In 2017, Bell Mason Group (BMG) and GCV launched the CVC Trends & Insights project, an annual qualitative research initiative designed to “get in front of the data”. The inaugural report capped a look at five years of explosive CVC growth, highlighting the professionalisation of CVC as a speciality practice with defined roles and compensation benchmarks, and the progressive acknowledgement of CVC as a mainstream contributor to corporate growth and innovation strategy.
In 2018, we look forward at how programs at various maturity levels are leveraging this mainstream positioning to accelerate end-to-end investing for impact, scale and sustainability, particularly in the face of a potential market correction, when historically many CVC programs have fallen victim to parent retrenchment. Throughout the year, BMG will be delving into key market trends and corporate venturing best practices through a series of interviews with practitioners from leading programs.
One key trend is elevation of the corporate venture business development (CVBD) and portfolio development function as a strategic capability for CVCs, and integration of this function with CVC investment processes to enhance portfolio financial and strategic impact. It seemed appropriate to kick off the series by talking to Lee Sessions, the veteran architect of the pioneering Intel Capital Portfolio Management program, who is currently breaking ground with Intel Capital’s newest and potentially transformative CVBD program.
Intel Capital is arguably the most successful and influential program in corporate venturing. What have been the keys to Intel Capital’s staying power and influence over the years?
Sessions: The consistent backing of Intel Corporation leadership over the years, through all economic cycles and under multiple CEOs, has been central to our continued evolution and success. In the 1980s and 1990s, CEO Andy Grove and Gordon Moore, then chairman of the board, boldly instilled the DNA of consistently investing in future growth through research, product development and factory construction, even during economic downturns, which was counterintuitive at the time in such a cyclical industry.
We are fortunate they applied the same approach to Intel Capital, helping us navigate the twists and turns of economic cycles and evolving corporate direction over the years. The keys to leading a great corporate venture firm are striking the right balance between strategic and financial impact, delivering value to the portfolio, and not straying from these objectives regardless of near-term disruption or distractions. Leaders build an organisation to deliver on this.
When Intel Capital started 25 years ago, our first president was Les Vadasz, who reported to Andy Grove. As an influential leader in the company, Les was able to nurture the organisation through its formative days and establish the initial processes and direction as a strategic investor. He developed a team of CVC leaders and established the cultural foundation of the organisation.
Intel Capital was established in 1991 to invest in strategically impactful and financially attractive companies. Les ensured deal terms focused on delivering mutual strategic value to Intel and our portfolio companies – “When the give and get is just money and ownership, then that deal does not go through.” Les also set the stage for the types of deals we engaged in, many of which were ecosystem building, to extend beyond what was then our core business, as well as market development and gap-filling investments. From the beginning, there was also a concerted focus on pathfinding investments that help Intel gain insights into new and potentially disruptive technologies and business models.
When many of our CVC counterparts disappeared following the internet bubble collapse, Intel Capital stayed the course and emerged with a reputation as a reliable partner. Intel Capital continued to learn and adapt, and over time created a global organisation that is responsive and attractive to entrepreneurs, delivers solid financial returns and delivers impactful strategic value to Intel.
Wendell Brooks, Intel Capital’s current president, regularly repeats his mantra about our investment philosophy, which permeates the organisation: “We invest only in companies where we can add or accelerate value.” Intel brings incredible resources to support portfolio company growth, which leads to better outcomes. Wendell reminds us: “We are paid to learn. Our portfolio companies provide insights that inform strategies. When we invest, we don’t look for companies that are completely aligned to current business unit strategy. Instead, we need to look further out to find disruptive new startups that will shape business in the future.”
Though each generation of Intel Capital leaders has had different styles, and faced different challenges, I sit back in amazement at the consistency of their direction – continue investing in attractive companies beyond the core of our business, add value to portfolio companies, and deliver impact and learning to Intel. I think Andy Grove and Gordon Moore would be pleased.
As one of the early leaders of Intel Capital’s CVBD program, which Intel calls “portfolio management”, what capabilities and skillsets do you see as essential in a mature and well-resourced CVBD function?
Sessions: One of our core values is “customer orientation”. We regularly look at how Intel Corporation can help each portfolio company. Viewed through this lens, we focus our efforts. Every investor talks to entrepreneurs about how to help their portfolio companies. But it takes more than talk. We put resources and expertise to work to ensure we deliver on our commitments, starting with a plan for how to best help a company from the time we close our initial investment.
There are several elements to delivering value beyond the cheque. First and foremost is the role of the individual investment professional on the deal. They leverage their expertise, training and network when working with the CEO and board. To support the investment professionals we have created a specialised team with unique skillsets and capabilities across multiple domains. The skills in this team have grown to include technical expertise, leadership and influence, multi-sector industry knowledge, as well as go-to-market acumen for startups.
This allows us to provide focused expertise and scale on certain activities, beyond the value driven by the investment professionals. For example, a talent management partner can quickly focus on the most effective recruiting strategies, staffing sources and compensation for key positions.
Early on, as we experimented with new ways to add value, we defined and resourced business development processes and built an organisation to help our portfolio companies with a systematic, scalable approach to gain new customers, leveraging Intel’s vast worldwide customer network of leading companies. Hiring the right people with the requisite skills and networks for these positions is essential.
The core of what we deliver through our Intel Capital Technology Days and our Intel Capital Global Summit is thousands of curated introductions worth millions of dollars in sales. The best business development professionals are able to navigate across several technical domains, understand the emerging technology interests and needs of Global 2000 chief innovation officers and chief technology officers, and connect them with the best solutions. They should have the ability to learn and track the technology and business value of dozens of startups.
I should mention that the needs of our customers and our portfolio companies and the solutions they require are constantly evolving. So adaptability, gravitas, discipline, excellent communication and execution skills all play a part.
This, in addition to technology expertise, business unit alignment, strategic guidance and transaction support, has helped our portfolio companies grow and attain successful outcomes. Over the years, we have enhanced and focused our value-add services, finding the best ways to tap into the technical expertise and business acumen of Intel, provide public relations and marketing support to elevate a start-up’s profile, and work with Intel’s global customers to help portfolio companies expand into new markets and geographies. Under the leadership of Tamiko Hutchinson, we continue to expand our offerings and deepen our collaboration with our portfolio companies.
Describe the vision for this new CVBD program and its primary goals.
Sessions: Wendell spelled out his vision late last year: “Given Intel Capital’s history and sustained success, we must take a leadership role in building a stronger CVC ecosystem for collaboration and co-investment. Corporate investors should be our strongest allies across technologies and business models. Working together, we can help our portfolio companies by delivering value beyond our investment, as well as finding new opportunities in emerging pathfinding areas.” He asked me and Bryan Wolf, vice-president, managing director and head of Intel Capital’s investment committee, to lead our CVC partnership efforts and execute this vision.
Our primary goal is to generate the most impact and best outcomes from the companies we invest in. We know the value beyond the cheque from Intel Capital is a differentiator for our portfolio companies. Increasingly, other CVCs also offer unique and complementary capabilities.
This is the right time to focus on this. In recent years, we have seen the rise and maturation of CVCs worldwide. More corporates are investing in more deals globally. Many have established business development and related practices for their portfolio companies. The deep domain expertise, global reach, brand visibility and deal execution support now offered by many CVCs delivers unrivalled and synergistic value beyond the money invested. With so much money chasing so few deals, rising valuations and super-sized funding rounds, money alone is not a differentiator.
Corporate investors and entrepreneurs benefit from a stronger and more collaborative CVC ecosystem, including faster fundraising for start-ups, increased dealflow among investors, and accelerated technology adoption and market success.
How are you approaching implementation of this new program?
Sessions: Bryan and I established goals and an initial process to assess the current landscape. We developed plans to prioritise our outreach and establish new and deeper relationships. We decided early on to keep the indicators simple and to minimise bureaucracy. There are no forms to sign, no secret handshake. Success is having more CVCs collaborating on dealflow, co-investing together, and ultimately adding value to portfolio companies.
We started by gathering feedback from our investment managers. They helped identify CVCs we have successfully invested with in the past, as well as CVCs who are active in sectors we are focused on. We then cross-referenced this with industry data on investment activity, plus references from portfolio CEOs who highlighted CVCs that have added value to their companies. This resulted in an initial list of nearly 100 CVCs.
Wendell formally launched this initiative at the GCV Summit in Monterey in January. Since then, we have conducted more than 70 joint meetings and continue to grow our network. As we work through meetings and deepen awareness of common interests, we are starting to identify opportunities to collaborate across new areas, and earlier in the investment process. As it becomes clear which of these relationships create the optimal value for our portfolio companies, we will focus on nurturing and developing those relationships in more depth. We are actively engaging potential collaborators, and also connecting CVCs with each other to strengthen complementary networks.
What have you learned so far? What do you look for in a good CVC partner?
Sessions: We are investing in this initiative because it is good for our entrepreneurs and good for the CVC industry. We all benefit when corporate investors work together and add more value to startups. There is a multiplier effect. We are also learning more about what other CVCs have to offer, what they really care about. It is great to see that many CVCs have put in place programs and professional resources to add value to their portfolio companies.
I like to look at this similarly to the way I engage my closest friends and my family members. There are close friends who call each other often and at any time. There are folks that always invite each other to gatherings or opportunities based on proximity or interest, but also cases where we know we need to catch up with a distant friend. And yes, there are those situations where several of us show up at the same party at the same time, look up, notice that we are both there and then later think: “I should have invited them”. Or vice versa.
We want more close friends and friends of mutual interest, and to be more intentional about the relationships we sustain and the value they bring to our portfolio companies. And we don’t want to bother people with things they don’t care about.
We have instances where great relationships already exist, but also many cases where co-investing occurred by happenstance rather than proactive outreach to bring the best investors together for a portfolio company. It has been tremendously valuable to learn from other CVCs and to work with our investment teams as they open up their networks to others. When our team members are in touch with their counterparts at other firms on a regular basis, we are finding new opportunities that otherwise may not have been top of mind.
Bryan and I are acting as catalysts, internally and externally, to initiate and extend a fabric of relationships leading to new opportunities for co-investment with other CVCs. I have been more outward facing, meeting CVCs, connecting them with the right dealmakers at Intel Capital. Since Bryan leads Intel Capital’s investment committee, he looks for opportunities to create CVC syndicates for new deals, as well as bring in new corporate investors who can help existing portfolio companies. Together, we are learning about the breadth of CVC investing interests and working to connect relevant parties with each other. Then we are getting out of the way.
Deal-sharing is fuelled by reciprocity, but someone needs to be the first mover. We are sharing deals in our pipeline and we are seeing some of the more engaged CVCs share new opportunities with us. The best CVC co-investors engage each other during the evaluation and diligence process, bringing each other in early and often, rather than waiting for a term sheet in the next round.
What is a good example of next-generation CVBD and CVC partnerships making strategic leverage and impact more tangible to portfolio companies, parent companies and partners?
Sessions: Earlier this year, we led an investment in Joby, alongside two other corporates, Jet Blue Ventures and Toyota AI Ventures. Investors included Allen & Company, AME Cloud Ventures, Ron Conway, Capricorn Investment Group, 8VC among others. We each bring different and complementary domain expertise to the company. I expect more opportunities like this where different industries co-invest to help startups scale with complementary expertise.
We have a growing number of portfolio company exits where Intel Capital successfully collaborated with other CVCs to generate exceptional value. Successful companies like Amplidata, acquired by Western Digital, recognise the value CVCs provide over a company’s lifecycle, and look to build a strong CVC investor base throughout, as opposed to doing a one-time strategic round.
I would like to collaborate with my colleagues at other CVCs to build more case studies and examples we can share, demonstrating complementary value-add across industries and sectors. Typically, most of us prefer to wait for an exit before declaring success, but we should see accelerated traction in the first one to two years of an investment. Imagine what we can do together building great companies with the resources we each provide.
What advice would you offer to new programs and leaders looking to accelerate portfolio commercial traction and strategic impact?
Sessions: A starting point is having the right mindset. Begin with the portfolio company. Think through what they need and how your CVC and parent company can help. The CVBD profession is beginning to mature. Portfolio services was once a unique offering. Now it is table stakes. We may have started an arms race, where we each up the ante in terms of the breadth, value and quality of services CVCs need to provide to compete for the best deals and to achieve the best outcomes for portfolio companies. But rather than competing against each other in a zero-sum game, we have an opportunity to form value-added syndicates with CVCs offering complementary expertise.
The practices, systems and means to helping portfolio companies vary widely and continue to evolve. It is important to continue to learn, evaluate and evolve your strategies. Step back and look at what you can tap into from your parent company that can add unique value for your portfolio companies. CVCs can improve their impact by getting to know fellow CVCs and their respective advantages, and co-investing with complementary CVCs to produce the best outcomes.
When I started leading the Intel Capital CVBD team, we focused on our portfolio companies. I don’t think we realised just how much impact we were having until we started tracking sales and other activities, and looking at how the resources of Intel and our efforts led to market acceleration, and then to exits.
Similarly, as we look at the value of smart syndication, I have a hunch the impact will be substantially greater than we imagine. I have been inspired by the insights of my colleagues in other industries, not just for the investments we can do together, or the potential for greater returns, but for the substantial impact we can have collectively for our companies and for the markets we serve. One said to me: “If we do this, we are going to save lives.” Who doesn’t want to co-invest in that?
