2011: A year in perspective

Responses were broadly split between the growth in corporate venturing and more macro concerns, such as the impact of technology plus stock market and economic volatility on sectors and deals.

On corporate venturing

Johan Carlsson, president of Volvo Technology Transfer, the Sweden-based truck maker’s corporate venturing unit, said the most important event or trend in 2011 had been the "increased activity in corporate venturing, several companies starting or looking to start initiatives to cover a broad range of corporate venturing business models".

Brad McManus, director of investments at Panasonic Ventures, the corporate venturing unit of the eponymous Japanbased electronics maker, said: "New programme and investmentactivity to help address corporate innovation challenges."

Thorsten Peisl, vice-president of product innovation at US-based financial services provider State Street, said: "As a corporate venturing freshman, we will be more interested in learning best practices and industry statistics to start and run our programme efficiently."

Peter Christy, a principal at consultancy firm Internet Research Group, said: "An increasingly important part of corporate venturing will be understanding the notion of platforms, both from a business perspective and as embodied by the underlying integration that will be providedvia the internet and cloud computing. ‘Big data’ is the hottest of topics, and under that [name], the potential for business optimisation based on the analysis of data."

Ignaas Caryn, innovation and venturing manager at European flight operator Air France-KLM, said: "Cleantech investments coming from corporate venturing."

This was especially important, as Erik Rutten, senior investment manager at Netherlands-based industrial group DSM’s venturing unit, said: "Bankruptcy of [USbased solar panels producer] Solyndra put solar energy under scrutiny again."

On macro concerns

Reese Schroeder, managing director of MotorolaSolutions Venture Capital, half of the phone maker’s corporate venturing unit that divided in January, said: "The economy."

Stefan Gabriel, president of 3M New Ventures, the USbased industrials group’s corporate venturing unit, said: "Downturn of the global economy, debt crisis, global economic uncertainty [and] slowed growth."

Cédric Latessa, investment manager at Aster Capital, which manages the corporate venturing investments of French companies Schneider Electric, Alstom and Rhodia, added: "Greece, almost default[ing on its debt and leaving the eurozone]."

Echoed by Joerg Sievert, a managing member of Germany-based software group SAP’s Ventures unit that raised a $350m fund earlier this year, who said: "The ripple effect of a relatively small economy like Greece going bankrupt."

Andrew Gaule, founder of innovation forum Corven Networks, added: "(Impending) crisis in the eurozone, which is causing more instability in financial and corporate systems."

Mary Kay James, managing director at US industrials group DuPont’s venturing team, said: "The rise of the European debt crisis, which hurts the European Union and overshadows any hope of a US recovery."

Campbell Murray, a US-basedmanaging director of Novartis Venture Funds, the corporate venturing unit of the eponymous Switzerland-based drugs maker, said: "Balance sheet (meaning debt induced) recession across the western world."

Joe Chang, head of corporate development for Greater China at computer equipment supplier Cisco Systems, said: "Capital flight from the US, weakening of the dollar, investments in China moving towards [local currency] RMB [from the US dollar], and Shanghai A-share exits [of portfolio companies by flotation]."

A director of a US-based company’s corporate venturing activities, who wanted to remain anonymous, said the big issue of 2011 was "the debt crisis", adding: "We are now really beginning to feel the impact across many of our businesses. This has implications for all activity and spending within the company, including corporate venturing."

Peter Dunphy, treasurer at tyre maker Michelin, which chose not to initiate a corporate venturing programme, cited "market movements that proved that decoupling is a myth – impacts all companies large and small".

Roel Bulthuis, head of Merck Serono Ventures, the corporate venturing unit of Germany-based pharmaceuticals firm Merck, said: "Venture capital firms trying to find business models and financing strategies that are less dependent on capital markets."

The unnamed head of a corporate venturing unit of a large industrials group said more broadly the concern was: "Continued challenges for independent venture capital funds to raise funds successfully."

However, Erik Sebusch, partner of venture capital firm CMEA Capital, said some areas had been able to float companies, saying the most important trend had been "venture capital-backed IPOs (initial public offerings), such as Groupon and LinkedIn, and the [post-listing stock] price holding steady."

But Mark Heesen, president of US trade body National Venture Capital Association (NVCA), said: "The shuttering of the [US] IPO market in mid-August caused more firms to delay raising new funds and kept mature companies in venture capital firms’ hands, thereby limiting their ability to invest in new ventures."

In Europe, Marcos Battisti, Intel Capital’s managing director for western Europe and Israel, said: "2011 continued to be a challenging venture capital investment environment. Valuations started to rise in the first half of the year, so we expect to see a correction, and highly volatile markets have had an impact on exits, with IPOs virtually non-existent in the second half.

"The eurozone debt crisis has obviously contributed to market volatility but has not directly impacted our investment year. Venture capital and private equity years long, so while debt problems in Europe are not likely to impact our business in the short term, in the long term we might positively benefit from lower valuations and a focus on key drivers such as innovation and entrepreneurship as opposed to financial speculation and debt.

"On the downside, new fundraising could become challenging for investors. Continued negative perception of Europe is negatively affecting foreign limited partners (LPs – investors) and the debt crisis could further exacerbate this, sowing the seeds of further problems. Even with this, we believe Europe remains a hot-bed of talent where innovation is thriving, and, along with Israel, it is leading the way in key technologies such as perceptual computing, an area we have been very active in during 2011."

Marcin Hejka, Intel Capital’s managing director for eastern Europe, Middle East, Africa and Russia, added: "Despite market turbulence, we believe innovation continuesand often grows through tough times – 2000 was a great vintage year for example. Emerging markets grew through the 2008-09 crisis and we still see plenty of opportunity in 2012 and beyond.

"This year we made our first investment in Africa and closed our first deals in Turkey with Nokta and Grupanya – markets where innovation and social commerce is flourishing. In fact, Turkey has been growing as fast as China. In terms of measures to improve the situation, we would like to see more commercialisation in state-funded research centres in order to unlock new technology developments more effectively and bring them to market."

In Asia, Richard Hsu, managing director of China for Intel Capital, said: "The rise and decline of the public market, and scrutiny of the investment entity structures with which Chinese companies go public in the US, have been factors this year. But there has also been an explosion of early-stage deals and serial entrepreneurs coming back as angels as the venture investment industry in Asia matures."

But the returns might have come too late for some VCs in some sectors, with the unnamed head of one healthcare corporate venturing unit saying the most important event or trend in 2011 had been the "decline or failure of a significant number of private venture funds".

Gary Dushnitsky, associate professor of strategy and entrepreneurship at UK-based university London Business School, said: "This past year, many independent venture capital firms continued to navigate challenging times on the investment front, for example deal sourcing, nurturing and exits, but even greater turmoil on the fundraising front, with LPs cautious or unable to commit capital.

Given the unique source of corporate venturing capital, it might be interesting to qualify further whether its big issue was external – investments – or internal – availability of funds availability or other issues."

Michael Jeon, head of Samsung Ventures Europe, a regional affiliate of Samsung Venture Investment Corporation (SVIC) that independently manages the corporate venturing deals of South Korea-based conglomerate Samsung, said concerns were "for SVIC, raising new funds of a significant amount, in venture capital in general, IPOs of some of the highest-profile venture capital-backed social companies – LinkedIn, Pandora, Groupon, Zynga on the way – [and in] technology in general, death of Steve Jobs [co-founder of electronics maker Apple]."

Daisuke Tojima, general manager of corporate business development at NEC (America), said: "In addition to the challenge of a devastating economic situation, Japan was hit by tsunami plus earthquake plus nuclear plant failure, and floods in Thailand, which affected the global supply chain in industrial sectors. Also, the European financial crisis destabilised the global economy."

On the impact of innovation in sectors

Gian (John) Brown, president and general counsel of technology services provider SAIC’s Venture Capital Corporation, cited: "Mobile and how it is changing things the way software has been ‘eating the world’ for the past few years."

Shin Nagakura, executive managing director of Japanbased outsourcing provider Transcosmos (Silicon Valley office), added: "Social and mobile. This is huge trend in Japan as well as in the US.

"[Also, online games developer] Zynga filing for its IPO. We own some of it and it will help our balance sheet look good as well as the actual cashflow will help our war chest [for new deals]."

Amy Banse, managing director and head of funds for US-based cable group Comcast’s corporate venturing unit that merged with peer Peacock Fund earlier this year, said: "One trend I am passionate about is the evolution of discovery on the web away from search. Curation and aggregation are back and better than ever. I have seen broad adoption of discovery tools – including sites like Hulu and Gilt Groupe – as well as the launch of new subscription-model businesses – including Birchbox and Kiwi Crate – focused on curating and aggregating goods, products and services."

Roger Pomerantz, global therapeutic area head for infectious disease at Merck and taking over its new $250m corporate venturing fund for the area, Reid Leonard, managing director of this Merck Research Ventures Fund, and Greg Wiederrecht, head of the external scientific affairs department of the Merck Research Laboratories, in a joint email said the most important event or trend in 2011 had been "a significant decline in the number of therapeuticsfocused new ventures funded".

They added: "This is attributable to both a decrease in the amount of private venture capital directed to the sector, and a narrowing focus of those investments toward therapeutic areas perceived to have a fast, or more predictable, path to exit [such as those in] oncology and rare niche diseases. With venture capital firms focusing less on early-stage opportunities, during 2011 it appears leadership in accessing intellectual property from academia is shifting to the large pharma companies, such as Pfizer and others, which have taken bold moves in establishing their own relationships with academia."

William Taranto, managing director of US-based drugs maker Merck’s other, Global Health Innovation, corporate venturing fund launched this year, cited "the gradual shift from traditional life science investing in therapeutics to service, solution and healthcare information technology (HIT).

He added: "The difficulty in any exits and lack of additional funding has caused this shift. It is easier to raise capital and exit for service, solution and HIT companies."

Chris Coburn, executive director of Cleveland Clinic Innovations, US-based healthcare provider Cleveland Clinic’s corporate venturing arm, agreed, citing "the emergence of IT as a differentiator in healthcare".

Maurice Wagner, director at Debiopharm Group, said: "The tightening of healthcare resources in the western markets … makes cost effectiveness more important than ever before. The prices of drugs are likely to be reduced. If the industry wants to keep generating enough money to fund research, it has to cut research costs and make all costs preceding the marketing phase more effective.

"Cutting the cost prior to commercialisation is a multifaceted task. It concerns not only the industry but also, for example, the registration authorities, which have to consider ways of reducing their costs [by ways including] more mutual recognition of regulatory processes."