A member of the top 25 from the Global Corporate Venturing Powerlist
Many large corporations have made multiple efforts to develop their corporate venturing strategies. New York-listed industrial conglomerate General Electric (GE) has spent more than 20 years working on its own initiatives in this area.
Its latest iteration, GE Ventures has been regarded as an industry leader, viewed increasingly by other groups as a model of best practice. Its five main units are equity investing, which invests in and partners startups, GE Licensing, New Business Creation, Healthymagination and Catalyst, its new early-market development discipline. Sue Siegel heads GE Ventures as chief executive, reporting to GE vice-chairman Beth Comstock, who runs GE Business Innovations, developing new businesses, markets and service models.
GE Ventures launched in 2013 with a commitment from the parent company to invest $150m a year. However, while GE Ventures may appear to be a relatively young undertaking, its parent’s interest in the corporate venturing sphere goes back to 1995 through its GE Capital, equity division. From 2010, the conglomerate also made investments in promising energy technologies and disruptive business models through its Energy Ventures and $100m Ecomagination Innovation Challenge, GE’s first open innovation program. And GE joined forces in 2011 with New York-listed utility NRG Energy and oil major ConocoPhillips to form Energy Technology Ventures, which over the following four years funded 19 venture and growth-stage companies to accelerate emerging energy technology.
Under Siegel, GE Ventures has become the primary unit backing earlier-stage entrepreneurs. Siegel remarked at the Global Corporate Venturing and Innovation Summit in California in January: “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. 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.”
Nearly half her team – 19 of 40 listed on GE Ventures’ website after analysis by Global Corporate Venturing – were internal moves from GE. Siegel herself joined GE from venture capital firm Mohr Davidow Ventures along with partners Marianne Wu, Alex De Winter and Rowan Chapman, who was named one of Global Corporate Venturing’s Rising Stars in January.
Siegel sits on the board of US trade body the National Venture Capital Association as one of two corporate venturing representatives, the other being Lisa Lambert from Intel Capital. Her background was in healthcare investing for VC firm Mohr Davidow Ventures from 2007 and a career in the industry stretching back 30 years to 1985 at chemicals company DuPont and Bio-Rad Laboratories, then later as president of both Affymetrix and Amersham (acquired by GE) and before that as a student in Boston and Puerto Rico. This was a time at the dawn of medical genetics and biotech industries and venture investing as Kleiner Perkins Caufield & Byers had become the first VC firm to set up a life sciences group a year earlier in 1984, after it backed the first biotech, Genentech, founded in 1976.
Now, the sights and tools able to be used have broadened. In a profile published in March by GCV, Siegel referred to the GE Ventures platform as a business toolkit – a multi-pronged approach aimed at accessing innovation. This toolkit consists of traditional corporate venture capital (CVC) investing, new business creation, licensing and early market development practices. She said five new businesses had been created over the past 18 months through New Business Creation, a practice area led by Risa Stack. Add to this toolkit Catalyst, an early market development practice that put in place “a discipline that helps identify and develop collaborations with leading scientist entrepreneurs creating breakthroughs that are market disruptors and could be the next big thing”, as Siegel said.
Among these new business creations has been Evidation Health, a digital healthcare company using predictive analytics to improve patient outcomes. Evidation is the result of a collaboration between GE Ventures and Stanford Health Care, the university hospital of Stanford University.
Other startups being created are Current, which aims to provide a sustainable energy ecosystem, and GE Fuel Cells, which has developed fuel cell technology that uses stainless steel instead of platinum and rare metals to reduce costs and increase efficiency.
Siegel also pointed to the Healthymagination platform, which works on catalysing solutions for major global health challenges. The HealthyCities initiative and brain health efforts are two examples. Siegel added that “as a CVC, we are being asked to expand our focus to move beyond the role of ‘tech scout’ and equity investor” in the quest for future growth. She affirmed that “GE Ventures has expanded GE’s access to the innovation ecosystem, its technologies, new business models and practices, and the incredible entrepreneurs that power them”.
And GE Ventures has set up its Edge program under Lisa Coca, managing director of corporate venture investments and commercial development at GE Ventures, to provide what Siegel said was support for “our portfolio companies through what we can bring to their growth and development by providing access to our research and development experts, our distribution channels, our worldwide footprint and our regulatory and policy expertise. We have really fuelled this effort by also offering leadership educational programs at our Crotonville campus, with a curriculum ranging from leadership skills, hiring to marketing, and the art of storytelling, geared at enhancing entrepreneurs’ development”.
Corporate venture capital investments “aimed at transforming industries and generating meaningful returns, might require more capital or global access than what a financial VC might be interested in doing”. Siegel also emphasised the importance of collaboration among players in the field. “Corporates understand that innovation is broad and diverse, and that we cannot do it alone. Partnerships are key and GE welcomes partners in the growth journey.”
To date, GE Ventures has inked more than 100 equity deals, technology and commercial collaborations across its five focus areas – software and analytics, healthcare, energy, advanced manufacturing and corporate productivity and operational efficiencies.
In terms of investment trends, Siegel said: “Everything is going digital in every industry. Everything will be connected via the cloud. Data is the new currency. Business models that are established in the tech vertical will be widespread into other verticals such as healthcare, energy and in oil and gas, to name just a few.”
Siegel said: “On the financial side, SolarEdge had a successful IPO last year [raising $126m in its Nasdaq flotation in March 2015]. On the strategic side, Rethink Robotics products are being used in a number of our businesses, while other investments are helping us optimise our manufacturing processes. We have also seen big wins in our licensing division, such as our PFS [potassium fluorosilicate] program [using red phosphor in light-emitting diodes], which identified non-core intellectual property in one of our businesses to enable great growth through both licences and supply.”
US-based energy management company Opower was previously the biggest IPO exit from a GE portfolio company, raising $116m in proceeds in 2014. GE first invested in the company when it won the group’s Ecomagination Challenge in 2010, splitting a total of $55m with 11 other winners. GE held less than 5% in Opower.
GE Ventures, however, has not been directly responsible for all investments since inception. In 2013, the company invested $104m in Pivotal, a spinout of data services provider EMC/VMWare in return for a 10% stake. That deal was made by the GE software centre’s business development team and, according to an unnamed insider, “since it was such a large deal, it is not considered GE Ventures for the purpose of budget, but it went through the same channels”.
GE Ventures, therefore, is increasingly been seen as an effective tool to drive the innovation and growth inside the parent. As Siegel said in a speech at the GCV Rising Stars awards in Sonoma, California, in January: “GE has given us, the GE Ventures team, a chance. We 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.”
General Electric’s investment activity since the beginning of 2015