A speech by UK minister Graham Stuart was followed by discussions on topics such as new markets, external CVC collaboration and risk versus return.
The eighth annual global corporate venturing London symposium began yesterday with opening remarks from Global Corporate Venturing’s chief operating officer, Tim Lafferty, who addressed a crowd of close to 400 attendees.
Investors present at the event manage a total of $100bn in venture assets, for parent companies with aggregate revenues of at least $4 trillion.
Entitled ‘The Shoulders of Giants,’ this year’s conference has largely focused on showing the benefits of increased collaboration between ecosystem players, with startups and entrepreneurs helped to to new heights by their corporate backers while the latter enjoy increased exposure to emerging technologies.
Shortly after the opening address, Graham Stuart, minister for investment at the UK’s Department for International Trade (DIT), took to the stage for a keynote presentation in which he reminded the audience of the key role played by London – Europe’s “capital of VC” – in the worldwide venture ecosystem.
According to Pitchbook data, UK tech firms attracted a record £3bn ($4bn) in VC investment in 2017– almost twice that of the previous year (£1.63bn) – with London accounting for around 80% of that alone. The UK also currently stands as the leading destination for foreign investments in Europe, with around £1.2 trillion of capital invested at present.
“Too many people see finance and capitalism as a ‘dirty’ word, but they are the fuel of an advanced economy,” Stuart said, adding: “What you do matters to our economy. We need people like you, who are willing to take risks to invest in the future. Our innovation depends on startups, and our startups depend on people in this room.
“In the same way that one cannot have capitalism without capital, we need capital to create the innovations of the future and fund the innovators of the future.”
Stuart stated that the government’s role is to understand how it can add value and contribute to attracting investment, both from UK investors into foreign companies and from international investors to UK-based businesses. That help, he added, can be divided into the high-growth company question (ie. creating conditions where UK companies are an attractive investment), the venture capital question and the international question.
The DIT has formed a special unit dedicated to venture capital that has collaborated with over 250 VCs to date and has committed to raising the UK’s research and development spending to 3% of GDP.
Stuart said: “What we want is to cement the UK’s position as the number one VC club in Europe. Of course we do have weaknesses, but we want to work with you to fix those. That is why I am keen to hear from you and hear about the barriers that you face.
“With your help, the UK will hopefully remain Europe’s natural hub for venture capital, creating more jobs and innovation, and changing people’s lives for the better – because that is why we do what we do.
“There is a saying that says ‘If it ain’t broke, don’t fix it’. Well, clearly whoever said that was not a venture capitalist. There is always room for improvement, and we should always be striving to improve. That is what VC is all about – seeing the opportunity that others have missed.”
Stuart’s speech was followed by a panel that brought together Tony Askew, founding partner of information and analytics services firm Reed Elsevier’s corporate venturing unit, REV, and a co-chairman of 2018’s symposium, and Raj Singh, managing director of JetBlue Technology Ventures, the investment arm of airline group JetBlue.
The pair agreed that although technology used to be a separate branch of corporate activities, it has now become an integral part of any company’s development. Askew said: “There is no longer a ‘tech’ sector. All organisations now think of technology as part of the products they develop and take to market, and that is what has really changed.”
Askew added that larger bets are going into unproven technologies such as artificial intelligence, saying: “I think we are at the point where the human is not necessarily the centre of the workflow and the product, and that will continue to evolve over the next 20 years or so.”
Another key change is that corporate venture capital has now become a crucial part of the VC space, representing around 25% of the deals done globally according to GCV analytics. In the face of those changes, corporates have progressively adapted, explained Singh.
“Most companies have recognised that innovation does not just come internally anymore, but that they also have to look outwards,” he said. “While internally, we are still pushing towards incremental innovation, we often reach out outside for radical innovation. The pace of change is so quick that we have no choice but to do that.”
A persistent issue is that entrepreneurs still remain largely unaware of what they should look for in an investor when raising funds.
Singh said: “I think there is recognition that [CVC] is not just about the money, and not just valuations either. Things have evolved in a very positive way, and one of the things that entrepreneurs most regularly ask us to do is help them understand the industry.”
Finally, Askew insisted on the importance of talent recruitment in the building a successful business, saying: “It is very easy to buy technology, but it is very hard to find, and also keep talent. A business’s profitability is dependent on the ability to find that talent pool.”
Akira Kirton, managing director for Europe, the Middle East and Africa at BP Ventures, oil and gas producer BP’s corporate venturing arm, then joined Marianne Wu, president of power and automation conglomerate General Electric’s GE Ventures subsidiary, for a discussion moderated by Ken Gatz, founder and CEO of online financial transaction platform ProSeeder.
The panel, entitled “Going beyond the core of an organisation: how corporate venture can open up new markets,” examined how GE and BP locate and make the right investments.
Kirton said: “A lot of it is about trying to create a win-win situation. Venturing 2.01 was about starting to integrate our investments into the business, and trying to create value in our deployment. Venturing 3.01 is much more about playing a role at platform level, where you have to look at the overall portfolio and value chain.”
Detailing GE Ventures’ strategy, Wu added: “We are very fortunate in that we report to the company’s chief innovation officer, and are an integral part of the company. I often think of our role as extending the core of GE’s activity, whose activity focuses on three areas: empowering the world (energy), curing people (healthcare) and helping them move around (aviation).”
Kirton and Wu also discussed the growing importance of impact investing, with Kirton commenting: “Although we do not engage into impact investing for the sake of it, it has definitely become an emerging criterion in our assessments.
“As investors, if we cannot actually bother to create a business case and say ‘this is the future’ then that is a failure for our industry.”
The mid-morning break was preceded by a joint keynote session comparing the investment strategies of Johnson & Johnson Innovation – JJDC, the CVC vehicle for pharmaceutical group Johnson & Johnson, and M12, Microsoft’s recently rebranded corporate venturing fund.
M12 was represented by its global head, Nagraj Kashyap, while JJDC’s strategy was explained by president Tom Heyman. Their exchange was moderated by financial services firm Silicon Valley Bank’s managing director, Alex McCracken.
The two companies’ approaches diverged in many ways and Kashyap and Heyman agreed that whether the corporate provides strategic or financial support, a startup should never simply and fully rely on that help.
Kashyap said: “Ultimately, we cannot protect the startups from their own failure. We are not responsible for shielding them from their own mistakes.
“What our investment essentially means is, ‘we are giving you a first shot, but if you run slow, you will get crushed’. So of course, they still have to deliver and perform well.”
Heyman added: “We will do anything to make our portfolio companies successful and we definitely do not like pulling the plug, but on certain occasions – after repeated failures, for example – there is just nothing more you can do.”
Following the mid-morning break, James Mawson, founder and editor-in-chief of Global Corporate Venturing, invited a panel on stage for a discussion around the themes of risk, return and impact.
The panel consisted of Laurel Buckner, managing director of telecoms firm ATN International’s CVC arm, ATN Ventures; Girish Nadkarni, president of petroleum supplier Total’s Total Energy Ventures fund; Ram Jambunathan, managing director of SAP.io, enterprise software producer SAP’s innovation unit; and Susana Quintana-Plaza, a partner at industrial technology producer Siemens’s Next47 subsidiary.
Nadkarni said: “When the impact issue was first thrown upon us my first reaction was to say well, I can only juggle with two balls, with three it is getting difficult. But actually there are many ways of getting involved in this,” and cited Total’s recent focus on offering access to energy in emerging countries in Africa and Asia.
ATN is also attempting to help emerging markets, Buckner said, citing how its technology can help areas recover more quickly from damages caused by disasters such as hurricanes in the US.
“Given where climate change is going, the possibility of bringing faster infrastructure systems to those areas is very important,” she said.
Jambunathan said SAP has been committed to driving impact in the 17 areas listed by the United Nations as part of the Goal 17 global sustainable development strategy.
Referencing recent privacy and data protection scandals surrounding social media platform Facebook, Mawson asked the panel how they tackled the problem of potentially unintended consequences of technology. Nadkarni recommended avoiding partnerships with companies whose affiliations were unknown or unclear, as this could involve a reputational risk for the investor.
Following a data insights presentation delivered by Martin Haemmig, adjunct professor at the Centre for Technology and Innovation and Management in Germany and the Netherlands, and a case study on corporate venturing unit Robert Bosch Venture Capital’s recently adopted lean startup strategy, a panel led by GE Ventures executive managing director Karen Kerr brought together representatives from Intel Capital, M12 and ABB Technology Ventures, part of power and automation group ABB.
The panel returned to a topic that was the leading thread at this year’s Global Corporate Venturing and Innovation Summit (GCVI): diversity, which still appeared to be a prime source of debate among CVC leaders.
Wrapping up the first day’s morning session, Bryan Wolf, Intel Capital’s managing director of data centre and cloud infrastructure, spoke to Mike Wall, who was general manager of the group’s storage division before joining Intel Capital portfolio company Amplidata as chairman and CEO.
Wolf and Wall discussed the importance of delivering value from term sheet to exit for CVC units at a time where funding sources for startups have become more abundant and diverse.
“There is an ever-increasing amount of CVC money and deals, but there are also a lot of other sources of money,” Wolf said, identifying sovereign funds, mutual funds and pensions funds as examples. “So how can we make sure that we stay at the forefront? Beyond just the strategic imperative, we have to be able to offer a lot more value.”
As mentioned in the introduction to the 2018 GCV Powerlist, Intel Capital has been particularly active on that front, having encouraged collaboration between CVC units in other companies through what is informally known as the Wendell doctrine, named after Intel Capital president Wendell Brooks, who summed it up by saying: “we are better when we work together”.
Wolf said: “As we bring syndicates together, we can offer much more assistance to portfolio companies, helping them with go-to-market processes and facilitating exits. One plus one really does make five when CVCs work together to bring up the value of companies.”
Referencing Intel’s role in driving Amplidata’s development and its eventual successful exit, Wall said: “Once Intel had made the investment, that created a ton of market awareness, progressively transforming an otherwise unknown small Belgian business into a global company.
“It was something that validated the group’s technology, and therefore created many market opportunities. There were also strong synergies between the two product development and technology teams, from which both sides could benefit. This meant that we would always be on the leading edge of the sector.”
Reflecting more generally on the value brought by CVCs to their portfolio companies, Wall added: “I have always been a believer in the strategic value of corporate investors – they represent way more than just working capital.
“A corporate validates your technology, your company, and gives you the ability to meet other companies as potential partners or investors. The fact you share your technology also means you increase your competitiveness. A corporate is also likely to bring in people who can be great employees or board members.
“Cross-functionally, working with corporate venturers has brought way more value than working with purely financial VCs.”