A good corporate venturer has been described as a renaissance man, someone who excels at a wide variety of subjects and tries to develop their capabilities to the full.
It is, therefore, perhaps no coincidence that US-listed car maker General Motors (GM) has based its corporate venturing team at the Renaissance Center in downtown Detroit.
GM Ventures was started in June with a $100m fund to identify and build relationships with venture capital firms, companies and individuals where its equity investments deliver innovative technology to the global transportation sector, and especially GM.
Jon Lauckner, president of GM Ventures, said: "We are looking for next generation auto technology that makes a difference. I was the former vice-president of global product planning, so its not about investing because it is interesting and offers a financial return but because it can support our core automotives by making equity investments in advanced auto-related technology."
Although Lauckner said he was still putting the people for his team in place, developing a process to evaluate start-ups and deciding on which sectors to focus, the first step had been to develop a clear mission statement.
He said: "From talking to lots of VCs [venture capital firms]and corporate venturers, a lesson learned is to have a clear objective of whether the goal is strategic or financial. We are interested in financialgain to maintain our activities in a self-sustaining way but our primary purpose is to support the core business – finding companies to invest in today that will be in our autos tomorrow.
"This means investing as a prelude to being a customer to the portfolio company over a longer-term horizon of three to four years. The next generation of cars rather than this one means investing in series A or B rounds rather than D and E, and not as a prelude to [GM acquiring the portfolio company]."
The GM Ventures mission statement was developed out of one set for the whole company: "to design, build and sell the world’s best vehicles" as the company went through a bankruptcy process requiring $50bn in government handout to help it survive the credit crunch. The state support of GM saved a million in jobs at the company and its suppliers, according to government estimates, and 1% of US gross domestic product.
After 18 months, GM emerged from this so-called Chapter 11 process profitable and in November successfully floated on the New York Stock Exchange, raising an initial $20bn in the country’s largest initial public offering (IPO) and valuing the company at $63bn. The IPO allowed China-based car maker SAIC Motor to buy a 1% stake in GM as part of a technology sharing partnership and help in its overseas expansion.
And shareholders were particularly interested in GM’s green credentials, such as its Chevy Volt (pictured), a plug-in hybrid electric vehicle with internal combustion engine.
Lauckner had been an instrumental part of the team that developed the Volt and he said the shock of the bankruptcy and success of the Volt had helped lead to the decision to set up GM Ventures.
He said: "GM’s vision of the car has technology as part of it. The Chevy Volt was extremely instructive as it was a risk and pursued new technology while there were considerable doubts it could be done and within the timeframe. Now GM is through its bankruptcy it is willing to take more risk to get advanced technologies in our vehicles first."
By 2015, GM said more than 40% of a vehicle’s content could be composed of electronics, controls and software technology, while the Volt has 10 million lines of software code compared with the Boeing 787 Dreamliner airplane’s 8 million lines. The focus on technology has led GM Ventures to focus its investments on four areas: clean-tech, such as fuel cells, charging, smart grid, energy efficiencyand biofuels; infotainment, such as voice recognition, cloud services and personal devices; smart materials, such as lights; and "other", such as microprocessors and sensors that can help autonomous driving. A car already has 75 computer processors loosely organised into a local area network, Lauckner said.
The firstfour investments in GM Ventures’ portfolio have come in the clean-tech sector, although the firm agreed two more just as Global Corporate Venturing was being published. The first two, Coskada and Mascoma, are biofuel providers and were backed in 2008 before GM Ventures was formed. The last two disclosed deals, Sakti3 and Bright Automotive, are a lithium-ion battery maker and electric van company respectively.
Last year, GM Ventures and Itochu Technology Ventures, the Japanese company’s US-based venture subsidiary, invested an aggregate $4.2m, reportedly split $3.2m and $1m respectively according to newswire Bloomberg, in Sakti3, while GM Ventures provided $5m for a minority stake in Bright as part of a strategic relationship between the firms.
Sakti3 and Bright were backed despite two-thirds of the six-person team at GM Ventures joining only in September, and deputy director Tim Brumbaugh a month later. Lauckner said GM Ventures had received more than 200 pitches between June and December 7 and washed out 111 in pre-screening or after closer examination.
He said entrepreneurs and other investors were pitching because GM Ventures could help them by offering access to their scale, technical expertise and publicity, while avoiding competition. Lauckner said: "We are backing companies where the technology is not deployed in-house and has to be used. GM Ventures is not backing a company as one of several options – we invest as a customer, which is hugely important. We can also boost the profile of a start-up and help them gain additional funding from non-dilutive sources, such as government grants and loans."
The fifth advantage in setting up GM Ventures as an independent subsidiary was its independence from the GM decision-making process. Lauckner said he reported to Stephen Girsky, GM vice-chairman of corporate strategy and new business devel-opment, who reports to Thomas Stephens, GM vice-chairman of global product operations, but GM Ventures was a separate subsidiary so it was not part of the GM process.
But just like a renaissance man, GM will be judged on its achievements – it has to make its cars better. Lauckner said: "Success? We will be judged by to what extent technology we invest in is part of the next generation, maybe not necessarily a high proportion of the car but in critical parts, such as batteries."
Fact box
Assets under management: $100m
Launched: June 2010
Portfolio companies: Sakti3, Bright Auto, Coskata, Mascoma
Team: Six
Jon Lauckner, president of GM Ventures;
Sherwin Prior, managing director;
Tim Brumbaugh, deputy director;
Fernando Prieto, investment manager;
Anish Patel, investment manager;
Jerneja Loncar, investment manager