The Global Corporate Venturing (GCV) Leadership Society’s mission is to help bridge the different strengths and ambitions of investors across industry sectors, geography, structure, and their returns.
Its GCV Institute is by CVCs, for CVCs to help their benchmarking and professional development. Find out more details here.
The symposium was co-chaired by Nacho Gimenez, managing partner at BP Ventures, the corporate venturing unit of energy group BP, and Eileen Tanghal, managing director at In-Q-Tel (IQT), the strategic investment unit of the US, UK and Australian intelligence community.
James Mawson in his opening remarks thanked them, the attendees to the symposium as well as the prior GCVI Summit in California – (see logos below) – and sponsors.
He said the past decade of symposia had a number of recurring themes, from how to show strategic and financial value, to managing C-suite changes and support portfolio companies looking for capital, customers, product development, help with hiring and an exit, as well as managing the challenges of building a team and developing their experience and professionalism in an increasingly competitive venture ecosystem.
Both BP and IQT have shown this journey of increased relevance and professionalism and Gimenez and Tanghal pointed to GCV’s role as an association to help bring the community together to do more and better deals and encourage their professional development to become better participants with co-investors, the corporate parent and entrepreneurs.
A decade ago, BP Ventures was just a unit in the main company calling for and investing in sustainability and the energy transition as part of a responsible use of land and resources. Now, the whole BP company reflects these cultural values under new CEO Bernard Looney as a reflection of its strategic impact allied to financial returns and an expansion of its model beyond ventures to building and majority control to deliver greater impact.
Similarly, IQT has been investing about $100m per year in more than 500 early-stage investments and strategic partnerships between startups and government agencies with Tanghal noting its focus on sustainability and energy transition. But the symposium heard plenty of other CVCs were increasingly active.
Irina Gorbounova, Fund, ArcelorMittal; Dr Tobias Jahn, Partner, Hitachi Ventures
Martin Haemmig, adjunct professor at the Center for Innovation & Technology Management (Cetim) in Germany and the Netherlands, and Kaloyan Andonov, a reporter at Global Corporate Venturing and head of its GCV Analytics platform, presented data insights on venturing activities from the pandemic period.
Andonov commented that there are now more corporate venturers investing in minority-stake deals than before, with more than 2,000 corporations having conducted at least one deal in the past two years. He also pointed out about a fifth to a quarter of all active corporates appear to be first-time investors.
Despite covid, the upward trend in the total number of corporate-backed deals and the total estimated dollars in them as seen in pre-pandemic years have held up, with new higher highs being registered almost every quarter since March 2020, Andonov added.
However, he stressed that as more corporates participate in venture capital investments, there may be more competition to get into the best syndicates and in the best deals, which poses a risk for corporates as a class of investors. If they drop out of the venture investing game or are perceived as inconsistent investors, it may tarnish their reputation among other co-investors, which is undesirable.
Haemmig had analysed 2020-2021 data on the overall VC space and shared findings with the audience. He spoke of the upward trend in VC deals activity over the past decade, which has reached new highs in terms of both deal count and deal volume, highlighting the record levels of megadeals of multibillion-dollar valuations and record amounts of money raised in top early-stage rounds.
He also noted while corporate participation in VC deals has increased considerably, there have been other entrants to the scene, whom he referred to as “tourists” – hedge funds, private equity funds and other asset managers – that are on the lookout for yield and whose participation has increased even more than that of corporates.
Haemmig additionally touched on the evolution of exits for VC investors and noted that, while the number of exits has substantially increased in both volume and dollar value terms, there are some interesting patterns emerging from the data – the dollar value of initial public offerings has skyrocketed, in part thanks to the rise of Spacs (special-purpose acquisition companies), while mergers and acquisitions appear to be taking a breather.
Haemmig found that acquisitions and buyouts tend to occur earlier now, as measured from the time of a first VC-backed deal – some even after the seed stage – while the number of years leading up to an IPO has remained relatively stable over time.
He posed some open-ended questions to the audience, based on his data finding in terms of the impact of mega-rounds for entrepreneurs, the potential impact of hedge funds and other asset managers in VC and the role of corporate venture investors on this changing scene.
Dr Riam Kanso, Conception X; Dr Mark Mann, Oxford University Innovation
The CVCs took up the challenge to discuss with a series of unpanels or roundtables hosted by Paul Morris, chief investment officer at the venture capital unit of the DIT and also president of the Global Energy Council of CVCs and adviser to the GCV Institute.
Folake Shasanya, head of new and strategic channels at Silicon Valley Bank’s UK office, described the reflections of its financial technology unpanel as incumbents recognised the changes in the industry from crypto and integrating acquisitions.
Similarly, the financial panel including Alokik Advani, head of fund manager Fidelity’s strategic investments unit, and Ben Luckett, chief innovation officer at insurer Aviva, dived into the fintech challenges and opportunities while Jim Barry, global chief investment officer at the world’s largest fund manager, BlackRock’s alternative investors division, said it was pushing CEOs of corporations to be more responsive to sustainability issues.
Sony Innovation Fund’s Antonio Avitabile, LG Technology Ventures’ Dong-Su Kim and UCB Ventures’ Erica Whittaker spoke about building a business strategy that adds value to a CVC’s portfolio.
Mark Geday, a partner at law firm Morgan Lewis, moderated the session where the panellists shared insights and advice on how to build a successful business strategy that adds value to a corporate venture capital (CVC) group’s portfolio.
“One of the advantages of being a CVC is the possibility to leverage a strong and widespread international network that can be extremely useful to boost and accelerate the expansion of startups around the world,” said Avitabile from SIF, a vehicle for Japan-headquartered consumer electronics producer Sony.
“Furthermore, we bring an investment partner sitting on the board that broadens our companies’ investment views, helping startups develop locally and internationally, overcome management changes and achieve smooth ownership transitions while improving and optimising KPIs (key performance indicators).”
Kim, who oversees LTV, an investment arm of South Korea-listed electronics manufacturer LG, added: “It is essential to provide portfolio companies with validation, support and added value to their business strategy. There can be conflicts, culture differences and concerns, especially because startups are often agile and move fast while CVCs need to take into consideration a wide array of factors, including the relationships with their main business units. However, sophisticated CVCs are able to support portfolio companies without restricting their strategy, while expanding their horizons and helping their businesses grow.”
Whittaker from UCB Ventures, Belgium-based biopharmaceutical company UCB’s CVC unit, said: “CVCs tend to have a longer and wider view than other types of investors and a much deeper knowledge of the sector key trends and the mechanics of how a company can be guided towards success. Moreover, we have built a team of people with different backgrounds and having all this expertise around the table really helps to add value and develop an effective business strategy.”
Marianne De Backer, effectively head of growth for Germany-based Bayer, said: “The covid-19 pandemic has spurred a level of investment in healthcare like never before. In particular, biopharma, diagnostics, and alternative care (healthtech) are reaping the benefits.”
More corporations are adding to their CVC units through limited partner commitments, such as Eli Lilly’s to Tara Bishop’s new Black Opal digital healthcare-focused fund, and focusing on venture building to access earlier-stage ideas.
Christian Lindener, announced the launch of plane maker Airbus’ Scale venture building programme in partnership with Mach 49. Mach 49 describes this process as a venture factory as it is a “repeat, scalable mode. Not just an incubator or accelerator but both to ideate and then mobilise resources to grow.”
As a result, countries are particularly keen to have CVCs invest there. Lord Gerry Grimstone, minister for investment at the UK government’s department for international trade and department for business, energy and industrial strategy, spoke about investment opportunities across the country and strategies to boost the development of the local venture capital ecosystem.
“VC investment in the UK has remained strong despite the pandemic, activity has been intense, and we expect the ecosystem to further accelerate its growth in the coming years. We are all now emerging from the shadows of the pandemic and this gives us the chance to reshape our economy and build a sustainable, cleaner future.
“The UK offers some of the most diverse and promising investment opportunities, and we plan to further boost innovation and attract capital to fuel this growth by developing a suitable trade market and an adequate fiscal environment for institutional investors and especially pension funds. This will free more resources to be invested in private equity and venture capital, accelerating the development and expansion of the entire ecosystem.”
Regarding the effort that the government and the private investment community should deploy to accelerate the transition to a decarbonised economy, Grimstone said: “We all have a joint responsibility, both the government and the private sector, to contribute to the development of a fertile environment for the growth of the technologies able to decarbonise our economy and help us reach net-zero goals.”
He concluded his speech with an invitation to the audience of global CVCs: “I would like you to be open-minded about the promising opportunities available in the UK, come forward if you find obstacles that can be overcome through regulatory improvements, and most of all, be as excited as I am about this technological revolution and the possibility to build a sustainable future.”
The environmental, social and governance (ESG) as well as the deeptech and healthcare areas were a particular focus for the second day of the symposium.
Tracey Carr, CEO of Eco-shaper, Christoph Birkl, CEO and co-founder of Brill Power, and Paolo Bavaj, head of Henkel Tech Ventures, took part in a panel moderated by Maija Palmer, innovation e or at Sifted, about ESG investments.
“We have come across a way to improve lifetime and sustainability of batteries through battery management systems able to extend the battery life by 60%, reduce the use of hazardous lithium-ion waste and cut costs,” said Birkl. “The greatest advantage of our technology is the possibility to reduce energy consumption and avoid the waste of hazardous materials which are used in the manufacturing process, while instead using them for as long as possible.”
Describing the selection and evaluation process followed by a CVC in sustainable investing, Bavaj said: “When evaluating the sustainability of a business, we measure its decarbonisation impact, energy-saving and footprint reduction. We also try to understand how experimental a technology is, how differentiated to similar products might become and how effectively it can be translated into a market launch.”
Carr talked about what her company focuses on: “Eco-shaper collects pertinent organisation data at an enterprise and employee level. We use this to determine what standards your organisation needs to comply with and where it can make the biggest improvements when it comes to sustainability. We are still at the experimental stage but we have registered interest from corporates. More collaboration across the community is essential, especially now, at a time when we need to provide feasible solutions to the climate crisis, solutions that can only be developed and adopted through a deep cultural change.”
Brown Rudick’s Neil Foster moderated a discussion between National Grid Partners’ Ian Cooper, Baker Hughes’ Luca Maria Rossi and ZeroAvia’s Katya Akulinicheva on the fuels of the future.
Looking ahead, there will not be one single fuel that covers every application, said Rossi, vice-president of new frontiers at oil field services provider Baker Hughes, emphasising that we will need a multi-source approach. Many of the up and coming technologies like next-generation nuclear and hydrogen are not ready for widescale use yet.
The investment gaps for such an emerging technology, said Akulinicheva, chief financial officer of hydrogen-electric aircraft developer ZeroAvia, tend to lie in the fact that investors are more hesitant to put money behind propositions that have lengthier innovation cycles that take longer to start generating revenue. She also said she hopes more investors will be willing to take the plunge earlier going forward.
Cooper, managing director and head of CVC Europe at National Grid Partners, noted that the decarbonisation of heat poses a tougher challenge than that of electricity, which is already well underway. There are ongoing initiatives including trials to blend hydrogen and biomethane into the gas grid, though that will also require extensive hardware upgrades and smarter grid infrastructure.
It will have to take place gradually, though, as electrifying the entire grid right now would significantly impact bills before we can get the per-kWh cost down. On an optimistic note, Rossi remarked that the situation is comparable to renewable assets that could not in the past survive without government subsidies but are now cost-competitive after a sustained decrease in costs.
The government has an important role to play, particularly in the early stages – during R&D and proof of concept – to support new companies and technologies. Subsequently, it would do well to put in place funding mechanisms that could include direct equity investments, according to Cooper.
Governments’ impact as policy-making entities will also be significant – both in bringing about something like a carbon tax, which would go a long way to make new fuels more competitive while maintaining long-term regulatory certainty for investors.
For a technology like hydrogen, mentioned Akulinicheva, collaboration with the government regarding unchartered regulatory waters, like certifications for hydrogen powertrains, would streamline new transportation technology.
OSI portfolio company First Light Fusion’s co-founder and CEO, Nicholas Hawker, explained how his company’s nuclear fusion technology could contribute to net-zero targets.
Nicholas Hawker, co-founder and chief executive of UK-based nuclear fusion research company First Light Fusion who was formerly an engineering lecturer at University of Oxford’s Lady Margaret Hall, introduced his company’s technology and spoke about the future of energy.
Spun out of University of Oxford and University College London (UCL) in 2011, First Light Fusion was co-founded by Hawker and Yiannis Ventikos, head of UCL’s mechanical engineering department.
The company is conducting research on electricity generation using nuclear fusion from chemical compounds with heat from high-energy beams. “One target will release the energy equivalent to 10 barrels of oil,” Hawker said, explaining that projectile fusion is a new method for inertial fusion.
The fusion target is the key technology of the company, and Hawker said its designs consist of two parts: amplifier and fuel capsule. The amplifiers boost enough pressure and create convergence to facilitate the working of inertial fusion.
With proven materials and existing supply chains, the company leverages existing nuclear technology and produces a model with “huge market opportunity for fusion energy”, according to Hawker, who also said its safe, clean and limitless technology could help accelerate the transition to net-zero emissions.
First Light Fusion collaborates closely with the academic community, both in its home country and elsewhere to make fusion energy a reality. Its investors include University of Oxford’s Oxford Sciences Innovation (OSI) fund, university-oriented fund manager IP Group as well as Parkwalk Advisors and Invesco.
Energy Transitions Commission chairman Lord Adair Turner also spoke on the hydrogen space.
Turner explained: “We know the key elements need to build a zero-carbon economy and I do think we need to build a zero-carbon economy and need it in place by 2050.
“The absolute core of a zero-carbon economy is to electrify the economy as much as possible and make sure that all of that electricity comes from zero-carbon sources. And we can do that.”
He also pointed out that hydrogen appears to be the answer for some of the setbacks along the way to mass electrification: “But then there are some sectors of the economy which you cannot just say: I am going to electrify it.
“We cannot make long-distance aviation work on battery-based electricity nor long-distance shipping. You cannot at the moment electrify the process of making steel. One important technology to deal with those bits you cannot seem to electrify is hydrogen.”
The cost of both producing and using green electricity has been transformed over the past decade, according to Turner, citing that the cost of production of solar photovoltaics has come down 80% to 90%. He believes the cost of electrolysers will also come down due to economies of scale and a significant rise in demand in the near future.
Turner admitted, however, that steel produced with green hydrogen may be more expensive than steel produced with electricity coming from fossil fuels. He suggested that there would either have to be a global carbon tax or regulations that make it economical to use greener energy sources.
He noted that, while aviation and shipping have international regulating bodies that may impose a specific mandate, there are other industries that do not, in which case the way to impose such regulations would be through the carbon border adjustments for uniform carbon pricing and green procurements from governments, among other methods.
“Although there are some on the cost reductions – with the Chinese probably hitting the lowers costs, I think you will see electrolytes capacity being built across the world.” While accepting there may be international trade of hydrogen, Turner concluded: “I think most places will have local production of hydrogen.”
