US-based chip-maker Texas Instruments (TI) has completed a strategic review of its corporate venturing programme which has extensively changed its approach in an effort to make sure it is more in synch with its business units.
The effort will now see the group’s corporate venturing unit focus on core markets for TI such as energy, solid state lighting, security and analytics and healthcare technology, as well as capabilities, such as various kinds of sensors, man-machine interaction, high voltage and cloud computing and communication. For more details on TI’s plan see the attached over-view.
Davorin Kuchan [pictured], a director of corporate venturing and innovation at TI, said the revamp follows a thorough-going examination by TI of how it approaches corporate venturing.
Kuchan said: “We have done venturing since 1996, usually at two extremes: on one hand using the fund of funds approach as an LP [limited partner] in venture funds and on the other hand M&A [mergers and acquisitions].
“Once we analysed historical data, we have basically realised there may be other options in between. There are many creative ways large semiconductor companies can add value to entrepreneurs besides buying the company or just being a source of capital.
He said: “We also found that if we brought an investment in house on pure investment merit, it often found it difficult to get mind-share of the business units, leading to the orphanage effect, where the entrepreneur could simply not get the time of day or interest in follow-on investments.”
Kuchan added: “We spent a good bit of time to make a comprehensive list of markets and target areas we are considering. We went to our business units and asked them about what are we doing, where are we going, what opportunities are we considering?
“With a dozen different business units there were many unrelated areas but we also found there was a some over-lap and redundancy with different business units focusing on same set of areas. This was really eye-opening. Once we put this list together it became a great tool in our organization as a list to put in front of people internally and ask: ‘How come this is on the list? Did we forget something else?’”
Kuchan added: “The best investments for TI will have three key criteria – First, they have potential of being integrated or marketed as a TI core product. The second is strong interest and support from one of our business units and the third is the large and growing market trend in line with our capabilities.”
Brad McManus, at Japan-based consumer electronics company Panasonic, said: “Panasonic’s corporate venturing experience mirrors TI’s, especially in the sense that while financial returns are required for the sustainability of the programme, the primary accomplishment of the group will be the contribution to strategic goals (e.g. business or technology innovation that leads to corporate growth).
“CVC [corporate venture capital] is a non-trivial activity that requires (a) corporate-wide (at mid-level and top management) buy-in, (b) effective strategies and methods for the venture partnering process, and (c) capable people to execute on the strategic and financial objectives. TI understands these challenges and is approaching them with an effective strategy.”