IESE Business school ran its 8th Open Innovation Conference last week, with the virtual event co-hosted by Prof Josemaría Siota and Prof Julia Pratts.
The first discussion panel featured Telmo Perez, chief of innovation and new business at Spain-based construction company Acciona, Itxaso del Palacio – investment director at UK-based venture capital firm Notion Capital (formerly a partner at software provider Microsoft’s corporate venturing unit, M12) and Phillip Wockatz – director of open innovation at carmaker Volvo’s Connected Solutions Innovation Lab.
The speakers defended the case for the usefulness and versatility of open innovation tools, using both the experiences of Acciona and Volvo as examples. However, they mostly refrained from commenting on the impact of the raging Covid-19 pandemic, which has hit Spain particularly hard. That may be understandable, if taking into account the great deal of short-term economic and even political uncertainty the Mediterranean country is facing as it de-escalates its strict lockdown measures.
Wockatz commented on partnerships with startups in corporate-backed accelerators, where it is corporate investors themselves who bring and invite startups and work with them to find out if a viable partnership or a type of commercial relationship can be established. In such cases, they do not actually take equity stakes at that stage, as he clarified. He also said: “If uncertainty is the new norm, partnerships are the new leadership.” This reinforces a commonly held view among many European, and particularly Southern European, corporate investors.
Such a cautious approach stems from a conservative assessment of the riskiness of venture investing in emerging tech business and such players tend to opt for open innovation initiatives (and similar) through which they effectively engage with promising new companies and, if economically feasible, help them scale and invest in them later on. It may not be an accident that in Spanish and other European languages, the term “venture capital” translates literally to “risk capital” or “risky capital”. We are yet to see if the looming downturn induced by Covid-19 will reinforce this cautiousness.
This is not to say that such cautious initiatives and connections created with incumbents are not useful to the entrepreneurs. Del Palacio, now investing for a traditional and financially-oriented VC firm, stated that she likes startups coming out of accelerators and incubators that have been backed or set up by corporates or which have some ties to a corporate player.
It is encouraging to observe how the perception of corporate venturers among other investors has significantly evolved in recent years – from neutral or even somewhat disparaging (the infamous “dumb money” label in the US) to being seen as a desired co-investor. After all, the presence of strategic and commercial ties with corporations, being part of their larger ecosystem or supply chain simply increase the likelihood of success of those startups or, at the very least, reduce their likelihood of immediate failure.
Another contributing factor to the broader perception shift may have been the mere migration of talented professionals from corporate venturing units to traditional VC firms. The key to understanding such migration lies in compensation-related issues. Del Palacio commented on her move to a VC firm and said she believed carried interest would be necessary for CVCs to retain innovation-scouting talent in the long run.
The second discussion panel of the online conference was focused on fundraising. It was led by Josemaría Siota and featured Paula Blázquez Solano – head of investments at InnoCells, the venturing unit of Banco Sabadell, Giancarlo Savini from Shell Ventures – the venturing subsidiary of oil and gas major Shell, as well as Diego Fernandez from Gellify – a Spain-based B2B innovation platform which supports startups. All participants in the panel concurred on the importance of creating and maintaining a network of entrepreneurs and investors in one´s particular region. Blázquez recommended both entrepreneurs and investors, whether VCs or corporates, “map out investors in their region and reach out to them as well as to investors from elsewhere who look to invest in their geography.” She stressed: “Even if you do not end up investing or co-investing, you always get valuable feedback.”
Feedback, networking and exchange of ideas are behind the philosophy of all the conferences and networking events GCV has held over the years. While virtual contact could never completely replace in-person connections, we have decided to stay true to our mission of delivering this value to the corporate venturing community even in the current climate. Hence, we have set up the Digital Forum 2020 which will take place on June 3 and 4. Sign up today and connect to exchange ideas and solutions with your investment peers in these challenging times.