After several decades of peaks and troughs, corporate venturers feel they are climbing up the slope of enlightenment.
Under research firm Gartner’s hype cycle theory, after a technology trigger comes a peak of inflated expectations then a trough of disillusionment, followed by the upward slope of enlightenment.
After several decades of peaks and troughs, corporate venturers feel they are climbing up the slope of enlightenment, according to Dominique Mégret, head of telecommunications firm Swisscom’s corporate venturing unit, Swisscom Ventures, at the Global Corporate Venturing (GCV) Symposium’s first day.
There are more corporate venturing units, with GCV tracking more than 1,500 and about a dozen launches per month (see the latest issue here), and these are increasingly active, with 801 doing a corporate venture capital (CVC) deal last year.
Doug Trafalet, managing director at data provider Pitchbook, at the GCV Symposium said CVCs so far this year (to 17 May) were involved in about 60% of all venture rounds, up from 45% last year. By number of deals, CVCs were in about 20% of deals this year, up by about a third from last year, Trafalet added.
These are heady figures, reflecting CVCs able to be stage-agnostic from early-stage to high-value, large, later-stage rounds, such as Toyota’s recent investment in taxi hailing app Uber or General Motors’ in peer Lyft.
It is also requiring CVCs to rethink their approach to how they partner with independent VCs and deal syndicates and bring collobarative ideas back to the parent corporations.
George Ugras, managing director at IBM Ventures, in a GCV Symposium discussion with former head and industry legend Claudia Fan Munce, said his focus was on crafting a “new playbook, CVC 3.0”. This was under development after the work by Sue Siegel, CEO of GE Ventures, and peers, such as Fan Munce, the first corporate venturer on the board of the US trade body National Venture Capital Association, in “redefining the conversation with VCs” after 2012 as the CVC 2.0 model.
The conversation has already been reset by some.
Jeffrey Li, the managing director of Tencent Investments who conducted about $5bn worth of equity deals in some 100 companies last year, took the stage at the GCV Symposium to talk about its parent company, China-based internet group Tencent.
Tencent’s corporate venturing efforts are currently handled by a team of nearly 40 people, all based in China, who have jointly invested more than $10bn in more than 300 companies in about five years (the value of its listed investments alone top $15bn).
The speed and scale of its investments took many delegates by surprise (Li was given the industry’ Person of the Year award for topping the GCV Powerlist 2016). However, while Tencent, and Chinese peers, such as Alibaba, remain outliers in terms of ambition, the general acknowledgement by the 440 attendees at the Symposium was that technology and business model changes were creating unprecedented disruption – hence the event’s lead theme of “view from the crow’s nest” that the industry was increasingly important to CEOs.
Ginni Rometty, CEO of IBM, said: “IBM Ventures is essential to how we engage entrepreneurs and developers who are building innovative applications and technologies for cognitive solutions and cloud platforms. I am delighted to have George [Ugras] leading our efforts to amplify this essential component of IBM’s strategy.”
Toby Lewis, Global Corporate Venturing’s chief analytics officer, at the Symposium introduced four other corporate venturers, including who were given seven and a half minutes each to convince the audience of their views on how corporate venturing units can deal with disruption.
Sue Siegel, CEO of conglomerate GE’s corporate venturing unit, GE Ventures, began the discussion with her argument that digitisation is causing major disruption. The trend started in the consumer sector but has since spread across all industries.
As companies move from a centralised to a distributed model and static offerings become smart, the importance of building partnerships and collaborative networks is increasing.
“Data is raw material and has become the currency of today,” Siegel said, explaining GE Ventures is doing its best to maximise the benefits of this new ecosystem.
Nagraj Kashyap, corporate vice-president and global head of software provider Microsoft’s accelerator initiative, Microsoft Ventures, focused his attention on the declining cost of technologies as a major element of disruption.
Kashyap claimed many companies today, including smartphone manufacturer Xiaomi and electric vehicle producer Tesla, are in fact software companies, pointing out that if Tesla wants to upgrade a car it can do so through a software update without replacing any parts.
Kashyap is hopeful that corporations are understanding this change, citing investments by car companies like Ford and GM in startups such as ride-hailing app Lyft.
After Mégret’s insights, Ralf Schnell, chief executive of engineering company Siemens’ strategic investment division, Siemens Venture Capital, which manages about $1.5bn including on behalf of its corporate pension fund, listed a range of important areas for disruption.
The areas include industrial design and manufacturing, where concepts like 3D printed goods have led to individualisation; energy, where changes such as decentralised power generation have had a major impact; healthcare, which is moving towards personalised medicine and more educated patients; and mobility.
Unsurprisingly, therefore, the SetSquared pitch sessions on earlier-stage companies, was well-attended and covered a host of sectors being targeted for further disruption, including such stand-out startups as Green Running, before the Symposium’s first evening’s gala awards dinner.
The second day begins at 8.30 on 25 May.