A September post in TechCrunch extolled the unique benefits that corporate venture capital can provide to startups versus institutional venture capital, and it also emphasized financially focused corporate venture capital over strategically focused corporate venture capital. The latter I’ll touch on in a bit, because it’s an important debate, but I would argue that these comparisons are actually irrelevant. For startups, the reality and challenge of funding should come down not to corporate versus institutional, nor to strategic versus financial, but to the connection and personal match between investor and entrepreneur.
Startups should take money from the person and the team they feel is best able to help their company succeed, whether from a corporate or institutional venture capital firm. As I’ve said many times, the VC industry is barely an industry — more a “cottage industry” — and what I mean by that is the people involved in a startup’s investment have a huge impact on the entire process and thus a disproportionate weighting in its decision matrix. Entrepreneurs need to work with the people they most get along with, admire, and trust. Any type of investing partner should be one who can help you solve the problem you set out to solve — not just offer a headline valuation. It’s a partner who balances financial success with educational return.
JetBlue Technology Ventures has invested in a range of companies, from those driving incremental changes to those with moonshot ideas. We recognize the need for a more seamless travel experience and better customer service. It’s why we invested in companies like Redeam and Gladly. We also recognize that the world is facing a pilot shortage and rise of urban gridlock, yet remains heavily dependent on driving and flying (nowhere more so than in the US). It’s why we invested in companies like Joby Aviation and Zunum Aero. We want a seat at the table to help startups solve transportation problems and improve the future of travel and hospitality — and we’re uniquely qualified to help do it.
Our team at JetBlue Technology Ventures is a group of investors who understand Silicon Valley and how to grow a business (we’ve done it ourselves) combined with operators who joined from JetBlue and understand the travel world. This mix of investors and operators who know both venture capital and the mothership company and industry enables us to support our portfolio in unique ways. That type of team is just one of the benchmarks an entrepreneur should look for when evaluating a CVC. Here are a few key others:
- Does the firm act as a reliable customer and turn startup investments into corporate suppliers?
- Do the investors make connections not only within their parent company, but elsewhere throughout the industry?
- Does the team share industry insights and best practices to inform product and market strategies?
- Are there terms that are out of market on exclusivity or RoFRs? (Not optimal.)
Now for my two cents on financially focused CVC versus strategically focused CVC. JetBlue Technology Ventures is in the second bucket. Our long-game perspective offers a different value proposition. We need to provide more value to startups because we don’t have an abundance of funds to invest — we allocate our money to where we know we can consistently add strategic value based on our industry knowledge. That’s how we measure success — improving JetBlue’s bottom line by engaging our portfolio as suppliers, driving cost and revenue improvements, and opening new markets.
Crunchbase’s Jason Rowley recently pointed out that Q3 2018 was the most active quarter for worldwide startup investment to date and 2018 is on track to set the record for CVC investment. There’s a lot of money out there for the taking, but it’s important for entrepreneurs to focus on the investors that offer the most optimal strategic and personality match. Be as picky as you can and wait for the right partner to help you succeed. Everything needs to fit together well in order for the airplane to fly.
Raj Singh is managing director of investments at JetBlue Technology Ventures. To learn more about JetBlue Technology Ventures, please visit our website here and sign up for our weekly newsletter here.