By James Mawson, Robert Lavine, Thierry Heles, Liwen-Edison Fu, Kaloyan Andonov, Callum Cyrus and Jordan Williams
Editor-in-chief’s letter
It took months of hard work to prepare for the third GCV Digital Forum as the Festival of Corporate Venturing.
It had a host of awards, the World of Corporate Venturing annual review, magazines and brought together luminaries to share insights. It also brought dealflow through the GCV Connect powered by Proseeder platform.
To have about a thousand attendees at the forum and Mach 49 workshop plus hundreds of meetings and engagement with the pitch sessions is awesome, particularly through the regional and sectoral meetings, such as those for the hydrogen roundtable and Global Energy Council meeting and report.
At the event, we launched our professional development and community platforms for venture investors of all types, the GCV Institute and Global Innovation Venturing, respectively.
We have set out the stall for this year for the growth of the GCV Leadership Society, GCV Connect powered by Proseeder platform, Global Innovation Venturing, the GCV Institute, including the Academy and a boost to readers across our titles, with my colleague, Thierry Heles, bringing out the latest quarterly report for Global University Venturing.
Let us work together to achieve our common goals. There is strength in unity. After all, in innovation we trust.
Above: Sponsors and attendees of the third Global Corporate Venturing Digital Forum
Rising Stars and Emerging Leaders awards
The GCV Rising Stars and Emerging Leaders celebrating their awards met up with mentors from the GCV Leadership Society and Powerlist to exchange insights and best practices in coordinated breakout sessions.
Next-generation CVCs offer insight on future plans
Executives from the corporate venturing units of TDK, General Motors and Stanley Black & Decker revealed the initiatives they are using to build the strategic investment arms of their companies.
Matthew Tsien, executive vice president at GM Ventures, corporate venture capital (CVC) unit of carmaker General Motors, and Dina Routhier, president at Stanley Ventures, the CVC arm of hardware product maker Stanley Black & Decker, spoke as Nicolas Sauvage, a managing director at electronics manufacturer TDK’s corporate venturing subsidiary, TDK Ventures, moderated the discussion.
Routhier revealed Stanley Ventures was looking to build out its portfolio development function, which would focus solely on extracting the maximum strategic value from its portfolio companies, as well adding value.
“I think we need to add people to our team, initially just one person, to start building our portfolio development function. It means that we are able to scale commercial partnerships faster, so that Stanley Black & Decker and the startups are generating and scaling revenues in the fastest way possible.”
She added the person responsible for portfolio development would find multiple applications for its portfolio companies’ products across Stanley Black & Decker.
Tsien said GM’s corporate venturing arm was the best kept secret inside the company.
“A lot of people know a little bit about GM Ventures, but not very much about it. To really drive maximum benefit we need to make sure that there is true synergy with the business and there is a real understanding of how we can extract the most value from the relationship.”
Routhier said Stanley Ventures’ mandate in corporate venturing was to be a large customer of its portfolio companies but not the only customer.
Routhier added, however, that there were some situations where the synergies between the portfolio company and the corporate were too great to
ignore, and Stanley Black & Decker has made an acquisition in those cases.
Creating concord between traditional venture and CVCs
Vinod Khosla, founder of venture capital firm Khosla Ventures, spoke on how to improve collaboration between traditional VC firms and the strategic investment arms of the world’s leading businesses.
Khosla spoke in the open keynote fireside chat at the GCV Digital Forum 2021 alongside Victor Boyajian, a global chairman and partner at law firm Dentons.
Khosla co-founded Sun Microsystems in 2004 and it has grown to over $5bn of assets under management. The firm invests in a range of sectors including consumer, enterprise, education, financial services and health.
When asked whether Khosla Ventures is actively approaching corporate strategic investors in its deals, Khosla said: “Surprising as it may seem, we have never had a sourcing function in our firm. They just happen to come our way and we have a lot of relationships.”
Khosla also highlighted events like the forum as anopportunity to source deals and partner corporate investors. He added it makes a lot of sense to partner with corporates when they are interested in the same sectors and when in areas like deep technology, that kind of partnership is necessary. Khosla mentioned robotics and artificial intelligence (AI) as areas in which Sun is partnering with a number of corporate venture firms.
In terms of the positives corporate venturing firms bring to deals, Khosla said that some corporates understand markets better than venture capitalists.
“They generally have a better handle on the competitive offerings in their area because they are focused on one area. Sometimes, if a technology is facing specific risks, they will have expertise in that area.”
However, Khosla said that the length of time it takes to partner with corporate investors is an issue he has encountered in the past and that they could do better is setting expectations correctly. “Being fast is valuable, but even more valuable is setting expectations.”
Scaling up: how VC is helping startups succeed
Business development was the topic for the panel entitled “Scaling Up: How VC Is Helping Startups Succeed”.
Jeramiah Gordon, general counsel and chief compliance officer at CapitalG, the late-stage dealmaking arm of internet conglomerate Alphabet, said access to the firm and its Google search engine unit often lured in portfolio companies and that his team had dedicated resources guide new investments through the process.
He said: “Our mandate and goal at CapitalG is to bring the best of Alphabet to growth-stage startups. So we have developed an investment approach as well as growth and operations support.
“We have an onboarding process and an entire team for the growth stage, and our agenda once we have made those investments is bringing the best of Alphabet to those companies and making sure what happens is up to [the management] at those companies.”
Gordon was joined by Paul Asel, managing partner at NGP Capital, the CVC firm for Nokia, and the panel was moderated by John Park, a partner at law firm Morgan Lewis.
Asel argued NGP Partners had a broader span of sector-specific partnerships that could include a whole variety of portfolio companies.
He added “Within our portfolio we have 20 investments, we can go to a potential partner and give them a range of companies that we think might be relevant to them.
“So it is a different type of conversation, a broader type of conversation. There might be meetings we have exposing a variety of companies, that might be a lead-in before the company comes in with this specific pitch. I very much see that as being complimentary. Ultimately, we think it is the job of the company to make the sale, but we would like to believe we can help their efforts be a lot more efficient.”
NVCA chairs on the need to support innovation
Barry Eggers, the chairman of the National Venture Capital Association and co-founding partner of Lightspeed Venture Capital, joined one of his predecessors to chew over venture’s role in innovation in a session chaired by Heidi Roizen, a partner at Threshold Capital and former NVCA board member.
The panel kicked off with the incoming administration and questions of policy given the NVCA’s role in lobbying. Eggers says the body was looking to drive infrastructure and climate tech projects that are anticipated to form part of the Biden presidency’s initiative and foresees an opportunity for corporate-startup collaboration.
Eggers’ predecessor Kate Mitchell, co-founding partner of Scale Venture Partners, who was chairwoman in 2010 and 2011, said there was a role for corporate venture to play and that Eggers was bringing together the cultures of Silicon Valley and Washington DC to benefit innovation.
She said: “I think the overarching thing is a common interest in promoting innovation as the engine for growth in our economy. And that happens in small companies or large companies, and how critical that is for US economic competitiveness and leadership.
“Everything they can do to reduce the friction around tech innovation – that includes funding around the National Institutes of Health and National Science Foundation, and all the other early-stage technology that all of us corporates and venture capitalists use as we go for growth and cutting-edge technology. Now we have elevated all of that innovation to the cabinet level [under Biden’s appointee as chief science adviser Eric Lander].”
The discussion moved on to the evolving priorities in post-money startup support and how corporate venture was adding value.
The good news was VC and corporate venturing complemented each other and would play a key role as startups aimed to adapt to new situations posed by the pandemic, including remote working, which could tempt more businesses to hire workers away from the Bay Area, Eggers argued.
Mitchell added CVC units could offer specific expertise in this area. She said: “Whether it is hiring people or whether it is partnering – this is again where corporates can help a lot. They are hiring legions of people remotely.”
GCV Institute’s call to professionalise the industry
The new GCV Institute is primed to tie the education of industry professionals and management at the parent group more closely together, to solidify the principles of the corporate innovation community – as defined by CVCs for CVCs.
A panel moderated by James Gunnell, managing director of Global Corporate Venturing publisher Mawsonia, provided a preview. Initiatives will be held over two tracks.
First, Essentials for Enterprise is about how to drive corporate venturing business development activity and startup management in line with the objectives of the parent firm.
The second track, CVC Essentials, will serve as an introduction to strategic investing and CVC targeted at corporations planning to start venturing programmes, or senior executives that oversee the corporate venturing group.
Echo Health Ventures’ chief executive Rob Coppedge spoke with Bell Mason Group partner Liz Arrington, who is acting as a partner of GCV Institute, around the rising power of CVCs and the potential now available for CVCs to have agency in syndicates.
Coppedge said: “This is a really exciting time for CVCs generally – how specific programmes are establishing best-practices.
“My hope for GCV Institute is the critical part of solidifying the advantages. How do we get our team – how do they learn our playbook. Multi-estate corporate venture – for our consulting and advisory and diplomacy.
“We are ready to step up to make that shift from all of us figuring it out in our silos, to collectively learning it together to accelerate our programmes. My hope is that we can create great networks and shared playbooks that help each of us accelerate our programmes.”
The future is in our universities
Jim Wilkinson, the chief financial officer at University of Oxford’s venture capital vehicle Oxford Sciences Innovation (OSI), has highlighted investment opportunities were being missed at universities.
Wilkinson spoke about how universities could play a pivotal role in solving the world’s biggest problems, by turning cutting-edge science into technologies and innovations.
“It is important to recognise that for a large part of the 20th century, the corporate lab was responsible for researching and commercialising many of the most important technologies of the last century. But for the last 40 years, we have seen corporate innovation dwindle.”
Research as a percentage of corporate research and development has fallen from 30% of total spending in 1985, to 20% in 2015, according to data from the National Science Foundation.
He added: “So less corporate dollars on finding the science and more corporate dollars on development. This is translating into a reduction in innovation from corporates.”
He said breakthrough research was shifting from being conducted at commercial labs to university labs and detailed how OSI was working to enable scientists and entrepreneurs to build companies which would address world’s biggest challenges and commercialise academic research.
University roundtable
Global University Venturing editor Thierry Heles moderated a roundtable for university funds and tech transfer offices which identified a number of points:
the pandemic has affected everyone’s business, but investors and spinouts have generally done well; some spinouts have benefited
international deals have not been impacted at all and the universities said their existing international presence helped
work from home has not generally been a problem for operations and DeepTech Labs, a Cambridge, UK-based accelerator and VC fund was even “born remotely”
Frontier IP has created a subsidiary in Portugal because Brexit is causing headaches for financial services (chief executive Neil Crabb pointed out that it is still not clear what the implications actually are, so the subsidiary is a precautionary measure)
ESG has been, and will continue to be, increasingly important to investors and founders, driven in no small part by millennials who are demanding companies act responsibly
social enterprises exist, and some have been very successful (Oxsed was founded out of Oxford and acquired within six months), but everyone on the panel agreed that it would be far more beneficial to have all companies incorporate ESG rather than focusing too much on social enterprises
Blazing a new path through incubation
Hicham Abdessamad, chairman at technology producer Hitachi America, and Paul Holland, managing director and venture capitalist-in-residence at Mach49, have provided advice on how large corporations can achieve organic growth and how to partner with them.
Abdessamad and Holland discussed how Hitachi has been exploring social innovation and detailed the various corporate venture capital initiatives the company is involved in.
Abdessamad said: “Social innovation is something we started six years ago and it is simply using innovation to solve some of the world’s biggest problems.” He said by doing so, Hitachi can contribute to society and can create value for the environment, the economy and the ecosystem it is a part of.
Abdessamad also said that one way it is trying to drive organic growth is by starting to think entrepreneurially as a company. He provided a tutorial for how a large corporation such as Hitachi can adopt Silicon Valley-like strategy, through activities such as recruitment and partnerships.
He said that to follow in Hitachi’s footsteps, a corporate would need to build a small team, secure a small amount of capital and engage in a fail-fast methodology.
“You need to fail a lot of ideas early.”
Abdessamad added that for its partnerships, Hitachi looks for organisations that are like-minded, trying to solve problems and creating something new.
Sector and tech discussions
Impact
The Impact investing roundtable was led by Moses Choi, and included Gen Tsuchikawa, head of Sony Innovation Fund; Raj Singh, managing director at JetBlue Tech Ventures (JTV); Leah Nguyen from Telus’s new sustainability impact fund; and John McIntyre from American Family’s foundation. The panel followed last year’s discussion by Ronald Cohen and George Serafeim from Harvard Business School on societal pressures to do more on impact investing.
The main discussion topics:
Corporates are increasingly seeking to invest in sustainable business models that drive social and environmental performance
Corporates can do so by investing in external innovation (Telus, American Family, JTV) and incubating internal innovation (Sony)
These efforts can be diverse thematically and may be strategic (such as climate change for JTV) or adjacent (for examples African biodiversity for Sony, etc.)
Corporates have many resources to bear, and success hinges on leadership
Impact measurement is still very nascent, but companies are doing so: Telus is an example
Hydrogen
A 75-strong roundtable discussion by VCs and CVCs on why and how they are interested in entrepreneurs to support the shift to hydrogen-based economy.
The initial debate centred around an Economist article that compared solar power with nuclear – why one scaled up and costs fell and the other did not. Which camp would hydrogen fall in to?
Ultimately, attendees felt this time was different for hydrogen after false starts. Startups could connect to corporations in this capital-intensive field. VCs were more cautious about areas they could see scaling and delivering financial returns on investment but the ecosystem could come together.
AI
Jeff Herbst, vice-president of business development at Nvidia and head of Nvidia GPU Ventures, and George Hoyem, managing partner at In-Q-Tel, shared their predictions on AI.
The pair provided an overview of the AI market and revealed their thoughts about where the technology is heading over the next few years and beyond.
Herbst said: “Modern AI is basically pattern recognition on data, whether it is images or voice.”
“Fundamentally what is going on in the world right now is that the traditional model of how computers are programmed has been turned on its head.”
He added that in the past, software engineers used to write code which produced data, but now the scalable way of building applications was through processing vast amounts of data and recognising patterns from it.
Herbst predicted the industries that would be transformed by AI the most will be the those that manage large amounts of data such as healthcare or retail.
Hoyem said that in the same way most technology uses the internet today, AI was also heading in a similar direction.
“It is going to creep into every vertical application and it starts with things that are highly parallelised and data sets like images, voice and even unstructured text.”
“It is going to cover pretty much everything in about ten years, in my opinion.”
Women In Venture meeting
The Festival hosted the latest Women In Venture meeting thanks to sponsors Fenwick and West and Silicon Valley Bank plus the prominent inaugural chairwoman of the GCV Leadership Society, Claudia Fan Munce.
There is gradual diversification of talent at CVCs and the broader venture industry.
GCV’s annual survey has seen a six-percentage-points drop in all-male teams to 12% from 18% in 2018.
And corporations are also leading using a wider lens of diversity, equity and inclusion by supporting and committing as limited partners (LP) to external VC funds targeting under-represented minorities.
Eli Lilly, a New York-listed drugs developer, has just committed $30m to Unseen Capital Health Fund to invest in racially-diverse, early-stage healthcare companies and those building solutions for marginalised communities. This follows a $10m commitment by Apple to Harlem Capital in the wake of other corporations, such as PayPal.
In aggregate, US companies have committed more than $35bn towards racial equity investing, according to the Wall Street Journal.
And Culture Shift Labs (CSL), which has undertaken a three-month study of 84 black-led VC firms in the country to gather baseline data on their size, character and capacity, has seen its LP community grew from 40 in January 2020 to more than 138 by November 2020.
Andrea Hoffman, chief executive of CSL, found 100% of the portfolio gains in one sample firm were attributable to women-led companies, and over 75% of the gains were attributable to mixed-ethnicity teams.
“The bottom line is that for whatever reason – be it ethical or be it the pursuit of returns – it looks like billions are inching towards investing in diverse founders and their ventures,” the report found.
How M12 supports diversity and inclusion
Tamara Steffens, managing director at software provider Microsoft’s corporate venturing unit M12, has unveiled her strategy for supporting female founders at the GCV Digital Forum.
M12 has held two female founders’ competitions in recent years, in a concentrated effort to address disparities in the market.
Steffens said: “As you know, female founders get far less funding than their male counterparts, so it was great to be able to open the doors and say, ‘brings us your ideas, bring us your companies, let us fund you’.”
Steffens shared advice with other CVC organisations on how to help companies with female founders even if they were unable to invest.
“If you cannot invest in them, or it does not fit your thesis for whatever reason but it is a great idea, can you help them sell to your company?”
Steffens added corporate venturing professionals could introduce female founders or under-represented minority founders to their own parent companies if they cannot fund them directly. “Hopefully, you can do both.”
Steffens said part of M12’s team was focused on seeking out seed-stage companies and seed-stage venture funds that support under-represented minorities.
She said they are not only looking to supply capital but also determine if they can provide mentorship or access to their network. “We are going to continue to lean in on that space. We would love to increase our focus on seed funding ourselves with female founders and underrepresented minorities.”
Pitch events
There will be GCV Pitch events each month for different sectors, starting with Services on February 17.
- Go Further Index – GCV digital partner event showcasing innovation in northern England and Scotland
- GCVI Summit, Monterey September 28-29, 2021
- China delegation with Accenture Ventures. September
- GCV Symposium, London, early November
- GCV Asia, Tokyo, November 8-12
Corporates Nabtesco and Sabic are looking for startups. Nabtesco is looking for electrification/hydraulic actuators while Sabic wants next-gen batteries. Have a solution? Know a company that does? Want to create your own challenge? Go to GCV Connect Challenges
All pitch videos from the European Bank for Reconstruction and Development, SETsquared and the transport and data analytics sessions can be found at the GCV Connect powered by Proseeder platform.
UC-XTC Startup innovation challenge
Three startups aligned to the University of California ecosystem have been awarded entry to finals events at XTC’s startup competition after being crowned best in their class at the GCV Digital Forum by Andrea French.
The winners include the champion in the XTC Social Impact contest Curies, which provides a system for enrolling patients in clinical trials, with a focus on minority groups that have historically been under-represented.
Curies’ victory was announced by Barrett Parkman, director for Samsung Catalyst Fund and co-manging director of XTC.
The other winners were trash-to-cash recycling service Takachar and Sophie’s Bionutrients, a producer of sustainable food proteins using fermented feedstock that is headquartered in Singapore.
Takachar was selected for the early-stage track, while Sophie’s Bionutrients was best among the growth-stage businesses. Each has been awarded a $50,000 cash prize, and entry into XTC’s regional finals competition.
There were 2,419 startups from 87 countries in the last XTC finals. 2021 will see more than 20 startup competitions, the winners from each progressing to boot camp finals to be held in May and June.
Data trends from 2020
Martin Haemmig, adjunct professor at the Center for Innovation & Technology Management in Germany and the Netherlands, analysed 2020 data from GCV Analytics and other sources.
He said that global VC deals have gone down but the total estimated dollars in them have increased across most regions, except for Europe.
In corporate venturing, the number of corporate-backed transactions has increased in 2020 but the total estimated dollar value has decreased in most regions.
However, Haemmig highlighted that the European startup ecosystem is interesting for both US-based traditional VC firms and corporate venturers.
Haemmig also spoke about increasing overall M&A activity
but noted around 10% of corporate-backed companies
were acquired by the parent corporation in 2020, suggesting a decline versus previous years. Haemmig’s data analysis suggests that the internationalisation of corporate investments is still on the rise globally.
