Augmented reality and virtual reality (AR and VR), artificial intelligence (AI) and the internet of things (IoT) are the hottest innovation area for investors from the media and telecoms sectors.
David Zilberman, managing director at Comcast Ventures, told GCV that AR and VR were a “significant disruptor in the ecosystem”, presenting a new medium and a host of new opportunities for content creation. He said the same was true of original content.
Zilberman also said of the impact of developments in AI: “We believe it brings a broad horizontal value-add in telecoms.”
AI and machine learning are expected to bring further efficiencies to the sector. Reese Schroeder, managing director at Motorola Solutions Venture Capital and a veteran investor, said: “I am paying a lot of attention to deep learning and artificial Intelligence technologies – and the rise of bots.”
IoT is another important area of innovation. Paul Asel, managing director of Nokia Growth Partners (NGP), which runs a $350m IoT fund, said he saw IoT as the “convergence of cloud, sensors and mobile technologies”.
He pointed out that IoT itself is a broad horizontal, spanning various sectors, giving them more intelligence and disrupting them. He gave the example of sensor-based solutions that could make even traditional outdoor advertising smarter.
These powerful trends are expected to have profound transformational effects on both the media and telecoms sectors. Patterns revealed by the investing behaviour of corporate venturing units may be considered indicative of the changes currently under way or anticipated.
In media, GCV found slightly more than a fifth (74) of corporate venture deals involved media portfolio companies. Most of the rest involved companies in other sectors, most notably IT (109 deals), consumer (70), services (42) and financial services (28).
Meanwhile, corporate venturers in the telecoms sector included an even more diverse mix of companies in their portfolios over the past 12 months. Only a small number of the deals GCV tracked (6) were in rising telecoms enterprises, while more than half of the deals (109) were investments in IT companies.
In addition, there was considerable interest among certain investors in the transport and freight sectors. Asel said interest in these areas stems from the enhanced intelligence and connectedness provided by IoT, as developments in the connected car and autonomous vehicles fields were bound to transform the broader transport and logistics industry.
International Data Group (IDG), Comcast and Bertelsmann led in a number of deals within the media sector, while SoftBank, Swisscom and Verizon were involved in the largest number of deals conducted by telecoms investors. The top-ranking corporates in media were Baidu, IDG and Renren, and in telecoms SoftBank, Orange and Nokia.
Since July 2015, GCV Analytics has tracked 362 deals worth a total of $15.84bn involving corporate venturing investors from the media sector. Their counterparts in the telecoms sector participated in 192 deals totalling $13.3bn. Leading geographies for sourcing media deals were the US, China and India. Telecoms corporate investors committed to emerging enterprises in the US, the UK, China and India.
Media deals
In September last year, Uber China, the local subsidiary of ride-hailing service Uber, raised a $1bn funding round featuring internet company Baidu, according to Reuters. Baidu was joined by insurance firms Ping An and China Life Insurance, hedge fund Hillhouse Capital and financial services firm China Citic Bank.
In October, social media and financing company Renren closed a $150m preferred stock investment in US-based online lending platform Social Finance, which had closed a $1bn series E round a month earlier, featuring Renren, telecoms firm SoftBank, Wellington Management, Institutional Venture Partners, Baseline Ventures, DCM Ventures and Third Point Ventures.
In April this year, China-based real estate services provider Lianjia raised RMB6bn ($927m) in a series B round featuring internet companies Tencent and Baidu. The round valued Lianjia, also known as Homelink, at $6.2bn. Lianjia has some 5,000 branches across China and an online portal listing about 56 million properties.
US-based augmented reality technology developer Magic Leap raised $793.5m in a series C round led by e-commerce firm Alibaba in February this year. Internet technology provider Google, mobile semiconductor maker Qualcomm, through Qualcomm Ventures, film studio Legendary Entertainment and Warner Brothers also invested in the round. Magic Leap’s Mixed Reality Lightfield superimposes ultra-realistic moving light sculptures on real-life settings.
In August, media and entertainment group Time Warner acquired a 10% stake in US-based television streaming platform Hulu for a price reported to be $583m by the Wall Street Journal. Set up by News Corporation, Hulu was launched in 2008 and offers monthly subscribers on-demand streaming of TV programming and films. Walt Disney and NBC Universal are among the backers.
Telecoms deals
In June this year, China-based ride-hailing service Didi Chuxing closed a record financing round by a private venture-backed company, raising $7.3bn in debt and equity, according to the Wall Street Journal. The $4.5bn equity portion of the round included $1bn from electronics producer Apple, a reported $400m from Alibaba, $600m from insurer China Life as well as contributions from Tencent and SoftBank. The company claims the lion’s share of China’s ride-hailing market.
In August, India-based e-commerce company Snapdeal confirmed a $500m funding round co-led by Alibaba, SoftBank and contract manufacturer Foxconn. The round also included mobile software provider Myriad, Singaporean state-backed fund Temasek, investment manager BlackRock and investment firm PremjiInvest.
Last November, India-based ride hailing service Ola raised $500m in a series F round, featuring China-based counterpart Didi Kuaidi and SoftBank. Ola operates an app-based ride-sharing service similar to that of Uber, with which it competes in its home market.
In August, Singapore-based ride-hailing app operator GrabTaxi confirmed a $350m series E round featuring China-based counterpart Didi Kuaidi, SoftBank, sovereign wealth fund China Investment Corp, as well as hedge fund Coatue Management and Tiger Global Management. GrabTaxi runs a ride-ordering app that operates in 26 cities across six Southeast Asian countries.
Media exits
GCV tracked 42 exits worth a total of $4.6bn involving corporate investors from the media sector. Only 10 of them, however, were exits from promising media enterprises. The majority of reported exits were from enterprises in other sectors where media CVCs had invested heavily – IT (11 exits), consumer (10) and services (six).
In September last year, digital media firm Axel Springer agreed to pay $343m for an 88% stake in US-based online media company Business Insider, one of its portfolio companies. Founded in 2007, Business Insider covers business news from around the world in addition to more generalised viral content. The company, which employs 325 people, also offers a paid data subscription service called BI Intelligence.
In the same month, media conglomerate News Corporation bought its portfolio company UK-based advertising technology producer Unruly. The acquisition consisted of $90m in cash and up to $86m in future payments contingent on performance. Established in 2006, Unruly’s technology tracks user engagement with videos.
YouTube, the video streaming platform owned by diversified conglomerate Alphabet, acquired US-based musician marketing service BandPage in February 2016, providing an exit to media company International Data Group. The deal was worth approximately $8m, according to TechCrunch. BandPage originally launched as RootMusic and enabled musicians through a special Facebook page tab to sell concert tickets, merchandise and other products to fans.
In April this year, telecoms firm Verizon and media group Hearst agreed to jointly acquire Complex, a US-based online media company in which Hearst was already an investor. Hearst and Verizon would take each a 50% share of Complex, according to the Wall Street Journal. Founded in 2002, Complex operates a digital media site covering US pop culture aimed at “millennial” men, and has been profitable since 2010, according to a statement by Hearst.
There were, however, much larger exits for media corporate investors.
In October, internet and media group Naspers paid $1.2bn to increase its stake in Russia-based classified listings platform Avito, from 17.4% to 67.9%. Founded in 2007, Avito claims to be the largest classified listings website in Russia and the third largest in the world.
In July 2016, consumer goods manufacturer Unilever agreed to buy US-based grooming product seller Dollar Shave Club, in a deal reported by Fortune to be $1bn in cash, thus providing an exit for Comcast. Founded in 2012, Dollar Shave operates an online platform selling men’s grooming products through a subscription model.
1010Data, a US-based big data company backed by Wells Fargo-affiliated VC firm Norwest Venture Partners, was acquired by media company Advance Publications for $500m in August 2015. Advance completed the acquisition through its subsidiary Advance/Newhouse.
In September 2015, e-commerce firm Amazon agreed to acquire US-based multiscreen video provider Elemental Technologies, giving exits to backers including Telstra, BSkyB, Citrix and the Disney-affiliated Steamboat Ventures. Amazon Web Services reportedly paid $500m.
Telecoms exits
Only 18 exits by telecoms corporate investors were tracked over the past year, totalling around $4.88bn in estimated size. There was no exit from an emerging telecoms enterprises. Most exits were from companies in the IT, media and consumer sector.
In January 2016, property conglomerate Dalian Wanda agreed to acquire a majority stake in US-based film studio and comic book producer Legendary Entertainment, as Reuters reported. This provided exits for SoftBank and investment firm Waddell & Reed. Launched in 2004, Legendary is best known for blockbusters produced in partnership with Warner Brothers, such as sci-fi film Interstellar and the Hangover trilogy.
Also in January, department store chain Hudson’s Bay Company agreed to acquire US-based e-commerce company Gilt Groupe for $250m, providing an exit to SoftBank. The deal came less than five years after Gilt raised $138m at a $1bn valuation, when SoftBank had invested $62.5m. Founded in 2007, Gilt was among the first so-called flash fashion sales companies in the US.
In April, Idinvest Partners, a private equity firm spun out of insurance firm Allianz, was set to exit France-based digital health technology developer Withings in a €170m ($193m) acquisition by communications technology manufacture Nokia. Withings produces a range of connected health products. Rajeev Suri, Nokia’s president and CEO, said: “We have said consistently that digital health was an area of strategic interest to Nokia.”
In March, semiconductor manufacturer Intel agreed to acquire Israel-based TV imaging technology provider Replay Technologies, providing exits to electronics producer Samsung and telecoms firm Deutsche Telekom. Though officially undisclosed, the price was reported to be $175m. Replay develops a sports event viewing system called FreeD, allowing viewers to watch from any angle.
Emerging enterprises
Investments in emerging media and telecoms companies over the past year feature a diversity of corporate investors – not only traditional media players such as Bertelsmann, Comcast, IDG or Time Warner, but significant investors from other sectors, such as Intel, Tencent, Alibaba, Alphabet and Kraft Group, currently branding as Mondelez International. Rising media enterprises are of interest to a wide variety of investors and some of them have raised sizeable rounds.
In March, diversified conglomerate HNA Group agreed to invest RMB1.2bn in online sports streaming platform Le Sports as part of a series B round that could reach $1.08bn, according to a regulatory filing. Le Sports, formerly LeTV Sports, streams sporting events to Chinese customers. Le Sports had raised $460m in series B funding a month earlier, as reported by China Money Network. Investors in the round included media company Ti’ao Power.
In August last year, China-based smart TV startup Whaley Technology raised RMB2bn from investors including Alibaba and Tencent, according to Xinhua. Whaley was formed by media-focused venture capital and private equity firm China Media Capital in April 2015.
In July, US-based daily fantasy sports platform DraftKings secured $300m in a series D round led by Fox Sports, the sports broadcasting subsidiary of 21st Century Fox, as Recode reported. The round included US professional sports leagues Major League Baseball, National Hockey League and Major League Soccer, VC firms Atlas Venture, Raine Group, and Kraft Group.
In November, Weiying Technology, a China-based developer of a ticket booking app, closed a RMB1.5bn series C round featuring Tencent and Dalian Wanda Group, as reported by China Money Network. Founded in 2014, Weiying operates ticketing portal WePiao and also sells tickets through Tencent’s WeChat and QQ apps.
In December, media and entertainment conglomerate Walt Disney paid $200m to double its stake in US-based media company Vice Media from 5% to almost 10%, according to the Financial Times. Originally founded in Canada in 1994 as a free magazine on alternative culture, Vice has become a global media organisation providing original print, online and video content.
People
In July 2015 Hervé Schricke left his position as chairman of Xange Private Equity, a France-based private equity fund backed by postal service La Poste. Shricke helped launch Xange in 2001 as CEO, and became chairman in September 2014.
In August, Jay Onda left Docomo Capital, the venturing arm of mobile network NTT Docomo, to take up a position at automotive and motor manufacturer Yamaha, which had also recruited Silicon Valley venture insiders George Kellerman and Amish Parashar.
The same month, South Korea-based internet company Daum Kakao named Ji Hoon Rim, a former principal of SoftBank’s venturing subsidiary SoftBank Ventures Korea, as its next CEO.
In September 2015, Alfred Lo joined AMP New Ventures, the corporate venturing subsidiary of Australia-based financial services firm AMP. Lo, currently heading the unit, was previously a principal of Optus-Innov8, an Australian seed fund set up by Australia-based telecoms company Optus and SingTel Innov8, the investment arm of telecoms firm SingTel.
The same month, Gaurav Sachdeva, former general manager of strategic investments at Brand Capital, the investment vehicle of media company Times Group, joined the new JSW Venture Fund, according to the Economic Times.
Also in September, Ratan Tata, former chairman of diversified conglomerate Tata & Sons, took up a senior adviser position at IDG Ventures India, a corporate venturing affiliate of International Data Group. In October, Kris Gopalakrishnan, co-founder of India-based IT services provider Infosys, also became an adviser at IDG Ventures, as the Economic Times reported.
The same month, Nokia Growth Partners vice-president Annie Lin left to join digital identity management company Inflection. Lin had worked at Nokia since 2010.
Jan Borgstädt, formerly a vice-president at Bertelsmann Digital Media Investments (BDMI) since 2011, co-founded venture firm Join Capital with Tobias Schirmer, a BDMI alumnus. Schirmer, formerly an associate at Deutsche Bank, had joined the Bertelsmann Entrepreneur Program, where Borgstädt spent a year before moving to BDMI as a principal in 2008.
Jessica Verrilli returned to social media company Twitter less than six months after leaving to join Google Ventures, the corporate venturing arm of Alphabet. Verrilli initially joined Twitter in 2009, rising through the ranks to become director of corporate development and strategy in July 2014. Google Ventures had hired Verrilli as a partner in May 2015.
In November, Nokia Growth Partners appointed Todd Forrest as operating partner and Bryan Biniak as an entrepreneur-in-residence. Forrest came to Nokia after four years as partner and chief financial officer at private equity firm JH Partners. Biniak was previously general manager of the worldwide developer ecosystem and application marketplace for Microsoft’s smartphones and feature phones.
In January 2016, it was announced that Steve Murray, former managing director of SoftBank Capital, an early-stage venturing subsidiary of SoftBank, would be moving to VC firm Revolution Growth. Six months earlier, in June 2015, SoftBank had announced the winding down of SoftBank Capital. Murray joined SoftBank Capital as a partner in 1996 and has taken board seats at a variety of startups, including wearable device manufacturer Fitbit.
Also in January, Emmanuelle Pierret and Mathias Raynaud were appointed investment directors at Idinvest Partners.
In February it was announced that Richard Osborn was to join Telus Ventures, the venturing unit of Canada-based telecoms firm Telus, as managing director. Osborn was managing director of health and wellness-focused investment fund RecapHealth Ventures since its inception in 2010.
In March, Matthew Lee left IDG Ventures Korea to co-found Cognitive Investment as managing partner. Lee had been CEO and managing partner of IDG Ventures Korea since 2007, focusing on mobile and social technology developers.
In April, Jack Young, who led Qualcomm Ventures’ investment in Fitbit, joined Deutsche Telekom’s recently formed Deutsche Telekom Capital Partners. Young had recently been promoted to head North America at Qualcomm Ventures, stepping up from head of the Qualcomm Life Fund.
In May, Bernhard Gold left T-Venture, another venturing subsidiary of Deutsche Telekom, to join France-based venture capital firm Iris Capital as managing director of its North American office. Gold had been managing director of T-Venture America since early 2014, having been promoted after three years as an investment director.
Also in May this year, Jason Spinell was hired as an investor for messaging platform Slack’s $80m corporate venturing fund, announced in late 2015. Spinell was previously ventures director for Undercurrent, a New York-headquartered, digitally-focused consulting firm, until it closed in August 2015.
In June, Alexander Schlaepfer took up an investment director position at Swisscom Ventures, the corporate venturing arm of Switzerland-based telecoms firm Swisscom. Schlaepfer had previously worked at Aster Capital, a France-based venture capital firm for industrial corporates Alstom, Schneider Electric and Solvay.
Also in June, Nikesh Arora left SoftBank, where he spearheaded its corporate venturing strategy as company president and chief operating officer. Arora joined SoftBank in late 2014 from Google, where he was chief business officer.
Gavin Teo left corporate venturing unit Comcast Ventures, where he was a principal, to join US-based venture capital firm B Capital Group as a partner. Teo joined Comcast Ventures in 2012 and often led its investments in virtual and augmented reality, healthcare IT and connected home technology startups.
At the end of June it was announced that Takayuki Inagawa would replace Nobuyuki Akimoto as head of NTT Docomo Ventures, the corporate venturing unit of Japan-based phone operator NTT. Akimoto said: “Due to a management change, I will be transferred to the global service planning office, the smart-life business division of NTT Docomo.”
In August, Joe Chang left SoftBank China Venture Capital (SCVC), a subsidiary of SoftBank, to join Eight Roads Ventures, a corporate venturing subsidiary of financial services group Fidelity International. Chang had worked at SCVC since September 2014, after four years as managing director of networking equipment producer Cisco’s corporate development team.
In July, Mel Gaceta joined US-based consumer finance company Synchrony Financial as managing director for strategic investments. Gaceta previously spent nearly three years sourcing strategic investments and business development at US Cellular, having earlier worked for nine years at corporate venturing unit Motorola Solutions Venture Capital.
Also in July, Troy Williams, former president of publisher Macmillan’s New Ventures until August last year, joined University Ventures as a managing director. Williams had spent five years as president of Macmillan New Ventures before becoming CEO of its enterprise solutions division.
In August it was announced that Rich Miner, general partner at GV, Alphabet’s venture capital arm, would step down to work on an Alphabet education initiative, according to Fortune. Miner had been a general partner at GV since 2009 when the unit was formed, having joined Google when it acquired Android, the mobile operating system he had co-founded four years earlier. Miner had also helped launch telecoms firm Orange’s corporate venturing unit, Orange Ventures, as principal.
Funds
GCV tracked a total of 58 funding initiatives since July last year involving corporate players from the media and telecoms sector. Those included 35 VC funds, six new corporate venturing units, seven accelerators and two corporate-backed incubator initiatives.
The most notable initiative was launched in July 2016 by smartphone maker HTC – the Virtual Reality Venture Capital Alliance in partnership with 27 other VR investors. The fund will invest in VR technology and content startups, as well as augmented and mixed reality. The partners have $10bn of deployable capital. Backers include Colopl VR Fund, a $50m fund launched in December last year; the Virtual Reality Fund, also backed by Colopl and game developer Gumi; and Legend Capital, venturing arm of Legend Holdings.
IDG Capital Partners, the China-based venture capital affiliate of IT media firm IDG, closed its latest fund at $1bn in July. IDG Capital Fund III was raised in partnership with US-based VC firm Breyer Capital and will fund healthcare, energy, consumer products and technology, and media and telecoms companies based in China or looking to enter the Chinese market.
Also in July, US-based venture capital firm DCM Ventures closed its eighth flagship fund at $500m, securing capital from a raft of corporate limited partners including Baidu, Tencent, Naver, Qualcomm, SoftBank and social media company Gree. DCM VIII will invest in early-stage companies based in the US, Europe and Japan, in areas of interest like digital media, software-as-a-service, financial technology, e-commerce as well as virtual reality, automated drones and artificial intelligence.
In December 2015, China-based record label Modern Sky Entertainment and online entertainment platform Shanghai Joy Network agreed to launch a RMB3bn private equity fund, as China Money Network reported. The fund will invest in international music and entertainment assets that can be extended or licensed to the Chinese market.
In February 2016, NGP closed a $350m fund dedicated to IoT technologies. The fund is to back companies developing connected enterprise, consumer solutions, connected car and digital health technologies, in addition to those based on capabilities in big data and analytics. IoT technology is used by Nokia in secure connectivity for its networks, as well as distributed cloud products and platforms.
Alibaba Pictures, the motion picture subsidiary of e-commerce and internet group Alibaba, launched a RMB2bn entertainment fund with Wuhu Gopher Asset Management, according to Hollywood Reporter. Alibaba is providing up to $75m while Gopher Asset will supply $225m. Hainan Alibaba Pictures Entertainment Industry Investment Fund will target companies involved in film production and development, celebrity resources, marketing, distribution and advanced technology.
In May 2016, South Africa-based Naspers formed Silicon Valley-based corporate venturing unit Naspers Ventures. Naspers historically leveraged an early investment in China-based internet group Tencent, now worth over $60bn, to evolve into a diversified internet and media firm with holdings across the world.
Telecoms firms Deutsche Telekom, Orange, Singapore Telecommunications and Telefónica launched accelerator program Go Ignite in February this year. The corporates are backing the initiative through their respective units Hubraum, Orange Fab, SingTel Innov8 and Telefónica Open Future.
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Interview: David Zilberman, Comcast Ventures
By Kaloyan Antonov
Comcast Ventures is a combination of Comcast Interactive Capital and NBC’s Peacock Fund, merged when Comcast bought NBC in 2010. The fund’s goal is “to be a catalyst for innovation and financial returns”. In general terms, Comcast Ventures claims to look for scalable innovative ideas, “defensible” technologies and “solid teams”. It considers portfolio prospects from any stage with initial investments ranging from $2m to $15m.
David Zilberman, managing director at Comcast Ventures, joined the team in 2006 after having served as business development manager at Flarion Technologies (2003-06) and Lehman Brothers (2001-03). He said the most exciting part of his job was the ability to be a “beneficial investor, because of the platform at Comcast and the very unique approach I think we have because of the affiliation with the broader organisation”.
What differentiates Comcast Ventures from other corporate venturing investors? Zilberman believes it all lies in the question investors at the firm ask themselves as former entrepreneurs: “How can we at Comcast Ventures be a value-add to those companies?” Rather than merely thinking how the companies could add value to Comcast, it should go both ways, according to Zilberman. He also pointed out that Comcast Ventures avoided making “passive investments” – committing capital in areas where it cannot be beneficial to entrepreneurs.
The strategic element does not always play a pivotal role and it does not seem to be an indispensable condition of investing. “There is no hard requirement for us as an investor to be strategic. Given our broad investment mandate, we can explore different categories, some of which may become strategic and some may not,” Zilberman said. He described the role of Comcast Ventures as a learning tool for the corporate organisation at large. “We do, of course, look at the strategic needs of the organisation but also spend a similar amount of time, if not more actually, thinking ahead and thinking about what may be on the horizon.”
Financial returns, on the other hand, appear to play a much more important role. Zilberman said: “We are very much financially driven and, from our perspective, the economic alignment of financial interest is absolutely critical because you could always identify strategic opportunity in financially sound businesses.”
Comcast Ventures was one of the most active corporate VC investors in the media and telecoms sectors, with 25 disclosed deals over the past year, most of them in North America. When it comes to geographical reach, Zilberman was reluctant to define Comcast Ventures as completely geography-agnostic. “Even though we have invested in places like Israel and Western Europe, it is somewhat difficult if we do not have people on the ground there, so we believe there are still so many opportunities to explore domestically.
“Within the US we are agnostic to geographies. We have obviously invested very heavily in Silicon Valley but also in companies based elsewhere, for instance in Boston, New York, Washington DC, North Carolina, Delaware and the Pacific Northwest.” He hastens to add that within the US innovation scene “we don’t limit ourselves to a single geography within a driving distance from us – we are happy to get on a plane or train or whatever it takes to get to know new companies”.
When it comes to investments in rising enterprises from the media and telecoms sectors, Zilberman named three major trends – augmented reality and virtual reality (AR and VR), original content for media, and artificial intelligence (AI) in telecoms. Comcast Ventures considers AR and VR to be a “significant disruptor in the ecosystem”, as they constitute a new medium and present opportunities for new content creation and monetisation. Original content, as he defines it, has much to do with decreasing production and distribution costs and easier reach to specific niche segments of consumers, to whom content can be provided via YouTube, Facebook, Snapchat or similar modern channels.
In the telecoms industry, Zilberman explained, it is mostly about increasing levels of data consumption from wireless devices and he believed developments in AI would bring about further operational efficiencies in this area. “The AI component of it will create more efficient and optimised networks. We believe it brings a broad horizontal value-add in telecoms.”
Zilberman said there were several major categories the investment team at Comcast Ventures exploreed and reviewed periodically, including AR and VR, original content, enterprise software, big data, AI, the broader consumer sector, from e-commerce to consumer-oriented content, as well as financial services and cybersecurity. Zilberman himself is in charge of deals from the financial services, cybersecurity and application layer software – software-as-a-service.
He identified two major factors driving the competitiveness of financial service startups – offering an improved customer experience as well as more specific targeting translating into a more efficient customer acquisition. He cited College Ave Student Loan, a direct lender targeting prospective college students in the US. In terms of cybersecurity, Zilberman said cyberthreats were increasingly a concern for small and medium-sized enterprises, and the demand for addressing such threats led to “a need for a managed service offering of security products to small businesses”.
Zilberman said that while Comcast Ventures remained “opportunistic and open-minded to new, undefined segments”, the majority of its investments in the near future were likely to consist of companies falling neatly into the major categories considered now. Comcast Ventures would continue to explore opportunities in these categories, always aspiring and aiming to add value and be a beneficial partner to companies.
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Interview: Paul Asel, Nokia Growth Partners
By Kaloyan Andonov
How does the idea of connectedness at Nokia Growth Partners (NGP) relate to the strategic goals of Nokia, whose brand slogan is “connecting people”?
Nokia’s vision is about connecting everything and everyone and IoT is an important part of that. Upon the acquisition of Alcatel Lucent, Nokia’s concurrent commitment to NGP for a $350m IoT fund signalled Nokia’s broader vision and strategy behind the acquisition. NGP has been a long-term source of innovation, partner and a window to technology for Nokia. NGP’s IoT fund will help Nokia develop an IoT ecosystem while NGP focuses on making investments in important companies and delivering superior returns, as we have in past funds.
How do some of NGP’s deals over the past year relate to your investment thesis?
We have been investing in IoT over the last couple years and our IoT investment activity predates the announcement of our IoT fund. IoT is a broad term. Much like saying that a company is a “mobile company” was insufficient some years ago, today saying that a company is an “IoT company” is similarly insufficient. We understand it as a convergence of cloud, sensor and mobile technologies. Those three trends create the conditions for disrupting industries and providing new and enhanced services.
Your most recent deal was the $275m series E round raised by Deliveroo. How does Deliveroo fit into the overall “connectedness” investment philosophy of NGP?
We have been looking at the freight and logistics industry overall for some time, so last-mile delivery is an area that comes from the enhanced intelligence stemming from the convergence of cloud, mobile and sensor technologies. I think sensors allow to have more efficient services in the freight and logistics sector. So last-mile delivery is one of the segments we are looking at in that space.
What are the other segments you have been looking at in that area?
In addition to last-mile delivery, we also keep an eye on regional delivery, full-truckload delivery and less-than-truckload delivery. There is an entire ecosystem which is quite well developed within the freight and logistics industry. We see new companies emerging across these different market segments.
Regarding IoT, there are different views on its nature and character, what is your view on the matter as an active investor?
IoT is a broad horizontal and it spans almost the entirety of various industries. A study by McKinsey came out claiming that 90% of global GDP is untouched by the internet and the internet of things. So there is an opportunity to “touch” that vast remaining part.
What have been the major and most exciting trends to watch for in the broad IoT horizontal?
On the enterprise side, we see this as an opportunity to bring real-time information and new intelligence to various industries. Within the industrial sector, we see opportunities to bring operational efficiencies, as with our investment in Digital Lumens. Its product is a silicon-based solution that goes on lighting, enabling a more intelligent use of energy, providing significant savings on lighting costs.
And what is IoT’s impact on the consumer and health side?
Connected devices such as FitBit, Nest and GoPro are bringing added intelligence and insight into our daily lives. Other devices will emerge, enabling us to quantify and calibrate most aspects of our lives. We have invested, for example, in a smart collar developer Whistle, which is a GPS-connected activity-monitoring devices for pets. Whistle offers dog owners the peace of mind of never losing their pet. But the secondary benefits are more profound, enabling one to better observe the physical activity level of their dogs and cats, which ultimately promotes longer and healthier pet lives and reduces veterinary costs through better pet care and nutrition.
NGP also runs a Connected Car fund, so what is your perspective on that horizontal and how profoundly do you think it will disrupt the landscape?
We are investing in the transformation of the transportation industry as a whole. For example, we believe that private transportation will migrate toward a shared model improving affordability, allowing consumers to drive better cars by increasing utilisation rates, which are about 10%. Our investments in car-sharing companies include Drivy in Europe and Zoomcar in India. In public transportation, we have invested in Moovit, which is improving traffic congestion and intra-city travel through smarter use of public transportation. In the trucking sector we invested in Peloton, which is a semiautonomous driving solution that allows trucks to pair up and drive closer together, thus saving 10% of fuel costs. These are just a few examples of the range of innovation and opportunity across the transportation sector.
Such car-sharing platforms are part of what some refer to as the sharing economy, which is also a very broad term. How do you view the sharing economy and the opportunities it presents?
The sharing economy is ultimately driven by broader use of assets and reduced cost of ownership, the merits of which vary substantially across asset classes. Alibaba, Airbnb and Homeaway have shown sharing works well in the home rental sector, and we believe this is transferrable to car sharing, once friction at pick-up and drop-off is eliminated and trust improves through visibility into driving behaviour. But this logic applies primarily to assets whose cost of ownership is high, their utilisation rates are low and also where the risk of wear and tear is relatively low.
What do you think will be the impact of autonomous vehicles?
With autonomous driving, as with innovation generally, people tend to overestimate the short-term impact and underestimate the long-term impact. Innovation normally takes longer to be deployed and adopted. But once adoption of new technologies reaches critical mass, the ripple effects are much more profound than people anticipate. Semi-autonomous driving is available today, but it will likely take decades for fully autonomous driving to be widely implemented on a massive scale. But when it happens, the ripple effects will be very significant across a host of sectors and change the way people live. I think it is likely to lead to a more widely distributed living environment. The average driver spends nearly an hour commuting daily, so the implications for productivity improvement are enormous. About 20% of the US economy is tied to the transportation sector so autonomous driving will impact numerous other industries. The implications for car insurance and the medical industry, for example, will depend on autonomous driving safety. Since most accidents are due to driver error, accident rates should be reduced once autonomous driving is perfected resulting in savings of over $100bn in insurance and medical expenses.
What other trends do you see in the media and telecoms sectors?
One of the companies we have invested in China is Sensoro. They provide sensor devices across different venues, so the idea is to bring more intelligence to traffic and usage patterns, improving local advertising and marketing promotions on a real-time one-to-one basis. RetailNext, another portfolio company, brings intelligence within an in-store context to improve customer experience and sell-through within stores.
We are also active in AI solutions, which influence the media and telecoms sectors. Over the past nine months, we have invested in RapidMiner and WorkFusion. RapidMiner provides predictive analytics and intelligence, while WorkFusion automates complex, manual tasks. We see AI as an extension of big data, which creates signal from noise and handles the onslaught of data in a more effective way.
Given the global presence of NGP, have any geographies captivated your attention as an investor?
We are global investors with offices and investment activities in China, India, Europe and the US. Within these geographies, we are seeing interesting developments. When we started investing in China 10 years ago, the companies were largely local instantiations of companies in the west. Today we are seeing indigenous innovation, distinct from the innovation in the west and, in some cases, more advanced than elsewhere. A good example of that is DJI, which is the innovation leader in the drone space globally.
What have been the most exciting and challenging aspects of your job at NGP?
We are creating a new model for corporate investing. While we have a sole limited partner in Nokia, we operate independently as a venture firm. We believe this enables the financial discipline and rigour of an independent investor along with the strategic advantage, insight and partnership from being closely aligned with a strategic partner. We believe this is the best of both worlds and a superior business model that we have been pioneering with demonstrated success over the past 10 years.
What have been your most notable portfolio success stories?
We were early investors in five $1bn-plus companies, including UCWeb and Ganji, the two largest acquisitions in technology in China.
What kind of investment should we now expect to see from NGP? Are you considering any new areas to explore?
We have an industry-focused approach, so we deeply focus primarily on connected car, digital health, IoT – both consumer and enterprise. Those are the sectors we expect to be focused on in the foreseeable future. We are market-driven, so we always look at how innovation is likely to transform the landscape, and those sectors are at the moment broad enough to enable us to be responsive to market opportunities.
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Interview: Reese Schroeder, Motorola Solutions VC
By Kaloyan Andonov
Motorola Solutions Venture Capital and its investment philosophy revolve around the idea of public safety. What does the future holds for public safety and how do you see it in present-day innovation?
Just as technologies are rapidly evolving in other industries, I see the same thing happening in public safety. Public safety solutions are going mobile. IoT, data analytics, persistent video and user experience are all evolving and will play a key role. For example, we recently demonstrated our vision of a virtual reality command centre using our portfolio company Eyefluence and the Occulus rift.
Motorola Solutions is exploring a future where virtual reality will immerse a public safety command centre supervisor in an incident scene. By using a combination of virtual reality and eye-interaction technologies to navigate through video and data feeds from multiple sources, incident responses can be quickly coordinated and information shared widely to help guide officers and protect people at the scene. The virtual command centre proof of concept uses eye-interaction technology from startup company Eyefluence, a Motorola Solutions Venture Capital investment, to envision the future of public safety.
How do some of the recent deals by Motorola Solutions align to the main idea of public safety for the future?
All our investments are aligned with Motorola Solutions’ strategy for mission-critical communications evolving toward mission-critical intelligence. For example, the CyPhy Works drone collects sound and video data at an incident site, Eyefluence enables the virtual command centre, and API.ai allows an officer to interact with his or her devices with speech to enable them to keep their heads up and hands free.
What is the role of financial and strategic returns for Motorola Solutions Venture Capital?
We are unabashedly a strategic investor. With every company we evaluate, the initial focus is on current or potential future strategic fit – if that is not established, we won’t do it. If we do see the strategic fit, then we will evaluate the company with the same financial discipline as any other investor – corporate or financial.
What are the general investment criteria an experienced corporate VC investor like you uses when sourcing deals?
After assessing strategic fit, we look for the same kinds of things that any VC looks for. Great team, large market and truly differentiated solution are key criteria we look for.
Are there any emerging geographies on the innovation map that have caught your attention in particular in most recent times?
Today we are focused on North America and Israel as our key geographies. While we know that there are other areas of the world with great technology, we are focused on the places where we have MSVC team members.
This year at the GCV Symposium in London, you were given the Lifetime Achievement award. Given this recognition, it only behooves to ask: what have been the most exciting and most challenging aspects of being a corporate VC investor over the years?
The most exciting part of the job is to meet so many wonderful entrepreneurs with such passion and new technologies. Every day holds the real prospect of seeing something I have never seen before. One of the most challenging aspects for any CVC is maintaining alignment with portfolio companies over time as people and strategies might shift, both in the start-up and in Motorola Solutions.
What new or emerging trends have you been seeing in the Telecommunications and Media sectors? How likely are they to disrupt the field in the medium and long run?
For me, I am paying a lot of attention to deep learning and artificial intelligence technologies – and the rise of bots. I also continue to be very interested in augmented and virtual reality. Finally, I am interested in the increasing role of drones and robotics in the public safety space in the years to come. All of these have disruptive aspects.
What trends do you see in other sectors you invest in?
Mobility, sharing and everything getting smarter and connected are key trends. These, in turn, lead to the need for new and better security solutions. I would also mention the continued development of the autonomous vehicle.
