April 2020 issue editorial by James Mawson, editor in chief, Global Corporate Venturing

The meeting of 34 senior corporate venturing executives in the Covid-19 Venture Crisis Forum last month identified the global concern the disease is causing.

Naturally, the community’s first thoughts were of the human aspects of people falling ill or struggling with isolation and the economic impact that could see global gross domestic product severely affected and an estimated $4.5 trillion bail out. As one forum participant said: “Our guys believe in a 50% of GDP wipe out scenario. In this case the question is if the rebound happens in a year or in 15 years.”

But it also brought out the corporate venturing industry’s desire to see the opportunities in the challenges in three main areas.

First, organisation. Corporations with established venture units have already had their units externally validated through dealmaking and sometimes third-party capital but also know from experience they need to continue their commitments to the unit.

Creating opportunity funds that third parties could commit to could become possible given some pension funds are now saying this is the time to increase allocations to venture capital and private equity.

In return, supporting the parent company that might be going through unprecedented supply and demand shocks requires CVCs thinking of their tactical, short-term needs while being aware of longer-term strategic priorities. Corporate venturing by bringing startups and open innovation into an organisation matrix where people have newly moved from a fixed to growth mindset can be transformational.

As one said: “We are actually seeing accelerated engagement by business units. I had as many business unit [BU] calls in the last couple of weeks as I have over the past three months. BUs are looking for ventures team to lead on innovation front and leverage startups to accelerate some of our technology initiatives. Tons of proactive reach-outs.”

People have the opportunity to help shape the broader innovation toolset of research and development and mergers and acquisitions and become the leader of the future organisation.

Second, dealflow and portfolio management. Updating portfolio financing and cashflow plans against those made at the start of the year can help validate why portfolio companies can be supported with CVCs sharing their portfolio company support documents. With the end of the first quarter and the need to mark to market, the likely valuation decline across larger portfolios will be clear.

As another leader said: “To land the message with IC [investment committee] that follow-ons, while not contractually committed, they are reputationally committed. So, while new investments may become more challenged, follow-ons are locked in.”

Others were less certain, with CVC units expected to take their share of reduced budgets. “I would not be able to look my board in the eye if I said we should be immune,” one said.

Corporate venturers can also help after the triage of portfolio companies with their general survival or expansion by offering to be customers or suppliers or managing the human resources. Their experience dealing with governments can also offer help accessing bailout money or job support programmes – the US-based National Venture Capital Association has identified Covid-19 US federal relief packages, while another shared document is circulating for Germany.

Looking back at past downturns indicated independent VCs might turn more to earlier-stage deals, making growth-stage deals more challenging potentially, one said. Deal volumes will decline as syndicates prove harder to form even if the top 20% of CVCs – those responsible for 80% of activity – remain cash rich in the main.

Already, the overall venture industry has broadly halved its dealflow to about 1,250 deals in March, according to PitchBook, compared with before the start of the year.

Third, future issues. The openness among governments and stakeholders across all parts of the economy to see innovation as part of the solution to the coronavirus opens up the possibility for corporate venturing to be a figurehead in the crisis and in helping limit other outbreaks. This is likely to be against a backdrop of volatility and as sustainability becomes an increasingly important watchword.

As one said: “Who would have thought that the EU would become an investor of this scale? Very interesting times.”

After all, Ancient Rome prevailed by first winning the hearts and minds of its people.

Membership news:

To record a podcast for the Leadership Series, please let me (jmawson@mawsonia.com) know. Members of the GCV Leadership Society can use GCV Connect to use the private messaging platform to connect to their corporate venturing peers and swap deals. The GCV Symposium on 3-4 June will use be primarily a digital forum (agenda out now) as a value-added service to enable portfolio companies and thought-leadership to be shared remotely with the in-real-life part of the program expected to be moved to the second half of the year.

The attendees of the forum include:

  • Shankar Chandran, Samsung Catalyst
  • Tom Lounibos/Mike Redding, Accenture Ventures
  • Kim Armor, Comcast Ventures
  • David Gilmour/David Hayes, BP Ventures
  • Barbara Burger/Kemal Anbarci, Chevron Tech Ventures
  • Sam Brasch, Kaiser Permanente Ventures
  • Sarah Holland/Ryan Scanlon, Lonza
  • Dong-Su Kim, LG Tech Ventures
  • Bonny Simi, JetBlue Tech Ventures
  • Bill Taranto/Dave Stevenson, Merck GHI Fund
  • Ilonka Jankovich, Randstad Innovations
  • Dominique Mégret, Swisscom Ventures
  • Crispin Leick, EnBW New Ventures
  • George Gogolev, Severstal
  • Girish Nadkarni, Total Carbon Neutrality Ventures
  • Brian Schettler/Damineh Mycroft, Boeing HorizonX
  • Erik Ross/Amelia Gandara, Nationwide Ventures
  • Rene Cotting, ABB Tech Ventures
  • Ainhoa Maiz Urtizberea, M12
  • Harrie Vollaard, Rabo Frontier Ventures
  • Faran Nouri, Lam Research
  • Austin Noronha, Sony Innovation Fund
  • Joel Albarella/Sepeedeh (Sahar) Omrani, NY Life Ventures
  • Tarik Galijasevic, Allstate Ventures
  • Tony Cannestra, Denso
  • Hector Shibata, AC Ventures
  • Jonathan Schalliol, The Heritage Group
  • Charles Holtsclaw, Technip FMC
  • Alex Kamenetskiy, Munich Re Ventures
  • Nat Puffer, In-Q-Tel
  • Sergio Escobar, BCF Ventures
  • Sumito (Sam) Sugata, Fujitsu

Observers:

  • Bindi Karia, Draper Esprit (guest)
  • Brian Hollins, Harvard Business School (guest)
  • Heidi Mason/Liz Arrington (guest for GCV Institute)
  • Lee Sessions (GCV executive in residence)
  • Janice Mawson (GCV Leadership Society)
  • James Gunnell (MD, Mawsonia, publisher of GCV)