A cynic is a man who knows the price of everything and the value of nothing, writer Oscar Wilde famously quipped.
Arguably, this is a trap some in the venture and wider business community fall into when they write off corporate venturing, pointing to difficulties experienced by some companies which quickly retreat from opening up to external and internal innovation and taking minority stakes in third parties.
Yet, while many corporate venturing groups may struggle to achieve the glitzy results of a top 10 independent venture capital firm, in certain deals they provide some of the important ingredients to an entrepreneur’s success.
It appears to have been the case that corporations have delivered this additional value in the growth of Quantenna, a US-based chip developer for wireless data transmission (wi-fi) networks set up in 2006, which sealed a $79m round last week, with slightly more than half the money coming from Russian government-backed investment firm Rusnano, which was introduced to the deal by Bright Capital, the $350m corporate venturing unit of Russia-based internet conglomerate Ru-Com.
This round was over-subscribed and was an up-round, according to a Quantenna spokesman. The company projects its revenue, which is in the single digit millions, could rise as high as $35m this year and above $70m in 2013. The spokesman added: "We have plans to break-even by 2013 and could go public by 2014."
The company has reached the cusp of success after corporate venturing backing came in its third round of funding, and it had a top tier venture syndicate backing it. Dominique Mégret says the corporate venturing unit he heads, Swisscom Ventures, was able to co-lead this C round to back Quantenna in 2009, because its investment would provide links into the corporation that would be its first customer.
Mégret said: "We were the first corporate venture participant and we only came in because we had strategic insight, to be key partners of Quantenna. A normal VC [venture capital firm] would not have come in to this deal but they wanted to have us on board. They didn’t have the insight into what was going on in our labs, and so our contribution on the ground in understanding what the customer wanted was useful, which let us cooperate with the bigger guys who have the money [to invest in venture capital deals]." Swisscom Ventures was subsequently joined by Spain-based phone operator Telefónica’s corporate venturing unit, which backed Quantenna last year.
Swisscom Ventures was able to come into a promising investment alongside top tier VCs, such as Sequoia Capital and Venrock Associates, because the opportunities it offered the company rather than its limited pool of capital, according to Mégret.
If corporates investing in venture can play this role adeptly, with limited capital invested they can still get involved in venture capital deals of the highest quality. "The relationship is excellent between venture firms and corporate VCs if each can find their areas of strength and they do not step on each other toes," Mégret added.
The value corporate venturing can create is beginning to be recognised, even to a cynic.