AAA Gaule’s Question Time: Stephen Socolof, NVP

Gaule’s Question Time: Stephen Socolof, NVP

Gaule: Introduce yourself and New Venture Partners (NVP).

Socolof: I am one of the managing partners of NVP, a venture capital frm focusing on corporate spin-outs. I am a founder, a member of the investment committee, and I lead deals in a broad range of areas from semiconductors to networking technologies to consumer products and medical devices.

We were a venture incubator for Bell Labs within Lucent Technologies from 1996-2001. In 2001, with the challenges facing the telecoms industry, we spun ourselves out of Lucent to form an independent venture frm.

We focused on investing in technology-based opportunities developed inside corporations that decide the opportunity is better pursued as an independent venture.

Gaule: Give us a brief overview of the people in the team and the organisations you work with.

Socolof: Our original team is still based in New Jersey, just across the street from the Alcatel-Lucent North American headquarters (Lucent merged with Alcatel in 2006).

In 2003, we concluded a transaction in which we took over the activities of Brightstar, a corporate incubator for BT Labs. Two of the leaders of that organisation joined our team and became our partners.

Subsequently, we added a venture partner in the Netherlands, and a couple of partners in the US.

Gaule: Why would organisations focus on your approach to spin-outs?

Socolof: There are three basic reasons corporations do spin-outs. The frst is strategic. For example, they have developed a component or technology or software that they want to use as part of a solution for their customers, but they recognise it as an enabling rather than strategic technology and realise it would scale more competitively as an independent venture with other investors and customers.

Second, visionary managers understand that nurturing the innovative health of their labs or their businesses may result in the development of interesting opportunities that fall outside the focused business interests of the parent.

Rather than force the opportunity on to the shelf, they allow the team to take it outside and develop it separately.

Third, the corporation may just be interested in the fnancial return from a business opportunity that does not fit their current priorities.

Gaule: What is your view of current market conditions for starting a new venture or creating spin-outs?

Socolof: On the supportive side, we seem to have reached an infection point in the technology that supports personal and business networking and its adoption by users.

As a result, there has been a tremendous amount of innovation in areas such as wireless networking, large-scale data centres and the information and analytics they can provide.

Further, communications technology and trade and economic devel-opment policies have encouraged innovation worldwide.

Finally, corporations have embraced open innovation and opened themselves to reaching globally for new innovative ideas.

On the challenging side, the global economy has had many diffculties, making it harder for new companies to raise fnancing and access and grow markets quickly.

Gaule: Give an example of a recent venture that has developed from a corporate programme.

Socolof: We spun Everspin Technologies out of chip maker Freescale a few years ago. Freescale was the frst to develop and commercialise magnetic semiconductor memory and had invested substantially in this technology, but decided it did not want to focus resources away from its core microprocessor business.

However, it did want to leverage the technology as part of several of its product offerings.

We entered into a very creative arrangement whereby Freescale spun the team and technology out to a syndicate of investors and entered into several agreements addressing joint development and marketing opportunities and sharing supply chain.

We brought in a new chief executive, helped him build the team around the strong foundation of folks from Freescale, and they have succeeded extremely well in commercialising the technology.

You can get free previous audios of Gaule’s Question Time on iTunes store – search Corven Group – and as audio downloads from Global Corporate Venturing or from www.corven.com/corven-networks.

To contact Andrew Gaule and for future interview ideas email andrew.gaule@corven.com and jmawson@global-corporateventuring.com

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