James Mawson: It gives me great pleasure to welcome Neil Foster from Baker Botts. Neil is the Head of Technology, Media and Telecoms group for them – or it is basically ‘Technology’ now, I think as that underpins all of the sectors. He is the Head of the London office for Baker Botts which is one of the world’s largest law firms with a particular focus in energy, life sciences as well, obviously, as technology. He will say a little more about their global reach – I think that it is 13 offices now. I will allow him to introduce the rest of the panel. It is a really wonderful look at the next generation of corporate venturing leaders. This is particularly interesting, not just for the people of corporate venturing leaders, but of firms and the types of firms. Neil will explain more, but I am really looking forward to this session and I will hand over to Neil now.
Neil Foster (pictured right): Thank you very much, I will not bother you with more about me, but I will tell you about this panel, which is clearly made up of the next generation of corporate venturing leaders. We have Mike Brown (pictured second right), founding partner of AOL Ventures, launched AOL Ventures in February 2010. One of the things which I want to discover is why he has done 23 deals in America and none in the UK so far, so that will clearly have to come up. He was previously with Virgin, investing some of Mr Branson’s money – clearly unlimited resources there. Tech-orientated, consumer internet, clearly from AOL.
We have Davorin Kuchan from Texas Instruments – Director of Corporate Venturing and Innovation at Texas Instruments (pictured middle). Based in Palo Alto and clearly a semi- conductor company.
We have Geoff Duyk at TPG (pictured second left) – formerly known as Texas Pacific Group, but no longer – Co-Head of Biotech and Alternative Renewable Technologies, clearly two or three of the areas in which the corporates, in particular are very, very active, as well as the private equity funds. So the bravest man in the room and the bravest man on this panel. We are hoping that the three of him gang up on him, but I suspect that his $55 billion will almost be able to match the rest of the panel.
Then Bernhard Mohr head of Evonik’s Corporate Venturing team (pictured left) which started in 2012. So it is a new-ish panel, and the theme is the next generation. A new-ish corporate venturing team, before that, of course, Bernhard was hugely experienced at BASF, one of the most active of the corporate venturers and has as his speciality chemicals, as you know.
That is the panel and as I say, I am Neil Foster, Corporate Partner at Baker Botts. I do Corporate Venturing deals, currently for three of the world’s largest 100 companies. One of the reasons why we, as lawyers, particularly like Corporate Venturing deals, is because I get, occasionally, to do the term sheets – unlike with private equity funds where they are prescribed to us – so this is one of the advantages for us.
Now, if you have a question as we go along, just put your hand up. I will ask specific questions, but if they say something as we go along, then please do put your hand up and ask.
Under the theme, ‘The next generation of Corporate Venturing Leaders’, there was a sub-title in there about the corporate venturing units themselves. Rather than just investing through the business and corporate development teams, but as a specific unit. So, Mike, why set up a specific unit, why not just have balance sheet deals from a corporate development team?
Mike Brown: I cannot speak broadly, but I think from AOL’s standpoint, for us, if you think back to December 2009, when the business was spinning out of Time Warner and AOL was, it was no surprise, fairly irrelevant to the early stage community. I think that we played with this notion of how can we be as fast and approachable and focussed as possible without having the problems and the turn around issues that are going to plague our parent company over the next few years. So, in our view, the most optimal way of doing that was telling AOL to entrust investment professionals or portfolio managers with the ability to go out and manage a pool of capital on their behalf. As long as the strategic and financial aims were going to be met, there was a reason behind why we would do it structurally, not balance sheet specific. I think, from our standpoint, it has been very positive. It has enabled us to gain a great deal of the benefit of the association with them, without a great deal of the traditional negatives which take place with corporate venturing.
Neil Foster: Thank you, and Bernhard?
Bernhard Kuchan: We will analyse off balance sheet and, of course, we also have internal discussions about what the stand would be. Based on my previous experience, I don’t think it is a problem, as long as you have the full backing from your executive core, and as long as you can also convey to the industry that you are there to stay and this is a sustainable thing to do and that there is no risk that, in two or three years, or when it comes to follow an investment, you have to back up and say, ‘No, we are not willing to do this any further.’ So, we have so much backing and we are so convinced about this that we think that we can convey the message that it does not matter if we invest off balance sheet or if we have a separate allocated fund.
Neil Foster: Right. In the March edition of Global Corporate Venturing there was the top 50 or the top 40 of the most influential renewables, clean tech investors and the top 16 were all separate Corporate Venturing units and the rest were corporate development arms. Now that might just be Jim’s prejudice for Corporate Venturing Units? Davorin, do you think that that is just Jim being unfair on the corporate development teams?
Davorin Kuchan: I think that there is a little bit of a bias. [Laughter] In general, from our perspective, it is a complex issue. We have done Corporate Venturing since 1996, and we went back and forth in a number of different directions. Fundamentally, it is complex issue, because on the one hand, if you have the business units doing venturing on their own, right, then they do not have a broad enough perspective on what it is like to work with the entrepreneurs, and if you look at the corporate development teams, then they do not have broad enough business experience. Neither one of the two entities really knows how to work with the entrepreneurs out there. So you have a really complex issue of the domain expertise, the business expertise and really knowledge of what it is like outside of the large corporate environment.
Neil Foster: So what are some of the other advantages, to the deal, to the company itself, to the other investors, of a corporate venture capitalist, as opposed to a private equity fund?
Davorin Kuchan: I think that fundamentally it is being able to, number one, understand the domain; to be able to add specific value besides funding. Funding can be found in a number of different areas, but what we find – especially in the semi-conductor space, that small companies need a great deal more help, above and beyond the financing. Financing is obviously essential. You can have a specific case where a small start-up which is doing the next generation of chip is going to have a really difficult time getting in a major OEM, simply securing their first customer. So having the back up of a large corporate investor, sponsor, friend, can certainly help that.
Neil Foster: So what you are saying is that private equity funds don’t bring anything but money?
Davorin Kuchan: Well, you know! [Laughter]
Neil Foster: Geoff, do private equity funds bring anything but money?
Geoff Duyk: Well, I guess it depends on which fund. We set up our group – in some ways we are like a corporate venture group, in the sense that we live inside a very large, strategic organisation. If you took the market cap of the companies that TPG owns or controls, it is a Fortune 10 company, so they are representative across the entire value and supply chain, geographically. So to a large extent, the reason that people are in corporate venture, is partly because of competitive intelligence – what is over the horizon. So we have the same issue as an organisation. We have $6 billion or $7 billion invested in oil or natural gas and $5 billion or $6 billion invested in techs, so there are threats. Also, from a macro point of view, people view this as a sector – in the long term, it is a big growth area, but it is a sector which, in many ways, is an unnatural act for private equity. Private equity works on the physics of balance sheets, not on companies which have significant technology and more often market engineering risk.
So, if you look at the composition of my team, it probably looks more like Bernhard’s team – we are the oldest guys in TPG, and we are all 40 or 50 years old, most of us have spent about 20 to 25 years on R&D somewhere. My son once asked me, ‘What is your job?’ and I jokingly said that I am a pet geek. I think that we do have a great deal of technical expertise. I think that, at least our group, strategic financial – but we also bring other things – I think that when you look at the scale of deals – to be quite honest, I don’t think that venture capital works in the clean tech arena. You are building new businesses, which have to reach significant scale, commercially before the market will uptake them. You have to be ‘in it to win it’ for a long period of time.
I think that we bring a great deal of global presence. We represent an organisation with offices all over the world, we have a great deal of experience in emerging markets, I think that a great deal of our partnerships are with people who want to get into emerging markets. We also offer sophisticated financial engineering. That is not represented in my group, but if I look across my firm, we have all of that. And also, there is then your point about access – it is one thing to be a small venture capital firm, it is another to own a company like – well, I could name a company like TXU – a big utility company – or a Meaner Markets – a consumer of electrical efficiency. You have some of the same purchasing power that you are talking about. If you are smart about it, the private equity fund can do it. If it is only capital – this is not an industry that needs capital per se: it needs smart money and it needs capability. I think that if you look at most of the deals that we do, we look for corporate partners and we think of them more as joint ventures, as opposed to communal investment of equity. You have to do heavy lifting to get these companies up and going.
Neil Foster: So Davorin, if venture capital doesn’t really work in clean tech, apart from areas like IT for clean tech, etc., then with the capital deployed, are there some specific areas where the next generation of corporate venturing teams, specific sectors that they are going to come from – is it just clean tech or is it elsewhere?
Davorin Kuchan: Being in a valley, there are dirty words that come and go, right? Clean tech was hot not so long ago, now clean tech is a dirty word, right. Areas like semi conductors are definitely out of fashion for those of you who have looked at it – anything that is not capital efficient – medical devices are very difficult. I have actually spent a great deal of time thinking about this – I believe that there is a fundamental crisis in innovation that is going to be happening over the next couple of years, because large corporates like us rely on making later stage acquisitions of technology ideas, companies and we do rely on a healthy venture progressing of these companies early on. If you cut that off at some point and there is no influx of fresh ideas and being funded by attritional VC capital, then there are going to be no mature companies later on that we can acquire. So I think that corporate venture capital does have some fiscal responsibility and industry responsibility to step in.
Geoff Duyk: I think it is very important point, because financial investors tend to play chequers instead of chess about what is going on – to your point that they go to the path of least resistance. If you think of your dilemma, if you are venture capitalist in Silicon Valley today, literally what we do is opex, capex, intensive and long time ones. If you look at the flavour of the day – which is a social media company or something like that – it is $300,000, two kids, two computers, a cloud and a case of Red Bull and you have $20 million of revenue in six months. It is very hard to compete against that.
Neil Foster: Okay, so let’s turn it over to Mike who is clearly in the area where a case of Red Bull is enough?
Mike Brown: Or an Espresso machine?
Neil Foster: Is that enough?
Geoff Duyk: Or the perception – that is where capital flows, right?
Neil Foster: So do you compete with the venture capitalists? Why are AOL in there? If they have to go early in semi-conductors, chemicals, health care etc., renewables, but in social internet, etc., why there?
Mike Brown: Why does AOL focus there?
Neil Foster: Well, how do you compete with a venture capital fund?
Mike Brown: To your first point, it is the only thing that we know, right? That is what we think about every day. I would be laughed out of the room if I were still talking about semi-conductors or renewables.
I think that the notion that we compete with independent venture funds is probably pretty incorrect now. You can probably tell that I am fairly young – I did not grow up either having been an entrepreneur or an investor in what we would define as the V1 of the internet. That was a market and a model which was vastly different from where we are today. The supply side has just come online in a way which we have never seen. There is no possible way that you could ever be a corporation and beat the Kleiner Perkins and Excels and Union Square Ventures in the world to deals – it is just not possible – the game is up – you have proved that you have not been able to provide that significant measurable value or been able to extract that value on behalf of your corporation.
I think that it is less about competition and much more about partnerships and how close and focussed you are in your strategy, where an independent fund that is highly respected and knowledgeable knows that you can slot in nicely to a cap table or a particular deal and really provide a significant amount of value which may in some sense be outside of their scope. They do not have weekly meetings with the CEO of AOL. They don’t talk to the operating units. That is what we talk about all of the time to the markets – most of the funds that we partner with know the value that we provide.
Davorin Kuchan : I think that Mike has made some really good points. I have been doing this for 25 years. I started and ran two companies before I got into investing. If I go back to when we started our first company – Kleiner Perkins was one of our investors – if your brought a corporate venture in, it was a favour. The corporate venturers promised to be seen and not heard. I think that was has changed is that the corporate venturers have a seat at the table – pari passu -and there is a transition – where people would say, ‘There is a promise that we could help you for corporate development’ or some other thing – but almost as though they wanted to make sure that they wanted to have no influence – that no one was telling us what to do. I think that the biggest change is that corporate is part of it.
In terms of your question before about corporate development versus corporate venture – it really depends on what company you are talking about. I think that there tends to be quite a – you are purely separated and then there is more chimera between those two. But I think that the corporate venture groups have become a force, as opposed to a passive, trying to find some intelligence about what is going on.
Neil Foster: So the ‘seen and not heard’ point comes to one of the next questions which is about the disadvantages of corporate venture and venture capital. The advantages might be a channel to market – they might become a customer – but then, to the energy panel earlier, the Q&A, the chairman was from energy, the CEO was going to have to negotiate a customer contract with his chairman. Is that insurmountable, how do you get round those sorts of conflicts? Bernhard?
Bernhard Kuchan: I think and I am convinced – and this goes back to what we said – that a syndicate always has to bring [coughing] testing. It is a combination of both entities, of the institutional investor which brings value on one end – and you made a couple of good examples, but we are also out there to bring value to our portfolio companies as well as to extract value on our side. I think that there are some cases where we can bring value, where we want to be seen, where we want to be heard, but there might also be situations which offer conflict and I think that then you need to act professionally and you need to know when to bring your ideas forward, when to bring your thoughts forward, or when to step back as this might be something which might be a conflicting issue.
This is something which we discussed quite clearly also in our organisation, before we were setting this up to explain very clearly what the rules are, where we want to interfere, where we can interfere and where it is better just to step back and not to convey any information internally or engage in any discussion. I think that is a no-brainer, but when it comes to an exit situation, and you are a potential acquirer, then I think that is quite natural that you need to step back and I think that the art is to engage whenever you can bring value to the table but to be able to step back as well. I think that a corporate has to be more careful and more sensitive to this type of activity, than an institutional. Yes, you are biased, as you have this strategic angle which means that you are not completely free of your own ideas or intentions.
Geoff Duyk: The dilemma of no conflict, no interest, is a problem for companies – if you have purely independent individuals who have no understanding of the sectors, then they cannot bring anything to you. And quite frankly the financial investors are just as conflicted as the corporate investors. If you look at their portfolios and things like that, then I think that it becomes a behavioural modification. The other thing which I think has changed is that if you go back to 20 years ago, the people who ended up on the corporate venture side were either one cycle away from retirement or for some reason they could not be exited from the organisation – they were not senior leadership, it was a dead end. [Laughter] My point is that what has changed is that you actually have very senior executives who carry weight in the organisation who have the gravitas and the maturity to understand when do they have to be forceful Board members and when you have to accuse yourself. That is a big change.
Neil Foster: So the next generation – it is now a better career move? Is that what you are saying internally to organisations? They have access?
Geoff Duyk: I think that it is people who actually look at venturing as a path – as a career path or as a choice, right? It is a classic example that before retirement executives line up their network of pro bono activities or Boards to be on. I think that along the way, what is important is that, as a corporate investor, especially in the areas that are strategic to your business? It is very difficult – and we run into this all of the time – to be restrained and to try to play fair. Just because you can demand and extract unfair terms, you should not. We have been guilty of some of those, which makes it very difficult, doesn’t it? That is why I asked the question, earlier, to the panel.
Neil Foster: So the motivations for corporate venturing might be financial return but more pressing, very often, will be access to innovation, open innovation being the key which people have been talking about: access to intellectual property, access to people. With all of those – and you might be the buyer of the business at the end – there are a number of conflicts there, so how do you deal, for example, with intellectual property? At the Tech Scout event, which was held yesterday, we heard from one of the panellists that if you do not want to give full access to your intellectual property, as a small company with a very large company, then the very large company was saying, ‘I don’t want to talk to you anymore.’ Is that the fair approach?
Geoff Duyk: It is, and it is a conflict, because it is a Catch-22 situation. Earlier on, to have due diligence, you had to have enough information but you don’t want to get too much information in case it does not happen. So, sometimes we have to go so far as to firewall the discussions. You get an expert within a company who has a due diligence discussion but who is then fire walled from the potential stakeholders internally. Sooner or later, it has to be an open discussion – I think that somebody made this comment earlier – it has to be an open collaboration. In order for us to add value beyond just the equity and funding, you do need to get deeply now to the point that you can actually add value.
Mike Brown: I also think that the entrepreneurs and the non-strategic investors have to be much more sophisticated. I think that companies get into trouble when you are doing a straight equity deal, but they give other rights that do not necessarily get other things, so I think that there is a level of sophistication.
Neil Foster: What sort of other rights?
Mike Brown: Things like rights of first refusal, exclusivity.
Neil Foster: What would that exclusivity be over?
Mike Brown: For acquisitions, matching rights, rights of certain technologies and things like that which other preferred shareholders don’t have. You might see that in a corporate development deal where you have certain rights in the context of that corporate development deal but those individuals are usually paying a premium to buy the stock in the company and it is usually a different class of stock so you are actually exchanging some value. But if you are pari passu with the rest of the investors, then you cannot have different rights. Sometimes companies give away those rights and that is why I am saying that part of accommodating to this evolving ecosystem means that people have to understand what the rules of the game are and where the boundary conditions seem to be, and people have to be fairly sophisticated. I have no problem asking a corporate group to get out the room because you are doing an M&A, and most groups don’t object to doing that and I think that people understand it.
Bernhard Mohr: I think that it is important before you join a company just to manage expectations properly, to line out quite clearly why you are doing this, what your expectations are, how you run this and really to align objectives. They are not to get in and all of a sudden have a discussion on some right – whatever this means – which has not been discussed before. I think that it is essential to set the scene, agree on everything and to try think ahead to what could happen, how we do this, whether you can agree on it. There will still be a great deal of conflict, as everyone knows, it will be a very bumpy road to the exit, but I think that you should at least try to predict what could happen and align on the basics. Once you have this alignment, you will have a good start and this is how we try to do it.
Davorin Kuchan: There are some new issues. There are times when you will have a separate corporate venture group but then the company will have a commercial relationship with the parent and now you are in three party situation: the corporate venture group is to distinct to some extent, it has different relationships with the company and so there are other things that you have to match.
Geoff Duyk: But to go back to your original question, this is where the value is of a sophisticated group which actually knows how to manage the multiple entities and the multiple objections and manages the deal instructions well, both the technology perspective, from the business side and from the IP side. That way you enable the company to be a successful player and to be able to get follow-on financing. If you don’t and you mess up on any of these directions then you might have this orphan out there: it is solely dependent on you that you cannot get a syndicate, any kind of financing, in the follow on rounds which would mean that you would basically be killing the company at that point – smothering them to death.
Neil Foster: So if in corporate venturing, very often the motivation, Mike, is access to smart new people, innovation, new markets etc., and new technologies, then why is it that large companies are so bad at innovation?
Mike Brown: Why is that large companies are bad at innovation? You know I think that a great deal of it relates to how you deploy innovation and/or improper personalities and hiring and whoever is in the organisation. I left Virgin to go and work for AOL so it was a different thing, but one thing that I learned was the Virgin’s interview process and hiring was as absurd as ridiculous as any of these other Google or Apple processes, or whoever you hear about. Largely, they run a structural organisation which is very flat and fairly malleable and streamlined from the sense of innovation in that you can basically be a junior person and have access to the investment advisory committee of Virgin group within a pretty short period, if a new idea or a new thought comes up. I just don’t think that is the case at AOL: there is a tremendous amount of structure and there are silos and that limits the amount of innovation or collaboration that you can possibly deploy.
Neil Foster: Bernhard?
Bernhard Mohr: I would challenge this. I would not say that large corporate companies are bad at innovation. I think it is a specific type of innovation, in most cases, incremental innovations which work with existing products. In their core areas of business, I think that corporate companies are great. To further develop products, and if we follow what David said, taking the example of P&G, just to take outside innovation into their silos and then to develop it and bring it to completely new innovations, I think that corporates are great at doing this, but when it comes to thinking outside the box, I think this is where corporates lack the intellectual freedom.
I think that there is one simple thing – you have seen the P&G bar: this is probably 1% of the research that is out there, so there are 99% more small prints out there, so how could you claim that you know everything, even if you are Procter & Gamble and even if you are biggest player in the industry, then there are still other people out there. I think it is a combination of those – of being very good in incremental innovation and taking things to the market but also not neglecting the rest of the world which might also have brilliant ideas. This is why we are doing this. This is why we are saying, ‘We are a small company, we dominate our core areas which are very limited and this is why we want to participate in this industry, where we think that we can take this and use it and help them to grow in our areas.’ This is our approach. Corporates are good, but not that good.
Geoff Duyk: I would add two things: one the greatest opportunities, from a private equity point of view, the best deals we have done is actually spinning out innovation from a large companies. Large companies are actually very good at starting stuff. I think that you get in some of the structural issues in terms of how to get it to the next step. In fact, I think that is a great opportunity for all of us. Even doing it as a joint venture with a larger company and a separate capital structure under different rules, is an enormous opportunity, because for example the renewal space has internal R&D in this area, and so does every major company. For either business cycle reasons or P&O reasons or structural reasons, they cannot get out. The other thing to remember is that most of these really disruptive businesses are disruptive because of their business model, not because of the underlying technology. Google and search was not a new idea, it was Google which figured out this pay per click and that is how they went through and it went from there.
Often, the way that companies become disruptive is when they find a way to disintermediate or restructure a market. IBM spent more money, I think, on the PC than the entire Silicon Valley, but they were trying to back-integrate it into their model of how to sell computers, as opposed to reinventing the model. That is why larger companies get caught, because it is an existential act of totally re-structuring the underlying business model, and sometimes when new companies are forced to commercialise themselves have to take a tack that you just could not do, because of the inertia within a large organisation.
Neil Foster: Who has questions from the floor, we have another ten minutes.
Davorin Kuchan: I have another comment to add here: in addition to large companies being structured around the business units which are really designed to be operationally effective, they are just great engines for producing products, cranking them out, certain profit margins, doing some incremental innovation – that is obviously why – because they are not designed to be innovative.
The other thing is – and I was in seven start ups before I joined TI, in fact my last one was by TI, so I had been an entrepreneur and started a company before. On some very basic level – and nobody really talks about it – it is a risk profile on a personal level. I think that people are either comfortable or not. Some of us are hunters, and some of us are farmers, right? Some people like the rush and the risk and they do it, some people like to have a consistent, steady pay cheque through a corporate environment. I think that a risk profile really determines whether you are an entrepreneur, whether you take the risk, or you are comfortable in a more structured, safe environment that is more predictable and which is stable.
Geoff Duyk: Are you more afraid of failing or succeeding?
Davorin Kuchan: Yes, if you look a venture model, then Silicon Valley is designed on risk rather than on failure.
Neil Foster: Are there any questions from the floor? [No questions] While we are thinking: one of the issues and I don’t know if Jim has yet written about this and I might have missed it, but one of the outcomes – when a private equity fund invest in something it is a 10-year fund, and there is an outcome at the end of it and they tend not to be the buyer at the end of that, they tend to be the seller – they are looking for an exit – they float it and they sell it. What is the outcome for the company which has a corporate venture backer, rather than a traditional private equity fund?
Davorin Kuchan: In our case, we always look for the possibility of acquiring licence. We always look at it from the perspective of whether this could become a product for TI? Could we commercialise it? It has to fit into one of the business units: could we adopt it, could we take it on and commercialise it?
Neil Foster: So could you acquire the company?
Davorin Kuchan: We always look at it that way, because if that is not the case then it is probably beyond the scope of our comfort level – it is too broad or it is outside in some way.
Geoff Duyk: We look at it a couple of ways: you could sell to a strategic, you could sell to the public market, but if you think about a traditional joint venture in the industry then two corporate partners want the same thing: they want an equity stake in the profits of the enterprise. We spin things out sometimes and do joint ventures with a large company in the understanding that they are going to buy from us. We are providing them with a source of capital, globalisation, maybe, a P&O relief – if you think about, then you get to do something off balance sheet if you are a public company. So there are many ways of structuring things to sell. Sometimes it is an advantage that we are not a buyer in this sense.
Neil Foster: So first, do you co-invest with corporate venturers? And if you do, is that one of your preferred routes and why would you do that?
Geoff Duyk: I think that in the business which we are in right now – which mostly in the industrial biotech, then given that it is $30 million to $100 million in the R&D side and another $200 million on the manufacturing side, and you need a great deal of capability then it does not work for venture, it does not work for growth equity, it does not work for traditional infrastructure type funds. Then the only groups are really going to be large corporate groups or development banks or sovereign wealth type funds, which have the right skill and scope and the timeline horizon. It is a question of who you are going to go with war with and you have to make sure that you are compatible and that is why it is increasingly a preference.
Neil Foster: Are there any questions? [No questions] So, Mike, why have AOL done no deals in Europe?
Mike Brown: Why have we done no deals in Europe? I am one man! A great deal of it is time. We set up the fund largely to be US focused opportunistic internationally and just because of our experience and knowledge over here, that is the first local area we will think more about. I am here once every other month now.
Neil Foster: Thanks, we have a question now.
Ross Conser: I am from Shell. This morning, in Justin’s key note, he talked about the possibility of mergence of new models for corporate venturing, partnerships between corporate venturing groups or partnering with incubators. I am interested in the panel’s thoughts about that, and whether that is a trend, whether it has some traction, or whether it is just a fad?
Geoff Duyk: I think that the partnership between corporate venturing groups and other investing group is rational. I think it is happening, whether we call it or not. I come out of industries where incubators have been popular – biotech and med-tech – and I think that by and large, those have not worked. I think that when they have worked, I think it is really because you have a group of really clever people who are good at doing prototyping, and that prototyping is predictive of a product. I think that incubators are really deferring the actual investment that you have to make. I think that people have put a great deal of money in universe academic collaborations. They feel like a low cost option but I think that if you look at the history, then I think that they have probably not been very effective in getting commercialisation. I think the most interesting one for us, in terms of new models, is the ability to get larger scale private equity funds to partner with something like your organisation to do something, where you can actually put the scale of capital in that matters. I think that is really something that is going to happen. I think that this partnership with the development banks, particularly in the emerging world, because you have no new source of debt for new technology, except for development banks, I think that is a new partnership model which is really, really important.
Davorin Kuchan: I think that as corporates we have a unique set of skills and offerings which don’t really come from the traditional finance side. So I think that the more that you, as a corporate understand and appreciate what you can bring to the table, to a relationship, especially to a private equity or a VC, then I think that is value added. They need you and you need them. So, the traditional model that the VCs just do their thing and you just show up with the money or not and stay out of the game – I think those days are over, especially in terms of the hardware side, these days, they need your skills and expertise. We have 8000 people on the street – sales people – so my distribution channel is very valuable to somebody. My manufacturing skills are valuable to somebody.
They need your skills, your expertise. We have 8,000 people on the street, salespeople, so my distribution channel is very valuable to somebody, my manufacturing skills are valuable to somebody. I think the key importance is to understand what you bring to the table, to a potential entrepreneur, and to your partner, and then collaborate what you do best.
James Mawson: So, one last comment, Geoff.
Geoff Duyk: I was going to say, in these particular tech-intensive, manufacture-intensive businesses the traditional venture model, the greater four theory model of, you get a good team, you get a good advisory board, you make a website and you sell to somebody, that’s not going to work, because I think this a market, particularly because we’re dealing with a lot of commodity-based products. It’s show-and-tell, you have to show up with a certain unit of economics and demonstrate that you have something that either on a performance basis or some other attribute is superior to the alternative in the market, that’s just a different game than the traditional venture capital game.
Neil Foster: So, time’s up for the panel. It just remains for me to thank the panel – Geoff, Mike, Bernhard and Daverin – thanks very much, everybody. [Applause]
James Mawson: I’ll add my thanks to Neil, for hosting a great panel, that was really interesting – I think it fitted with a number of themes before, particularly about development banks coming in and being able to work to take some of the larger scale start-ups in different areas that maybe some of the VCs are focussed in on social media. Thank you very much, guys, that was a truly great panel.