As the start of a new decade, 2010 was appropriately the year when countries, companies and individuals roiled by the credit crunch took a fresh look at how they would use innovation to cut costs or increase revenues.
Debt magnifies returns – whether positive or negative – but often in effect pulls forward future income to be spent in the present. The loosening of credit controls and the debt explosion over the past 40 years culminated in the credit explosion between 2001 and 2007.
After the dot.com bubble burst, the US Federal Reserve held interest rates artificially low and investment banks used derivatives and structured securities to snap the link between assets and what could be lent or gambled on them, which magnified the effective debt to multiples of global gross domestic product (GDP).
Although part of the debt has been repackaged from banks and private companies to governments in the short term, it has not been repaid.
The levels of austerity packages being seen in Iceland, Ireland and other regions are being combined with attempts by countries to increase their GDP by attracting businesses or offering opportunities to entrepreneurs to start one.
This issue of Global Corporate Venturing includes the first analysis of how whole regions or countries – this month it is Ireland – are trying to attract entrepreneurial capital and people to boost innovation and growth.
Companies, too, have used the year to deal with the legacy of the downturn. Profits and cashflows have rebounded with the economies back to near 2008 levels, although those acquired in leveraged buyouts or tied most closely to the debt markets, such as banks and property companies, remain vulnerable.
The challenge remains for businesses to refresh existing product lines to keep up with traditional competitors as well as potential disruption from unexpected sources, such as different sectors.
Equally, applying technology, business models or services from one industry to another for new revenue streams, or using entrepreneurial businesses to cut costs and boost margins, is what can separate good businesses from category killers.
Apple’s rise following its move from personal computers to music and mobile phones is a case study in creative destruction.
Corporate venturing’s role is in providing a window on these shifts, a platform to deal with innovation and entrepreneurs, and a way to encourage change inside the company.
These factors help explain why there have been so many corporate venturing programme launches this year, across all sectors, regions and business sizes and maturities, from car maker General Motors, to power group RWE, to software firms Asseco and Google, to Korea Telecom and drugs group Boehringer Ingelheim.
Switzerland-based chocolate company Nestlé’s use of venture capital firm Inventages to seed consumer-focused medical products over eight years before setting up a $1bn a year division in the area in the summer has been textbook.
These themes of searching for growth and margins across sectors and regions in an era of unprecedented market and capital liberalism will again be present during 2011. Companies’ role as part of the entrepreneur’s ecosystem and shareholder base is increasing.
Global Corporate Venturing will be there to report on their achievements and present the data, analysis, commentary and case studies, as well as to pick the most influential corporate venturing unit in each sector.
To improve accuracy and provide the most comprehensive community site, please send a round-up of your activity – investments, exits and staff moves – this year and keep us in touch with your news, plans and events for 2011. Email jmawson@globalcorporateventuring.com
Global Corporate Venturing will be holding its inaugural awards event in mid-May based on the industry’s success in the publication’s first 12 months, please contact the editor James Mawson, at the email address above for more details.
He can also help with subscription enquiries for the magazine and website at the full rate of £1,000 ($1,600) for the first two users or $900 with a National Venture Capital Association’s membership discount.