. There are lot of things related to the economy affecting business in general and parent companies, but the pace of innovation is not slowing down. Companies realise change is happening faster than it used to and they are looking to tap into that and harness it and not be at the reactive end."
Patty Burke, a partner at advisory firm Bell-Mason Group, who attended EVCA’s summit in Hungary last month as a speaker, said getting investment from a corporate used to be regarded as a last resort, but that attitude has changed.
She said: "Corporate venturing is no longer the last kid to be picked for the team in the playground, it is the first." One EVCA delegate responded to her: "It is the only one."
EVCA held its Corporate Venture Workshop on November 18 and 19 in Budapest, Hungary, the BVCA held its first separate corporate venturing stream at its annual summit in London on October 13, while the NVCA held its annual Corporate Venture Summit at the campus of US-based sportswear company Nike in Montana, on November 2, and will hold a special main board meeting next month in California to reflect the growing influence of the industry in the asset class.
The NVCA conference discussed issues including how corporate venturing units help go meet company-level sustainability goals, how the units’ partner portfolio companies, deal and exit issues, how to structure corporate venturing units, the advantages of working with early-stage companies, and the opportunities afforded by investing globally. A dinner at the event was hosted by US-based law firm Lowenstein Sandler.
LeSage Krause said the panels had been selected to provide a "how to, nuts and bolts" look at corporate venturing, as well as to address how corporates should approach major trends in venture capital, such as corporates using their venturing units to meet sustainability targets, to broaden their overseas investment, and to keep pace with developments at small, innovative companies. A full list of the NVCA speakers is provided in the box on the left.
The BVCA workshop examined the importance of corporate venturing in Europe, with John Holloway, a director of the European Investment Fund, the
venture unit of the European Investment Bank, giving the opening speech. It also touched on different approaches to corporate venturing as well as how to build an innovation ecosystem.
The EVCA workshop dealt with topics such as the first right of refusal, the impossibility of balancing strategic and financial goals and compensation for corporate venturing staff.
Gary Dushnitsky, associate professor of strategy and entrepreneurship at London Business School, presented at the EVCA’s symposium provisional research showing companies that engage in corporate venturing outperform industry peers without a minority equity strategy in terms of market-to-book value and patent output. He added that the more the unit invests, the more the parent benefits.
Yet this is not always the case, with a notable fraction of corporate venturing units seeming to contribute to a reduction in market-to-book value, he said.
Other EVCA speakers included Bernhard Mohr, a senior investment manager
at BASF Venture Capital, Thorsten Peisl, a product innovation executive at
State Street Global Services, an affiliate of the US bank, and René Savelsberg, from SET Venture Partners, a fund backed by Dutch-based corporates Robeco, Essent and Delta as well as Canada-based venture firm Chrysalix Energy.
They helped identify the challenges corporate venture units faced in their organisational structure, maintaining or building initial support for a programme and in doing successful deals, often needing both strategic and financial returns.
Mohr said: "Corporate venture capital firms are an important part of the industry. Everyone has recognised and realised the value corporates can give to a start-up company and in an investors syndicate. Also, many corporates have matured and are very professional investors.
"At BASF Venture Capital, we have always been looking to combine strategic objectives and financial return. Finding good performance indicators to actually measure strategic return is a key challenge for a corporate venturer."
The celebration of corporate venturing has also spread across Asia. The events in Europe and the US are due to be followed at the end of November with a corporate venturing forum held by the Indian Venture Capital Association, in association with Stanford University, covering India’s venture capital industry in its global context and the current environment for corporate venturing in the country.
Others such as the Korea Trade Investment Promotion Agency, the Shanghai Venture Capital Association and the Japan Venture Capital Association have also promoted the industry this year with seminars and roundtable
discussions.
Rising Asian corporate investors are also travelling wide to ensure their investments are diversified.
EVCA’s Noël said: "This was the first time we had Russian and Japanese participants. Things are moving a little bit east now."
Non-trade body conferences that took place after the largest gathering of industry practitioners at the IBF Corporate Venturing and Innovation Partnering conference in February and May’s Global Corporate Venturing Symposium, include Cleveland Clinic Innovations’ annual medical summit and White Bull, a Barcelona-based conference group which mixes venture capitalists and entrepreneurs.
Christopher Coburn, director at Cleveland Clinic Innovations, said: "People seemed to enjoy the added touches of a competition between IBM’s [super computer] Watson and some of our top cardiologists and cardiac surgeons, as well as former US vice-president Dick Cheney sharing the intimate details of his 40-year journey as a heart patient, with ABC [journalist] Bob Woodruff, himself a survivor of a roadside blast in Iraq."
Coburn added some corporate venture executives who had attended said they had sealed a couple of large deals in the past month, after hatching the transactions at previous summits.
White Bull assembled Nagraj Kashyap, the vice-president of Qualcomm Ventures, the corporate venturing unit of the eponymous US-based technology company, Joerg Sievert, an adviser to SAP Ventures, the corporate venturing unit of the Germany-based technology company, and Anu Shah, from UK-based advertising agency Bartle Bogle Hegarty’s corporate venturing unit Zag.
The panel discussed how corporate venturing units can best interact with entrepreneurs as well as whether entrepreneurs should think about seeking corporate backing.
However, the companies themselves have been increasingly active in directly organising events with entrepreneurs, peers and venture capitalists, led by Intel Capital, which this month hosts its 12th annual CEO Summit.
NVCA speakers
Lisa Frankovitch, formerly of US-based venture firm Adams Capital Management
Liz Arrington, vice-president of US-based advisory firm Bell-Mason
Christopher Kay, managing director at Citi Ventures, a corporate venturing unit of the US-based bank
Marie Quintero-Johnson, mergers and acquisitions director at US-based drinks company The Coca-Cola Company
Mark Klopp, managing director at Coronis Medical Ventures, a US-based venture firm backed by Research Corporation Technologies
Don Wood, managing director at venture firm Draper Fisher Jurvetson
Dave Chen, founder of sustainable investment firm Equilibrium Capital Group
Brad Feld, managing director of venture capital firm Foundry Group and angel network TechStars
Claudia Fan Munce, managing director of IBM Venture Capital Group, the corporate venturing unit of the technology company
Alexander Marquez, director at Intel Capital, the corporate venturing unit of the chip maker
John Miner, an angel investor at Pivotal Investments, formerly at Intel Capital
Ed Zimmerman and Kathi Rawnsley, from the technology group at US-based law firm Lowenstein Sandler
Dan Cherian, general manager of sustainable business and innovation at US-based consumer sports company Nike
Elaine Jones, executive director at medical group Pfizer’s corporate venturing unit
Phil Giesler, director of innovation at Anglo-Dutch consumer company Unilever and part of Physic Ventures
Jeff Weedman, vice-president of global business development at US-based consumer company Procter & Gamble
Dan’l Lewin, vice-president of business development at US-based computing company Microsoft
Renny Gleeson, co-founder of Pie, the corporate-backed Portland-based incubator
Jeff Clavier, founder of early-stage venture firm SoftTechVC
Mike Majors, investment partners from Siemens Venture Capital, the corporate venturing unit of the Germany-based conglomerate
Beau Laskey, general partner at Disney’s corporate venturing unit Steamboat Ventures
Sven Weber, president of SVB Capital, the corporate venturing unit of Silicon Valley Bank
Brook Wessel, senior investment manager at T-Venture of America, the US operations of the corporate venturing unit of Deutsche Telekom
Panellists at the BVCA workshop
Bruce Beckloff, vice-president of corporate business development at ARM Holdings, the UK-based chip company
Cédric Latessa, investment manager at Aster Capital, a venture firm backed by Alstom, Schneider Electric and Rhodia
Graham Howes, associate at BP Ventures, the corporate venturing unit of the UK-based oil company
Simon Barnes, managing director of Circadia Ventures, the corporate venturing unit of UK-base consumer company Tate & Lyle
Nigel Grierson, managing director of Doughty Hanson Technology Ventures, a venture unit of the UK-based private equity firm
Paul Morris, partner at Dow Venture Capital, the corporate venturing unit of the US-based chemical company
Tatiana Issaeva, investment manager at the European Investment Fund
Martin Kelly, partner at IBM Venture Capital Group, the corporate venturing unit of the US-based technology company
Michael Jeon, head of Samsung Venture Europe, the European corporate venturing unit of the Korea-based electronics group
Martin Grieve, managing director of Unilever Corporate Ventures, the Anglo-Dutch listed company