There are few situations more challenging to the longevity of a corporate venturing unit than the break-up of its parent into two companies.
For communications equipment maker Motorola, however, while the process of deciding whether to keep and develop its corporate venturing unit was "arduous" for the team, it has been ultimately rewarding for them.
The separation of Motorola – to Motorola Solutions, which sells to enterprises and governments, and Motorola Mobility, a consumer-focused company – has led to two venturing units being created out of Motorola Ventures to reflect the diferent needs of the separated parents.
Michael Annes, leader of the successful separation and corporate vice-president of business development and ventures at Motorola Solutions, said Motorola Mobility and Motorola Solutions were "fundamentally different businesses with different customers, with Solutions having longer product lifecycles than mobile devices".
He said: "The separation forced the ventures group to re-evaluate its reason for being and whether there should be one, two or none after the separation. Many firms offered to help spin off or buy the assets, but the determination was that there was a strategic reason to maintain ventures in both."
The split meant out of a portfolio of 45 companies and 10 funds there was some "horse-trading and arm-wrestling" over which team took over a few assets. Motorola Solutions Venture Capital ended up with about 10 funds and 20 portfolio companies managed by a US-based team, while Motorola Mobility Ventures had the remaining portfolio companies and Mony Hassid as managing director based in Israel as the only overseas representative, as well as a US team under Wallace Pai.
The separation has not come without change, as Stephen Moore, Europe head of Motorola Ventures left. Reese Schroeder, head of Motorola Solutions Venture Capital after previously running Motorola Ventures, said: "We have a US focus in a global business but through funds of funds have global reach. Being a limited partner offers good ideas and stronger relationships but we are more a believer in direct investing as it offers strategic benefits.
"From a team perspective, the process was arduous but rewarding as we gained the feedback from both chief executives [at Mobility and Solutions] that ventures is important to their strategies."
Annes said Motorola Ventures’ successful exits and flotations meant the finances warranted keeping going but "strategically ventures is critically important to innovation in our business".
Motorola Ventures had been one of the largest and most active corporate venturing teams over the past decade having invested more than $500m, including deals such as France-based Sensitive Objects, which was sold for $62m to Tyco Electronics last year.
The exits have continued with semiconductor company Sequans Communications successfully floating last month. At the time, the company spokesman said: "Motorola Solutions, and especially the ventures team, is really excited about Sequans. It is definitely one of the shining stars in the portfolio. Motorola actually invested in both the D (back in 2006) and E (2009) rounds."
Annes added: "Start-up companies are innovative, and by helping entrepreneurs we can anticipate where we and the competition are heading from seeing the emerging trends."
However, the importance of finances was a factor. Annes said: "We are not in ventures because we have excess cash but because it is a prudent, strategic thing to do."
In its annual results for last year, Motorola Solutions posted pro forma sales of $7.9bn, up 10% compared with 2009, while Motorola Mobility had a rise of 4% to $11.5bn.
Motorola Solutions had net cash on its books of $3bn after the separation from Mobility and at the end of April a market capitalisation of $14.9bn. This size and market understanding is seen as a reason for portfolio companies to choose Motorola Solutions as a backer.
Schroeder said: "We offer portfolio companies a seat at the table so they have the opportunity to win business from Motorola Solutions, with 70% historically gaining just such a relationship. One portfolio company saved a Motorola business unit $22m per year. Second, Motorola Solutions can spread the word about portfolio companies and help with sales within Motorola Solutions.
"Motorola has also gone on to buy four portfolio companies, including 4th Pass and Mesh Networks, a handful of the number we have backed."
Brian Russell, chief executive (CEO) of Zephyr Technology, said: "Motorola Solutions Venture Capital [MSVC] offered much more than just investment dollars. The venture capital team provided strategic guidance as well as insight into a market where they are the clear leader. Access to the various business teams inside Motorola Solutions was invaluable in honing the product and sales and marketing approach."
And Bob Zollars, CEO at Vocera, added: "We launched a joint product with Motorola Solutions that would not have happened without leadership from MSVC."
Both Motorola Solutions Venture Capital and its Mobility peers have been active since the separation.Motorola Mobility Ventures has recently backed Moblyng, a games developer for mobile devices, soon after backing Catch Media, which manages digital rights.
Last month, MSVC reinvested in the consortium backing Scanbuy, a US-based provider of mobile barcodes, with a further $5m, and a few weeks earlier invested in Vivotech, a near-field communication software and systems company. Annes said the division was planning five or six new deals this year on top of follow-on investments.
Schroeder said the trends this year were for mobile computing, cloud, applications, video and analytics, retail experience and analytics and radio frequency identifiction-enabled solutions. He said there was also a move for "software and hard-ware at a consumer grade playing in a piece of the enterprise ecosystem, such as dongles".
MSVC and his team keep an excellent relationship with Mobility Ventures and informally pass across deals that may be a good fit for Mobility, Schroeder said.
As Doug Donzelli, CEO of Apprion, said: "Motorola Solutions Venture Capital reflects corporate venturing at its best – strategic business synergy, seasoned venture experience and practical operational guidance."
Fact box
Formed: 1999
Key people:
Michael Annes, corporate vice-president of business development and ventures at Motorola Solutions,
Motorola Solutions Venture Capital
Reese Schroeder, managing director,
Tony Palcheck, managing director
Mel Gaceta, investment manager
Loren Minkus, director
David Sardana, senior investment associate
Portfolio: 20 direct investments, 10 fund commitments