IBM has been doing venturing and partnering for many years. Give a brief description of your programmes and their purpose.
IBM set up the venture capital group in 2000 with the objective of leveraging the ecosystem of entrepreneurs and venture investors to enhance IBM’s growth strategy. Since 2000 we have extended our breadth and depth and are truly global, being in around 41 countries. We aim to build and maintain relationships with venture investors and their portfolio companies where they are relevant to IBM and its clients. We offer many programmes, like SmartCamp and GlobalEntrepreneur, as a means of looking for entrepreneurs that will help drive our growth strategy.
The IBM Watson division and venture fund is relatively new. What are the focus areas and how is it different to other programmes?
IBM has traditionally not invested capital directly in the start ups so this is new for us. The Watson division was set up in late 2013, and in January 2014 we launched a $100m investment fund to seed the ecosystem around Watson to jump-start and accelerate a new class of cognitive applications and services around this new technology platform. We have a strong machine learning and natural language capability, which won the US Jeopardy game show, and we are leveraging in business areas. The fund has similarities to the iFund from Apple to leverage the iPhone and Java funds, nourishing these young start ups that are developing state-of-the-art applications.
Give us a couple of examples of investments you have made and the societal impact they will have.
A good example of societal impact is in healthcare, and IBM has been working with the Memorial Sloan-Kettering Cancer Centre and WellPoint. These large partnerships are working together in the decision-support area of healthcare. Doctors and nurses are drowning in information, with new research coming out, so navigating data and new treatments is a key area where we are focusing right now. WellPoint’s chief medical officer says something I think is really interesting, that healthcare professionals can make much more accurate decisions in lung cancer – where in the past only 50%of cases were diagnosed, this is now raised to over 90% with the capability they are able to achieve with Watson. They are seeing so much more data and the utilisation of the data has jumped, which is creating such a major impact.
Give us a brief overview of the people in the IBM Venture Capital team.
Because we are very strategic and we are only recently doing financial investments, the team are largely strategists. Our whole team mission is to find strategic insights, partnerships and acquisitions that will drive IBM revenue. I lean very heavily on technical domain expertise and, to be honest, as we are a large organisation with such a broad portfolio of businesses I rely on people who know IBM really well. As you and I both know, the biggest challenge in being a corporate venture professional is to navigate internally and identify the championship that can really drive the relationship that can eventually payoff in terms of strategic value. My team are by and large technical business professionals who have been with IBM for a while and they have a broad knowledge of our business strategy and technology foundation.
You recently became chairman of the Global Corporate Venturing advisory board. Give us your view on the importance of corporates in the venture ecosystem.
I think corporate participation is tremendously important in this whole ecosystem. We all know technology and innovation has accelerated at such a pace that corporates are unable just to sit there and wait for technology to be mature before they see the potential leverage point. We need to have a close monitoring and involvement in what is going on as everything is shifting so fast. For corporations this is a mission for the vitality and sustainability of their business as they are driven by technology and data in virtually every industry.
For entrepreneurs, by the same token, as they look at potential innovative solutions, they need that partnership much earlier than we saw 10 years ago. The ultimate delivery to consumer and channel of the innovative solution needs to be achieved sooner. You cannot go under the radar and work on something for a long time before there is a solution as by the time the launch occurs the world might have moved on.
There is partnership from early on involving the finance investor, which has a strong role in creating these young innovative companies and supporting them, the corporation, which can help guide them and consume their products and services, the entrepreneur, to develop their direction to build their dream company. This type of partnership today is much closer than before in driving really innovative solutions.
What is your view on the current market conditions for starting a new venture?
It is a really exciting time for venture capital. Some people might even say this is a bubble. Definitely there is a sense of this with entrepreneurs and venture capitalists with almost $30bn invested last year, and this year could be another record judging data from the first two quarters. Of course valuations we cannot escape with companies like AirBnB valued at $10bn. The appetite for initial public offerings (IPOs) is looking up and I think there are 81 venture-backed IPOs, which is something like a 70% increase from a couple of years ago. The bottom line is this is a very exciting time to start a new company or venture and for corporates to play a key role by starting something as well.
I agree we are bringing together technologies that are more mature with key price points and capabilities such asIBM Watson. It is now about how these are applied and what is the business model, so it is now an exciting timeto bring together the corporates, start ups and finance in this space. Finally, what do you do to relax when you arenot on the plane and building ventures?
When I get my own time I make sure I do not fly anywhere. I love being on the lake. Not far from Silicon Valley is LakeTahoe and I just sit there and look at the beauty and enjoy our place there very much. I try to bring my brainwaves down
To contact Andrew Gaule and for future interview ideas email andy@roscahill.com and tlewis@globalcorporateventuring.com