Alba Zurriaga Carda, head of global Innovation strategy at US-based venture capital firm and accelerator 500 Startups, and Nicolas Sauvage, managing director at TDK Ventures, the corporate venturing capital subsidiary of Japan-based electronics producer TDK, shared a number of lessons learned from interviews aiming to capture insights on how today’s multinationals are catalysing innovation. This followed on from a keynote where Sauvage described how it raised its second CVC fund at three-times the size of its first one.
– Lesson 1: Your team matters most. Sauvage explained the need to have “the right mix of skills and people in a team.” However, he also warned: “Technical skills and capital are not enough. You need to have investment experience. You need to also make sure you set the right incentives to keep your team empowered.”
– Lesson 2: Develop a robust investment thesis. Zurriaga pointed that if that robust thesis features a significant strategic element, involving business units early is a must.
– Lesson 3: Utilise pattern matching wisely. Sauvage acknowledged that pattern recognition in aiming to identify great startup teams and investments may encourage a shortcut approach and biases.
– Lesson 4: Adding value is critical to entering a round. This is particularly true in a time when capital is relatively abundant and corporate VCs have to “pitch” to startups to differentiate themselves and be let in an investment syndicate.
– Lesson 5: Capturing strategic value and returns is vital. Sauvage cited one of the executives interview who said that not caring about the business units’ support “would be a big mistake.”
– Lesson 6: Dedicate resources for corporate connectivity. As practical examples, Zurriaga pointed how some corporate venturing units bring business development teams to the table right after a deal is done to make sure there is value captured by the corporate parent or others having a special team dedicated to connecting portfolio companies with the mothership
– Lesson 7: Always be a good board advisor. Sauvage reminded that a board seats involves a fiduciary duty to the startup first. In addition, he stressed that the ability to develop relationship with the CEO and other key members on the board is instrumental in the investment process.
– Lesson 8: Aim to quantify strategic returns, even if it is hard. Zurriaga encouraged reporting a different kind of ROI – return on innovation – including some measurement on how learning and knowledge were transferred it to the corporate mothership. In addition, it would have to include some quantitative measure of what gains the corporate parent may have obtained (market entry, new market category etc.) as well as the cost and time savings that investments have brought about.