The symposium unpanel breakout sessions on the first day provided a popular and lively forum for delegates to have their say. Expert facilitators guided wide-ranging and stimulating discussions at 15 packed round tables, overseen by ringmaster Paul Morris, of UK Trade & Investment. Six facilitators were invited on stage on the second day to provide a 30-second snapshot of the good, the bad and the ugly. Here are some key highlights.
The unpanel Making spinouts work facilitated by Brian Kolonick, of Cleveland Clinic Innovations, identified talent as the biggest issue and concluded that challenges in raising pre-seed funding were less onerous than in the past. The group warned that you underestimate the importance of the inventor at your peril as you make or drive key decisions.
Dominique Mégret, of Swisscom Ventures, led the discussion Corporate venturers and internal business units: friends or foes? The diversity of corporate venturing structures was evident as the group was divided on issues such as whether an investment required pre-approval from an internal business sponsor, and internal reporting lines – where chief technology officers exceeded chief financial officers and others. There was full agreement on the need to spend quality face-to-face time with key internal stakeholders at least once every six months. No blood was spilled and the group hedged its bets by declaring corporate venturers and internal business units both friends and foes.
How can a relatively small corporate venturing team cover major markets? This question was considered in the session facilitated by Fabien Mondini, of Sabic Ventures. Deal flow sourcing was seen as a key challenge, with external resources such as consultants or limited partner and general partner positions seen as options to supplement the internal team. Lack of focus was considered potentially fatal. Portfolio management was flagged as the other reason for managers of small corporate venturing teams to spend restless nights. One solution is to have the corporate pension fund manage investments that are no longer strategic.
onathan Pulitzer, of GE Ventures, coordinated a popular discussion – How do you measure success in corporate venturing? The group agreed this was critical but challenging, as the measurement of strategic-focused success tends to be subjective. There was agreement that over the long term the VC unit should produce financial returns and that value creation for the company was the challenging but desirable goal. The group posited that clear, quantifiable goals were essential, around which success metrics should be built. Without these, you will not be around long enough to measure anything meaningful.
A passionate mob descended on the round table How can corporate VCs interact most effectively with independent VC funds?, facilitated by Gina Domanig, of Emerald Technology Ventures. Follow-on financing was seen as a critical test, where corporate venturers should include follow-on financing in their initial investment approval request. Independent VCs should implement draconian terms on those that do not follow on. The logic expressed was that this would give the corporate venturers internal leverage to get approval – or maybe just get themselves fired. The corporate venturer should closely track strategic value and ensure resources are available as required to support the portfolio company in the desired direction.
Steve Smith, of PwC, helped a group of enthusiasts to overcome their timidity in Everything you always wanted to know about tax and CVC, but were afraid to ask. Knowing when to get tax advice was considered a real challenge, and getting it wrong could be costly. A corporate venturer should have clarity over its fund structure and its deal structuring. Carried interest is attractive to corporate venturing personnel and can be cost effective for the corporate. Convincing senior management, however, has proven challenging. The group concluded that flexibility and simplicity were virtues – and when in doubt, consult your tax expert.
Understanding the language of the entrepreneur was a discussion facilitated by Davorin Kuchan, of Sparkling Logic, and Sara Murray, of Buddi. The group was adamant that the corporate venturing should define its own objectives and be transparent in communicating these to the entrepreneur. They also recognised that warp speed is not usually available in the corporate venturing toolbox, so upfront realistic time frames should be communicated. The group also endeared themselves to the law firms, suggesting that external attorneys could be used for term sheets or other specific topics such as intellectual property and mergers and acquisitions.
Michael Fox, of Massachusetts Institute of Technology (MIT), led an enthusiastic discussion on the challenge of How do corporations monetise innovation? The challenge of tying compensation to success was considered a major impediment. Middle management and its desire to maintain the status quo was an obstacle that must be overcome. Suggested solutions included defining and promoting a clear investment thesis, focusing on monetising as opposed to management, and knowing when to be active and when more passive. It was suggested that the agility of a mountain goat would also be helpful.
Forging effective links between corporates and startups was a popular discussion, led by Bindi Karia, of Silicon Valley Bank. The group donned their chef hats to create a recipe for success. Key ingredients included ensuring the contact person in the corporate has relevant experience of startups, adapting the speed of communication, sensitivity to one another’s needs, and timing of initial commitment from the corporate. Add to this a dash of agreed budgets, a clear mandate and a pinch of effective internal networks and the corporate-startup soufflé is close to perfection
Boris Battistini, of Metellus, and Martin Haemmig, of CeTIM, facilitated the topical discussion How do you tackle emerging markets? Staging the entry to emerging markets was considered critical, suggesting that a corporate might progress through fund investments to co-investments to leading deals. Corporate venturers should recognise the value of adapting to local markets and trends over and above the value of technology in itself. Some corporate venturers may consider the absence of a local VC market a limiting factor. The group suggested that for the bold, and crazy, this was, in fact, an opportunity.
Impact investing: why and how should corporates do it? If you do not know the answer, you should have attended the unpanel, ably facilitated by Amanda Feldman and Charmian Love, of Volans. You would have understood that the spectrum of impact investing ranges from philanthropy to finance-first investing – it even includes bonds. Further, you would have been enlightened on the need for non-financial incentives aligned with non-financial returns. And if you area government employee in the UK, France, Germany and several other countries, you now know that your governmentis backing impact investing initiatives, not forgetting the G8 impact investment taskforce.
Megan Muir, of DLA Piper, led the round table discussion Deal terms: the good, the bad and the ugly. Significant changes in deal terms are being seen at both very early-stage and very late-stage deals. Angels – presumably good rather than bad or ugly – and some traditional VCs – probably bad or ugly – are doing tiny $25,000 to $50,000 convertible deals. These are not technically debt – no interest or obligation to repay. Later-stage valuations are now frequently exceeding those in the public markets, potentially an issue if and when those companies need to raise further rounds in the future. Hedge funds, private equity funds and mutual funds are also now active in later-stage deals. Whether these are good, bad or ugly is a matter of opinion.
If you wanted to know How do you quickly develop competence within your VC unit? then the unpanel facilitated by Erik Sebusch, of Mercer, was the place to be. The group identified three critical elements. Be brutally honest about the purpose and objective of your corporate venturing unit, structure it accordingly and ensure buy-in from all stakeholders. Next, build a database that tracks returns, contacts, pipeline and value propositions. Third, invest for early success, and balance internal and external hires.
Tom Whitehouse, of the London Environmental Investment Forum, led the discussion External communications for corporate VCs and innovators. The unpanel advised that target audiences must be clearly defined and shared with the parent company. The next step is to generate appropriate content, such as Q&A, opinions and video – and get the parent to sign off on this. Then create communities around your VCs. All that remains is for you to go out and tell, shout or sing your story.
The round table Creating a Silicon Valley strategy for international corporates was facilitated by Rodrigo Sanchez Servitje, of Bridge 37 Ventures. This is a reputation game, the group said – and you had better put your money where your mouth is. That requires creating a network and adding value. Silicon Valley key strengths are in providing deal flow and additional capital. But building a network is not easy, so hire people with an existing network and track record.