This photo opportunity of a Saudi Arabian prince and Silicon Valley-based venture capitalists taken during the Global Entrepreneurship Summit (see comment) was an interesting snapshot in a number of ways. It is hard to imagine, say, German chancellor Angela Merkel meeting a similar women-only group of VCs, but then Saudi Arabia’s sovereign wealth fund has just invested $3.5bn in one of the valley’s venture-backed successes, taxi-hailing company Uber run by Travis Kalanick.
Germany has generally eschewed such high-profile trophy deals in favour of supporting its federal agencies, such as KfW, or state-backed investors, such as Berlin’s IBB Beteiligungsgesellschaft, or public-private investors, such as High-Tech Gründerfonds, in encouraging entrepreneurs and VCs. It might be Germany’s approach is a longer-term path to encouraging an innovation capital ecosystem, but as a shock to the system to encourage cultural change and invitation for a meeting, the Saudi approach is hard to beat (see guest comment).
Corporations can swing in usually more limited ways between similar approaches to that of Germany and Saudi Arabia. The big bang launch of a well-funded scheme with sizeable ambitions as a calling card for VCs to meet them can reflect internal issues seen as an important strategic decision as much as demand for the money and help they bring to the entrepreneurs and innovation capital ecosystem.
Others prefer to build a team more slowly and prove their investment thesis over time. Where sufficient capital and opportunity meet, such as Tencent – ranked first in the GCV Powerlist – and Alibaba in China, or smart hiring and considered roll-out, such as Microsoft’s latest approach (see profile) under Nagraj Kashyap, then things can go well.
The challenges more often reflect misalignment in these areas, driven by hubris or ignorance, and failure to adjust leadership and be open to outside perspectives.
One chemicals company’s corporate venturing unit was unaware that the C-suite had commissioned a headhunter to replace its managing director to shake up the team, but had felt it was doing a good job because it had made two profitable exits in the past two years.
Sure, “it was not too wrong what we did up to now”, as they said defensively, but being blinkered in respect of where you look for support and insights – beyond your current sector peer group and regional investments – limits awareness of how the industry has been changing.
The challenge is to do more to help parents rather than avoid doing too much wrong. By contrast, George Hoyem has recently been made up to managing partner of the US government’s strategic investment unit In-Q-Tel (IQT), with an expanded brief to support its intelligence community and federal agencies, because it has shown over more than 15 years how it can do more. IQT now conducts 45 deals a year, such as last month’s Databricks, Interset and Orbital Insight investments (see our sister title, Global Government Venturing).
While corporate venturing can become a nice sinecure, ticking over a handful of deals each year while the team busily exchanges emails and takes drinks with peers, the opportunity becomes more interesting when it looks at how to grasp innovation opportunities (see the 2016 outlook: tech to change world series) and develop an operational platform able to scale.
The past few months have seen political upheaval in the UK, Europe, Brazil and the Philippines, among others, and could see more in the US with its presidential election. But it will definitely see more upheaval as the entrepreneurs and business engage with innovation opportunities and challenges.
Those that remain wedded to shutting themselves off from half the world, whether by gender or regions or sectors or anything else, are risking more than those who can open themselves up to orthogonal ideas and can build the platform to capitalise on them, which is the theme for our next Global Corporate Venturing & Innovation Summit in Sonoma, California, on January 24-26 and the first major venture event after the inauguration of the next US president.
As author Daniel Defoe said in Robinson Crusoe: “Thus we never see the true state of our condition till it is illustrated to us by its contraries; nor know how to value what we enjoy, but by the want of it.”