The secret sauce of corporate investing is creating opportunities for portfolio companies and parent company business units to collaborate. It may be launching a fully fledged joint business project, or it may simply be sharing technology or market knowledge. But these collaborations take corporate venturing into something beyond a simple financial transaction.
“The most successful organisations tap into the broader network beyond the corporate venture team, to benefit from the goodness that their larger corporation can provide. They’re able to really make an impact and integrate those new disruptive solutions into the fabric of the corporation,” said Lee Sessions former head of portfolio development at Intel Capital, chairing the recent GCV webinar Wiring the Corporation – Creating new pathways for disruptive innovation.
Creating these connections with multiple stakeholders across a large corporation is not easy, however. “There are often many players involved,” said Sessions, who was part of an Intel team that invested in more than 400 companies over 12 years. ”In most corporations, there are groups focused on M&A, R&D, various alliances or licensing. The challenge with this is understanding who’s doing what, and finding a way that you neither duplicate resources, or leave major gaps in the process.”
To be a good corporate investor, therefore, means being a champion networker and understanding the hidden currents of the corporate organisation.
Chad Bown, managing partner at at BP Ventures, and Nicole Lapointe, portfolio success lead at Capital One, shared advice on how to create those all-important internal connections.
Bown’s global team of 20 invests about $200m a year for the oil major, from seed up to even a recent series E round. It has 30 active investments.
Capital One Ventures, the investment arm of the financial services company, has two dozen people on the team, and a portfolio of some 70 companies. Around 60% of portfolio companies have engaged commercially with Capital One, at one point in time, Lapointe said.
Here are some of their most helpful tips on internal networking:
1. Create a business development function on the team
Many corporate investment teams are now hiring people who can specifically look after the development of the companies they have invested in, working alongside the investors who are putting together the deals.
BP Ventures is hiring a strategic development team like this.
“We currently wear two hats in our ventures team — we’re out chasing deals, putting together venture investments and sitting on the boards of those companies. And we’re also trying to deploy [those startup technologies] back in BP. It is too much to do, to be honest. And so, as part of our budget for this year, we decided to get a business development team, working very closely with us,” said Bown.
2. Build an internal network of champions
BP Ventures has built a network of what it calls “mavens”, or experts inside BP business units, who understand how the CVC unit works and act as liaisons and champions. This didn’t just evolve naturally – Bown and his team deliberately created the network.
“We went to each of those business units and engaged with the senior leadership,” says Bown. The CVC team explained that they had a budget that could be used to help the business unit accelerate its technology, and that they wanted a list of people who were interested in working with them. Executive vice presidents were generally happy to suggest names from which the investment team carefully selected a few.
“You need to make sure that you keep it somewhat tight. This is a tight knit group that you want to engage with a few times a month,” explained Bown. “Out of that we got a group across our business of 10 to 20 individuals that know about ventures and want to use our capital for their tech development.”
If you haven’t created a group like this, there are ways to tap into other pre-existing internal groups, says Lapointe.
“Unlike BP, we don’t have an internally built and incentivised network. But there is one key group that we’ve formed a tight relationship with over the past couple of years. That’s our sourcing and supplier management team,” she said. “They’re the first to receive any kind of request for information or for proposals. And so that’s been a great way for us to understand what’s coming in terms of strategic business needs.”
3. Internal networks create deal flow
These internal networks aren’t just good for getting buy-in and support. They can tip CVC teams onto the best deals too.
“Our best deal flow now comes internally,” said Bown. “It comes from those experts who understand what we’re doing, know the tech that we’re looking for, and are bringing opportunities to us.”
4. Startup collaboration comes in many forms
“There’s not always something to be done upfront. When we make an investment, sometimes it’s a wait-and-see: it’s bringing a company in, doing a series of demos, bringing some learnings into Capital One,” said Lapointe. “On the other hand, sometimes we’re investing at the same time as a commercial contract is closing with Capital One, and therefore, success looks different for that type of investment.”
BP Ventures has two different ways of looking at how a startup investment can bring value to the parent company, Bown said. Some startup businesses have a clear strategy — such as wanting to roll out 30,000 charging stations across the US. It is easy to see potential for commercial agreements here and how BP might benefit from having some influence over the final look of the product.
“But we’re also a venture capital team that looks 20 years into the future. In those scenarios, you can’t put in place a commercial agreement. It could be developing a hydrogen ecosystem, that’s maybe five to 10 years out,” said Bown. In these cases the value of the investment is in helping understand where the market and BP should be headed in the future.
Bown estimates that some 50% of startup deals are ones that are informing BP strategy and 50% are with businesses ready for a commercial agreement.
5. Consider paying for pilot projects to accelerate internal adoption of startup technology
Pilot projects are a key way that a corporation vets a startup technology and checks if a commercial agreement might make sense. But who should pay for the pilot project — the corporate investment team or the business unit?
This has been another recent area of change for BP Ventures. The team never previously paid for pilots.
“We’ve changed that this year. We actually saw an opportunity to start putting budget towards pilots,” said Bown. This is particularly useful for some of those early-stage technologies, like hydrogen, where a commercial project wouldn’t be feasible for years yet.
“We have a small part of our budget, less than 10%, that we’re going to put towards probably six or seven deployments this year, depending on the portfolio and what we invest in. I think it’ll be a positive and net positive in the long run,” Bown said.
Capital One Ventures does not pay for pilots, said Lapointe. But In-Q-Tel, the US defence investment fund, where Lapointe previously worked, had a different model.
“A lot of times they fund the company to provide some pilots or preferred pricing, things of that nature, in their development agreement. I think that’s a mechanism to really accelerate the timeline,” she said.
6. Make sure your parent corporation hears your success stories — and put hard numbers on this where you can.
Success makes it easier to get buy-in from colleagues.
“It’s been really important for us internally to be able to tell that story of strategic success and impact,” said Lapointe. Much of this is qualitative — for example, talking about learnings and cultural impact.
“We also think about a quantitative perspective — how many potential resources did the startup company save Capital One, did it save Capital One from deploying sprint teams when building something. Where we can we try and put a number to it,” she said.
Bown agreed that some measurement is helpful, especially for projects that won’t create commercial returns for years.
‘The venture lifecycle can be very long, if it takes 10 years to bring something new to the market. So you probably have some proxy indicators along the way.”
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Why every corporation needs a venture building programme — and how to do it well
February 8, 2023 at 5pm GMT.
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