The first day of the Global Corporate Venturing Symposium 2019 covered topics ranging from frontier technologies and risk-reward to the launch of Global Impact Venturing. The ninth annual symposium in London got under way with opening remarks from GCV founder and editor-in-chief James Mawson and chief operating officer Tim Lafferty.
Co-chairing this year’s gathering were BP Ventures vice-president David Gilmour and Jacqueline LeSage Krause, managing director of Munich Re’s corporate venturing unit, Munich Re/HSB Ventures, who spoke about the principal theme of this year’s symposium – facing up to potential “turbulence” in the industry. They identified the potential downsides from the perspective of their companies. As LeSage Krause remarked, “risk is everywhere in this world”.
LeSage Krause and Gilmour concurred that it is vitally important that CVC units demonstrate professionalism to their parent companies. As Gilmour put it, C-suite executives must be convinced that corporate venturing strategy is based on sustainability, not vanity. If you cannot demonstrate value then you are at risk.
The symposium’s attention then turned to challenges facing frontier technologies such as artificial intelligence (AI), and the need for the sector to continue innovating in both its investment strategy and product development.
Neil Foster, partner for corporate M&A and private equity at international law firm Baker Botts, chaired a panel that included Stuart Chapman, chief operating officer of Draper Esprit, and Bindi Karia, a former Microsoft innovation specialist and outgoing adviser to the EU’s European Innovation Council.
Bruno Massioner, chief executive of AI technology developer AI Brain, also took part, urging the industry to build more intelligent AI technologies capable of anticipating the user’s needs rather than merely responding to programming.
From a funding standpoint, Karia suggested prospective inventors in frontier tech could be put off by tick-box barriers to equity and grant funding, and argued investors were better off with vocational talent assessments such as interviews.
Mawson returned to the stage to moderate a panel on risk, return and collaboration featuring Jaidev Shergill, senior vice-president of Capital One Ventures and Scott Lenet, founding president of VC firm and corporate fund manager Touchdown Ventures.
Opinion was divided on the immediate prospect of an economic downturn. Despite cooling international trade ties and regulatory uncertainties, speakers seemed more bullish than those polled at January’s GCV summit in California. However Shergill warned a slump within the next year remained a distinct possibility.
William Taranto, president of Merck & Co’s $500m Global Health Innovation (GHI) Fund, spoke to Heidi Mason, co-founder of consultancy Bell Mason Group, about his experiences driving GHI forward over the past decade and in the wider healthcare corporate venturing realm.
Merck had needed convincing of Taranto’s game plan, but the strategy of GHI, which operates as a independent vehicle, soon took shape with the deployment of strategic innovation tools that kickstarted a period of rapid expansion between 2013 and 2015. Data was crucial for healthcare’s path forward, Taranto observed, with innovative products marrying informational tools to health data and existing health IT technology to hit two key industry targets at once – improved patient outcomes and lower healthcare costs.
A talk on the corporate venturer’s role as a value-added investor followed with insights from Ray Singh, managing director of JetBlue Technology Ventures, the corporate venturing vehicle for airline operator JetBlue, that was moderated by Ken Gatz, CEO of innovation platform Proseeder.
Singh compared the current proliferation of CVC units to the explosion of life that took place on Earth during prehistory. To bring value, however, corporate venturers had to tackle distrust from others wary of the acquisition motive, lest they be prevented from entering lucrative investment rounds. He echoed Gimour’s call for a business-like approach. As corporate venturing was a line of business for the corporate parent, he argued, it must be treated in the same way, though he also noted there were different approaches to measuring that performance.
Later, Max Fowinkel and William Janeway, respectively managing director and special limited partner at private equity firm Warburg Pincus, talked about the implications of macroeconomic disturbances for CVC funds.
Janeway claimed exits now came more often through corporate acquisitions rather than public flotations, facilitating strategic value for startups from CVC scouting operations outside the motive of financial returns. Fowinkel meanwhile cited a perception that funding would always be available for the increasing tendency of companies to postpone profitability for long periods, and Janeway stressed that a company must have a plan to achieve positive cashflow as a barrier to potential issues such as rising interest rates.
Thomas Zehnder of VC firm BlueOcean Ventures and Ami Ben David, managing partner of blockchain-powered fund manager Spice Venture Capital, touted blockchain’s potential in facilitating ownership of value, though the regulatory framework emerging for tokenised assets was a key consideration.
Blockchain technology had the potential to add a liquidity element to venture capital, and Zehnder said he was looking to make the process of getting investors on board more efficient. Ben David cited the potential it had to make the value of asset and securities ownership more secure.
After lunch, proceedings moved to an innovation showcase on disruptive mobility and energy applications that was overseen by GCV adviser on energy and mobility Tom Whitehouse. Representatives of four CVC-backed businesses gave an overview of the latest technological trends after being introduced by members of the venturing vehicles that backed them.
David Gilmour, vice-president of business development at BP Technology Ventures, made the case for electric powertrain supplier Lightning Systems; Tony Cannestra, director of corporate ventures for automotive component maker Denso, introduced conductive nanomaterial creator Canatu; Brian Schettler, managing director of Boeing HorizonX, introduced Mark Thomas, CEO of supersonic airplane engine developer Reaction Engines, and John Finney, founder of low-profile satellite terminal developer Isotropic Systems.
Soichi Kariyazono, chairman of trade association Japan Venture Capital Association (JVCA), featured in the penultimate session of day one, exploring trends in Japan’s corporate venturing ecosystem gleaned from a survey the JVCA conducted in partnership with GCV Analytics.
With venture funding on the rise in Japan, Kariyazono said the country’s corporates had seized the opportunity to mirror the transformational example set by the wider CVC community. He said the JVCA’s membership had doubled since 2015 alongside the significant growth of Japanese VC activity, in a country where corporates are the source of about half of investment. A lack of short-term returns may be a concern, but domestic corporates were increasingly seeking strategic benefits from their deals.
Mawson closed proceedings with Amanda Feldman and Charmian Love, co-founders of consulting firm Heliotropy, taking the wraps off the latest addition to Mawsonia’s family of publications, Global Impact Venturing.
GIV will report on impact investments that drive progress towards positive change globally, in areas ranging from sustainability to education and finance in developing nations, as corporates seek to support the UN’s Sustainable Development Goals.
Panellists Ademidun Edosomwan from Total Energy Ventures, Allie Burns from Village Capital and Martijn de Wever of Force Over Mass spoke about current investment trends in the space, before Clara Shen from Mars Wrigley Confectionery China and Andy Dewis of Schneider Electric discussed what impact investment looks like.
Feldman urged investors to strive for transparency in their impact-related portfolios, a call echoed by Mawson, who remarked: “It is about all of us coming together.”
The second day of the symposium featured discussions on implementing AI in deal-sourcing, hybrid CVC initiatives and a fireside chat with Tencent’s Jeffrey Li.
Josemaria Siota, director of research at the Spain-based IESE Business School, moderated the first panel, referencing an article he had written outlining the prejudices against corporate venturing. Julie Kainz, an investor at Salesforce Ventures, enterprise software producer Salesforce’s venturing unit, and Marc Rennard, president of Orange Digital Ventures, telecoms firm Orange’s investment arm, joined Siota to discuss how CVC units could manage their autonomy.
Kainz said that because customer success was the main concern for both Salesforce and Salesforce Ventures, having a common goal helped the unit “know our position as a venture fund”. Having been in a similar position, Rennard said the CVC’s role was to facilitate the relationship between startup and corporate, adding: “We are not forced to invest in companies just because of commercial relationships with Orange.”
Mark Muth, director of corporate venturing at auditing and consulting firm PwC, moderated a panel focusing on how direct investments in companies differed in strategic terms from indirect investing as a limited partner.
Muth was joined by Jacqueline LeSage Krause, managing director of reinsurance firm Munich Re’s Munich Re/HSB Ventures unit; Bernhard Mohr, managing director of Evonik Venture Capital, a subsidiary of chemical producer Evonik Industries; and Jeanne Bolger, vice-president of venture investments at CVC unit Johnson & Johnson Innovation–JJDC.
Bolger said indirect investments had yielded mixed results for Johnson & Johnson, while Mohr said investing in funds had constituted a useful lesson and dealflow-generating tool in the early days of the fund he manages. But LeSage-Krause noted that while there were opportunities that could be valuable to a corporate investor, she remained sceptical about the value of investing in traditional funds to learn and enhance dealflow.
On the next panel, Mark Wilson, principal at commercialisation consultancy Strategic Technology Bioconsulting, told attendees that CVCs were increasingly adopting hybrid fund models. He said the hybrid structure was emerging particularly from large pharmaceutical companies engaging with independent VCs, saying: “In many of these structures experimentation seems to be the dominant design and is used to bring together a vision of finance and decision-making.”
Shiva Dustdar, head of innovation finance advisory at the European Investment Bank, said a key issue was how CVC units and angel investors could come into these hybrid structures. Peter Cowley, president of European Business Angel Network, had previously set up a small corporate venturing unit for an engineering company, and said his main concern was the potential for misunderstanding between parties.
Later in the day, Gerald Schumann, partner at law firm DLA Piper, moderated a panel on balancing the differing interests of stakeholders in multi-corporate venture capital funds. The discussion included Dominique Mégret, head of Swisscom Ventures, the corporate venturing arm of telecoms firm Swisscom, Andrew Hinkly, managing partner of AP Ventures, the VC firm originally co-anchored by mining company Anglo American Platinum, and Samuli Sirén, founder and managing director of VC firm Redstone Capital.
Hinkly said that where purely strategic situations arose for profit-led VC funds with corporate backing, the best approach was to communicate the decision-making process to investors. Mégret added that it was crucial for a unit to find the correct balance between keeping contact with its parent company and maintaining independence from the corporate’s central financial motives. Sirén said it made sense to work with corporates through VC funds to aid with the process of amassing a portfolio with strategic value.
Trond Undheim, partner at VC firm Vidian Ventures, moderated a discussion on the future of work and the role of AI. Paul Jacquin, managing partner at Randstad Innovation Fund, an investment vehicle for human resources firm Randstad, said the easiest way to get to grips with the future of work was to hire millennials. He also said required skills should be assessed using AI to make hiring decisions based on data.
Leo Clancy, head of technology, consumer and business services at state-sponsored foreign investment agency IDA Ireland, agreed that millennials had more skin in the game and added that Ireland had to focus on retraining and staying agile as a solution to concerns about whether policy could keep up with the pace and extent of AI implementation. Bo Ilsoe, managing partner at NGP Capital, the VC firm spun off from communications technology provider Nokia, also pointed to AI success stories from around Europe.
In a fireside chat, Jeffrey Li, managing partner of Tencent Investment, a subsidiary of China-based internet group Tencent, explained that rather than acquiring or investing in companies as a get-rich-quick scheme, Tencent was trying to build an ecosystem of strong long-lasting partnerships.
Li told Michael Redding, managing director at Accenture Investments, an investment vehicle for consulting firm Accenture: “We are creating an ecosystem because whether it is gaming or mobile payments, we cannot run these business ourselves – it just not in our DNA. That is the way we provide the best service to the end user.”
Li said technology was a combination of personnel and capital, and he noted of the huge potential in retail, in particular the convergence of offline and online experience.
Kaloyan Andonov, a reporter and analyst for GCV Analytics, presented data showing that since 2011, deal sizes in corporate-backed rounds had risen across the board from seed-stage to series E and beyond.
Martin Haemmig, an adjunct professor at the Technical Centre for Mechanical Industry and the Glorad Centre for Global R&D and Innovation, showed data identifying China as the biggest destination for investment flowing out of the US, with 83 deals representing about 15% of the overall total. He also highlighted corporate venturing’s performance advantage over institutional VC-backed businesses according to certain metrics.
Global University Venturing editor Thierry Heles moderated a panel in which he spoke to professionals from four fusion energy technology companies to gauge the challenges involved in scaling a breakthrough technology. Panellists were Klaas de Boer, managing director at General Fusion, joined Nicholas Hawker and Jonathan Carling, respective CEOs of First Light Fusion and Tokamak Energy, and Jim Wilkinson, chief financial officer of university venture fund Oxford Sciences Innovation.
Boer said that although technology moved quickly at a multinational institution, it often stalled between stages. He also suggested that nimbleness differentiated the private sector from the public sector.
Carling added that competition in the private sector was also a benefit, while Wilkinson said: “Governments should be underwriting these projects. It is not the easiest route but that is the most feasible.”
Turning back to AI and how it can help corporate venturers improve deal pipelines and unearth investments at scale, Roberto Bonanzinga, co-founder and investment partner of venture capital firm InReach Ventures, said the biggest asset a firm had was data, not the amount of cash available.
Mawson closed the final day of the symposium by moderating a discussion on the impact financial technology developers were having on incumbent banks.