Corporate Venture Investing: What is it and what’s it looking for?

by francine Hardaway on December 9, 2009

(This is rough, because it's a live blog from the Silicon Valley Venture Summit. Think of it as notes)

Why do corporations invest in ventures anyway? Corporate investors look not only for ROI, but for where the puck is going, so they don't get trampled by the next disruptive technology. SAP is especially concerned with this, because it's such sn established company.  It doesn't want to be a company that goes under because it doesn't see the iceberg coming. Most corporate venture funds are structured professionally, so they can't shut you down if they have a bad quarter.  Yet a corporation will always shut down a venture arm if it's not making money.

Sanjiv Parikh, Hewlett Packard Corporate Ventures: Any time HP puts money to work, he's expected to make money. But he's also interested in where the puck is moving. Corporate venture investors bring something to the table.  Returns are 30-40% higher than when just traditional VCs are involved. (see NVCA web site.) The access, distribution channels and customers play an important role. Better investors understand the role for corporate . Corporate VC has grown up in the last decade and is not so demanding as it used to be. It doesn't want to do the heavy lifting on investments, but it wants to help with knowing where markets and customers are moving. And they want to understand innovation. Sanjiv is very experienced and well-read; he clearly knows what he's doing around corporate venture investing. HP leads early deals or takes the whole round. 

Bill Maris, Managing Partner Google Ventures: A venture fund with one LP, Google. Their model is ROI focused, because they don't know what's strategic to Google in the future.. "What we say is less important than what we do. We encourage companies to talk to our current portfolio companies to find out what we're like." When Google started its venture arm, they looked at many other venture arms like Johnson&Johnson. There are many different structures, both off and on balance sheet, and you choose the one that works best for your corporation. Google takes the entire round on earlier deals, and leads or co-leads on later rounds.

Jai Das SAP Ventures: Is trying to prevent SAP from becoming the Titanic by looking for new disruptive technologie. When we invest, we look for places we don't have experience.  We try to get input from business units, but we try to be more market focused and invest where our product might have to go.  Example: social networking. SAP tries to separate the ROI-driven investments from the investments driven by the business units. SAP leads about 40% of its deals.

Rachel Lam, TIme Warner Ventures: is a strategic investor.  How are these companies interesting technologies for us or content to fill content gaps. Opportunity is for strategic value for partnerships. They look at ideas where they evaluate whether they should do this inside or outside Time Warner. Companies want their capital because it gives them access to TW's divisions. The companies have to be strategically relevant to a multiple number of divisions. They don't exist just to make money or they'd invest in an outside VC firm. In the end, it's a matter of the individual partner you are getting from a corporate VC firm, and entrepreneurs should check the individual partner's exits and reputation. There are a lot of differences among the corporations and among the individuals. Time Warner will lead in an investment.

Louis Toth, Comcast Interactive Capital: Comcast is their only limited partner, and they look for investment returns. They are looking at 1000 deals a year, and can glean trends and ferret out what businesses Comcast can get into. They act as a funnel. Comcast works with a group of VCs who know how to work with them and see them as good partners. Comcast took almost a year figuring out its venture investing model. Comcast leads or co-leads on all of its deals.

Francine Hardaway, Ph.D, Stealthmode Partners

"The stumble throws us forward."

Posted via email from Not Really Stealthmode

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