When creating an effective global network, corporate venturing units can make five mistakes.
In this week’s Global Corporate Venturing webinar, sponsored by Relevant Equity Systems, Ray Haarstick, chief executive of the fund and deal back office software system, moderated an excellent discussion on the right ways to create an effective global network – and what errors to avoid. The panelists, Nagraj Kashyap, head of Qualcomm Ventures, and Girish Nadkarni, head of ABB Technology Ventures, listed the mistakes as:
- Avoid going alone into a new country but, rather, partner with local venture capital firms.
- Do not assume that just because your parent has successful commercial operations in a country that you can make good venture investments there.
- Understand the local venture culture, are the VCs from a financial, technology or entrepreneurial background? (Nadkarni said he preferred working with those from an operational background.)
- Keep term sheets clean “as corporate riders on deals might look good initially but can come back to bite you”.
- Make sure the deal stacks up from a financial perspective as business units might be keen but then change management leaving a portfolio company “orphaned” with no future strategic merit. If this happens, at least the venture unit will likely make a financial return.
Both panelists said the challenges in building a global network was in finding a suitable time – 7am Pacific was favoured by Qualcomm – for all the teams in different geographies to connect weekly, while making sure of face-to-face catch-ups at least once a year.
However, while many independent venture capital firms have struggled to build and maintain a global network, corporate venturing units were helped by their parents’ often-large international network of offices.
And this global network can add value through helping portfolio companies based in developed markets expand around the world, as well as so-called reverse innovation when companies, such as Qualcomm’s Waze (founded in Israel) and Capillary (based in India), can use their investors’ help to expand into the US and Europe.
This advantage could help outweigh the challenges for becoming international but the main reason remains the fact that “innovation can happen anywhere” and not just a mile from your head office.