Raj Singh, managing director of JetBlue Technology Ventures, the corporate venturing vehicle for airline operator JetBlue, told attendees at the Global Corporate Venturing Symposium today how it aims to be a value-add investor.
Ken Gatz, founder and CEO of deal flow management platform Proseeder, moderated the chat. Singh opened by explaining that “we are in the Cambrian explosion of CVCs at the moment,” alluding to the period when the variety of living species on Earth greatly increased in number.
Addressing the issue of why this explosion is taking place now, Singh listed several factors that are contributing, ranging from the availability of money and credit to difficulties in conducting M&A deals through bottom line concerns and tax legislation frameworks.
Singh said that as a corporate venture capital (CVC) unit is actually a line of business for its corporate parent, it should be treated the same way, and drew attention to the fact that CEO turnover, strategy shifts or profound changes in the economy are likely to impact it much like it would any other line of business.
Describing the choice of whether a CVC vehicle is financially-oriented or strategically-focused, Singh said: “This is not a choice. You need to be both. How you measure financial returns is open to debate”.
He later alluded to the fact that measuring cost savings for the corporate parent is a more relevant way of measuring the financial return of a unit. In terms of deal execution and the choice between following or leading a round, Singh said both options are to be considered “as long as you understand what you are doing”.
Singh also touched on the challenge of distrust towards corporate venturers by other investors when trying to join investment syndicates.
He told the audience that JetBlue Technology Ventures had on some occasions been unable to participate in deals due to this perceived problem, adding: “We want the portfolio companies as suppliers. We are not interested in acquiring them, but convincing someone of this is hard.”
Singh also commented on the topic of career progression and compensation in CVC, underscoring the importance of having an appropriate compensation structure in place for managing and keeping talent within the team to ensure a unit’s operations are sustainable in the long term.
As an on-boarder of innovation into a corporation, a CVC unit is in the position to exert an impact not only on brand building efforts but also on the bottom line, he added, stating: “Profit eats innovation for breakfast. You need to make sure whatever you do has an impact.”