If imitation is the sincerest form of flattery, then IBM paid GE Ventures the highest compliment earlier this year when it hired George Ugras as the new head of IBM Ventures.
In deciding to recruit a leading venture capitalist – Ugras’s previous role was as general partner and adviser at Frost Data Capital – to replace Claudia Fan Munce, IBM followed the example of GE, which in 2013 lured Sue Siegel from Mohr Davidow Ventures to run its new GE Ventures unit.
Given Siegel’s achievements over the past three years, it is hardly surprising that any corporate venturing operation would look to GE’s example and then find the approach relevant to their organisation’s cultural and strategic priorities. Aside from the positive financial and strategic impact of the many investments GE Ventures has made since it was formed, Siegel has built a powerful, effective team while at the same time driving cultural change inside GE as a whole.
Transplanting a top venture capitalist into a major corporation’s venturing unit is unlikely to prove a straightforward process. But it is another mark of Siegel’s success to date that she has overcome the challenges she has faced in making her vision for GE Ventures fit with the wider organisational goals.
Although GE Ventures is relatively new, GE has a long history of investment in innovation in sectors such as healthcare, energy and aviation through various business units. Speaking at the Global Corporate Venturing & Innovation Summit in California in January, Siegel said GE Ventures had become the corporation’s main conduit for backing early-stage entrepreneurs.
“We have helped do this through the infusion of talent from the VC and entrepreneurial world. These are among a few things that we have done and yet there is much more to do both internally and externally,” she said.
“The GE Ventures team started in 2013, so we are still under three years old. We had to earn our place in the fabric of the company, and we have to keep doing that every day.
“Starting a VC discipline is tough as we are a cost centre versus a profit centre during the early days when your portfolio is in the J curve. During that time, it is especially important to prove your value beyond financial returns.”
GE Ventures has managed to demonstrate its worth, Siegel says, by creating startups through its New Business Creation program as well as by generating value from IP and technology transfer via its licensing practice.
“We earn our stripes by being engaged in corporate strategy for our business units, educating on new business models, emerging technology trends, and working to always sense emerging trends.”
Siegel also has a strong belief in the virtuous circle whereby corporate venture capitalists who focus on the success of their investee companies can benefit the entire industry.
“We need to be mindful of our role in the innovation ecosystem, a role we all claim that brings more than just money,” she said. “Our actions need to back up our claims – we must continue to drive towards thinking ‘What can I or my company do to make these startups successful?’ versus, ‘What can this startup do for me?’
“By behaving consistently with our claims, all boats rise in our CVC segment and we will become a preferred and sought-after partner to startups and VC firms alike.”
To this end, GE runs a program called Edge which supports its portfolio companies by giving them access to research and developments experts, distribution channels, and regulatory and policy expertise within the wider business. GE Ventures also runs a leadership education program for the entrepreneurs it partners with.
Since its inception, GE Ventures has closed more than 100 equity deals or technology and commercial collaborations across ﬁve focus areas – software and analytics, healthcare, energy, advanced manufacturing, and corporate productivity and operational efficiencies. Notable investments include Omada Health, a health-analysis service, Kwantera, which works in the energy wholesale market, and drone hardware and software business Airware.
GE Ventures has also created a number of startups, for example Evidation Health, a digital healthcare company that GE founded in collaboration with Stanford Health Care, and sustainable energy company Current.
In a bid to get in on the ground floor when it comes to identifying the right early-stage businesses to collaborate with, GE Ventures has also signed an agreement with crowdfunding platform OurCrowd that gives GE the right to co-invest in select early-stage companies operating in the healthcare, energy, software and advanced manufacturing sectors.
But for Siegel, the value of businesses such as GE Ventures goes beyond mere investing. “I believe our benefit to our respective corporations can be seen in the strategic returns we generate,” she says.
“Our efforts bring optionality to our parent company in seeing the future through the entrepreneurs’ lens, learning new business models and how they complement new technologies to create value, and derisking corporate strategic learning by being able to do so with best-in-class VCs and entrepreneurs, while leveraging OPM [other people’s money] and driving financial returns.”