7 Case Studies on Corporate VC
Lessons on how to set up and run venture capital programs from innovation experts and investors at GCV Synergize
Earlier in November, my business partner David Horowitz co-chaired the Global Corporate Venturing Synergize conference in New York. The one day event focused on sharing best practices for corporate venture capitalists, with a mix of keynotes, breakout sessions, networking, and seven case studies.
Each case study featured a corporate venture capitalist presenting or being interviewed for 25 minutes. David thought it would be fun (for the audience, I think, and probably for his amusement at seeing me sweat) if I would pay very close attention to the presentations and summarize them in real time, then get up on stage and provide simple take-aways in less than one minute each. Because I love a challenge, I said yes; to make matters worse, I decided to further summarize each case study in the form of a haiku.
Each expert focused on a different aspect of running a corporate venture capital program. While I highly recommend this annual conference for anyone interested in corporate innovation, for the TL;DR crowd or those who can’t wait until next year, here are the summaries:
1. Reese Schroeder of Tyson Ventures — Measuring Strategic Value & Reporting
Reese was interviewed by Ken Gatz of Proseeder, and focused on how to communicate the strategic value created by corporate venture capital efforts to key stakeholders, including CEOs, CFOs, and boards of directors. Here are my takeaways from Reese’s session:
- Focus on the successes you can quantify instead of every single interaction — for example, measurable cost savings
- Make sure investments have potential for strategic impact and then track milestones (because getting info from business units isn’t always easy)
- Use reporting to show there is ongoing engagement between your business units and portfolio companies
Reese stressed honesty and directness, and his case study provided a road map to keep CVC programs from being shut down:
2. Ulrich Quay of BMW iVentures — Alternative Avenues to Measure Strategic Value
Ulrich was interviewed by Tracy Isacke of Silicon Valley Bank. While Reese focused on specific ways to measure strategic value, Ulrich widened the lens, suggesting that there are many ways to create value and that venture capital teams need latitude when selecting investments:
- Emphasize financial value and strategic value, not one or the other (have a strategic vision for each investment, so long as it’s relevant)
- Investment decisions can be kept “autonomous” from business units, but a steering committee provides an opportunity to tell success stories
- Don’t be too strict about how you measure strategic value, especially with disruptive opportunities
While Ulrich clearly valued decision-making autonomy for the venture capital team when making investments, he provided a practical, haiku-worthy quote:
3. Raj Singh of JetBlue Technology Ventures — Best Practices To Strengthen Supplier Relationships
Raj was interviewed by Ian Goldstein of Fenwick & West, and focused his discussion on how to provide value to corporate investments. He described that JetBlue keeps its approach simple, by becoming a customer of each portfolio company:
- First, ask business unit leaders to tell us their strategic goals
- Use “pilot” programs so startups can become suppliers (i.e., vendors), because JetBlue can be valuable as a customer, not just a check-writer
- Select candidates for proof of concepts from an exhaustive list of startups, and remember that you don’t always need to invest
The transportation metaphors were overwhelming, but Raj got to the heart of why corporate investors can be valuable on the cap table:
4. Mike Lohnert of Boeing’s Horizon X Ventures, Boeing — Uncovering and Accelerating Transformative Technologies
Mike defined “transformation” and discussed how searching for disruptive technologies could impact deal flow, corporate strategy, and culture change:
- Transformative opportunities are the things that business units won’t do, and that could be disruptive to our core business
- Set investment focus areas as needed to address the breadth of the corporation’s business units
- Leveraging external innovation is key to recognizing new competitors
Mike also described the history of innovation in aviation and compared this to some of the ambitions expressed by today’s tech titans, providing a neat quote for my haiku:
5. Mark Rostick of Intel Capital — Alignment With Business Units on Evaluating Deals & Diligence
Mark’s discussion focused on the importance of developing authentic relationships inside the parent corporation. He stressed that a one-time meeting is not enough to build the type of rapport that makes corporate venture capitalists successful.
- Develop trust and credibility by sitting in on business unit staff meetings and scheduling regular contact to understand problems
- Align incentives by starting with empathy: put yourself in the shoes of the business unit executive instead of pushing deals you personally like, but don’t be afraid to share your opinion based on your expertise
- Remember that business unit teams are focused on near term goals and “make your own call” after taking their input
Mark described how his venture career at Intel Capital was heavily influenced by being assigned to office together with one of Intel’s sales teams, and how he turned those relationships into advantages for his portfolio companies:
6. Craig Schedler of Northwestern Mutual Life Insurance Co.
— First Year Management Experiences
Craig was interviewed by Jim Fischer of Drinker Biddle, explaining how to develop momentum when starting a program inside a large company:
- “Crawl, walk, run” can demonstrate traction and help you get started
- Leverage your parent company’s potential as an acquirer to develop traditional VC relationships if you don’t have established deal flow
- Look for opportunities where other corporate investors from your industry can collaborate and co-invest
Much of Craig’s advice focused on how to break through corporate inertia, offering hope for even the most established companies:
7. Jessica Peltz-Zatulove of MDC Ventures — Community Driven Internal Innovation & Collaboration
Finally, Jessica was interviewed by Tracy Isacke of Silicon Valley Bank. Their discussion addressed what’s different when your corporation is a holding company with disparate stakeholders in many business units:
- Corporate investment theses should be driven by real customer needs, so an operating background can help drive deal flow
- Holding companies have stakeholders in different units, and each can provide inputs (a “feedback loop”) that inform investment decisions
- Working with startups might be the “best part of the job” for corporate employees who aren’t on the venture team, so make them feel included
As we’d nearly reached the end of the day, Jessica and Tracy decided to make the final case study more fun, with on-stage libations:
Global Corporate Venturing will reconvene in January with its Monterey Summit, where there are sure to be many more insights on how to run a successful corporate venture capital effort.
Scott Lenet is President of Touchdown Ventures, a Registered Investment Adviser that provides “Venture Capital as a Service” to help corporations launch and manage their investment programs.
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