Change is in the air. Corporate venturers from more than 250 corporations (see logos above) during the first day of the Global Corporate Venturing & Innovation (GCVI) Summit in Sonoma, California, were broadly optimistic about how their industry could take an increasingly important role in the innovation capital ecosystem.
After the all-time highs of 2015, when GCV Analytics tracked 1,693 deals worth an aggregate $76.4bn – a near-doubling in value over 2014’s $40.9bn – the sentiment in Silicon Valley has been one of deals taking longer to close, a focus on backing businesses with better financials, and trying to use the dip to access strong companies while avoiding being dumb money propping up weaker enterprises pushed by VCs looking for a valuation bump to support their own discussions with limited partners.
Nagraj Kashyap, vice-president of Microsoft’s venturing unit since the start of the week, having left Qualcomm Ventures after 12 years, used the opening address as co-chairman of the GCVI Summit to advise newer groups there was no need to rush in deals.
He said: “2015 was a great year. An all-time high. There is no need to rush if you are starting. Be careful investing in later-stage, high-value deals. There were 124 unicorns [companies worth at least $1bn] compared with 43 in 2014, [according to data from CB Insights] – 2016 will see if many of them survive.”
Kashyap’s move to Microsoft to set up a new unit after building one of the largest and most successful teams at Qualcomm Ventures, which continues under new head Quinn Li, was one of the main talking points for the 450 attendees. They were also excited to hear the plans from Intel Capital’s new leader, Wendell Brooks, amid expectation of change at another industry leader, later confirmed as the conference concluded as being Claudia Fan Munce, head of IBM Venture Capital.
Deborah Hopkins, chief innovation officer at Citi and CEO of its Citi Ventures corporate venturing unit, introducing Brooks after her keynote address, said: “We are here because of Arvind. His are big shoes to fill, and to step in is a big deal.”
Brooks, in his first public speech since the retirement of Arvind Sodhani, laid out a vision of continuity – Intel Capital would continue investing $300m to $500m per year – and evolution by leading more deals, from 40% historically to between 50% and 60% in future, adding more value by taking board seats, streamlining its processes, being less insular, working more with appropriate partners and always asking “what can we do for our portfolio companies?” not “what can they do for us?”
Brooks said he recognised this and was “learning something new every day”. He continued: “It has been completely energising and I feel 20 years younger than I did when I was an investment banker [at Allan & Co, where he set up its European office in London].”
Brooks joined Intel three years ago, after helping to sell Intel Media to Verizon, and last year agreed its largest acquisition in buying Altera. When Sodhani was retiring he was approached by CEO Brian Krzanich and chief financial officer Stacy Smith about effectively combining the mergers and acquisitions and ventures role.
He said corporate venturing offered more value than traditional VC by focusing not just on cash or internal rates of return but making pathfinding investments, supporting business divisions and being socially responsible. Having a corporate limited partner was “quite a taskmaster,” he said and added: “Our responsibility is to be in between [financial and strategic extremes].
“Intel spends $25bn a year on R&D, M&A, business unit marketing, whereas Intel Capital does $500m so we cannot just follow business units [BUs]. It is increasingly important to plot a different path with a bigger agenda, investing as a hedge to BU strategies.”
While Intel invests across a broad range of technologies, its general themes are drawn around entrepreneurs trying to influence new strategies and products Intel could use, technologies that continue Moore’s Law – of exponentially increasing processing power – and develop diversity and inclusivity.
The previous night’s GCV Rising Stars awards had recognised nearly half were women and the corporate venturing industry panel after Brooks’s speech looked further at the topic of inclusivity. It was led by Kay Koplovitz, whose research included GCV Analytics data that nearly all the top 50 corporate venture Investing firms have women in their senior investment ranks (see report below).
Sue Siegel, CEO of GE Ventures, said 40% of her team were women and 69% minorities, as their openness to hiring and supporting the best talent attracted applications. Given GE Ventures is effectively three years old and has about 100 people in its team, this is a strong signal of what can be achieved.
Siegel is a member of the Global Corporate Venturing Leadership Society’s advisory board, chaired by Fan Munce, which was inaugurated at the GCVI Summit, with final development expected by GCV’s London symposium in May. The Leadership Society is looking to inform the community, connect leadership and transform business within the GCV ecosystem.
Judging by the first day, therefore, the industry is laying a firm foundation for a bright future.
CVCs ‘have arrived’
Address by Sue Siegel, CEO of GE Ventures, at the Rising Stars dinner
Thank you to the entire Global Corporate Venturing (GCV) team for pulling off what appears to be a tremendous gathering, chock full of wonderful content that we will get to learn from over the next couple of days. It is a great chance to network, learn the latest trends in corporate venture capital (CVC), pick up on some of the best practices on how to solve our collective and individual challenges, hear about the latest and hottest deals and get to see old friends. This type of conference, and all that it stimulates around it. is why we at GE enjoy working with GCV.
CVCs have become a larger, more influential and important player in the entrepreneurial ecosystem over the past five years. Last year was quite a year for CVCs. You all have heard the numbers – corporate venture investment hit a 15-year high in 2015. In 2015, CVC groups deployed more than $7.5bn to the [US] startup ecosystem through our collective participation in 905 deals, accounting for 13% of all venture capital dollars deployed and participating in 21% of all venture capital deals, according to US trade body the National Venture Capital Association (NVCA).
CVCs have arrived. We are participating throughout the funding spectrum from seed to IPO, we are being invited into the most elite of syndicates – and much earlier in the equation – and now the experienced entrepreneurs seek us out instead of just looking to the financial VCs.
With the explosion of CVCs, we share a collective responsibility. We need to be mindful of our role in the innovation ecosystem, a role we all claim brings more than just money. Our actions need to back up our claims. We must continue to drive towards thinking “what can I and my company do to make these startups successful” rather than “what can this startup do for me”. By behaving consistently with our claims, all boats rise in our CVC segment and we will become a preferred and sought-after partner to startups and VC firms alike. So, this means our individual behaviours will be important to our collective CVC brand. Let us continue to demonstrate to both financial VCs and to entrepreneurs that we do as we say – that we deliver.
The Edge program is a clear example of how GE is making this ambition a reality. Edge was created to support our portfolio companies through what we can bring to their growth and development by providing access to our research and development experts, our distribution channels, our worldwide footprint and our regulatory and policy expertise. We have really fuelled this effort by also offering leadership educational programs at our Crotonville campus, with a curriculum ranging from leadership skills, hiring, to marketing, and the art of storytelling, geared at enhancing entrepreneurs’ development.
I believe our benefit to our respective corporations go beyond investing and can be seen in the strategic returns we generate. Our efforts bring optionality to our parent company in seeing the future through the entrepreneur’s lens, learning new business models and how they complement new technologies to create value, and derisking corporate strategic learning by being able to do so with best-in-class VCs and entrepreneurs, while leveraging OPM [other people’s money] and driving financial returns.
GE has given us, the GE Ventures team, a chance. We started in 2013, so we are still under three years old. We had to earn our place in the fabric of the company, and we have to keep doing that every day. Starting a VC discipline is tough as we are a cost centre versus a profit centre during the early days when the portfolio is in the J curve. During that time, it is especially important to prove your value beyond financial returns.
Despite showing very strong internal rates of return in these early days, we charted a path to bring strategic returns to GE. We do this by creating new startups through our New Business Creation discipline. We have done it through licensing, where we create value from our IP [intellectual property] and technology transfer efforts beyond royalties by activating relationships that become longer-term partners for the innovation ecosystem. We earn our stripes by being engaged in corporate strategy for our business units, educating on new business models, emerging technology trends, and working to sense emerging trends. We have helped do this through the infusion of talent from the VC and entrepreneurial world. These are among a few things that we have done, and yet there is much more to do both internally and externally.
We are delighted to sponsor the Rising Stars dinner for the GCVI Summit. Supporting this ecosystem is vital to our collective success. By doing so we allow networks to form and flourish, allow for cross-fertilisation and best practice learning. We are all on this continuous learning journey and that is why we are so pleased to support GCV. The evolution of an ecosystem depends on having a thriving next generation. We need to foment the innovation catalysers. This is vital to our continued success.
It is an exciting time for the CVC world. It feels that our collective has arrived. Our efforts are so important to our parent companies, who recognise that they cannot innovate alone and that they will find many answers among the entrepreneurial innovation community. They realise the value of having the discipline of corporate venture helping to drive corporate growth for stakeholders – shareholders, employees, and the entrepreneurial ecosystem. u
See Rising Stars report
Talking points from the rest of the summit
Gary Coover, global head of operations at Samsung Accelerator, caught a sense of the fundamental challenges facing business leaders when his unpanel talked about “embracing your doomsday scenario” and “change everything except” your spouse and children.
Deborah Hopkins, chief innovation officer at US-listed bank Citi and CEO of its Citi Ventures unit, said change was becoming more disruptive and happening faster. More than 1,000 companies now have corporate venture arms, which is a nearly 80% increase over 2011, and that number continues to grow, according to GCV Analytics.
But thriving in such an era takes a special talent and grappling with a number of issues. Deborah Gage at the Wall Street Journal identified five broad areas:
1 Corporate venture capitalists (CVCs) and startup teams need to learn to talk to each other. Mark Bercow, an operating partner at Bessemer Venture Partners, said: “It is amazing that entrepreneurs can talk investors into giving them millions of dollars but cannot articulate what they do to people who want to buy their stuff.”
2 The costs of starting a company, including logistics, manufacturing, marketing and R&D, continue to drop, and software is getting more robust. Scott Sandell, managing general partner at New Enterprise Associates (NEA), in a discussion with Stanford University professor Ilya Stebrulaev, said his firm had invested $5m in bedding maker Casper and last year it posted revenues of $100m after launching a year earlier.
3 Companies, such as New York City-based Casper, do not need to be in Silicon Valley. Sandell said: “We [at NEA] fully expect to see innovation much more distributed across the US and the world and are figuring out how to respond.”
4 Big companies need to anticipate what might happen to their businesses as technology evolves. Caterpillar Ventures in May invested in Yard Club, a San Francisco-based startup that lets contractors rent idle equipment to each other. Michael Young, general manager at Caterpillar Ventures, said: “When the efficiency of machines goes up – if owners can rent machines to their partners – our sales of machines go down. If we don’t do it, someone else will.” UPS, meanwhile, set up a 3D print farm at its largest air transport hub to replicate critical parts for customers who need them fast. Rimas Kapeskas, managing director of UPS Strategic Enterprise Fund, said: “We have got the service line at the end of the runway – we are trying to participate in whatever the supply chain shift is. The future is hard to predict, but easier to create.”
5 When it comes to investing in new technology, corporate venture arms need to keep pushing against the naysayers inside their own companies. Kapeskas said: “You can try to create the best, most rational data-based presentation, but ultimately you find that human beings need to make decisions. You need to find the right people in the company and take them out in the world. They need to viscerally see and experience some of this stuff. That is what changes minds.”
Other issues identified by attendees at the GCVI Summit were:
• Slowing equity markets lead to a search for alternatives. The venture slowdown in Silicon Valley could lead to further debt issuance as a bridge to future equity rounds or flotations, such as Spotify’s $500m borrowing announced recently, and mergers and acquisitions of companies running out of cash.
• The large rise in venture round sizes indicates potentially falling returns. GCV Analytics tracked 1,693 corporate venturing investments in deals worth $76.4bn last year, which was up on the 1,481 investments worth $40.9bn in 2015. Martin Haemmig, author of GCV’s Corporate Vnturing on the Test Bench column, found the median Europe-based venture fund now had a higher internal rate of return than US peers as US funding of deals had increased dramatically, a view supported by Jan Dexel at the Netherlands’ Ministry of Economic Affairs in his subsequent keynote address.
• Corporate challenges with startups require deft handling. You “need to look holistically when working with startups because rules on profitability, compliance cannot necessarily be met”, one attendee summarised. Bank Wells Fargo said its first innovation was a stage coach and its CEO met its central innovation unit once a month. Singapore-based bank DBS said its top 250 executives worked with entrepreneurs to create fintech startups over a weekend. Robert Walcott, co-founder of the Kellogg Innovation Network, summarised why both sides wanted to work together as: “Small beats big and slow, but big and fast beats everything and CVC is the tip of the spear [for the big getting quicker].”
• Venturing is integrating with R&D. Accountant PricewaterhouseCoopers, after analysis of the GCV Analytics database, said R&D spending grew 70% since 2005 at a 5% compound annual growth rate. Worryingly for Europe, R&D increased in the US and China but fell in the UK and Germany as “access to tech talent and proximity to customers” were the main drivers for deciding where R&D money is spent.
• Diversity increasingly rules. Claudia Fan Munce, on the building capabilities of the corporate venturing team panel discussion, said when she joined IBM Venture Capital Group in 2000 it was a majority male team. At her retirement it was majority female, she added. And others have followed. Of the GCV Rising Stars (see separate report) nearly half were female even though the majority of the managers who helped identify them were male. Fan Munce said the crucial issue was the broad nature of the corporate venturing role, from tackling financial returns to dealing with strategic issues and portfolio companies. But with such breadth, encouraging diversity could help in decision-making. u
CVCs power up the market, many led by women
Address to the summit by Kay Koplovitz, founder of the USA Network and founder and managing director of venture capital Springboard Fund
There is a lot of angst in the ranks of VC firms about the lack of women investing partners, but the story for Corporate VCs is quite different. According to Toby Lewis, editor of Global Corporate Venturing, nearly all the top 50 corporate venture investing firms have women in their senior investment ranks.
Of the top 20 corporate venture firms, 16 have women among their investing partners. Importantly, according to CB Insights, 17% of corporate venture capitalists in the top 20 are women. This is in stark contrast to the number of women in venture firms at large, which is estimated to be at 6%.
Why is this important? As an entrepreneur and supporter of women entrepreneurs in diverse industries throughout the technology and life sciences fields, I am keenly interested in getting parity for women looking to secure institutional funding. According to the Babson study, a fund with at least one woman on the investment team is three times more likely to invest in companies with women CEOs. This is why woman playing a larger role in corporate venture funding is so important. Women entrepreneurs in high-growth tech and life sciences companies are more likely to be seen and heard by corporate VCs than they will be in the venture community at large if the Babson study holds true.
Kicking off the summit was Deborah Hopkins, chief innovation officer and CEO of Citi Ventures, and she heads a team of 16, 11 of whom are women. They have the responsibility of identifying and investing in companies of relevance to the financial world. Fintech is one of the hottest categories for venture investing in 2015. Citi’s team is populated by women who wield power of capital and much more.
The same is true in a vast array of consumer and enterprise products and services. Sue Siegel, CEO of GE Ventures and Healthymagination, has seen her role expanding beyond venture, to one that oversees innovation within the corporation. Her team looks for underutilised patents and then matches them up with startup innovators, or, if none are found, to create a company to bring new patented technology to market.
With a portfolio of 47,000 patents, that is some portfolio to monetise, whether with early-stage companies or partnerships with other corporations. Either way, her corporate venture unit has a huge impact on GE’s world of innovation.
On another note, Darcy Frisch, vice-president and investing partner at Hearst Corporation, has a different mandate for investing. She looks for media technology innovation but is not limited to that mandate. At Hearst, she, like counterparts Amy Banse at Comcast Ventures, and Avid Larizadeh Duggan, general partner at Google, are judged on the financial outcome of their investments. In addition, Hearst has funded an innovation lab to track companies from inception.
In a recent survey released by First Republic Bank, the objectives of corporate venture funds are almost equally focused on strategic alignment with corporate mandates and financial returns of the investments. Other important motivations are for corporate VCs creating knowledge for thought leaders in the business, establishing relationships with potential acquisition targets and leveraging portfolio companies to improve internal efficiencies.
I have worked with over 600 women entrepreneurs over the past 15 years, and many of them have disruptive products and services important to the corporate world.
One entrepreneur is Christina Lomasney, founder and CEO of Modumetal, a Seattle-based company that has developed a revolutionary nanolaminated alloy that is stronger and lighter than steel, more corrosion resistant and durable than chrome, and is redefining metals performance in major industries. She sees opportunities to transform the materials used in the construction industry, the oil and gas industry, airplane and automobile manufacturing, and roads, bridges and tunnels. Among her corporate investors are Chevron, ConocoPhillips, Catamount Ventures, Golden Seeds, Second Avenue Ventures, and the Founders Fund. These corporate investors bring not only capital to Modumetal, they bring support for changing industry standards to include the new alloys developed by Modumetal, and they bring project revenue.
Another entrepreneur is Carol Politi, founder and CEO of TRX Systems, a company founded to investigate the requirement for firefighter tracking systems driven by the September 11 tragedy. As we learned in that situation, tracking systems reliant on GPS and line of sight were rendered ineffective. After extensive work with the US Department of Defence, TRX developed 3D location and mapping for indoors, underground and in other locations without reliable GPS by utilising smartphones and other wearable technology. Motorola invested in TRX as an enhancement to the product line they offer to first responder units across the globe. In this case, Motorola brings capital and a potentially potent distribution channel.
There are dozens upon dozens of high-growth companies led by women that would be attractive to corporate VCs. They run the spectrum from media, tech, software, predictive analytics, fintech and fashion tech to biotech, diagnostics, devices and healthcare IT.
Focused on getting women entrepreneurs and their companies to parity in funding, whether venture-backed or corporate venture-backed is a goal of mine. I did not know when I started down this path by launching Springboard Enterprises 15 years ago that this would be my next career after founding and building USA Networks into a multibillion-dollar business. This mission has, however, captured my passion and my commitment. While we still have a long way to go, 600 companies and over $7bn in capital raised, we are on our way.
Corporate venture investors are becoming more important on the pathway to funding, as they invested in 25% of all venture deals in 2015. According to KPMG and CB Insights research, I am especially pleased to see more women on the investment side at corporations. Perhaps they can lead the way for venture funding at large. With funds that have at least one women on the investing team, the likelihood of women entrepreneurs getting funding improves by 70%.
We are not at parity yet, but women leading the way as corporate investors give us hope.
Best corporate innovation award
This award recognises the innovations and launches in 2015 by a company primarily from their internal resources.
Alibaba’s Smile to Pay, which allows users to make a purchase from their mobile phone, then require them to snap a selfie to authenticate the purchase using Alibaba’s facial recognition technology.
Alphabet’s Google Cardboard and Jump for virtual reality ecosystem development.
Baidu’s AutoBrain to control a modified BMW 3 series autonomous car.
BP Castrol’s Nexcel, clean-and-quick engine oil change unit, first used in partnership with Aston Martin.
Citi’ Digital Evolution to personalise private label credit card marketing.
Diageo’s Johnnie Walker smart bottle that uses thin, electronic sensors which can tell if the bottle has been opened or not and where it is in the supply chain and so change information when scanned by a smartphone.
GE’s Evidation Health startup, incubated in partnership with US university Stanford Medicine’s Health Care academic health system to try to clinically prove a health technology product is helpful for patients.
IBM’s Watson Health and the Watson Health Cloud platform using machine learning.
Johnson & Johnson’s Janssen Healthcare Innovation division’s integrated care delivery service.
Merck’s roll-up creation of a newco out of a majority acquisition of Preventice, combined with Merck’s current assets such as Physicians Interactive / Univadis / Medhelp.
Rigby & Peller’s smart mirror, Catherine, to scan bodies to select clothing
Xiaomi’s e-commerce and physical stores as part of its new business model approach to selling smartphones.
Winner: Nexcel
The Nexcel oil cell is an innovation that is set to introduce revolutionary efficiencies to the way motor engines use and replace lubricants.
Developed by BP subsidiary Castrol, Nexcel made its debut in October 2015 and is initially available in Aston Martin’s Vulcan track-only supercar. Castrol, based in Berkshire, UK, said Nexcel would be rolled out to other high-performance vehicles over the course of the rest of this decade, and then to popular passenger cars in the 2020s.
Nexcel is a cell than contains both engine oil and an oil filter. One of its biggest selling points is that it can be swapped out when a vehicle’s oil needs to be changed in around 90 seconds – significantly faster than conventional oil changes, which typically take in the region of 20 minutes.
But quick changes are not Nexcel’s only advantage: it also delivers superior engine performance as well as a potential reduction in carbon dioxide emissions.
Nexcel operates on a “dry sump” principle, only allowing the minimum quantity of lubricant into the vehicle’s sump – also known as the oil pan – when it is warming up. This means the engine can reach its optimum operating temperature much more quickly.
Nexcel offers further environmental benefits thanks to the ease with which lubricants can be replaced. The cells, containing all of the car’s old oil, are simply taken out of the engine after use, which means little or no oil is wasted during the course of the changeover. There is also less likely to be contamination with the likes of brake fluid.
As a result, it should be much more straightforward to recycle almost all of the used oil and to reprocess it for further use as high-quality lubricants. The Nexcel cells can themselves be reused as well.
As a further bonus, Nexcel’s internal sensors can keep a closer eye on the condition of the oil and give motorists a clearer idea of when it needs to be changed. The sensors will also be able to give early warning of potential engine faults.
Richard Parry-Jones, chairman of the Nexcel advisory board, said: “If you look back through the whole of Castrol’s history they’ve been innovators, using science to improve the performance of their lubricants and lead their industry.
“Nexcel represents one of its most significant innovations. It offers a solution to a problem that is increasing on the radar scope of manufacturers and when the Nexcel technology becomes standardised, people will wonder why we did it any other way.”
The Nexcel system has been tested on a wide range of vehicles, from small cars designed for urban use to high-powered racing engines. It has been found to work smoothly and effectively under severe braking conditions.
Castrol decided to collaborate with Aston Martin’s low-volume Vulcan supercar in order to accelerate the development of the Nexcel and to thereby allow it to be ready for mass-market production as soon as possible. Castrol says it aims to keep the price of Nexcel at the same level as a standard oil change today.
Andy Palmer, Aston Martin CEO, said: “The Aston Martin Vulcan sets a whole new standard in the ultra-high luxury supercar class, just as the Nexcel technology sets a whole new standard in engine lubrication. It therefore made perfect sense for us to bring these two innovations in engineering together and showcase their capabilities.”
Palmer added: “Today we see Nexcel in our most exotic car, but looking at the technology, I can well imagine seeing this system on every single production car we sell.”
To accommodate Nexcel, a certain amount of engine redesign is necessary, and Castrol is currently in discussion with a number of major manufacturers to see how the system can be integrated into their vehicles.
Oliver Taylor, chief engineer of Nexcel, said: “We’ve been testing the technology now for several years. We have various field trials underway and they include cars from a number of different manufacturers.
“Some of the tests we have done have included, for example, crash tests, and that is very important because that determines the safety of the system.”
Parry-Jones added: “For car manufacturers who are considering adopting Nexcel, they need to look at the three big advantages of Nexcel and weigh them up. These advantages are convenience and speed for the customer, fuel-efficiency improvements, and good control of the environmental consequences of the used oil.”
Best innovation developed in partnership with a portfolio company
Corporate venturing units’ portfolio companies are important partners for new products and business models. This award celebrates the collaborations that come with minority equity investments.
Baidu with Uber. With core disruption in the shift of search from desktop to mobile, Baidu has invested in a range of real-world companies, in particular driving through an investment in and partnership with taxiapp Uber.
HP with Adallom. Hewlett Packard Ventures took a stake in Adallom and the parent partnered with the portfolio company to deliver cloud security services to customers migrating to and using cloud applications. The relationship was so successful, Microsoft acquired Adallom in September.
Visa, Nasdaq, Citi Ventures, Capital One, Fiserv and Orange and Chain. Chain, a US-based provider of blockchain technology to financial institutions, raised $30m from a host of corporations and they joined a Blockchain Working Group to explore the application of the technology in various markets and take a collaborative approach to interoperability.
Alibaba and Alphabet with Jet. Jet.com reached unicorn status after raising $350m from investors including e-commerce group Alibaba and Alphabet, which acts as Google’s holding company, at a $1bn pre-money valuation. Jet competes with Amazon in offering an e-commerce model that prioritises transparency and customer empowerment for buying in bulk or near existing warehouses.
Winner: Chain
In collaboration with Visa, Nasdaq, Citi Ventures, Capital One, Fiserv and Orange
Some of the world’s leading corporations are using the technology that underpins the cryptocurrency bitcoin to try and make their own operations quicker, cheaper and more secure.
In September, a syndicate comprising Capital One, Citi Ventures, Fiserv, Orange, Nasdaq and Visa said they were together investing $30m into Chain, a US-based provider of blockchain technology. A blockchain is a potentially secure online database that can be used to record anything from financial transactions to mobile-phone credit and property deeds.
Entries into the database are timestamped and shared across thousands of computers on the internet, making it both transparent and extremely tamper-resistant.
While the blockchain was originally created to support bitcoin, major banks and payment processors have been quick to see the potential applications and benefits this technology could have for their own operations. Adam Ludwin, Chain’s CEO, said: “A blockchain is more than a financial technology – it is a strategy. Applied intelligently, blockchain networks fundamentally improve how assets move between parties.”
Transactions are recorded automatically on the blockchain’s shared ledger, providing transparency to the issuers and owners of assets as well as to regulators, for example. Parties to any blockchain trades use cryptographic signatures to confirm transactions, which, Chain said, makes this form of asset transfer “safer than any other alternative available today”.
Ludwin added “We are thrilled to be partnering with the organisations we believe are best positioned to capitalise on the inevitable changes in market structure that are on the horizon.”
Nathan Krishnamurthy, from Capital One Growth Ventures, said: “Blockchain technology has many compelling benefits — including cost, resiliency, speed and security — and application of the technology could span far beyond virtual currencies to such areas as payments and lending, smart contracts, records management, and investment platforms.
“We are excited to be part of this technological transformation with Chain, and have been impressed with their collaborative and thoughtful approach to innovation.”
Chain was set up in 2014 and works with partner companies to design and implement blockchain networks for specific markets and assets. In June 2015, Chain entered into agreement with Nasdaq to provide its blockchain technology to expedite the transfer of securities on the exchange, and the first blockchain-backed trade using Nasdaq’s Linq system was carried out on 30 December 2015.
Ludwin said financial services companies had “a lot to gain” from exploiting blockchain technology. “By transferring assets digitally over internet-based networks, they can avoid using costly clearing houses or doing complex integrations across entities.
“They will also be able to build more innovative products, and that is good for everyone else. When trusted institutions issue digital assets on the open internet, financial services will be less expensive, more secure, work better together, and be accessible to more people around the world.”
Chain’s investors have also agreed to set up a blockchain working group in collaboration with leading technologists, academics and researchers. The group is due to convene twice a year with the aim of identifying points of interoperability between blockchain-backed financial networks.
“Blockchain technology represents a fundamental, generational shift for financial services, and Chain’s platform is enabling and accelerating this transformation,” according to Ramneek Gupta, managing director and co-head of global venture investing at Citi Ventures.
“We hope to leverage Chain’s platform to rapidly test and develop applications as part of Citi’s multi-faceted blockchain strategy which has the potential to greatly enhance our customers’ experience well beyond just currencies and payments.”
Brad Peterson, chief information officer at Nasdaq, said his company’s collaboration with chain would increase efficiency in the capital markets.
“We see their platform helping us accelerate our time-to-market across our various blockchain initiatives.”
Best innovation developed in partnership with university-based research
Eli Lilly and Oxford University spin out Immunocore. The university retains a stake in Immunocore through Oxford Spin-Out Equity Management and, in June 2015, US drugs company Eli Lilly started a clinical trial collaboration to fight melanomas. A month later, Eli Lilly was part of Immunocore’s $320m round.
Heliatek, a spinoff from Technical University of Dresden and the University of Ulm, completing pilot installations in Japan, Germany, Italy, China, the US and Singapore after support from corporate investors, including Innogy,
Robert Bosch and BASF.
DNANexus, a spinoff from Stanford University and backed by search engine provider Google, acting as a platform for the Encyclopedia of DNA Elements Project (Encode).
Kensho, a Harvard University and Massachusetts Institute of Technology startup focused on analyzing how events affect financial markets.
Winner: Heliatek
“When I look at the facade of a glass office building, I see an area that is totally passive,” said Thibaud Le Séguillon, CEO of Heliatek. “What our technology does is activate these buildings to generate electricity.”
Heliatek was spun off from the Technical University of Dresden and the University of Ulm in 2006. The company has developed an organic solar film, known as HeliaFilm, which can convert daylight into electricity.
“Our customers are building and construction materials companies,” Le Séguillon explained. “They integrate our film as an energy-generation device into their materials, which could be glass, concrete, steel or membrane. Whatever you construct a building with, that is where our film is going to go.”
Le Séguillon said his company’s technology could effectively transform any façade into a power station. “When you look at an Ikea store, for example, this big blue box could be covered in our film, generating electricity every day of the year,” he said. “We have created a new technology, a new manufacturing process: now we are creating new markets. As a society, we are moving towards decarbonised, decentralised energy generation, and Heliatek is about to change the world as we know it.”
Heliatek has begun manufacturing HeliaFilm on a small industrial scale, and has completed pilot installations of its technology in Japan, China, Singapore, India, Europe, Egypt and the US. In 2015, Heliatek worked with Singapore firm vTrium Energy on Asia’s largest BioPV (Building Integrated Organic Photovoltaic) project, while HeliaFilm was also incorporated into a concrete façade at the headquarters of German building materials company Reckli.
Heliatek is now talking to strategic investors in Europe, Asia and North America in a bid to raise €75m ($81.7m) in order to finance the shift to large-scale manufacture.
“What is important is that all our existing investors are going to participate in this next round,” said Le Séguillon. “They have been involved in every round since the beginning of the company and they like the progress we are making.”
Existing corporate venturing investors include BASF Venture Capital, Innogy Venture Capital and Bosch, all of which took part in Heliatek’s C-financing round to raise €18m in September 2014 alongside Wellington Partners, eCapital, HTGF and TGFS.
“Europe is extremely good at developing new technology, the public subsidies are there. But what is difficult is to bring mature technology to industrialisation and commercialisation.”
Le Séguillon added: “We have to convince people we are going to create a multi-million euro company and that we are for real.” This is being done through Heliatek’s pilot programs as well as what Le Séguillon described as “the pull of the market”.
“We have partnerships with building and construction companies and these customers are ready to talk to our investors to say that, in order to activate their material, they need HeliaFilm.
“That is the best testimony, when the market is pulling. For investors, it reduces the risk they face.”
Given the groundbreaking nature of the technology that Heliatek has developed, it comes as no surprise that the company has been nominated for, and won, numerous awards. In November last year, for example, Heliatek received the Renewable Energy Design Award at the Elektra European Electronics Industry Awards in London. And three months earlier, the firm was selected by the World Economic Forum as one of its Technology Pioneers for 2015.
Fulvia Montresor, head of technology pioneers at the World Economic Forum, said: “Heliatek is part of a group of entrepreneurs who are more aware of the crucial challenges of the world around them, and who are determined to do their part to solve those challenges with their company.”
The accolade meant that Heliatek was invited to the forum’s prestigious Annual Meeting, which has just taken place in Davos, Switzerland [Jan 20-23].
Speaking before the event, Le Séguillon said: “This is a once-in-a-lifetime experience. It gives us the chance to interface with different industries, present our product and share our view of the future.
“There are also meetings with potential investors. As a startup, this really gives us credibility and access to the CEOs of large organisations which are thinking of investing in us.” Le Séguillon added that the awards his firm had been nominated for are “very good exposure and recognition of our progress”.
Crispin Leick, the former managing director and chief investment officer of Innogy Venture Capital, said: “Heliatek is a great company. When this technology hits the market, it will change a lot.”
Best innovation developed out of a corporate-backed accelerator or incubator
Appsflyer, a mobile marketing analytics and attribution platform incubated at Microsoft Ventures Accelerator Tel Aviv
Orbotix, which makes the Sphero robotic ball behind the BB-8 Droid from the latest Star Wars movie, was started at the Disney Accelerator powered by Techstars.
Talkdesk, which was part of Orange Fab US’s first season program, raised $15m in its A round.
Winner: Sphero
Developed at Disney Accelerator, Tech Stars
A place on Disney’s high-tech accelerator program gave connected-toy manufacturer Sphero the opportunity to make its mark in movie history.
The Colorado, US-based firm was among the first wave of 10 companies to join the Disney Accelerator, which was launched in 2014. Backed by Techstars, the three-month scheme is aimed at media and entertainment technology startups. It offers up to $120,000 in investment capital per participant, along with mentor support from Disney executives, experienced entrepreneurs and potential investors.
Sphero had been involved with Techstars in 2010 – in fact, current CEO Paul Berberian joined the company after acting as one of Sphero’s lead mentors on the program – and leapt at the chance to work with Disney.
But the benefits of doing so were not limited to financial backing and the chance to learn from senior Disney figures: Sphero’s involvement with the accelerator also led it to work on the recent Star Wars: The Force Awakens film, first to develop the robotic character BB-8, and more recently to market a toy based on the droid.
The partnership came about when Disney CEO Bob Igner sat down with Sphero staff to show them secret images of BB-8 that had been sent to him by the Star Wars production team at Lucasfilm, a Disney subsidiary.
The spherical BB-8, pictured, had a number of similarities to Sphero’s bestselling toy, also called Sphero, a three-inch robotic ball which can be controlled via a smartphone app. First, Iger asked the firm to come up with a working prototype for the movie; Sphero subsequently went on to work with Disney to design and manufacture a BB-8 toy, which hit stores late in 2015.
Speaking at the announcement of the Star Wars collaboration in April 2015, Berberian said: “What an incredible honour it is to work with the team at Disney on one of the most interesting new characters in the Star Wars franchise.
“Opportunities this significant are rare. If anyone can execute and deliver on an exceptional BB-8 experience, it is our Sphero team in Boulder [Colorado].”
Rob Maigret, Spero’s chief creative officer, added: “This is the beginning of a whole new category of consumer products. You can own a piece of the movie, have it in your home, and relive an experience that is authentic to the entertainment on the screen.
“Our hardware and software technology advancements make it possible to build the toys of the future now. We are deepening the user connection in ways that, until today, have only been portrayed in science fiction.”
Sphero completed its $45m series E round of investment in June 2015, bringing total funding to $80m. Disney was among the backers.
The Disney Accelerator ran its second program in 2015 with support for a further 10 businesses. These included Open Bionics, a firm which creates low-cost, 3D-printed bionic hands for child amputees; and Imperson, which uses artificial intelligence technology to allow TV and movie viewers to interact with their favourite characters.
Disney said its accelerator was looking for “consumer entertainment experiences – innovations that will transform entertainment and media”. The scheme offers entrepreneurs design and technical assistance, guidance and mentoring on products, prototypes and sales pitches. But each company “must be capable of building their own business”, Disney adds.
The chance to be part of the latest instalment in the Star Wars series was not the only advantage of being mentored by Bob Iger, Berberian said, recalling some useful advice the Disney boss gave him.
“Bob said, ‘hey, make sure you don’t make trombone oil: you can be the world’s best trombone oil manufacturer but you will always have a very small market. Make sure you are always focusing on the biggest and broadest market possible.’
“As startups you can sometimes get hyper-focussed on a particular niche or on a particular customer who wants you to develop something custom for them. It is a trap you can fall into pretty easily: so always step back and look at the bigger picture, at where are you taking this company.”
Chief innovation officer of the year
Deborah Hopkins, Citi
Luke Mansfield, PepsiCo
Geoff McGrath, Mclaren Applied Technologies
Navrina Singh, Qualcomm
Winner: Deborah Hopkins, Citi
When people in the worlds of venturing and finance talk about Citi’s Deborah Hopkins, they of course mention her pioneering status both as the bank’s first chief innovation officer and as the founder of its corporate venturing unit Citi Ventures.
But equally as important as the trail she has blazed in the world of corporate innovation is the tangible progress Citi has made as a direct result of the strategies Hopkins has introduced.
With the world of finance coming under the same competitive and technological pressures that have disrupted everything from entertainment and media to transport and leisure over the past two decades, Hopkins’ role in shaping Citi’s future has become increasingly vital. In the years ahead, it is certain that her work in developing new financial technology and opening up new markets will come to be seen as crucial in ensuring that one of the world’s biggest banks can maintain its market-leading role.
Since it was set up in 2010, Citi Ventures has established a global network of innovation labs, with offices in Dublin, Tel Aviv and Singapore among others helping the bank keep up to date with the latest advancements in fintech. Its Internal Acceleration Fund, launched in 2013, is designed to promote rapid experimentation and discovery, particularly around the most disruptive business models – these include the likes of blockchain technology, the internet of things, and next-generation commerce and authentication.
Citi Ventures’ investment portfolio has recently grown to 23 active startups. These include Chain, a US-based firm developing blockchain technology, and Square, a point-of-sale software company. Partnerships such as these give Citi insight into emerging trends as well as access to the latest fintech innovations.
Hopkins said: “At Citi Ventures, we are relentless about seeking new ideas, finding effective ways to collaborate across Citi, and ensuring constant learning. We are not afraid to look beyond our current roles, company, or even industry to learn from others and discover new ways to solve problems.”
But just as important and as challenging is Hopkins’ wider role as Citi’s chief innovation officer – not least of all in establishing a “culture of innovation”, as she has described it, in an organisation of more than 200,000 employees. “It is not just doing cool things,” Hopkins said. “It is also helping the business to be ready to accept them.
“Fostering a culture of innovation starts with sharing and embracing the right mindset – recognising that adaptability is the new stability and that change and discovery are thus both necessary and inevitable.”
Hopkins added that, over the past 18 months, Citi Ventures had focused on providing the “right set of lenses” through which to view potential customer opportunities.
“Often in large corporations, the lens is focused on obtaining more market share, which can keep an organisation narrowly focused on incremental opportunities. If we look for larger customer problems, we can find opportunities that we are well positioned to solve for and that can drive real growth.”
Heidi Mason, co-founder of corporate venturing consultancy Bell Mason Group, which advises Citi Ventures, said Hopkins’ most significant challenge was always likely to be “integrating the new with the old at Citi.
“I think her personal goal is to make the ability to adapt and innovate a fundamental part of Citi’s corporate DNA.
“Deborah knows how bring broad innovation concepts and their potential for corporate impact to life — how to take the ideas, tools and philosophies of what is now called lean startup models and turn them into an effective lean enterprise model. This is what she is doing at Citi right now.”
As Hopkins said: “Today’s accelerating pace of disruption requires new skills and new ways of working. By embracing the entrepreneurial mindset of discovery, we can uncover new possibilities for our customers, our businesses and our industry.”
That Hopkins has managed to ensure Citi retain and even increase its focus on innovation during a period when the corporation has replaced its CEO and reduced headcount from around 370,000 staff in 2007 to nearer 225,000 today is all the more impressive.
Hopkins joined Citi in 2003 as head of strategy, becoming chief operations and technology officer two years later. In 2008, she was given the new role of chief innovation officer (CIO) – one of the first with the title globally – and Hopkins has served as Citi Ventures’ CEO since it was launched in Palo Alto, California, at the start of the decade as a way to connect Citi to the entrepreneurial and high-tech ecosystem in Silicon Valley. This pioneering combination of CIO and head of ventures has become a model peers across industry sectors and beyond the US have looked to for inspiration.
Hopkins’ experience prior to joining Citi has much to do with her success over the past decade, Mason said. She has previously worked in the automotive, aerospace and telecoms industries with stints at companies from General Motors and Boeing to Lucent and Unisys.
“Her unique operating background reads like a preparatory roadmap for this new kind of role and especially at this time,” Mason explained. “Her leadership is enabled by the unique and diverse nature of her background and skills accumulation, and how they all come together with a natural instinct for innovation strategy and vision of implementation that are so integral to the chief innovation officer role.”
Naturally, Hopkins’ achievements have resonated far beyond the walls of Citi.
Fortune has twice named her among the most powerful women in American business, while in both 2011 and 2012 she was named in the Top Tech 50 list compiled by business-to-business publisher Institutional Investor.
Best government support for corporate venturing and the wider innovation capital ecosystem
Singapore: In October, the government said it would allocate S$40m to encourage “large local enterprises” to invest in early-stage, technology companies based in Singapore with funds awarded in January 2016
Brazil: In October, the government laid out a program with a full suite of nine resources to support a global corporation wanting to develop and enter a new market or industry by matching partners, deals and technology through a dedicated Aftercare Services Assistance section.
Russia: The National Technology Initiative was drafted in 2015 and is expected to lay out how the 2035 roadmap for new industry creation, including with incumbent support through venturing.
Japan: The “third arrow” boosting Japan’s economy has been around supporting entrepreneurialism through such areas as deregulation, government procurement, using quasi-public institutions and encouraging corporations to provide more venture capital.
Winner: Singapore
Innovation Capital Ecosystem 2016 National Research Foundation, Prime Minister’s Officer
The news in September 2015 that Singapore was to earmark S$40m ($29m) to support corporate venturing investment in early-stage technology companies only reaffirmed the country’s commitment to supporting innovation and entrepreneurship.
The announcement was made at Techventure 2015, the startup event run by the National Research Foundation (NRF), part of the Singapore Prime Minister’s Office. The money will be used to ensure that new technology businesses can attract funding from, and create partnerships with, “large local enterprises” (LLEs) – that is, Singapore-based firms with at least 30% domestic shareholding and annual revenues of S$100m or more.
It is the third instalment of NRF’s Early Stage Venture Fund (ESVF), and the first such scheme globally. The ESVF was set up in 2008 with a second round of investment taking place in April 2014. The ESVF has thus far been used to seed funds with venture capital firms to invest in local early-stage technology startups. This third round, however, is the first focused on stimulating the creation of corporate venture funds among LLEs.
The NRF says it wants LLEs to adopt corporate venture strategies both to access new technologies and to catalyse the growth of clusters of innovative high-tech companies. For their part, startups will be able to leverage their larger partners not only for funding, but also for mentoring and connection to customer networks, for example.
The NRF invited LLEs to submit their proposals for corporate venture funds by mid-January 2016, with details of which funds are to be backed due to be published by the end of March.
The selection panel is chaired by Lee Hsien Yang, brother of Singapore’s Prime Minister and also chairman of private equity firm General Atlantic.
The third round of the ESVF was announced at Techventure 2015 by Vivian Balakrishnan, minister for foreign affairs and also the minister-in-charge of the Smart Nation Initiative, a program which aims to boost innovation and the adoption of new technology in all aspects of Singaporean society.
Addressing an audience of entrepreneurs and corporate investors, Balakrishnan said: “By catalysing the development and the growth of more startups and of more innovative companies, and by building a tightly networked ecosystem, we can help all of you derive more value to exploit new technologies, build new networks, and in your success, you will also help Singapore to transit into an innovation economy.”
He added that the latest instalment of the ESVF would “facilitate the development of technology ecosystems”, where smaller companies grow around a core of larger businesses.
“It serves as a way for LLEs to remain competitive and renew their technology base by accessing new technologies being developed and prototyped through the smaller startups around them in the ecosystem,” Balakrishnan explained.
“Investee companies in turn can leverage the organisational resources of their corporate partners to overcome barriers to commercialisation, and access networks and expertise to go global.”
Another area of focus for the government to support entrepreneurs and LLEs is venture debt. State-owned Temasek led the acquisition of Silicon Valley Bank India last year and its new subsidiary is now building a pan-Asia platform, which will be the first in the region for the re-named entity, Innoven. InnoVen has already started setting up the team to cover Singapore and south-east Asia outside of India and is looking at other markets, including China, this year.
Looking at how corporations can fund entrepreneurs follows on from the successes the ESVF has had in helping VCs exit portfolio companies to LLEs.
A number of the startups that ESVF has backed have received follow-on funding or been acquired by other companies. These include JustCommodity, a trading and risk-management software developer acquired by Dallas-based Allegro Development in June 2015, and restaurant review portal HungryGoWhere, which was bought by Singapore Telecommunications for S$12m in 2012.
The NRF was set up at the start of 2006 to set the national direction for research and development in Singapore. It does this by developing policies and strategies for research, innovation and enterprise, and by encouraging international talent in science and innovation to relocate to the country. Its 2020 strategy was set in January with a S$19bn commitment and focus on four areas: the digital economy, smart cities, advanced manufacturing and biotech.
As well as administering the ESVF, the NRF has recently established a collaborative project involving researchers in Singapore and the UK aimed at increasing the resilience of systems and infrastructure against cyber attacks
And last autumn, the organisation announced the creation of the Lux Photonics Consortium, which will promote research into the harvesting and distribution of energy derived from light generation. Photonics is expected to have potential applications in sectors such as medicine, security and defence.
Corporate impact venturing award
In a pilot partnership between Asda Foundation and the Social Investment Business Foundation, the First Steps Enterprise Fund is a £300,000 pilot fund offering loan-grant packages to charities and social enterprises working in communities in England from 19 October.
Centrica’s Ignite is the UK’s first impact investment fund with a focus on energy and £10m to invest over the next 10 years.
RBC Generator Fund is a $10m pool of capital for investment in businesses that tackle social and environmental challenges, while generating a financial return.
Schneider Electric Energy Access Ventures Fund had its first closing in February and so began to invest in entrepreneurial companies bringing electricity to Sub-Saharan Africa.
Winner: Centrica Ignite Fund
The challenge of any new fund in a new market space is to show both potential as well as returns. Ignite, the UK’s first energy-based impact investment fund, has done both with its first exit coming in mid-2015, two years after it was set up in 2013.
The fund, however, had broader goals than just making quick exits. It had three clear goals. First, to create commercial benefits for the parent company, UK-listed energy utility Centrica, by working with new, disruptive and profitable business models and technologies.
Second, Ignite’s investments and partnerships would give Centrica’s employees the chance to broaden their experience and increase their skills by working as mentors or non-executive directors. Finally, the fund was a way to support social enterprises, which deliver positive outcomes – from increased employment to reduced carbon use – to the communities in which Centrica operates.
At the time Ignite was launched, Sam Laidlaw, then CEO of Centrica, said: “The answers to society’s challenges do not lie solely with the private sector or the public sector, but with social entrepreneurs, in communities, and in cross-sector partnerships. I am passionate about the potential for Ignite to help find and grow energy related social enterprises to innovate and create these answers.”
Julia Rebholz, Ignite’s managing director, said Ignite aimed to invest a minimum of £10m ($14.2m) over its first 10 years, with individual investment ranging between £50,000 and £2m.
She said: “We have developed a model that has already supported 19 enterprises and invested in 11, and we are delivering sustainable financial returns.
“Our enterprises have supported 10,000 people in the UK, have created 44 jobs and 68 people have been trained as a result of our investments.
“In addition, we have generated a pipeline of projects for the corporate entity to the value of £100m, and we have completed our first exit with a healthy return.”
This exit involved E-Car Club, a pay-per-use electric car club which was sold to rental firm Europcar in July 2015. E-Car Club was the second business Ignite invested in. As well as a taking an initial £500,000 stake in 2014, Ignite worked with the company to define and quantify the social impact of its operations, and provided a non-executive director to offer strategic advice.
An employee from Centrica subsidiary British Gas was seconded to help develop sales and customer insight capabilities.
Rebholz said: “The success of this exit from our perspective was that, although we knew we were selling to another large corporate, we actually embedded the outcomes in the deal structure. So E-Car is going to continue to work for the impact outcomes in terms of their mobility agenda and supporting people in communities to have greater access to transport where local funding and government subsidies have been cut.”
Much of Ignite’s work is devoted to ensure that social businesses are ready to receive funding. The organisation’s pre-investment program involves selecting up to 10 enterprises a year and matching them with a suitable mentor from within Centrica.
Rebholz added: “On top of that, we run a residential program in partnership with a business school, where we look at strategy and all the elements of running a business and help them develop a business plan.
“We also provide them with a social impact and outcome specialist who helps them understand the impacts of the activities they undertake, as well as how they are going to measure their business in a